Exhibit 10.70
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LEASE AGREEMENT
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as Owner Trustee,
as Lessor
and
ALOHA AIRLINES, INC.,
as Lessee
Relating to one (1) Boeing B737-200 Aircraft
Manufacturer's Serial No.: 23913
U.S. Registration No. N827AL
Dated as of June 1, 1998
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This Lease Agreement has been executed in several counterparts. To the extent,
if any, that this Lease Agreement constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease Agreement may be created
through the transfer or possession of any counterpart other than the original
executed counterpart containing the receipt executed by Lessor or, if Lessor
has assigned its rights to a third party in accordance with this Lease
Agreement, such third party on the signature page of this Lease Agreement.
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VEDDER, PRICE, XXXXXXX & KAMMHOLZ
CHICAGO, ILLINOIS
TABLE OF CONTENTS
PAGE
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SECTION 1. Definitions; Construction of Terms ...........................................................1
(a) General Definitions ..........................................................................1
(b) Construction ................................................................................14
SECTION 2. Lease of Aircraft ...........................................................................14
(a) Agreement to Lease ..........................................................................14
(b) Delivery Conditions; Inspections ............................................................15
(c) Changes in Delivery Date; Limitation of Lessor's Obligation to Deliver Aircraft .............16
(d) Bridging Maintenance; Registration; Airworthiness Certificate ...............................16
SECTION 3. Lease Term; Rent; Payments .................................................................17
(a) Lease Term ..................................................................................17
(b) Basic Rent ..................................................................................17
(c) Supplemental Rent ...........................................................................17
(d) Security Deposit ............................................................................17
(e) Payments in General .........................................................................19
(f) No Deductions or Withholdings ...............................................................19
SECTION 4. Conditions Precedent ........................................................................19
(a) Delivery of Aircraft ........................................................................19
(b) Delivery Conditions .........................................................................20
(c) Approved Maintenance Program ................................................................20
(d) Due Diligence ...............................................................................20
(e) Agreements and Documents ....................................................................20
(f) Delivery Date Conditions ....................................................................21
(g) Registration ................................................................................22
(h) Import License and Ferry Flight Permit ......................................................22
(i) Necessary Government Actions ................................................................22
(j) No Government Actions .......................................................................23
(k) No Change in Law ............................................................................23
(a) Title to Aircraft ...........................................................................23
(b) Delivery Conditions .........................................................................23
(d) Delivery Date Conditions ....................................................................24
SECTION 5. Representations and Warranties ..............................................................24
(a) Disclaimer; Lessor's Representations, Warranties and Covenants ..............................24
(b) Lessee's Representations and Warranties .....................................................26
SECTION 6. Certain Covenants of Lessee .................................................................30
(a) Maintenance of Corporate Existence; Duly Qualified; Certificated Air Carrier ................30
(b) Merger or Consolidation .....................................................................30
(c) Reporting Requirements ......................................................................31
(d) Government Approvals ........................................................................32
(e) Taxes .......................................................................................32
(f) Place of Business ...........................................................................32
(g) Filings .....................................................................................32
(h) Approved Maintenance Program ................................................................32
SECTION 7. Return of the Aircraft ......................................................................33
(a) Date and Location of Return .................................................................33
(b) Condition of Aircraft .......................................................................33
(c) Final Inspection ............................................................................33
(d) Operational Ground Check ....................................................................34
(e) Demonstration Flight ........................................................................34
(f) Technical Acceptance ........................................................................35
(g) Failure to Return Aircraft ..................................................................36
(h) Transition ..................................................................................36
(i) Letter of Credit ............................................................................37
SECTION 8. Liens .......................................................................................37
(a) No Liens ....................................................................................37
(b) Removal of Liens ............................................................................38
(c) No Adverse Action ...........................................................................38
SECTION 9. Indemnities .................................................................................38
(a) General Indemnity ...........................................................................38
(b) Exceptions to General Indemnity .............................................................39
(c) Taxes .......................................................................................40
(d) [Intentionally reserved] ....................................................................47
(e) Scope, Survival, Etc ........................................................................47
(f) Gross-Up for Taxes on Indemnity Payments ....................................................48
SECTION 10. Title; Registration; Maintenance and Operation; Insignia ...................................49
(a) Title to the Aircraft .......................................................................49
(b) Registration ................................................................................49
(c) Maintenance .................................................................................50
(d) Operation ...................................................................................53
(e) Insignia ....................................................................................54
(f) Costs of Operation ..........................................................................55
(g) Payment of Flight Charges ...................................................................55
(h) Loss or Damage ..............................................................................55
iii
SECTION 11. Possession .................................................................................56
(a) Maintenance, Etc ............................................................................56
(b) Installation of Engines on Other Airframes ..................................................57
(c) Sublease ....................................................................................57
(d) Transfers of Possession in General ..........................................................57
SECTION 12. Replacement of Parts, Alterations, Modifications and Additions .............................57
(a) Replacement of Parts ........................................................................57
(b) Modifications ...............................................................................59
SECTION 13. Risk of Loss, Destruction, Requisition, Etc ................................................61
(a) Risk of Loss ................................................................................61
(b) Event of Loss With Respect to the Aircraft ..................................................61
(c) Event of Loss With Respect to an Engine .....................................................62
(d) Application of Payments From any Government Entity for Requisition of Title, Etc ............63
(e) Application of Payments During Existence of Default .........................................64
SECTION 14. Intentionally Reserved .....................................................................64
SECTION 15. Insurance ..................................................................................64
(a) Requirements ................................................................................64
(b) Application of Proceeds of Hull Insurance ...................................................64
(c) Insurance for Indemnities; Continuation of Liability Insurance ..............................65
(d) Reports, Etc ................................................................................65
(e) Self-Insurance ..............................................................................66
(f) Additional Insurance by Lessor ..............................................................66
(g) Application of Payments During Existence of a Default .......................................66
SECTION 16. Inspection .................................................................................67
(a) Maintenance Schedule ........................................................................67
(b) Reasonable Inspections ......................................................................68
(c) No Duty to Inspect ..........................................................................68
(d) Follow-On Lease .............................................................................68
(e) Absolute Right ..............................................................................68
SECTION 17. Assignment .................................................................................68
(a) Assignment by Lessee ........................................................................68
(e) Collateral Assignment .......................................................................70
(f) Successors and Assigns ......................................................................71
SECTION 18. Early Termination ..........................................................................71
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SECTION 19. Events of Default ..........................................................................71
(a) Failure to Pay Basic Rent ...................................................................72
(b) Failure to Pay Supplemental Rent ............................................................72
(c) Insurance ...................................................................................72
(d) Return ......................................................................................72
(e) Unauthorized Transfer .......................................................................72
(f) Certain Covenants ...........................................................................72
(g) Other Covenants .............................................................................72
(h) Representations and Warranties ..............................................................73
(i) Authorizations ..............................................................................73
(j) Voluntary Bankruptcy, Etc ...................................................................73
(k) Involuntary Bankruptcy, Etc .................................................................73
(l) Government Action ...........................................................................73
(m) Cross Default ...............................................................................74
(n) Change of Ownership .........................................................................74
(p) Letter of Credit ............................................................................75
SECTION 20. Remedies ...................................................................................75
(a) Retake Possession ...........................................................................75
(b) Termination or Enforcement ..................................................................76
(c) Application of Funds ........................................................................76
(d) Damages .....................................................................................76
SECTION 21. Transaction Expenses .......................................................................77
SECTION 22. No Setoff, Counterclaim, Etc ...............................................................77
SECTION 23. Further Assurances, Etc ....................................................................79
(a) Further Assurances ..........................................................................79
(b) Lessor's Performance of Lessee's Obligations ................................................79
(c) No Implied Waivers; Rights Cumulative .......................................................80
(d) Warranties ..................................................................................81
SECTION 25. Governing Law and Jurisdiction .............................................................81
(a) Governing Law ...............................................................................81
SECTION 26. Miscellaneous ..............................................................................82
(a) Amendments ..................................................................................82
(b) Severability ................................................................................82
(c) Counterparts ................................................................................82
(d) Chattel Paper ...............................................................................82
(e) Time of the Essence .........................................................................83
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EXHIBITS AND SCHEDULES
Exhibit A-1 Technical Acceptance Certificate
Exhibit A-2 Final Acceptance Certificate
Exhibit B Basic Rent
Exhibit C Financial Requirements
Exhibit D Form of Lease Supplement
Exhibit E Intentionally Omitted
Exhibit F Insurance Requirements
Exhibit G Intentionally Reserved
Exhibit H Form of Letter of Credit
Exhibit I Approved Maintenance Providers
Exhibit J Form of Opinion of Lessee Counsel
Exhibit K Form of Opinion of Lessor's Special Counsel
Exhibit L Form of Aircraft Status Report
Exhibit M Terms of Hush Kitting Financing
Schedule 1 Permitted Jurisdictions
Schedule 2 Delivery Conditions
Annex A Delivery Receipt
Attachment 1 Aircraft Status
Attachment 2 Aircraft Documentation
Schedule 3 Addresses and Accounts
Schedule 4 Filings and Recordings
Schedule 5 Return Conditions
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LEASE AGREEMENT
THIS
LEASE AGREEMENT, dated as of June 1, 1998 (this "AGREEMEMENT" or
this "LEASE"), is between Aloha Airlines, Inc., a Delaware corporation having
its principal place of business at 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000
("LESSEE") and First Security Bank, National Association, not individually,
but solely as trustee under that certain Trust Agreement dated as of June 1,
1998 between itself and Sanwa Business Credit Corporation ("Lessor").
WITNESSETH:
WHEREAS, Lessee desires, upon the terms and conditions hereof, to
lease the Aircraft (as defined below) from Lessor, and Lessor is willing,
upon the terms and conditions hereof, to lease the Aircraft to Lessee.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS, CONSTRUCTION OF TERMS.
(a) GENERAL DEFINITIONS. The following terms shall have the
following meanings for all purposes of this Agreement:
"AD" shall mean any airworthiness directive or other
requirement of the Aviation Authority.
"ADDITIONAL PARTS" has the meaning specified in Section
12(b)(ii)(z).
"ADJUSTMENT AMOUNT" shall mean the amount added to the
amount of the Letter of Credit to account for the difference between the
Aircraft's then current condition and half-time with respect to the Airframe
and the Engines pursuant to Section 3(d) hereof.
"AFFILIATE" shall mean, in relation to a Person, any other
Person directly or indirectly controlling, controlled by or under common
control with that Person.
"AIRCRAFT" shall mean, collectively, the Airframe
(including the APU) and the Engines and, unless the context does not permit,
the Aircraft Documentation.
"AIRCRAFT DOCUMENTATION" shall mean, collectively, any and
all log books, records, manuals and other data or documents relating to the
Aircraft which are delivered to Lessee in connection with the delivery of the
Aircraft and/or set forth on Attachment 2 to the Delivery
[
Lease Agreement]
Receipt and such additional log books, records, manuals and other data or
documents relating to the Aircraft which are maintained by Lessee as required
by the Aviation Authority.
"AIRFRAME" shall mean, collectively, (i) the Airframe
Manufacturer model 737-200 airframe (except only Engines or engines from time
to time installed thereon), bearing the Airframe Manufacturer's serial number
and the registration xxxx specified in Lease Supplement No. 1, leased
hereunder by Lessor to Lessee and (ii) any and all Parts so long as the same
shall be incorporated or installed in or attached to such airframe, and any
and all Parts removed therefrom so long as title to such removed Parts shall
remain vested in Lessor in accordance with the terms of Section 12.
"AIRFRAME CYCLE" shall mean, with respect to the Airframe,
one takeoff and landing thereof.
"AIRFRAME FLIGHT HOUR" shall mean each hour or part thereof
elapsing from the moment the wheels of the Airframe leave the ground on
takeoff until the wheels of the Airframe touch the ground on landing
following such flight. For purposes of all calculations under this Agreement
measured in Airframe Flight Hours, such Airframe Flight Hours (and parts
thereof) shall be rounded to the nearest minute.
"AIRFRAME MANUFACTURER" shall mean The Boeing Company, a
Delaware corporation.
"AIRWORTHINESS CERTIFICATE" shall mean a valid, current
transport category airworthiness certificate issued in respect of the
Aircraft by the Aviation Authority.
"ALL" shall mean Airlease Industries Limited, a company
organized under the laws of Singapore.
"APPROVED MAINTENANCE PERFORMER" shall mean Lessee or such
other maintenance performer, if any, which (x) shall have a repair station
license and approval by the Aviation Authority and (y) with respect to
maintenance performers who are to accomplish Heavy Checks, Basic Shop Visits
and/or Landing Gear Overhauls, are either listed on Exhibit I hereto or are
otherwise approved by the Lessor.
"APPROVED MAINTENANCE PROGRAM" shall mean Lessee's Aviation
Authority-approved written maintenance, inspection and repair program and
schedule for Boeing Model B737-200 aircraft, including Lessee's current
approved maintenance schedule, and the CPCP approved by the Aviation
Authority.
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Lease Agreement]
"APU" shall mean (i) the auxiliary power unit identified by
manufacturer's serial number in Lease Supplement No. 1 and (ii) any auxiliary
power unit substituted for such auxiliary power unit in accordance with this
Agreement.
"AUTHORIZATIONS" shall mean each and every approval,
waiver, authorization, consent, license, certificate or order of, or
registration with, or requirement for the giving of prior notice to, or the
taking of any action in respect of, the Aviation Authority, or any other
Government Entity having jurisdiction over Lessee, the operation of the
Aircraft or any transactions contemplated hereby or by any Operative Document.
"AVIATION AUTHORITY" shall mean the United States Federal
Aviation Administration, and any person, governmental department, bureau,
commission or agency succeeding to all or any of such authority's functions,
or such other aviation authority as may be approved by the Lessor, such
approval not to be unreasonably withheld.
"BASE RATE" shall mean the rate of interest announced from
time to time by Xxxxxx Trust & Savings Bank, Chicago, Illinois as its prime
commercial lending rate (or its equivalent successor rate if the prime
commercial lending rate is no longer used).
"BASIC RENT" shall mean the rent payable during the Lease
Term with respect to the Aircraft pursuant to Section 3(b).
"BASIC RENT DATE" shall mean (i) the Delivery Date and (ii)
each date specified on Exhibit B on which Basic Rent is payable during the
Base Lease Term.
"BASIC SHOP VISIT" shall mean, with respect to any Engine
or the APU, any shop visit, as defined by the Engine Manufacturer or the APU
manufacturer, as the case may be, that is based on an approved program of
condition monitoring and trend monitoring of performance deterioration that
results in an Engine or APU, as the case may be, being restored to full
performance standard.
"BASIS POINT" shall mean 1/100 of 1%.
"BREAK AMOUNT" shall mean, with respect to any termination
of the Lease prior to the Expiry Date, an amount equal to the loss, cost or
expense which Lessor sustains or incurs (including, without limitation, any
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds utilized by Lessor to fund or finance the Aircraft
and/or the transactions contemplated hereby) in connection therewith.
"BUSINESS DAY" shall mean a day (other than a Saturday or
Sunday) on which banks are not required or authorized to close in Hawaii or
Chicago, Illinois.
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[Lease Agreement]
"CABIN" shall mean the passenger compartment and all doors,
windows, interior panels, storage bins, lights, seats, seat covers, carpets,
lavatories, galleys, galley equipment, closets, flight attendant seats,
passenger communications and entertainment systems, emergency and
miscellaneous equipment, seat tracks and floor areas.
"CERTIFICATE OF REGISTRATION" shall mean the certificate of
registration issued by the Aviation Authority in respect of the Aircraft.
"CERTIFICATED AIR CARRIER" means a Citizen of the United
States holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49 of the United States
Code, for aircraft capable of carrying ten or more individuals or 6,000
pounds or more of cargo or that otherwise is certified or registered to the
extent required to fall within the purview of 11 U.S.C. Section 1110 or any
analogous successor provision of the United States Bankruptcy Code.
"COMMITMENT TERMINATION DATE" shall mean October 31, 1998.
"CPCP" shall mean a Corrosion Prevention and Control
Program and/or Aging Aircraft Program that establishes minimum requirements
for the Aircraft, incorporating, among other things, the recommendations of
the Airframe Manufacturer and the mandatory requirements established by the
Approved Maintenance Program.
"CYCLE" shall mean an Airframe Cycle or an Engine Cycle, as
indicated by the context.
""D" CHECK" means a "D" Check, as such term is defined in
the Approved Maintenance Program relating to the Aircraft or an equivalent
check that meets the requirements of a "7C" Check as defined in the Boeing 737
Maintenance Planning Document (MPD); or such other structural check which
shall then be the most significant maintenance check under the MPD.
"DEFAULT" shall mean any Event of Default or any condition,
circumstance, act or event which, upon the giving of notice, the passage of
time and/or the fulfillment of any other condition would constitute or give
rise to an Event of Default.
"DELIVERY" shall have the meaning set forth in Section 2(b).
"DELIVERY CONDITIONS" shall mean the requirement for the
condition of the Aircraft on delivery, as set forth in Schedule 2.
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[Lease Agreement]
"DELIVERY DATE" shall mean the date, local time at the
Delivery Location, on which the Aircraft is delivered by Lessor and accepted
by Lessee pursuant to this Agreement as such date is set forth in Lease
Supplement No. 1, which date shall be the Scheduled Delivery Date.
"DELIVERY LOCATION" shall mean Christchurch, New Zealand, or
such other location, if any, as Lessor and Lessee shall agree, in writing.
"DELIERY RECEIPT" shall have the meaning specified in
Section 4(e)(iii).
"DEREGISTRATION POWER OF ATTORNEY " shall mean a
Deregistration Power of Attorney substantially in the form of Exhibit B.
"DOLLARS" and "US$" mean the lawful currency of the United
States of America.
"ENGINE" shall mean (i)(y) either of the Engine Manufacturer
Model JT8D-9A engines listed by Engine Manufacturer's serial numbers in Lease
Supplement No. 1 and originally installed on the Airframe at the time of
delivery to Lessee hereunder whether or not from time to time thereafter
installed on the Airframe or installed on any other airframe (z) any
Replacement Engine which may from time to time be substituted, pursuant to
the terms hereof, for either of such engines, and (ii) in each case, any and
all Parts incorporated or installed in or attached thereto or any and all
Parts removed therefrom so long as title thereto shall remain vested in
Lessor in accordance with the terms of Section 12 after removal from such
Engine, provided that at such time as an engine shall be deemed part of the
property leased hereunder in substitution for an Engine, pursuant to the
applicable provisions hereof, the replaced Engine shall cease to be an Engine
hereunder. The term "Engines" shall mean, as of any date of determination,
all Engines then leased hereunder.
"ENGINE CYCLE" shall mean, with respect to any Engine, one
takeoff and landing of the airframe (including, without limitation, the
Airframe) on which such Engine is from time to time installed.
"ENGINE FLIGHT HOUR" shall mean each hour or part thereof
elapsing from the moment the wheels of the airframe (including, without
limitation, the Airframe) on which such Engine is from time to time installed
leave the ground on takeoff until the wheels of such airframe touch the
ground on landing following such flight. For purposes of all calculations
under this Agreement measured in Engine Flight Hours, such Engine Flight
Hours (and parts thereof) shall be rounded to the nearest minute.
"ENGINE MANUFACTURER" shall mean Xxxxx & Xxxxxxx Engines
GROUP, a division of United Technologies.
5
[Lease Agreement]
"EVENT OF DEFAULT" has the meaning specified in Section 19.
"EVENT OF LOSS" shall mean, with respect to the Aircraft,
the Airframe or any Engine, any of the following events, conditions or
circumstances with respect to such property:
(i) the actual or constructive loss of such property
or the use thereof due to the destruction of or damage to such
property which renders repair uneconomical or which renders
such property permanently unfit for normal use by Lessee or
Lessor;
(ii) any damage to such property or other occurrence
which results in an insurance settlement with respect to such
property on the basis of a total loss or a constructive,
compromised, arranged or agreed total loss;
(iii) the confiscation, condemnation, seizure,
forfeiture or requisition of the title to such property (for
any reason whatsoever and whether de jure or de facto), other
than as set forth in clause (v) below);
(iv) the disappearance, hijacking or theft (including
a seizure of title or use not otherwise included in this
definition) of such property for a continuous period in excess
of thirty (30) days (or, if less, the remaining Lease Term);
and
(v) the confiscation, condemnation or seizure of, or
requisition by any Government Entity or purported Government
Entity of use or hire of such property which shall have
resulted in the loss of possession or use of such property by
Lessee for a continuous period in excess of sixty (60) days
(or, if less, the remaining Lease Term).
An Event of Loss with respect to the Aircraft shall be deemed to have
occurred if an Event of Loss occurs with respect to the Airframe. An Event of
Loss with respect to one or more Engines without loss of the Airframe shall
not be deemed an Event of Loss with respect to the Aircraft.
"EVENT OF LOSS DATE" shall mean (i) with respect to any
Event of Loss set forth in clause (i) or (ii) of the definition of "Event of
Loss," the earliest of (x) the date of actual loss, (y) the date on which the
loss is agreed, arranged or compromised by the insurers and (z) thirty (30)
days after the date of notice to Lessee's brokers or insurers claiming the
loss, (ii) with respect to any Event of Loss set forth in clause (iii) of the
definition of Event of Loss, the date such event, condition or circumstance
occurs, or (iii) with respect to any Event of Loss set forth in clause (iv)
or (v) of the definition of Event of Loss, the earlier of (y) the date on
which insurers make payment on the basis of a total loss or (z) the
expiration of the period, if any, and the
6
[Lease Agreement]
continuation of the condition or circumstance beyond the date, described in
the applicable clause of such definition.
"EXPENSE" shall mean any liabilities, obligations, losses,
damages (including, without limitation, damages for loss of life, injury to
persons or damage to any property), penalties, fines, sanctions, claims
(whether fraudulent, groundless, false or not), actions, suits, judgments,
legal proceedings (whether civil or criminal), costs, disbursements and
expenses (including reasonable legal fees and expenses, costs of
investigation and related expenses), in each case, of every kind and nature
whatsoever (including, without limitation any liability, obligation or claim
arising in contract or tort, whether or not arising from the negligence,
actual, implied or imputed, active or passive, or absolute or strict
liability of an Indemnified Party or any other Person or under any other
theory).
"EXPIRY DATE" shall mean the date one hundred two (102)
months following the Delivery Date.
"FINAL ACCEPTANCE CERTIFICATE" the Final Acceptance
Certificate, in the form of Exhibit A-2, delivered at Delivery of the
Aircraft.
"FINAL INSEPCTION" shall mean the inspection of the
Aircraft by Lessor and any other Inspecting Parties during any part of the
inspections, checks, and test flights required pursuant to Sections 7(c),
7(d) and 7(e) or otherwise performed in connection with the Return.
"FINAL MAINTENANCE" shall mean prior to the return of the
Aircraft on the last day of the Lease Term, the completion of the next
scheduled heavy maintenance check ("C" Check or above and, if applicable,
multiples of such checks falling due within a "C" Check maintenance interval)
in respect of the Aircraft under the Approved Maintenance Program (which
check shall incorporate all lower-level checks and any special repair items
or special inspections (including, without limitation, all applicable AD's
that are required to be accomplished in accordance with the terms of this
Lease, Required SB's and CPCP items) as well as inspections that have a
frequency less than a "C" Check and all cleaning and refurbishment that would
be a normal part of the Approved Maintenance Program were the Aircraft to
continue in commercial passenger service by Lessee.
"FLIGHT CHARGES" shall mean all flight charges, route
navigation charges, navigation service charges and all other fees, charges or
Taxes payable for the use of or for services provided at any airport or
otherwise payable to any airport, airport authority, navigation or flight
authority or other similar entity or for any services provided in connection
with the operation, landing or navigation of aircraft.
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[Lease Agreement]
"FOLLOW-ON OPERATOR" shall mean any Person acquiring title
to or the right to use the Aircraft after the end of the Lease Term (whether
or not such Person is an airline or other operator).
"FORCE MAJEURE" shall mean delay or nonperformance due to
or arising out of acts of God or public enemy, civil war, insurrection or
riot, fire, flood, explosion, earthquake, accident, epidemic, quarantine
restriction, any act of government, governmental priority, allocation,
regulation or order affecting, directly or indirectly, the Aircraft, Lessor
or Lessee or any materials or facilities, strike or labor dispute causing
cessation, slowdown or interruption of work, inability after due and timely
diligence to procure equipment, data or materials from suppliers in a timely
manner, or any other cause (including unforeseen maintenance) to the extent
that such cause is beyond the control of Lessor or Lessee whether above
mentioned or not and whether or not similar to the foregoing.
"GAAP" shall mean generally accepted accounting principles
as shall from time to time be in effect in the Lessee Jurisdiction, as such
principles may at any time or from time to time be varied by any applicable
financial accounting rules and, with respect to any Person, shall mean such
principles applied on a basis consistent with prior periods.
"GOVERNMENT ENTITY" shall mean (i) any national, state or
local government of any country, any territory or possession of any country,
or any international authority (including, without limitation, in. each case,
any central bank or fiscal, tax or monetary authority), (ii) any board,
commission, department, division, instrumentality, court, agency, territory,
possession or political subdivision of any entity described in clause (i)
above, however constituted, (iii) any association, organization or
institution of which any entity described in clause (i) or (ii) above is a
member or to whose jurisdiction any thereof is subject or in whose activities
any thereof is a participant and (iv) any taxing authority of any entity
described in clause (i), (ii) or (iii) above.
"HOUR" shall mean an Airframe Flight Hour or an Engine
Flight Hour, as indicated by the context.
"INDEBTEDNESS" means all obligations of Lessee that would,
in accordance with GAAP, be shown as a liability on Lessee's balance sheet,
and in any footnotes or notations thereto, including, without limitation, (i)
obligations for the repayment of monies borrowed or raised, (ii) obligations
under finance leases, hire-purchase arrangements, conditional sale agreements
and other obligations for the deferred purchase price of property, (iii)
guarantees, direct or indirect, of the obligations of any other Person,
including any such obligations secured by a Lien on any property of Lessee,
(iv) indemnity and reimbursement obligations, including any such obligations
arising to any issuer of a letter of credit or similar instrument, and (v)
obligations to purchase or otherwise acquire any indebtedness of, or to
advance monies to or on behalf of, or make any investment in any other Person.
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[Lease Agreement]
"INDEMNIFIED PARTY" shall mean Lessor, in its individual and
trust capacities, Owner Participant, ALL and each of their respective
Affiliates, and the successors and permitted assigns of each of the foregoing
and the directors, officers, corporate stockholders, partners, employees,
servants and agents of each of the foregoing.
"INSPECTING PARTY" shall have the meaning specified in
Section 7(c)(i).
"INSURANCE BROKERS" shall mean any independent firm of
internationally recognized insurance brokers.
"INSURED PARTY" shall mean each Indemnified Party.
"LANDING GEAR" shall mean (i) each landing gear assembly of
the Aircraft identified by serial number in Lease Supplement No. 1 and (ii)
any landing gear assembly substituted for any such identified landing gear
assembly in accordance with this Agreement.
"LEASE SUPPLEMENT" shall mean any lease supplement entered
into in ACCORDANCE with the terms hereof to this Agreement substantially in
the form of Exhibit D; "Lease , Supplement No. 1" to be entered into between
Lessor and Lessee on the Delivery Date for the purpose of leasing the
Aircraft under and pursuant to the terms of this Agreement.
"LEASE TERM" shall mean the period described in Section 3(a).
"LENDER" means each of (a) any person or persons as the
Lessor may from time to time advise Lessee in writing to be the person or
persons providing finance to the Lessor to assist it in purchasing, funding
or refinancing the purchase by the Lessor of the Aircraft and including,
where the context so admits or requires, any agent or trustee for any one or
more of such persons; and (b) any of the respective successors, permitted
assigns or permitted transferees of any one or more of any such persons.
"LETTER OF CREDIT" shall mean the letter of credit issued by
a U.S. bank reasonably acceptable to Lessor delivered by Lessee to Lessor
pursuant to Section 3(d) as security for Lessee's performance hereunder.
"LESSEE JURISDICTION" shall mean the United States.
"LESSOR LIEN" shall mean any Lien of any Person claiming by,
through or under Lessor which arises from any act or omission of Lessor,
other than any Lien created or permitted hereby or by any other Operative
Document.
9
[Lease Agreement]
"LIEN" means any mortgage, pledge, lien, charge,
encumbrance, hypothecation, lease, sublease, seizure, exercise of rights,
security interest, judgment, writ, order or other claim or right of
possession of any kind or nature whatsoever, however and wherever created or
arising and whether or not consensual (including, without limitation, any
agreement or arrangement to give or effect any of the foregoing and any
conditional sale or other title retention agreement).
"LIFE LIMITED COMPONENT" shall mean any part or component
on the Aircraft for which the manufacturer has specified a certain life in
either calendar time, Cycles or Hours accumulated after which such part or
component must be replaced.
"MAINTENANCE PLANNING DOCUMENT" or "MPD" shall mean the
Boeing 737 maintenance planning document.
"MAJOR CHECKS" shall mean any "D" check, "C" check,
multiple "C" check (including all lower checks and all other items that are
due before the next "C" check), heavy structural inspection (or equivalent),
structural inspection or annual heavy maintenance visit or segment thereof
for commercial aircraft of the same model as the Aircraft as set out in the
Approved Maintenance Program.
"MAJOR MODIFICATIONS" includes, but shall not be limited
to: (i) changes that alter the fundamental nature of the Aircraft as a
passenger and cargo carrying aircraft or Cabin modifications that materially
change the interior layout of the Aircraft (excluding changes to the seats or
galleys), (ii) changes to the Aircraft structure or performance of the
Aircraft, (iii) changes that adversely affect interchangeability or
replaceability of Parts, (iv) substitution of different types of equipment or
accessories which are not equivalent in cost, value, remaining useful life
and/or operational capability to the equipment or accessories being replaced,
(v) changes that invalidate or impair any warranty with respect to the
Aircraft or any Engine or Part, (vi) changes that adversely affect the
eligibility of the Aircraft to obtain an Airworthiness Certificate from the
Aviation Authority or (vii) any changes that result in a variation from the
original type certificate for the Aircraft, but shall exclude changes
pursuant to ADs and SBs provided by the Airframe Manufacturer which have
Aviation Authority approval and all Required Modifications.
"MODIFICATION" shall mean any modification, addition,
alteration, removal or other change, including, without limitation, ADs and
SBs, to the Airframe, any Engine or any Part.
"OPERATIVE DOCUMENTS" shall mean this Agreement, each Lease
Supplement and any other document, agreement or instrument to which Lessee is
a party, or to which it consents in writing, or which is delivered by or on
behalf of Lessee and which is entered into or delivered in connection with
any of the foregoing or with any of the transactions contemplated by the
foregoing.
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[Lease Agreement]
"OWNER PARTICIPANT" means Sanwa Business Credit
Corporation, a Delaware corporation.
"OWNER TRUSTEE" means First Security Bank, National
Association, in its capacity as trustee under the Trust Agreement.
"PARTS" shall mean any and all appliances, parts,
components, modules, communications equipment, computers, instruments,
appurtenances, accessories, furnishings and other equipment of whatever
nature (including the APU, the Landing Gear but excluding complete Engines or
engines) which may from time to time be incorporated or installed in or
attached to the Airframe or any Engine, so long as title thereto shall remain
vested in Lessor, in accordance with the terms hereof.
"PAST DUE RATE" shall mean a rate per annum equal to 3%
over the Base Rate.
"PERMITTED JURISDICTION" shall mean any country listed in
Schedule 1.
"PERMITTED LIEN" shall mean any Lien referred to in clauses
(i) through (vi) of Section 8(a).
"PERSON" shall mean any individual, corporation, trust,
partnership, unincorporated association, joint venture, association,
joint-stock company, government or Government Entity.
"PROPOSAL LETTER" shall mean the Letter Agreement between
essee and Lessor dated March 27, 1998.
"PURCHASE AGEEMENT" shall mean the purchase agreement
between Owner Participant and ALL dated June 1, 1998.
"RELATED INDEMNITEE" shall mean, with respect to any
Indemnified Party, any Affiliate, successor, assign, director, officer,
corporate stockholder, partner, employee, servant or agent of such
Indemnified Party.
"RENT" shall mean, collectively, Basic Rent and
Supplemental Rent.
"REPLACEMENT ENGINE" shall mean an Engine Manufacturer model
JT8D-9A engine (or an improved model having a modification status, value and
utility at least equal to such an Engine Manufacturer model JT8D-9A engine)
(including, without limitation, all warranty rights with respect to such
engine) suitable for installation and use on the Airframe without impairing
the value or utility of the Aircraft, and with neither Engine Flight Hours
nor Engine Cycles since the last Basic Shop Visit greater than 4,000 Engine
Flight Hours or Engine
11
[Lease Agreement]
Cycles, as applicable, and which has a value and utility at least equal to
the Engine it is replacing (assuming such Engine was in the modification
status, condition and repair required by the terms hereof immediately prior
to being replaced) and which has been maintained, serviced, repaired and
overhauled in substantially the same manner as is required under this
Agreement as to "Engines", title to which shall have been conveyed to Lessor
pursuant to the terms hereof, together with all Parts relating to such Engine
so long as the same shall be incorporated or installed in or attached to such
Engine leased hereunder, and any and all Parts removed therefrom so long as
title to such removed Parts shall remain vested in Lessor in accordance with
the terms hereof.
"REQUIRED MODIFICATIONS" has the meaning specified in
Section 10(c)(ii)(B).
"REQUIRED SBS" shall mean all alert SBs and any other SBs
which have been accomplished on 50% of Lessee's fleet prior to the Return
Date.
"RETURN" shall mean the return of the Aircraft by Lessee to
Lessor at the Return Location in the condition and manner required by Section
7 and the other provisions of this Agreement and the other Operative
Documents, as evidenced by the execution by Lessor, and the delivery to
Lessee, of the Return Receipt referred to in Section 7(f).
"RETURN DATE" shall mean the date upon which the Aircraft
is returned to Lessor pursuant to and in accordance with Section 7 hereof.
"RETURN LOCATION" shall mean such location in the western
United States, western Canada or Mexico as may be designated by Lessor, or
such other location as shall be mutually agreed between Lessor and Lessee.
"RETURN RECEIPT" shall have the meaning specified in
Section 7(f).
"SB" shall mean any service bulletin as issued by the
Airframe Manufacturer, Engine Manufacturer or the manufacturer of any
appliances or Parts.
"SCHEDULED DELIVERY DATE" shall mean June 9, 1998 (local
time at the Delivery Location), or if such date is not a Business Day, the
next succeeding Business Day (such date to be extended in the event of a
delay in the delivery of the Aircraft as a result of additional work being
performed on the Aircraft at the request of Lessee), provided that if the
conditions precedent of Lessor contained in Section 4 hereof are not met, or
waived by Lessor, on such date, (i) Lessor and Lessee shall cooperate and, as
applicable, use reasonable efforts to satisfy such conditions precedent as
soon as practicable after such date and (ii) the next Business Day on which
such conditions precedent are met, or waived by Lessor, shall be the
Scheduled Delivery Date.
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[Lease Agreement]
"SECURITY DEPOSIT" shall have the meaning specified in
Section 2(e).
"SHOPVISIT" shall mean, with respect to an Engine,
scheduled maintenance of such Engine which requires the Engine to be removed
from the airframe to which it is attached (or, if the Engine is not attached
to an airframe, scheduled maintenance that would require such removal if the
Engine were so attached).
"STATE OF REGISTRATION" shall mean the United States.
"STIPULATED LOSS VALUE" shall mean US$12,000,000.
"SUPPLEMENTAL RENT" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which Lessee assumes, agrees or otherwise
becomes liable to pay to Lessor, any Indemnified Party or any other Person
hereunder or under any of the other Operative Documents, including, without
limitation, payments of or in respect of the Stipulated Loss Value, Expenses,
Taxes, Break Amount or other amounts payable under any indemnities.
"TAXES" shall mean any and all present or future fees
(including, without limitation, license, documentation and registration
fees), taxes (including, without limitation, income, receipts, sales, rental,
use, turnover, value-added, property (tangible or intangible), excise,
franchise, capital, user, transfer, doing business and stamp taxes or
duties), licenses, levies, imposts, duties, recording charges or fees, or
other charges, assessments, deductions or withholdings of any nature
whatsoever, together with any assessments, penalties, late payment charges,
notary charges, fines, additions to tax or other similar liabilities with
respect to any of the foregoing and interest on any of the foregoing.
"TAX INDEMNITEE" shall mean Lessor, in its individual and
trust capacities, Owner Participant, each of their respective Affiliates, any
successor or permitted assign of either of the foregoing and the directors,
officers, employees, servants and agents of each of the foregoing.
"TECHNICAL ACCEPTANCE CERTIFICATE" the Technical Acceptance
Certificate, in the form of Exhibit A-1, delivered at Delivery of the
Aircraft.
"TIME CONTROLLED COMPONENT" shall mean any component that
Lessee monitors with an interval pursuant to which action is taken to
inspect, replace and/or overhaul such component and that is limited by
Airframe Cycles, Airframe Flight Hours and/or calendar time.
"TRUST AGREEMENT" means that certain Trust Agreement dated
as of June 1, 1998 between Owner Participant and Owner Trustee.
13
[Lease Agreement]
(b) CONSTRUCTION.
(i) In this Agreement, unless the contrary intention is
stated, a reference to:
(u) Each of "Lessor," "Lessee" or any other
Person includes, without prejudice to the provisions of this
Agreement, any successor in interest to it and any permitted
assignee and, in the case of any Government Entity, any
Government Entity succeeding to all or any of its functions;
(v) Words importing the plural include the
singular and vice versa;
(w) Any document or any law includes that
document or that law, as the case may be, as amended, modified
or supplemented from time to time in accordance with its
terms, and any document entered into or any law enacted or
promulgated, as the case may be, in substitution or
replacement therefor;
(x) A "Law" (1) includes any statute,
decree, constitution, regulation, decision, finding, order,
rule, judgment or directive of any Government Entity, (2)
includes any treaty, pact, compact or other agreement to which
any Government Entity is a signatory or party, (3) includes
any judicial or administrative interpretation or application
thereof, and (4) is a reference to any of the foregoing as
amended, substituted, reissued or reenacted;
(y) The words "this Lease," "this
Agreement," "hereby," "herein," "hereto," "hereof" and
"hereunder" and words of similar import when used in this
Agreement refer to this Agreement as a whole including,
without limitation, the Schedules and Exhibits, and all
Annexes thereto, and not to any particular provisions of this
Agreement; and
(z) A Section or an Exhibit or a Schedule is
a reference to a section of, or an exhibit or schedule to,
this Agreement.
(ii) Headings used in this Agreement are for convenience
only and shall not in any way affect the construction of, or be taken into
consideration in the interpretation of, this Agreement.
SECTION 2. LEASE OF AIRCRAFT.
(a) AGREEMENT TO LEASE. Subject to satisfaction of the
conditions set forth in Section 4 and to the provisions of this Section 2,
Lessor hereby agrees to deliver the Aircraft to Lessee at the Delivery
Location and to lease the Aircraft to Lessee, and Lessee hereby agrees to
14
[Lease Agreement]
accept the Aircraft at the Delivery Location and to lease the Aircraft from
Lessor, on the Scheduled Delivery Date, in each case in the condition
specified in Schedule 2, but otherwise in an "as is, where is" condition,
pursuant to the terms and conditions of this Agreement and the other
Operative Documents, the commencement of such leasing to be evidenced by the
execution by Lessor and Lessee of Lease Supplement No. 1. At the time of
delivery of the Aircraft to Lessee, the Aircraft shall be free and clear of
all Liens. Lessee hereby agrees that its execution of Lease Supplement No. 1
shall, without further act, constitute unconditional and irrevocable
acceptance by Lessee of the Aircraft for all purposes of this Agreement.
(b) DELIVERY CONDITIONS: INSPECTIONS.
(i) Lessor shall use reasonable best efforts to procure that
Transmile complies with its obligations with regard to delivery of the
Aircraft (the "Delivery") pursuant to the Purchase Agreement. Lessee shall be
entitled to participate in the inspection and test flight (not to exceed two
(2) hours in length) relating to the delivery of the Aircraft from Transmile,
which inspection shall take place at Singapore Technologies, Paya Lebar,
Singapore ("Inspection Location"). Lessee shall be entitled to have two (2)
representatives on board as observers of any test flight. Lessee's
participation in the inspection and test flight under the Purchase Agreement
shall satisfy Lessor's obligations to provide Lessee with reasonable
opportunity to verify that the Aircraft meets the Delivery Conditions.
(ii) Upon completion of the inspection and test flight
referred to above and provided the Aircraft is in the condition required
pursuant to Schedule 2, Lessee agrees to execute and deliver to Lessor a
technical acceptance certificate (the "Technical Acceptance Certificate")
substantially in the form attached hereto as Exhibit A. Upon execution of the
Technical Acceptance Certificate, Lessee shall be deemed to have found the
Aircraft to be in acceptable condition for delivery hereunder (and shall not
be permitted to refuse to accept delivery of the Aircraft on the Delivery
Date on that basis) except to the extent damage or loss to the Aircraft or
any Part thereof occurs during the period following execution of the
Technical Acceptance Certificate and prior to the Ferry Flight (unless
Lessor has repaired any such damage or loss prior to the Delivery Date). To
the extent that the condition of the Aircraft at the time of the inspection
and test flight referred to above is worse than the condition as set out in
Schedule 2, Lessee may accept the Aircraft under the Technical Acceptance
Certificate in its actual condition but Lessee and Lessor will
correspondingly amend the return conditions set out in Schedule 5.
(iii) Prior to delivery of the Aircraft, Lessor shall cause
the Aircraft to be flown (the "Ferry Flight") to the Delivery Location;
provided, however, that Lessor shall bear no responsibility for damage to the
Aircraft (except to the extent such damage constitutes an Event of Loss)
which occurs during the Ferry Flight. At the conclusion of the Ferry Flight,
Lessee and Lessor shall execute and deliver the Final Acceptance Certificate.
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[Lease Agreement]
(iv) Lessor and Lessee shall cooperate such that the
inspection and delivery procedures shall minimize the tax impact to both
parties under Section 9(c) hereof
(c) CHANGES IN DELIVERY DATE, LIMITATION OF LESSOR'S
OBLIGATION TO DELIVER AIRCRAFT.
(i) Lessee acknowledges and agrees that Lessor's ability to
perform its obligations to deliver the Aircraft in the condition, at the
time, at the location and otherwise as specified in this Agreement is
dependent upon, among other things, delivery of the Aircraft under, and at
the time, at the location and otherwise in accordance with, the Purchase
Agreement. Lessee also acknowledges and agrees that Lessor may delay in the
delivery of, or fail to deliver, the Aircraft for reasons of Force Majeure
(including, without limitation, a failure by Transmile to perform its
obligations regarding delivery pursuant to the Purchase Agreement).
(ii) Lessor shall use reasonable efforts to give advance
written notice to Lessee of any change in the Scheduled Delivery Date.
(iii) Accordingly, if, owing to (y) any delay in the
delivery of, or failure to deliver, the Aircraft to Lessee due to a delay in
the delivery of the Aircraft to Lessor pursuant to the terms of the Purchase
Agreement and/or (z) reasons of Force Majeure, Lessor shall delay in the
delivery of the Aircraft under this Agreement beyond the calendar date
specified in the definition of "Scheduled Delivery Date," then Lessee shall
accept delivery of the Aircraft on the first Business Day after such date on
which Lessor has possession of the Aircraft at the Delivery Location;
PROVIDED, HOWEVER, that if delivery of the Aircraft under this Agreement is
delayed beyond the Commitment Termination Date, then either party hereto may,
by written notice to the other, terminate this Agreement and each other
Operative Document, whereupon neither Lessor nor Lessee shall have any
further obligation to the other hereunder or thereunder, except that Lessor
shall be obligated to return the Security Deposit paid (or delivered) by
Lessee prior to such termination. In the event of any such delay or any
eventual termination of this Agreement, Lessor shall not be responsible for
any losses, including loss of profit, costs or Expenses arising therefrom
suffered or incurred by Lessee.
(d) BRIDGING MAINTENANCE; REGISTRATION; AIRWORTHINESS
CERTIFICATE. Following delivery of the Aircraft to Lessee, Lessee, except as
explicitly set forth in Schedule 2 hereto, shall be solely responsible for:
(i) causing the Aircraft to be listed on Lessee's Operating
Specifications;
(ii) performing, or causing to be performed, all bridging
maintenance work necessary to allow Lessee to operate the Aircraft in
regularly scheduled revenue passenger service;
16
[Lease Agreement]
(iii) obtaining the Airworthiness Certificate for the
Aircraft; and
(iv) importing the Aircraft to the United States.
SECTION 3. LEASE TERM RENT; PAYMENTS.
(a) LEASE TERM. The term of this Lease (the "Lease Term")
shall commence on the Delivery Date and, unless this Agreement is terminated
earlier pursuant to the provisions hereof, shall end on the Expiry Date.
(b) BASIC RENT. During the Lease Term, from and including
the Delivery Date, Lessee shall pay rent for the Aircraft in advance on each
Basic Rent Date during the Lease Term in advance in immediately available
Dollars, in one hundred and two (102) consecutive monthly payments, as set
forth in Exhibit B hereto; provided, however, that Lessee shall pay Basic
Rent for the period from the Delivery Date through completion of the bridging
maintenance work contemplated by Schedule 2 hereto in arrears, following
completion of such bridging maintenance work.
(c) SUPPLEMENTAL RENT. Lessee shall pay, or cause to be
paid, promptly to Lessor, or to whomsoever shall be entitled thereto, any and
all Supplemental Rent constituting or in respect of the Stipulated Loss
Value, Break Amount and all other amounts of Supplemental Rent when and as
the same shall become due and owing. In the event of any failure on the part
of Lessee to pay any Supplemental Rent when due, Lessor and each other
Indemnified Party shall have all rights, powers and remedies provided for
herein or in any other Operative Document, or at law or in equity or
otherwise, in the case of nonpayment of Basic Rent. Lessee also shall pay to
Lessor, or to whomsoever shall be entitled thereto, on demand, as
Supplemental Rent, to the extent permitted by applicable law, interest at the
Past Due Rate on any part of any installment of Basic Rent not paid when due
for any period for which the same shall be overdue and on any payment of
Supplemental Rent (to the extent permitted by applicable law) not paid when
due for the period until the same shall be paid.
(d) SECURITY DEPOSIT.
(i) INITIAL DEPOSIT. In connection with the execution of the
Proposal Letter, Lessee delivered to Lessor a letter of credit (the "Letter
of Credit") in the amount of US$250,000 (the "Initial Security Deposit"). The
Initial Security Deposit shall be and remain the property of Lessor unless
the Delivery Date fails to occur due for reasons other than a default by
Lessee, in which case the Letter of Credit shall be returned to Lessee.
17
[Lease Agreement]
(ii) In the event Lessee fails to meet any financial
requirement (each, a "Financial Requirement") set forth in Exhibit C hereto
(such failure, a "Credit Event"), Lessee shall increase the Initial Security
Deposit in accordance with Exhibit C hereto.
(iii) The Security Deposit shall be held by Lessor during
the Lease Term as security for the fall and punctual performance of all of
Lessee's obligations to Lessor under this Agreement including, without
limitation, satisfaction of the requirements of the condition of the Aircraft
at the end of the Lease Term as set forth in Section 7. Lessee acknowledges
that Lessor may commingle the Security Deposit with its general funds. Lessee
hereby grants to Lessor a security interest by way of first priority
perfected security interest in its interest, if any, in the Security Deposit
and the proceeds thereof and hereby grants to Lessor any and all of Lessee's
right, title and interest therein, if any, as security for Lessee's
obligations hereunder. No interest shall accrue in favor of Lessee in respect
of the Security Deposit held by Lessor. At the end of the Lease Term, upon
performance by Lessee, satisfactory to Lessor, of all of Lessee's obligations
hereunder (other than potential contingent obligations (of which Lessor has
no knowledge) under the indemnity provisions of this Agreement), Lessor shall
promptly refund any remaining Security Deposit to Lessee. Lessor's
obligations in respect of the return of the Security Deposit shall be that of
a debtor of Lessee, not as a trustee or other fiduciary.
(iv) If a Default shall have occurred and be continuing,
Lessor may, but shall not be obliged to, apply the Security Deposit in whole
or in part for the payment of any Rent, indemnities, legal fees and other
expenses, insurance and other casualty payments and any other amount owing
from time to time by Lessee under this Agreement, for the payment of any loss
or damage suffered by Lessor as a result of any Default or utilize the
Security Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or to otherwise remedy any circumstance giving rise to a
Default, including the redelivery condition of the Aircraft, without
prejudice to any other remedy of Lessor (it being understood that an
application of the Security Deposit shall not constitute a cure of any
Default unless and until Lessee shall have complied with the following
sentence). In any such event Lessee shall, on demand, restore the full amount
of the Security Deposit by payment to Lessor of an amount in immediately
available Dollars equal to the amount by which the balance of the Security
Deposit has been reduced under this clause (iv).
(v) The Letter of Credit shall be of a duration of at least
one year, and shall provide for thirty (30) days' notice to the Lessor prior
to the expiration date if it has not been extended, renewed or replaced by
the issuer (the "Non-renewal Notice") and shall otherwise be in substantially
the form attached as Exhibit H hereto. The Letter of Credit shall provide for
payments to be made thereunder at sight, in dollars, and for drawings to be
made (by advice, confirmation or otherwise) in Honolulu, Hawaii. In the event
that the long-term unsecured debt rating of the issuing bank is reduced to a
level below A- (as rated by Standard & Poor's) or if the Lessor shall have
received a Non-renewal Notice (a "Substitution Event"), Lessor shall have the
18
[Lease Agreement]
right to draw down the entire amount of the Letter of Credit, if Lessee shall
not, within ten days of the occurrence of such Substitution Event, have
caused such Letter of Credit to be replaced with a substitute Letter of
Credit issued by a commercial bank reasonably acceptable to Lessor which
complies with the required minimum rating specified above.
(e) PAYMENTS IN GENERAL.
(i) All payments of Rent shall be made directly by Lessee
in Dollars by wire transfer of immediately available funds on the date for
payment to the account for Lessor specified peci led in column (2) of
Schedule 3, or to such account as Lessor shall otherwise direct by notice to
Lessee.
(ii) If the due date for any payment of Basic Rent, Break
Amount or Stipulated Loss Value is not a Business Day, then, unless otherwise
provided herein, such payment shall be made on the Business Day next
succeeding such due date with the same force and effect as if made on such
due date and without adjustment in the amount due.
(iii) All amounts of interest or amounts calculated by
reference to interest payable under any of the provisions of this Agreement
shall be calculated on the basis of the actual number of days elapsed and a
365-day or 366-day year, as applicable.
(f) NO DEDUCTIONS OR WITHHOLDINGS. All payments by Lessee
under this Agreement or any other Operative Document to Lessor or any other
Indemnified Party, including payments in respect of Basic Rent, Supplemental
Rent, interest, fees, indemnities or any other item, shall be made in full
without any counterclaim, delay, deduction or withholding of any kind or
nature whatsoever (including, without limitation, in respect of any setoff,
counterclaim, Taxes, insurance charges, monetary transfer fees or any costs
and expenses arising in connection with the use and operation of the
Aircraft) but excluding deduction or withholding required by law with respect
to Taxes for which Lessee is not required to indemnify Lessor or a Tax
Indemnitee under Section 9(c).
SECTION 4. CONDITIONS PRECEDENT. (I) The obligations of Lessor to
lease the Aircraft to Lessee are subject to the fulfillment to the
satisfaction of Lessor, and Lessee shall (with respect to such conditions
precedent as are within Lessee's reasonable control) procure such
fulfillment, on or prior to the Delivery Date (or, if another date is
specified below, on or prior to such date) of the following conditions
precedent:
(a) DELIVERY OF AIRCRAFT. Transmile shall have performed all
of its obligations under the Purchase Agreement with respect to the delivery
of the Aircraft to Lessor.
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[Lease Agreement]
(b) DELIVERY CONDITIONS. The Aircraft shall have met all of
the Delivery Conditions set forth on Schedule 2 hereto.
(c) APPROVED MAINTENANCE PROGRAM. Prior to the Scheduled
Delivery Date, Lessee shall have provided to Lessor a summary of the Approved
Maintenance Program and such information reasonably requested by Lessor
regarding the proposed Approved Maintenance Program, in each case, for the
Aircraft (including, without limitation, evidence that the Aviation Authority
has approved the Approved Maintenance Program and such minimum equipment
list), and Lessor shall have reviewed and approved such Approved Maintenance
Program.
(d) DUE DILIGENCE. Prior to the Scheduled Delivery Date,
Lessor shall have completed, in a manner satisfactory to it, its due
diligence review with respect to the Lessee's financial condition and
statements, including review of the legal and regulatory framework applicable
to this transaction, including, without limitation, resolution to the
reasonable satisfaction of Lessor of all legal and tax related matters.
(e) AGREEMENTS AND DOCUMENTS. The following documents,
agreements, instruments or certificates shall have been duly authorized,
executed and delivered by the respective party or parties thereto, shall each
be satisfactory in form and substance to Lessor and shall be in full force
and effect and in the English language and executed counterparts shall have
been delivered to Lessor and/or to its respective counsel:
(i) this Agreement;
(ii) Lease Supplement No. 1 covering the delivery and
acceptance of the Aircraft and dated the Delivery Date;
(iii) a delivery receipt (the "Delivery Receipt") in the form
of Annex A to Schedule 2;
(iv) (y) a Certificate of Insurance in the form of Exhibit F
and which otherwise complies with the requirements of Section 15 and
(z) a Broker's Letter in the form of Exhibit G from the Insurance
Brokers and which otherwise complies with the requirements of Section
15, together with such other evidence as Lessor shall request as to the
due compliance by Lessee with Section 15;
(v) an opinion of Char, Sakamoto, Ishii, Xxx & Xxxxx, special
counsel to Lessee in the form of Exhibit K and covering such other
matters as Lessor may reasonably request;
20
[Lease Agreement]
(vi) copies of documents where available evidencing the
issuance of each Authorization that may be required in connection with
the remittance to Lessor and any other intended recipient of any amount
payable under this Agreement, or any other Operative Document, the
performance by Lessee of any of its respective obligations hereunder or
thereunder;
(vii) certified copies of Lessee's Certificate of
Incorporation, bylaws and any other organizational documents plus any
subsequent amendments thereto;
(viii) copies of resolutions of the Board of Directors of
Lessee or other written evidence of appropriate corporate action, duly
authorizing or ratifying the lease of the Aircraft hereunder, and the
execution, delivery and performance of this Agreement and the other
Operative Documents, certified by a duly authorized officer of Lessee,
in the case of any such resolutions, to have been passed at a duly
convened and constituted meeting, and in each case to be true,
accurate, complete, unamended and in full force and effect as of the
Delivery Date;
(ix) certificate signed by a duly authorized officer of
Lessee:
(u) certifying the incumbency, and the
accuracy of the signatures, of the Person or Persons
authorized to execute and deliver the Operative Documents on
behalf of Lessee;
(v) stating that Lessee's representations
and warranties contained in this Agreement and each other
Operative Document are and shall be true and correct on and as
of the Delivery Date as though made on and as of such date
(unless made as of a specified date, in which case such
representations and warranties shall be true and correct as of
such specified date); and
(w) stating that no Default or Event of
Default has occurred and is continuing or will result from the
lease of the Aircraft under this Agreement; and
(x) such other documents, agreements, certificates and
evidence with respect to the Aircraft, Lessee, any Persons acting for
Lessee or otherwise as Lessor may reasonably request in connection with
the consummation of the transactions contemplated by this Agreement or
the other Operative Documents, the taking of all proceedings (corporate
or otherwise) in connection therewith or compliance with all the
conditions set forth in this Section 4.
(f) DELIVERY DATE CONDITIONS. Each of the following shall
be true on the Delivery Date:
21
[Lease Agreement]
(i) Lessee shall have paid in full (or delivered) (x)
the first installment of Basic Rent and (y) the Initial Security
Deposit;
(ii) all representations and warranties of Lessee
hereunder and under the other Operative Documents shall be true and
correct on and as of the Delivery Date as though made on and as of
such date (unless made as of a specified date, in which case such
representations and warranties shall be true and correct as of such
specified date);
(iii) Lessee shall have performed, complied with and
observed all its obligations, covenants and agreements set forth
herein and in each other Operative Document which it is required to
perform, comply with or observe prior to or on the Delivery Date;
(iv) no Default, Event of Default or Event of Loss,
or event, condition or circumstance that would with the giving of
notice or passage of time or both become or give rise to an Event of
Loss, shall have occurred;
(v) (y) no material adverse change has occurred in the
financial condition or prospects of Lessee from that set forth in its
consolidated financial statements dated December 31, 1997 and (z)
nothing has occurred between December 31, 1997 and the Delivery Date
which could materially and adversely affect the ability of Lessee to
carry on its business or to perform its obligations under any
Operative Document to which it is or will be a party; and
(vi) Lessor shall have received a copy of Lessee's
consolidated financial statements referenced in Section 5(b)(x)
hereof.
(g) REGISTRATION. The Aircraft shall be registered with the
Aviation Authority in the name of Lessor.
(h) IMPRT LICENSE AND FERRY FLIGHT PERMIT. Lessor shall be
satisfied that Lessee has obtained, or cause to be obtained, all
necessary licenses and certificates (or exemptions therefrom) for the
importation and ferrying of the Aircraft into the State of
Registration and that all applicable importation, customs and other
similar duties in respect of the Aircraft have been or will be
discharged (or the relevant exemptions obtained), and Lessor shall
have received a copy of such licenses and certificates (or exemption
therefrom).
(i) NECESSARY GOVERNMENT ACTIONS. All appropriate action
required to have been taken prior to the Delivery Date by the
Aviation Authority or any governmental or political agency,
subdivision or instrumentality of the United States in connection
with the transactions contemplated hereby shall have been taken, and
all orders, permits, licenses, waivers,
22
[Lease Agreement]
authorizations, exemptions and approvals of such entities required to be in
effect on the Delivery Date in connection with the transactions contemplated
hereby shall have been issued, and all such orders, permits, licenses,
waivers, authorizations, exemptions and approvals shall be in full force and
effect on the date hereof and on the Delivery Date (no such orders, permits,
licenses, waivers, authorizations, exemptions and approvals shall be issued
on a temporary basis pending further review by the entity requiring such to
be in effect).
(j) NO GOVERNMENT ACTIONS. No action or proceeding shall
have been instituted nor shall governmental action be threatened before any
United States or foreign court or governmental agency, nor shall any order,
judgment or decree have been issued or proposed to be issued by any United
States or foreign court or governmental agency at the time of the Delivery
Date to set aside, restrain, enjoin or prevent the completion and
consummation of this Lease or the transactions contemplated hereby and
thereby.
(k) NO CHANGE IN LAW. No change shall have occurred after
the date of execution and delivery of this Lease in applicable law or
regulations thereunder or interpretations thereof by appropriate regulatory
authorities which, in the reasonable opinion of Lessor, would make it a
violation of a law or regulations for Lessor to execute, deliver and perform
its obligations hereunder or under any other Operative Document to which it
is a party.
The conditions precedent specified in this Section 4(I) are for the sole
benefit of Lessor and may be waived or deferred in whole or in part and with
or without condition by Lessor. If any of such conditions is not satisfied or
waived in writing by Lessor on and as of the Delivery Date and Lessor, in its
sole discretion, nonetheless delivers the Aircraft to Lessee hereunder,
Lessee hereby covenants and agrees to satisfy, or cause the satisfaction of,
such outstanding conditions within thirty days after the Delivery Date.
(II) The obligations of Lessee to lease the Aircraft from Lessor are
subject to the fulfillment to the satisfaction of Lessee, and Lessor shall
(with respect to such conditions precedent as are within Lessor's reasonable
control) procure such fulfillment, on or prior to the Delivery Date (or, if
another date is specified below, on or prior to such date), of the following
conditions precedent:
(a) TITLE TO AIRCRAFT. Lessor shall have purchased the
Aircraft from Transmile and registered the Aircraft with the Aviation
Authority.
(b) DELIVERY CONDITIONS. The Aircraft shall have met all of
the Delivery Conditions set forth on Schedule 2 hereto.
23
[Lease Agreement]
(c) Lessee shall have received an opinion of Xxxxx, Xxxxx &
Xxxxxx, special FAA counsel, as to the absence of Liens of record with
respect to the Aircraft and in a form reasonably acceptable to Lessee.
(d) DELIVERY DATE CONDITIONS. Each of the following shall
be true on the Delivery Date:
(i) all representations and warranties of Lessor
hereunder and under the other Operative Documents shall be true and
correct on and as of the Delivery Date as though made on and as of
such date (unless made as of a specified date, in which case such
representations and warranties shall be true and correct as of such
specified date); and
(ii) Lessor shall have performed, complied with and
observed all its obligations, covenants and agreements set forth
herein and in each other Operative Document which it is required to
perform, comply with or observe prior to or on the Delivery Date.
The conditions precedent specified in this Section 4(II) are for the sole
benefit of Lessee and may be waived or deferred in whole or in part and with or
without condition by Lessee.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) DISCLAIMER: LESSOR'S REPRESENTATIONS. WARRANTIES AND
COVENANTS.
(i) THE AIRCRAFT SHALL BE DELIVERED UNDER THIS LEASE
"AS IS, WHERE IS" AND LESSEE AGREES, ACKNOWLEDGES AND ACCEPTS THAT,
NEITHER LESSOR NOR ANY OTHER INDEMNIFIED PARTY MAKES ANY WARRANTY OR
REPRESENTATION WHATSOEVER CONCERNING THE AIRCRAFT OR OTHERWISE.
LESSEE, FOR THE BENEFIT OF LESSOR AND EACH INDEMNIFIED PARTY, HEREBY
WAIVES, RELEASES AND RENOUNCES ALL WARRANTIES, REPRESENTATIONS AND
OTHER INDEMNITIES, OBLIGATIONS AND LIABILITIES OF LESSOR AND ANY OTHER
INDEMNIFIED PARTY AND ANY RIGHTS, CLAIMS AND REMEDIES OF LESSEE,
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, IN EACH CASE, WITH
RESPECT TO ANY NONCONFORMANCE OR DEFECT IN THE AIRCRAFT, ANY PART
THEREOF OR ANY OTHER THING DELIVERED, LEASED, CHARTERED OR TRANSFERRED
UNDER THIS LEASE, OR OTHERWISE INCLUDING, WITHOUT LIMITATION:
24
[Lease Agreement]
(A) ANY WARRANTY AS TO THE AIRWORTHINESS, VALUE, CONDITION,
DESIGN, OPERATION OF, OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN,
OR ANY DEFECT IN, THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY
DATA, ANY AIRCRAFT DOCUMENTATION OR ANY OTHER THING DELIVERED, SOLD OR
TRANSFERRED HEREUNDER;
(B) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE
FOR A PARTICULAR PURPOSE;
(C) ANY EXPRESS OR IMPLIED WARRANTY AS TO TITLE;
(D) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE;
(E) ANY OBLIGATION OR LIABILITY WITH RESPECT TO ANY ACTUAL OR
ALLEGED PATENT OR OTHER INTELLECTUAL PROPERTY INFRINGEMENT;
(F) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
WHETHER OR NOT IN STRICT OR ABSOLUTE LIABILITY OR ARISING FROM THE
NEGLIGENCE OF LESSOR OR ANY INDEMNIFIED PARTY, ACTUAL OR IMPUTED,
ACTIVE OR PASSIVE; AND
(G) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS
OR DAMAGE TO THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA
OR ANY OTHER THING, FOR ANY LOSS OF USE, REVENUE OR PROFIT OR FOR ANY
OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
(ii) DELIVERY BY LESSEE TO LESSOR OF LEASE SUPPLEMENT
NO. 1 WILL BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE
(BUT WITHOUT PREJUDICE TO ANY CLAIMS LESSOR OR LESSEE MAY HAVE
AGAINST THE AIRFRAME MANUFACTURER, ENGINE MANUFACTURER OR ANY
VENDOR WITH RESPECT TO THE AIRCRAFT) THAT LESSEE HAS EXAMINED
AND INSPECTED THE AIRCRAFT, THAT THE AIRCRAFT AND THE AIRCRAFT
DOCUMENTATION ARE SATISFACTORY TO LESSEE AND THAT LESSEE HAS
IRREVOCABLY AND UNCONDITIONALLY ACCEPTED THE AIRCRAFT FOR
LEASE HEREUNDER WITHOUT ANY RESERVATIONS WHATSOEVER.
25
[Lease Agreement]
(iii) Lessor represents and warrants that (i) on the
Delivery Date and throughout the Lease Term, so long as no
Event of Default shall have occurred and be continuing, except
as may be expressly provided in this Agreement or in any other
Operative Document to which Lessee is a party or consents,
Lessor shall not take or cause to be taken any action
inconsistent with Lessee's right of quiet enjoyment of, or
otherwise in any way interfere with or interrupt, the
continuing use, operation and possession of the Aircraft, the
Airframe or any Engine by Lessee or any permitted sublessee or
assignee thereof and (ii) Lessor and Owner Participant are
organized under the laws of the United States, or a state
thereof, and the trust created by the Trust Agreement is a
grantor trust for federal income tax purposes.
(iv) Notwithstanding anything herein to the contrary,
Lessee may install in the Aircraft passenger seats and
galleys, title to which is held by Lessee subject to a
security interest in favor of an unrelated third party or
title to which is held by an unrelated third party and such
part is leased or conditionally sold to Lessee (hereinafter
"Lessee Installed Parts").
Lessor agrees, for the benefit of Lessee and any
mortgagee or holder of any other security interest in any
engine (other than an Engine) or any Lessee Installed Part,
any lessor of any engine (other than an Engine) or Lessee
Installed Part and any mortgagee or conditional vendor of any
engine (other than an Engine) or Lessee Installed Part subject
to a conditional sale agreement or any other security
agreement, that no right, title to or interest in any such
engine or Lessee Installed Part shall be exercised or asserted
by the Lessor and the Lessor acknowledges and confirms that it
will not acquire any right, title or interest to or in any
such engine or Lessee Installed Part as a result of its
installation on the Aircraft.
No engine, part or Lessee Installed Part shall be
installed on the Airframe or any Engine unless either (i)
Lessee owns such item of equipment free and clear of all Liens
other than Permitted Liens or (ii) the mortgagee, owner,
lessor, conditional vendor or other lienholder in respect of
such item of equipment has agreed that it shall not acquire,
exercise or assert any interest over the Aircraft, the
Airframe, any Engine or any Part.
(b) LESSEE'S REPRESENTATIONS AND WARRANTIES. In order to
induce Lessor to enter into this Lease and to lease the Aircraft, Lessee
hereby represents and warrants to Lessor as of the date hereof and as of the
Delivery Date (unless, in each case, such representation and warranty is
expressly applicable on and as of another date or dates) that:
26
[Lease Agreement]
(i) ORGANIZATION. QUALIFICATION. ETC. Lessee (w) is a
company incorporated under the laws of the State of Delaware, (x)
holds all Authorizations necessary to authorize Lessee to engage in
air transport and to carry on scheduled passenger and cargo service in
each case as presently conducted, (y) has the corporate power and
authority to own or hold under lease its properties wherever located
or used and to enter into and perform its obligations under each
Operative Document to which it is a party, (z) is duly qualified and
authorized to do business, and is in good standing, in each
jurisdiction in which the nature of its business makes such
qualification necessary, except where the absence of such
qualification would not materially adversely affect its ability to
perform its obligations under the Operative Documents and (aa) is a
Certificated Air Carrier.
(ii) CORPORATE AUTHORITY. The execution, delivery and
performance by Lessee of this Agreement, Lease Supplement No. 1 and
each other Operative Document to which Lessee is a party have been
duly authorized by all necessary corporate action on the part of
Lessee, do not require any stockholder or shareholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee, except such as have been duly obtained or, by
the Delivery Date, will have been duly obtained, and copies of which
shall have been delivered to Lessor on or before the Delivery Date.
(iii) GOVERNMENT APPROVALS. Neither the execution and
delivery by Lessee of this Agreement, Lease Supplement No. 1 or any
other Operative Document to which Lessee is a party nor the
performance by Lessee of its obligations hereunder or thereunder
(including, without limitation, Lessee's payment of Rent in Dollars to
Lessor or any other Indemnified Party) requires any Authorization
(including, without limitation, any import, customs, foreign exchange
or other licenses or permits), except for (y) Authorizations that have
been duly obtained and are in full force and effect, and copies of
which shall have been delivered to Lessor on or before the Delivery
Date, and (z) any normal periodic and other reporting requirements
under the applicable rules and regulations of the Aviation Authority
(but only to the extent required to be observed or performed after the
Delivery Date).
(iv) NO BREACH. Neither the execution and delivery of
this Agreement, Lease Supplement No. 1 or any other Operative Document
by Lessee nor the consummation by Lessee of the transactions
contemplated hereby or thereby nor compliance by Lessee with any of
the terms or provisions hereof or thereof will (X) violate any of the
provisions of the organizational or charter documents or bylaws of
Lessee, (y) conflict with or contravene, or result in the creation,
perfection or enforcement of any lien under, any law applicable to or
binding upon the Aircraft, Lessee or any property of Lessee or (z)
conflict with or result in any breach of any of the terms or
provisions of, or constitute any default under, or result in or
require the creation of any
27
[Lease Agreement]
Lien upon any property of Lessee under, any indenture, mortgage, deed
of trust, conditional sales contract, note, loan, credit agreement or
other agreement or instrument to which Lessee is a party or by which
Lessee or its properties or assets may be bound or affected.
(v) LEGAL, VALID AND BINDING AGREEMENTS. This Lease,
Lease Supplement No. 1 and each other Operative Document to which
Lessee is a party, in each case, as and when entered into, have been,
or will be, duly executed and delivered by Lessee and constitute, or
will constitute, legal, valid, binding and enforceable obligations of
Lessee.
(vi) LITIGATION. There are no pending or threatened
actions or proceedings before any court or administrative agency (y) in
respect of this Agreement or any other Operative Document or the
Aircraft or the performance by Lessee of its obligations hereunder or
under any other Operative Document or (z) which would, if adversely
determined, materially adversely affect the ability of Lessee to
perform its obligations under the Operative Documents.
(vii) FILING. Except for the registration of the
Aircraft with the FAA and the filings or recordings described in
Schedule 4, no further action, including the filing or recording of any
instrument or document (including the filing of any Uniform Commercial
Code financing statement) is necessary or advisable under the laws of
the State of Registration or the Lessee Jurisdiction (x) in order for
this Agreement to constitute a valid and perfected lease of record
relating to the Aircraft, (y) to authorize or permit Lessee to perform
its obligations under each Operative Document (including, without
limitation, Lessee's obligation to pay Rent) or (z) fully to protect,
establish, perfect and preserve Lessor's title to, and Lessor's rights
and interests in, the Aircraft as against Lessee and any other Person.
(viii) NO WITHHOLDING. Lessee will not be required to
deduct from any Rent payment made or to be made hereunder any
withholding or other Tax under the laws of the State of Registration,
the Lessee Jurisdiction or any other jurisdiction, either (y) on or by
virtue of the execution or delivery by Lessee of this Agreement or any
other Operative Document or (z) on or by virtue of the performance by
Lessee of this Agreement or any other Operative Document, including,
without limitation, payment of Rent or any other amount made, or to be
made, by Lessee pursuant to this Agreement or any other Operative
Document.
(ix) NO DEFAULT OR EVENT OF DEFAULT. There has not
occurred any event which is presently continuing and which would
constitute a Default or Event of Default under this Agreement or any of
the other Operative Documents.
28
[Lease Agreement]
(x) FINANCIAL CONDITION. The statements of financial
position of Lessee as of December 31, 1997 and the related statements
of earnings and cash flows of Lessee for the year then ended, fairly
present the financial condition of Lessee as at such date and the
results of operations and cash flow of Lessee for the period ended on
such date, in accordance with generally accepted accounting principles
consistently applied (except as may be stated in the notes thereto),
and, since December 31, 1997, there has been no material adverse change
in such condition or operations, except as disclosed in press releases
issued by Lessee.
(xi) TAXES. Lessee has paid or caused to be paid all
Taxes when due and payable or has made adequate provision by way of
security for all Taxes payable by Lessee (except to the extent being
contested in good faith and by appropriate proceedings, and for the
payment of which adequate reserves have been provided, so long as such
contest does not involve a material danger of the sale, forfeiture,
confiscation, seizure or loss of the Aircraft, any Engine or Part
thereof). No Taxes (including, without limitation, any stamp or
value-added taxes), levies, imposts, duties or similar charges may be
imposed by the government of the Lessee Jurisdiction, or any Government
Entity or political or taxing subdivision therein, upon or with respect
to the execution or delivery of this Agreement or any other Operative
Document or the delivery of the Aircraft hereunder.
(xii) NO MATERIAL ADVERSE CHANGE. No event has
occurred or state of affairs exists that has or may have a material
adverse effect on (i) the ability of Lessee to carry on its business or
to perform its obligations under any Operative Document to which it is
or will be a party or (ii) the rights or interests of Lessor under any
Operative Document to which it is or will be a party.
(xiii) PARI PASSU. The obligations of Lessee under
this Agreement and the other Operative Documents are direct, general
and unconditional obligations of Lessee and rank at least pari passu
with all other present and future unsecured and unsubordinated
obligations (including contingent obligations) of Lessee with the
exception of such obligations as are mandatorily preferred by law and
not by virtue of any contract.
(xiv) SECTION 1110. Lessor is entitled to the
protection of Section 1110 of Chapter 11 of Title 11 of the United
States Code in connection with its right to take possession of the
Aircraft, Airframe and Engines in the event of a case under such
Chapter 11 in which Lessee is a debtor.
The rights and remedies of Lessor in relation to any
misrepresentation or breach of warranty on the part of Lessee shall not be
prejudiced by any investigation by or on behalf of
29
[Lease Agreement]
Lessor into the affairs of Lessee, by the performance of this Agreement or by
any other act or thing which may be done or omitted to be done by Lessor and
which would or might, but for this provision, prejudice such rights and
remedies.
SECTION 6. CERTAIN COVENANTS OF LESSEE. Lessee covenants and agrees
with Lessor at Lessee's sole cost and expense, as follows:
(a) MAINTENANCE OF CORPOATE EXISTENCE; DULY QUALIFIED;
CERTIFICATED AIR CARRIER. Subject to Section 6(b), at all times during the
Lease Term, Lessee shall (i) exist as a company incorporated under the laws
of the State of Delaware, (ii) hold all Authorizations necessary to authorize
Lessee to engage in air transport and to carry on passenger and cargo service
in each case as presently conducted by Lessee, (iii) have the corporate power
and authority to own or hold under lease its properties wherever located or
used and to enter into and perform its obligations under each Operative
Document to which it is a party, (iv) be duly qualified and authorized to do
business, and be in good standing, in each jurisdiction in which the nature
of its business makes such qualification necessary, except where the absence
of such qualification would not materially or adversely affect its ability to
perform its obligations under the Operative Documents and (v) at all times be
a Certificated Air Carrier.
(b) MERGER OR CONSOLIDATION. Lessee shall preserve its
corporate existence, and will not merge or consolidate with any person unless
the successor person resulting from such merger or consolidation (the
"Successor"):
(i) is the Lessee or an entity incorporated or
organized in the State of Delaware or another State of the United
States;
(ii) shall have a net worth immediately after such
merger or consolidation of not less than the Lessee's net worth
immediately prior thereto;
(iii) shall be authorized under applicable law to
perform the Lessee's obligations under this Lease to the same extent as
the Lessee;
(iv) shall deliver to the Lessor an agreement in
form and substance reasonably satisfactory to the Lessor containing an
assumption by the Successor of the Lessee's representations and
warranties under this Lease, together with the due and punctual
performance of all the Lessee's obligations under this Lease; and
(v) shall deliver to the Lessor an opinion of counsel
reasonably satisfactory in form and substance to the Lessor to the
effect that the agreement referred to in sub-clause (iii) above
constitutes the Successor's legal, valid, binding and enforceable
obligations.
30
[Lease Agreement]
(c) REPORTING REQUIREMENTS. The Lessee shall furnish to the
Lessor and the Lender:
(i) within 60 days after the last day of the first
three fiscal quarters of each fiscal year of Aloha Airgroup Inc.,
unaudited consolidated quarterly financial statements of the Aloha
Airgroup, Inc. prepared for such quarter as of the last day of such
quarter and statements of income and retained earnings for such fiscal
quarter and on a comparative basis figures for the corresponding period
of the immediately preceding fiscal year, all in reasonable detail,
each such statement to be certified in a certificate of Aloha Airgroup,
Inc.'s chief financial officer or chief accounting officer as fairly
presenting the financial position and the results of operations of
Aloha Airgroup, Inc. as at its date and for such quarter (subject to
year-end audit adjustments) and as having been prepared in accordance
with GAAP;
(ii) as soon as available but not in any event later
than 120 days after the last day of each fiscal year of Aloha Airgroup,
Inc., audited financial statements of the Aloha Airgroup, Inc. prepared
for such year, including a balance sheet of Aloha Airgroup, Inc. of the
last day of such year, statements of income and retained earnings of
Aloha Airgroup, Inc. for such fiscal year, a balance sheet of Aloha
Airgroup, Inc. as of the last day of such year and statements of income
and retained earnings of Aloha Airgroup, Inc. for such fiscal year and
in all cases on a comparative basis figures for the immediately
preceding fiscal year, all in reasonable detail, each prepared in
accordance with GAAP and certified without qualification by Coopers &
Xxxxxxx or another of the largest national firms of independent
certified public accountants as fairly presenting the financial
position and the results of operations of Aloha Airgroup, Inc. at the
end of and for such fiscal year and as having been prepared in
accordance with GAAP;
(iii) in lieu of the financial statements referred to
in sub-clauses (i) and (ii) above, any Quarterly Reports on Form 10-Q
and Annual Report on Form 10-K for the respective periods filed by
Aloha Airgroup, Inc. pursuant to and in accordance with the Securities
Exchange Act of 1934, as amended;
(iv) concurrently with the financial statements
furnished pursuant to Clauses 6(c)(i) and (ii) above, an officer's
certificate signed by the chief financial officer or chief accounting
officer of Lessee certifying to the best knowledge after due inquiry of
such officer that no Default occurred during the period covered by such
financial statements and no Default exists on the date of such
officer's certificate or, if a Default occurred or exists, stating that
fact and specifying the nature and period of existence of such Default
and the actions Lessee took or proposes to take with respect to such
Default;
31
[Lease Agreement]
(v) at the same time as it is issued to the
creditors of the Lessee, a copy of each, notice or circular issued
to the Lessee's creditors as a group; and
(vi) on request from time to time such other
information regarding the Lessee and its business and affairs as
the Lessor or the Lender may reasonably request.
(d) GOVERNMENT APPROVALS. Lessee shall maintain, or cause
to be maintained, in full force and effect all Authorizations obtained or
effected in connection with this Agreement and every document or instrument
contemplated hereby as are required to be maintained and shall take all such
additional action as may be necessary or advisable in connection therewith.
Lessee further undertakes to obtain or effect any new or additional
Authorizations as may become necessary for the performance of any of the
terms and conditions hereof or any other document or instrument contemplated
hereby.
(e) TAXES. Lessee shall file or cause to be filed all tax
returns which are required to be filed and shall pay or cause to be paid all
Taxes when due and payable (except to the extent being contested in good
faith and by appropriate proceedings, and for the payment of which adequate
reserves have been provided but only as long as such proceedings do not
involve any material danger of the sale, forfeiture, confiscation, seizure or
loss of the Aircraft or any interest therein).
(f) PLACE OF BUSINESS. Lessee shall provide to Lessor
written notice of any change in its principal place of business as set forth
in Schedule 3 within 30 days thereafter.
(g) FILINGS. Lessee shall promptly take all such action,
including the filing or recording of any instrument or document as may, from
time to time, be necessary or advisable under the laws of the State of
Registration, the Lessee Jurisdiction or any jurisdiction in which the
Aircraft is or will be operated (x) in order for this Agreement to constitute
a valid and perfected lease of record relating to the Aircraft, (y) to
authorize or permit Lessee to perform its obligations under each Operative
Document (including, without limitation, its obligation to pay Rent) or (z)
to fully protect, establish, perfect and preserve Lessor's title to, and
Lessor's rights and interests in, the Aircraft as against Lessee, and any
other Persons, excluding any third party claims arising prior to Delivery,
Lessor Liens and Liens granted by Lessor to Lessor's lenders. For the
avoidance of doubt, the cost of all filings and related notarizations,
required by this Agreement or any other Operative Document shall be borne by
Lessee.
(h) APPROVED MAINTENANCE PROGRAM. Lessee shall not make any
substantive changes to the Approved Maintenance Program unless Lessor shall
have reviewed and approved such substantive changes to the Approved
Maintenance Program which Lessee proposes to make during the Lease Term,
provided that (i) substantive changes shall mean changes specifically related
to the intervals between maintenance actions or replacements, and (ii)
Lessor's
32
[Lease Agreement]
approval/disapproval of such substantive changes shall be reasonable and
consistent with industry standards. Written notice, as specified in Section
23(f), of a proposed substantive change to the Approved Maintenance Program
may be given by Lessee independently or as part of a quarterly report
delivered pursuant to Section I 0(d)(vii) hereof. If Lessor has not notified
Lessee that Lessor is unwilling to approve a proposed substantive change
within ten (10) Business Days of Lessor's receipt of written notice thereof,
Lessor shall be deemed to have approved of such change.
SECTION 7. RETURN OF THE AIRCRAFT.
(a) DATE AND LOCATION OF RETURN. Upon any expiration or
termination of the Lease Term, subject only to Section 13(b)(ii)(x), Lessee,
at its own risk, cost and expense, shall return the Aircraft, including the
Airframe, the Engines, all Parts thereof and the Aircraft Documentation to
Lessor or its designee in accordance with the provisions of this Agreement
and Lessee and Lessor shall perform the elements of the Final Inspection as
required hereby, all prior to the end of the Lease Term (the "Return"). Not
later than the end of the Lease Term, the Aircraft shall be returned to
Lessor or its designee at the Return Location.
(b) CONDITION OF AIRCRAFT. At Return, Lessee shall, at its
sole risk, cost and expense, procure that the Aircraft is free and clear of
all Liens (other than liens which existed prior to Delivery of the Aircraft
to Lessee, Lessor Liens and Liens granted by Lessor to Lessor's lenders) and
that the Aircraft complies in all respects with the conditions and
requirements set forth in Schedule 5.
(c) FINAL INSPECTION.
(i) No less than 30 days prior to commencement of
the Return, Lessee shall provide Lessor with written notice of the
date (which shall be not less than fifteen (15) days prior to the
Expiry Date) of, and a reasonably complete plan for the content of,
the Final Maintenance and shall give Lessor further written notice
of the date of, and any changes to the plan for, the Final
Maintenance. During the entire period of such Final Maintenance, the
Aircraft, shall be made available to Lessor and/or Lessor's agents,
representatives and designees (each, an "Inspecting Party") for
ground inspection by the Inspecting Parties at the location of Final
Maintenance. The Aircraft Documentation shall be made available for
review at the then current operator's principal place of business.
So long as no Event of Default has occurred and is continuing, no
such inspection shall unreasonably interfere in the business
operations of Lessee except to the extent such interference is
reasonably necessary to enable an Inspecting Party to exercise its
rights set forth in this Section 7(c)(i).
33
[Lease Agreement]
Lessee shall make available to the Inspecting Parties such
documentation regarding the condition, use, maintenance, operation
and history of the Aircraft during the Lease Term as Lessor may
reasonably request. During the Final Inspection, any Inspecting
Party shall have the right to reasonably request that additional
panels or areas be opened in order to allow further inspection by
any Inspecting Party so long as either (i) such panels are
ordinarily opened during "C" Checks or (ii) there are indications of
damage found by Lessor during its inspection that reasonably warrant
opening such panels. Lessee shall remove the Aircraft from service
and open the areas of the Aircraft as required to perform the Final
Maintenance and the other inspections and checks as contemplated in
this Section 7 and Schedule 5 that are reasonably requested by
Lessor in accordance with the terms hereof and otherwise permit
Lessor to determine, and assist Lessor in determining that the
Aircraft, including the Aircraft Documentation, is in the condition
required herein.
(ii) Promptly after such inspections, except as
otherwise agreed in writing by Lessor and Lessee, any discrepancies
from the Aircraft return condition requirements set forth in this
Section 7, and any discrepancies that must be corrected in order to
comply with the Approved Maintenance Program, which shall include
clearing of all deferred maintenance items, shall be corrected by
Lessee at its cost prior to the operational ground check described
in Section 7(d).
(d) OPERATIONAL GROUND CHECK.
(i) In connection with the Return (and following
the inspection referred to in Section 7(c)), Lessee shall conduct an
operational ground check of the Aircraft in accordance with the
procedures set forth in the Airframe Manufacturer's maintenance
manual, for the purpose of demonstrating to the reasonable
satisfaction of Lessor the operation of all Aircraft systems that
can be verified on the ground, including, if required by Lessor and
at Lessee's cost, a full fuel tank visual leak check, audible
ignition check (both systems), pitot and static systems check and
hydraulic system external visual leak check.
(ii) Promptly after the operational ground check,
except as otherwise agreed in writing by Lessor and Lessee, any
discrepancies from the Aircraft return condition requirements set
forth in this Section 7, and any discrepancies that must be
corrected in order to comply with the Approved Maintenance Program
and the Airframe Manufacturer's maintenance manual criteria, shall
be corrected by Lessee at its cost prior to the demonstration flight
described in Section 7(e).
(e) DEMONSTRATION FLIGHT.
34
[Lease Agreement]
(i) Immediately following the operational ground
check pursuant to Section 7(d), but prior to Lessor's technical
acceptance of the Aircraft, Lessee shall, using its own pilots and
at its own cost, carry out for the Inspecting Parties a
demonstration flight in the Aircraft in accordance with Lessee's
specifications and the Lessee's Aviation Authority-approved flight
manual to demonstrate the proper functioning of Aircraft systems and
components, as requested by Lessor within limits and/or guidelines
established by the relevant manufacturers and the Aviation
Authority. Such flight shall continue for the duration necessary to
perform such check flight procedures, but for a period not exceeding
two (2) hours. Lessor shall be allowed at least two representatives
on-board as observers during such flight and Lessee shall comply
with all reasonable requests made by such representatives during
such flight.
(ii) Except as otherwise agreed in writing by the
Lessor and Lessee, promptly following such demonstration flight, any
deficiencies from the Aircraft return condition requirements set
forth in this Section 7 and Schedule 5, and any discrepancies that
must be corrected in order to comply with the Approved Maintenance
Program and the Airframe Manufacturer's maintenance manual and to
achieve the proper functioning of the Aircraft systems and
components, shall be corrected by Lessee at its cost prior to Return.
(iii) Lessor shall defend, indemnify and hold
harmless Lessee from and against all claims, liabilities, damages,
losses and judgments, which may be asserted against, suffered by,
charged to or recoverable from Lessee by reason of injury to or
death of any Person or Persons, or loss of or damage to any
property, including the Aircraft, arising out of or in any way
connected with such ground inspection, operational ground check and
test flights except to the extent occasioned in whole or in part by
the fault or negligence of Lessee or such Person or Persons.
(f) TECHNICAL ACCEPTANCE. Upon satisfactory completion of
the Final Inspection and, unless otherwise agreed in writing by Lessor and
Lessee, satisfactory correction of any discrepancies or deficiencies required
to be corrected by Lessee prior to Return, Lessor shall execute and deliver
to Lessee, a delivery receipt in the form of Annex A to Schedule 5 (the
receipt "Return Receipt") which shall, for all purposes hereof, constitute
complete, irrevocable and absolute evidence of Lessor's technical acceptance
of the Aircraft, except as validly noted in such Return Receipt. To the
extent technical acceptance occurs prior to Return, Lessee shall remain
liable for the performance of all of its payments and other obligations
hereunder, and for any damage to or loss of the Aircraft occurring between
the date thereof and Return (it being understood and agreed that Lessee shall
maintain insurance as required by Section 15 to and including such date).
35
[Lease Agreement]
(g) FAILURE TO RETURN AIRCRAFT. If Lessee shall, due to
reasons of Force Majeure or for any other reason whatsoever, fail to return
the Aircraft at the time or in the condition specified herein or return of
the Aircraft is not accepted by Lessor because of Lessee's failure to meet
the requirements of this Section 7 and Schedule 5, the obligations of Lessee
provided in this Agreement and each other Operative Document to which Lessee
is a party (including the obligation to pay Rent, on a per them basis based
upon a pro rata application of 125% of the monthly Rent in force during the
last month of the Lease Term) shall continue in effect with respect to the
Aircraft, and the Lease Term shall be deemed to be extended until Return of
the Aircraft to Lessor; provided that, this Section 7(g) (i) shall not be
construed as permitting or authorizing Lessee to fail to meet, or consenting
to or waiving any failure by Lessee to perform, Lessee's obligation to return
the Aircraft in accordance with the requirements of this Agreement and (ii)
shall not apply if Lessee's failure to return in a timely fashion is due to
(x) a reasonable good faith dispute between Lessee and Lessor as to the
meaning of one or more provisions of this Lease Agreement, (y) Lessor's
failure to diligently and responsibly cooperate to accomplish Return of the
Aircraft in a timely fashion or (z) Lessee's cooperation under Section
7(h)(iv) or (v) hereof
(h) TRANSITION. Lessee acknowledges that Lessor intends to
lease or sell the Aircraft to another Person at the end of the Lease Term. In
order to facilitate such lease or sale of the Aircraft, Lessee agrees to
cooperate with Lessor and to otherwise assist Lessor, at Lessor's cost, in
such matters by, for example:
(i) allowing reasonable inspections of the
Aircraft by the Follow-On Operator (without interrupting
any commercial operation of the Aircraft);
(ii) using reasonable endeavors to schedule the
Return of the Aircraft and the Final Inspection in a manner
that will allow for a simultaneous delivery of the Aircraft
to the Follow-On Operator;
(iii) assisting with exporting the Aircraft from
the State of Registration and arranging for the notice of
deregistration of the Aircraft to be sent to the aviation
authority in the country where the Aircraft will be
registered by the Follow-On Operator;
(iv) assisting with the transition of the Aircraft
from the Approved Maintenance Program to the maintenance
program of the Follow-On Operator by providing access to
the relevant technical data; and
(v) performing or procuring the maintenance or
modifications to the Aircraft as reasonably requested by
Lessor, at Lessor's cost.
36
[Lease Agreement]
(i) LETTER OF CREDIT. Following expiration of this Lease
and return of the Aircraft to Lessor, and subject to no Defaults outstanding
hereunder, the Letter of Credit will be promptly returned to Lessee subject
to Lessor's satisfaction with Lessee's compliance with this Section 7.
(j) REPLACEMENT ENGINES. Prior to commencement of the
return procedures under this Section 7, Lessee may replace one or both
Engines then subject to this Lease with Replacement Engines; provided that
such replacement shall not alter Lessee's obligations with respect to the
Return Conditions set forth in Schedule 5.
SECTION 8. LIENS.
(a) NO LIENS. Lessee will not directly or indirectly
create, incur, assume or suffer to exist, or agree to create or assume, any
Lien on or with respect to the Aircraft, any Engine or any Part or in this
Agreement, or in any right, title or interest in any of the foregoing, except:
(i) the rights of Lessor provided in this Agreement;
(ii) the rights of others under agreements or
arrangements to the extent permitted by the terms of Section 11;
(iii) Lessor Liens, Liens arising prior to filing of
this Lease with the Aviation Authority;
(iv) Liens for Taxes of Lessee arising in the
ordinary course of business either not yet due or being contested in
good faith by appropriate proceedings (and for the payment of which
adequate reserves have been provided) so long as such contest does
not involve any material danger of the sale, forfeiture, seizure or
loss of the Airframe, any Engine or any Part or any interest therein;
(v) materialmen's, mechanics', workmen's,
repairmen's, employees' or other like Liens arising by operation of
law in the ordinary course of Lessee's business (including those
arising under maintenance agreements entered into in the ordinary
course of business) securing obligations that are not yet due or are
being contested in good faith by appropriate proceedings (and for
the payment of which adequate reserves have been provided) so long
as such contest does not involve any material danger of the sale,
forfeiture, seizure or loss of the Airframe, any Engine or any Part
or any interest therein; and
(vi) Liens, other than Liens for Taxes, in respect
only of Lessee's interest as Lessee under this Agreement and arising
out of any judgment or award against Lessee (and for the payment of
which adequate reserves have been provided), but only if the
37
[Lease Agreement]
judgment secured shall have been discharged, vacated, reversed or
execution thereof stayed pending a good faith appeal or shall have
been discharged, vacated or reversed upon expiration of such stay.
(b) REMOVAL OF LIENS. Lessee will promptly, at its own
expense, take, or cause to be taken, such actions as may be necessary duly to
discharge any Lien not excepted under Section 8(a) that may at any time
arise, exist or be levied upon the Aircraft, any Engine, any Part or in this
Agreement, or in any right, title or interest in any of the foregoing, and
Lessee shall indemnify and hold harmless Lessor and each other Indemnified
Party from any Expenses arising therefrom.
(c) NO ADVERSE ACTION. Without limiting the foregoing or
any other provision of this Agreement or any other Operative Document, Lessee
will not do or permit to be done anything which may expose the Aircraft or
any part thereof to penalty, forfeiture, seizure, arrest, impoundment,
detention, confiscation, taking in execution, attachment, appropriation or
destruction, nor abandon the Aircraft or any Part.
SECTION 9. INDENMITIES.
(a) GENERAL INDEMNITY. Subject only to the exceptions set
forth in Section 9(b), Lessee hereby assumes liability for and hereby agrees
to indemnify Lessor and each other Indemnified Party against, and agrees to
protect, save and keep harmless each thereof from, any and all Expenses of
whatsoever kind and nature from time to time imposed on, incurred by or
asserted against any Indemnified Party in any way relating to or arising out
of.
(i) the Operative Documents, any of the
transactions contemplated thereby or the enforcement of any
of the terms thereof, including, without limitation, the
enforcement of this Section 9;
(ii) the Aircraft, the Airframe, any Engine or
engine or Part or any other thing delivered under this
Agreement;
(iii) the acceptance, delivery, lease, sublease,
charter, subcharter, registration, deregistration,
reregistration, possession, repossession, use, presence,
operation, condition, storage (unless otherwise expressly
provided herein), installation, testing, modification,
alteration, maintenance, repair, release, return,
transportation, transfer, exportation, importation,
abandonment or other disposition of the Aircraft, the
Airframe, any Engine or engine or Part or any other thing
delivered under this Agreement (including, without
limitation, any claim for patent, trademark or copyright
infringement in respect of any Part of the Aircraft which
was not delivered to Lessee hereunder, any liability for
any injury to or
38
[Lease Agreement]
death of any Person or loss of or damage to any property,
latent or other defects, whether or not discoverable and
whether or not any of the foregoing shall arise as a result
of the action or inaction of Lessee or any other Person);
and
(iv) any breach or noncompliance by Lessee with
any covenant, term, agreement, condition, undertaking or
obligation under this Agreement or under any other
Operative Document or agreement entered into or furnished
by Lessee in connection herewith or therewith, or the
falsity or inaccuracy of any representation or warranty of
Lessee set forth herein or therein, or the occurrence of
any other Default, including, without limitation, any
Expenses incurred, assumed or suffered by Lessor or any
other Indemnified Party as a consequence of Lessee's
failure to Return the Aircraft in accordance with this
Agreement on any date specified or required herein.
(b) EXCEPTIONS TO GENERAL INDEMNITY. The indemnity provided
for in Section 9(a) will not extend to any of the following Expenses of any
Indemnified Party:
(i) Expenses caused by the gross negligence or
willful misconduct of such Indemnified Party or a Related
Indemnitee (other than negligence imputed to such
Indemnified Party or Related Indemnitee by reason of its
interest in the Aircraft solely and by virtue of law);
(ii) Expenses caused by a breach by such
Indemnified Party or a Related Indemnitee of any covenant
or inaccuracy or falsity of a representation or warranty
made by such Indemnified Party or a Related Indemnitee in
this Agreement or the documents and agreements delivered by
such party to Lessee on or prior to the Delivery Date;
(iii) Expenses that are Taxes (it being agreed
that Lessee's sole responsibility for Taxes is as set out
in Section 9(c) hereof);
(iv) Expenses attributable to the period (x) prior
to the Delivery Date and (y) after the return of possession
of the Airframe, the Engines and the Parts to Lessor or its
designee pursuant to and in accordance with the terms of
this Lease (other than pursuant to Section 20 hereof, in
which case (and other than with respect to Taxes) Lessee's
liability under this Section 9(b) shall survive for so long
as Lessor shall be entitled to exercise remedies under such
Section 20);
(v) Expenses caused by any voluntary transfer or
disposition (other than any transfer pursuant to any
exercise of remedies in connection with an Event of
39
[Lease Agreement]
Default, pooling arrangement or Event of Loss) by Lessor of
its interest in the Aircraft, Airframe or Engines; or
(vi) Expenses to the extent covered by such
Indemnified Party's worker's compensation insurance.
(c) TAXES.
(i) LESSEE LIABILITY. Except as provided in
Section 9(c)(ii), Lessee shall pay or cause to be paid when
due, and shall indemnify and hold harmless each Tax
Indemnitee for, from and against, any and all Taxes
howsoever imposed or levied on or asserted against, from
time to time, any Tax Indemnitee, Lessee, the Aircraft,
Airframe or any Engine or any Parts or any interest therein
by any Government Entity on, with respect to, based on or
measured by:
(A) the acceptance, delivery, redelivery,
transport, registration, reregistration,
deregistration, possession, operation, location,
use, presence, condition, alteration by or on
behalf of Lessee, maintenance, repair, return,
storage (unless otherwise expressly provided
herein), repossession, disposition, abandonment,
installation, storage, charter, leasing,
subleasing, modification, transfer by or on behalf
of Lessee, importation, exportation or other
disposition of, or the imposition of any Lien on,
the Aircraft, Airframe or any Engine or any Part
or interest therein (or the incurrence of any
liability to refund or pay over any amount as the
result of any such Lien);
(B) the rentals or receipts from the
Aircraft, Airframe or any Engine or Parts thereof
or interest therein;
(C) the Aircraft, Airframe or any Engine
or any Parts thereof or interest therein
(including, without limitation, title or a
security interest therein), this Lease, any other
Operative Document or any data or any other thing
delivered or to be delivered under the Operative
Documents; or
(D) otherwise with respect to or in
connection with the execution, delivery,
enforcement, amendment or supplement to the
Operative Documents or the transactions
contemplated by the Operative Documents.
(ii) EXCLUSIONS FROM LESSEE'S LIABILITY. The provisions of
Section 9(c)(i) shall not apply to:
40
[Lease Agreement]
(A) Taxes on the income, profits or gains
of a Tax Indemnitee by any Government Entity or
Taxes in the nature of a value-added tax or
consumption tax to the extent such value-added tax
or consumption tax is enacted by a Government
Entity as a substitute for or replacement of a Tax
on income, profits or gains income as a revenue
source for that Government Entity; PROVIDED,
HOWEVER, that the exclusion contained in this
clause (A) shall not apply to any Taxes imposed by
any Government Entity (other than the United
States, a United States federal entity, or a
Government Entity with jurisdiction over the place
of a Tax Indemnitee's principle place of business
or residence or place of organization; except in
the case of a United Stated federal withholding
tax on gross income ("U.S. Withholding Tax"), U.S.
Withholding Tax imposed solely as a result of (A)
the enactment after the date of execution and
delivery of this Agreement of an amendment to the
Internal Revenue Code (as in effect on the
Delivery Date), (B) ratification after the
Delivery Date of any protocol or other amendment
to any United States income tax convention in
effect on the Delivery Date or (C) the
ratification after the Delivery Date of any new
United States income tax convention if and to the
extent that such Tax results (i.e., to the extent
that such Tax would not have been imposed but for
the existence of one or more of the following
factors) from (i) the use, operation, presence or
registration of the Aircraft, the Airframe, any
Engine or any Part within the taxing jurisdiction
of that Government Entity; or (ii) the situs of
organization, any place of business or any
activity of Lessee or any other Person having use,
possession or custody of the Aircraft, the
Airframe, any Engine or any Part within the taxing
jurisdiction of that Government Entity; or (iii)
any payment (actual or constructive) by or on
behalf of Lessee from the taxing jurisdiction of
that Government Entity; PROVIDED, FURTHER,
however, if the Delivery Location is in Malaysia,
Lessee will not be responsible for any taxes,
duties, charges or fees levied by any Malaysian
taxing authority or if the Delivery Location is in
New Zealand, Lessee will not be responsible for
any taxes, duties, charges or fees levied by any
New Zealand taxing authority;
(B) Sales, use or similar transfer Taxes
imposed on a Tax Indemnitee upon any voluntary
transfer (including a transfer by way of security
but excluding a transfer pursuant to the exercise
of remedies in connection with an Event of
Default, a Modification, a pooling arrangement or
an Event of Loss) or disposition (including a
disposition by way of security but excluding a
disposition pursuant to any exercise of remedies
in connection with an Event of Default; provided,
however, that Lessor shall in connection with an
Event of Default comply with any
41
[Lease Agreement]
reasonable request as Lessee shall make concerning
the appropriate jurisdiction in which such
disposition shall be made unless Lessor reasonably
determines in cooperation with any Tax Indemnitee
(and advises Lessee) that such compliance with
Lessee's request would generate an adverse
consequence to Lessor or such Tax Indemnitee) by
such Tax Indemnitee of any equitable or legal
interest in the Aircraft, Airframe, any Engine or
any Part or this Agreement to any Person;
(C) Taxes attributable solely to any
period (a) prior to the Delivery Date; or (b)
after the return of possession of the Airframe,
the Engines and the Parts to Lessor or its
designee pursuant to the terms of this Lease
(other than pursuant to Section 20 hereof, in
which case Lessee's liability under this Section
9(c) shall survive for so long as Lessor shall be
entitled to exercise remedies under such Section
20); provided, however, that the exclusions set
forth in this subparagraph (C) shall not apply to
Taxes to the extent such Taxes relate to events
occurring or matters arising prior to or
simultaneously with such return of possession;
(D) Taxes caused solely by a breach by
such Tax Indemnitee of any covenant or inaccuracy
or falsity of any representation or warranty made
by such Tax Indemnitee in this Agreement or the
documents and agreements delivered by such Tax
Indemnitee to Lessee pursuant to this Agreement;
(E) Taxes caused solely by the gross
negligence or wilful misconduct of any Tax
Indemnitee; and
(F) Taxes based on or measured by the
value or principal amount of any loan or
promissory note (or security therefore) entered
into by Lessor or a Tax Indemnitee or anyone
claiming an interest in the Aircraft or any
portion thereof through Lessor or a Tax Indemnitee.
(iii) NO REDUCTION FOR WITHHOLDING, ETC. Notwithstanding anything
that may be contained herein, all payments by Lessee under this Agreement or
any other Operative Document, whether in respect of Rent, interest, fees or
any other item, shall be made in full without any deduction or withholding
(whether in respect of setoff, counterclaim, duties, Taxes, charges, wages or
otherwise whatsoever), unless:
(A) the withholding or deduction is with
respect to Taxes for which Lessee is not required
under Section 9(c) to indemnify Lessor or any Tax
Indemnitee, or
42
[Lease Agreement]
(B) the withholding or deduction is
required by law, in which event Lessee shall:
(1) forthwith pay the recipient
such additional amount so that the net
amount received by such recipient after
the deduction or withholding will equal
the full amount which would have been
received by it had no such deduction or
withholding been made;
(2) pay to the relevant taxing
authorities within the period for payment
permitted by applicable law the full
amount of the deduction or withholding
(including, but without prejudice to the
generality of the foregoing, the full
amount of any deduction or withholding
from any additional amount paid pursuant
to this clause (iii)); and
(3) furnish to Lessor, within the
period for payment permitted by
applicable law, an official receipt of
the relevant taxation or other
authorities involved for all amounts
deducted or withheld as aforesaid or, if
no such receipt is issued, a certificate
of deduction or equivalent evidence
thereof.
(iv) REPORTS. Lessee will provide, promptly upon request,
such information as may be reasonably requested by a Tax Indemnitee or
required to enable a Tax Indemnitee to timely and properly fulfill its tax
filing requirements with respect to the transactions contemplated by the
Operative Documents, including, without limitation, those requirements that
relate to Taxes based on or measured by the total time the Aircraft is
located in a particular place irrespective of whether the Aircraft is there
for revenue, maintenance or storage purposes. If any report, return or
statement is required to be filed with respect to any Tax which is subject to
indemnification under this Section 9(c), Lessee shall timely file the same
(except for any such report, return or statement which such Tax Indemnitee
intends to file itself (and so notifies Lessee in writing) or for income tax
returns or any other return, report or statement which the Tax Indemnitee is
required by law to file in its own name); PROVIDED, HOWEVER, that Lessee
shall have no obligation under this sentence to the extent such Tax
Indemnitee, after receipt of Lessee's written request, shall have failed to
furnish Lessee with such information (including instructions) as is
peculiarly within such Tax Indemnitee's control and which is necessary to
file such report, return or statement and provided, further, that Lessee
shall have no obligation under this Section 9(c) with respect to any Taxes in
the nature of penalties, additions to tax or interest or expenses which could
have been avoided if such Tax Indemnitee had not failed to so furnish Lessee
with such information. Lessee shall either file such report,
43
[Lease Agreement]
return or statement and send a copy of such report, return or statement to
the Tax Indemnitee or, where Lessee is not permitted to file such report,
return or statement, it shall notify such Tax Indemnitee of such requirement
and prepare and deliver such report, return or statement to such Tax
Indemnitee in a manner satisfactory to such Tax Indemnitee no later than 30
Business Days prior to the time such report, return or statement is to be
filed. Lessee shall not have any right to examine the tax returns or books of
any Tax Indemnitee. Lessee agrees to use reasonable endeavors to obtain
official receipts indicating the payment by it of all foreign income and
withholding Taxes that are subject to indemnification under this Section 9
and shall promptly deliver to the relevant Tax Indemnitee each such receipt
obtained by Lessee. If actual notice is given by any Government Entity to a
Tax Indemnitee that a report or return is required to be filed with respect
to any Taxes with respect to which Lessee has an indemnification obligation
under this Section 9(c), Lessor shall cause that Tax Indemnitee to promptly
notify Lessee of such required report or return. Further, Lessor agrees to
cause each Tax Indemnitee to respond to any reasonable request of Lessee for
information within the control of such Tax Indemnitee with respect to the
filing of any such report or return. Notwithstanding the foregoing, nothing
in this Section 9(c)(iv) shall (x) require Lessor or Lessee to divulge to the
other any information which Lessor or Lessee, as the case may be, considers
confidential, PROVIDE, HOWEVER, that Lessor and Lessee, as the case may be,
shall be so required if required by applicable law or reasonably related to a
matter indemnified hereunder; or (y) prevent Lessor or Lessee from arranging
its tax affairs in such manner as it sees fit, unless to do so would increase
the obligations of the other under this Agreement.
(v) PAYMENT. Lessee shall pay any Tax for which it is
liable pursuant to this Section 9(c) in immediately available funds directly
to the appropriate Government Entity or, upon written demand of the Tax
Indemnitee, to such Tax Indemnitee, but in no event shall such payment be
required more than five (5) Business Days prior to the date such Tax is due.
Any such demand for payment from a Tax Indemnitee shall specify, in
reasonable detail, the calculation of the amount of the payment and the facts
upon which the right to payment is based and shall be verified upon the
request and at the expense of Lessee by a nationally recognized firm of
independent accountants for such Tax Indemnitee. Each Tax Indemnitee shall
promptly forward to Lessee any notice, xxxx or advice in the nature of a
notice or xxxx received by it concerning any Tax; provided, however, failure
to provide any such notice or xxxx shall not relieve Lessee of its
obligations hereunder. As soon as practical after each payment of any Tax by
Lessee directly to any Government Entity, Lessee shall furnish the
appropriate Tax Indemnitee with the original or a certified copy of a receipt
for Lessee's payment of such Tax or such other evidence of payment of such
Tax as is reasonably acceptable to such Tax Indemnitee. Lessee shall also
furnish promptly upon request such data as any Tax
44
[Lease Agreement]
Indemnitee may reasonably require to enable such Tax Indemnitee to comply
with the requirements of any Government Entity.
(vi) CONTESTS. If claim is made against a Tax Indemnitee
for any Tax with respect to which Lessee has an obligation under this Section
9(c), Lessor shall cause Tax Indemnitee to promptly notify the Lessee;
provided, however, that the failure to so notify Lessee shall not diminish
Lessee's obligations to indemnify under this Section 9(c). If reasonably
requested by the Lessee in writing and provided no Event of Default shall
have occurred and is continuing, Lessor, at the sole expense of the Lessee,
shall itself (or shall cause such Tax Indemnitee to) in good faith and
diligently contest (and not settle without Lessee's written consent) or shall
(or shall cause such Tax Indemnitee to) permit the Lessee, if desired by the
Lessee, to contest in the name of the Lessee the validity, applicability or
amount of such Tax. Lessor shall cause such Tax Indemnitee to contest, or
shall permit the Lessee to contest by (a) resisting payment thereof if
practicable, (b) not paying the same except under protest with funds advanced
by Lessee on an interest-free basis, if protest is necessary and proper, and
(c) if payments be made, using reasonable efforts to obtain a refund thereof
in appropriate administrative and judicial proceedings; provided, however,
that, in each such instance, the Lessor and such, Tax Indemnitee shall not be
required to undertake any contest or permit the Lessee to contest unless:
(A) Lessee shall have provided Lessor and the Tax
Indemnitee with an opinion of legal counsel reasonably
acceptable to Lessor and the Tax Indemnitee to the effect
that a reasonable basis exists to contest such claim
(provided, however, that no such opinion shall be necessary
in order to contest such claim in meetings with auditors,
revenue agents, or in other informal meetings with staff
members of the applicable tax authority) and, prior to the
commencement of any appeal of an adverse judicial decision,
with an opinion of such legal counsel to the effect that a
reasonable basis exists to appeal such adverse judicial
decision (which opinions shall be obtained at Lessee's sole
cost and expense);
(B) such proceedings, in the sole reasonable
discretion of Lessor and the Tax Indemnitee, do not involve
any material risk or danger of the sale, forfeiture or loss
of the Aircraft or any part thereof or interest therein or
the imposition of criminal penalties or sanctions against
Lessor or such Tax Indemnitee or the creation of any Lien
other than a Lien for Taxes not yet due or being contested
in good faith by appropriate proceedings, and for payment
of which such reserves if any, as are required to be
provided under generally accepted accounting principles
have been made unless Lessee has provided to the Tax
Indemnitee a bond or other security reasonably satisfactory
to the Tax Indemnitee (provided that in the case
45
[Lease Agreement]
of criminal penalties or sanctions such bond or other
security shall be satisfactory to the Tax Indemnitee in its
sole discretion) to protect against such risk or danger;
(C) in the event that the subject matter of the
contest is of a continuing nature and has previously been
decided adversely pursuant to the contest provisions of
this Section 9(c) by the highest court to which an appeal
could be taken (other than the U.S. Supreme Court), there
has been a change in the law (including, without
limitation, amendments to statutes or regulations,
administrative rulings and court decisions) after such
claim shall have been so previously decided and the Tax
Indemnitee shall have received an opinion of independent
tax counsel selected by the Lessee and reasonably
acceptable to the Tax Indemnitee, which opinion shall be
obtained at the Lessee's sole expense, to the effect that,
as a result of such change, it is more likely than not that
the position which the Tax Indemnitee or the Lessee, as the
case may be, had asserted in such previous contest would
prevail.
(D) no Event of Default shall have occurred and
be continuing,
(E) prior to the commencement of any contest
undertaken by the Lessee or any contest undertaken by any
Tax Indemnitee, the Lessee shall have delivered to such Tax
Indemnitee a written acknowledgment of its obligation to
indemnify fully Lessor and such Tax Indemnitee to the
extent that the contest is not successful;
(F) if such contest is to be initiated by the
payment of, and the claiming of a refund for, such Tax,
Lessee shall have advanced to the Tax Indemnitee sufficient
funds (on an interest-free basis) to make such payments,
provided, however, that Lessee shall indemnify such Tax
Indemnitee for any adverse tax consequences resulting from
such advance.
Lessee shall not be deemed to be in default under any of
the above indemnification provisions of this Section 9(c) so long as
Lessee shall diligently prosecute a contest in conformity with the
requirements of this Section 9(c)(vi), or in the case where the
Lessor or a Tax Indemnitee shall be prosecuting such contest
pursuant to this Section 9(c)(vi), Lessee has fulfilled all of its
obligations under this Section 9(c)(vi) with respect to such
contest. Notwithstanding the foregoing, if a claim is made against a
Tax Indemnitee which, if successful, would result in a Tax under
circumstances which would require the Lessee to indemnify such Tax
Indemnitee, such Tax Indemnitee shall be released from its
responsibility to contest such claim, or part thereof, if it agrees
in writing with Lessee not to seek indemnification from Lessee in
respect of the claim, or such part thereof to be contested. In the
event a Tax Indemnitee fails diligently to
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[Lease Agreement]
contest, or refuses to permit the Lessee to contest, a claim or
part thereof which such Tax Indemnitee has the obligation to contest
or to permit Lessee to contest under this Section 9(c), then Lessee
shall not be obligated to indemnify such Tax Indemnitee for such
claim or such part thereof and such Tax Indemnitee shall refund to
Lessee any amounts paid or advanced by Lessee in connection with
such Tax that were the subject of such claim (plus interest from the
date payment is due at the rate established for refunds by the
authority imposing such Tax); provided, however, that this sentence
shall not apply where a Tax Indemnitee permits the Lessee to contest
and the Lessee fails to diligently contest.
(vii) Refunds. If a Tax Indemnitee shall obtain a refund of
all or any part of Taxes paid by Lessee, Lessor shall cause such Tax
Indemnitee to pay the Lessee the amount of such refund less the
amount of any Taxes payable by such Tax Indemnitee in respect of the
receipt of such refund; provided that such amount shall not be
payable (x) before such time as the Lessee shall have made all
payments or indemnities then due to Lessor under the Lease, or (y)
while any Event of Default is outstanding and continues unremedied.
If in addition to such refund, such Tax Indemnitee shall receive an
amount representing attorneys fees, interest or other amount with
respect to such refund, the Lessee shall be paid that proportion of
such amounts which is fairly attributable to Taxes paid by the
Lessee prior to. the receipt of such refund.
(viii) Tax Savings. If as a result of the payment or
accrual of Taxes paid or indemnified by the Lessee a Tax Indemnitee
shall realize and recognize any savings with respect to Taxes, such
Lessor shall cause such Tax Indemnitee to, and such Tax Indemnitee
shall, promptly notify the Lessee that it has realized and
recognized such savings and pay to the Lessee within thirty (30)
days of the realization of such savings an amount equal to (i) the
net reduction in Taxes realized and recognized by such Tax
Indemnitee and (ii) the amount of any further net reduction in taxes
realized and recognized under such tax laws as a result of payments
pursuant to this sentence; provided, however, that the aggregate
amount of all sums payable pursuant to this claim (viii) shall not
exceed the aggregate amount of all prior payments made by Lessee
pursuant to this Section 9(c).
(d) [INTENTIONALLY RESERVED].
(e) SCOPE. SURVIVAL, ETC.
(i) Lessee shall be obligated under this Section 9 as a
primary obligor irrespective of whether an Indemnified Party or Tax
Indemnitee shall also be indemnified, guaranteed or insured with
respect to the same matter under any of the Operative Documents or
otherwise by any other Person, and such Indemnified Party may proceed
directly against
47
[Lease Agreement]
Lessee under this Section 9 without first resorting to any such other
rights of indemnification, guarantee or insurance.
(ii) All indemnities, obligations, adjustments and payments
provided for in this Section 9 shall survive and remain in full
force and effect, notwithstanding the expiration or termination of
the Lease Term or of this Agreement or any other Operative
Documents and the payment in full of all sums payable under the
Operative Documents. The obligations of Lessee in respect to all
such indemnities, obligations, adjustments and payments are
expressly made for the benefit of, and shall be enforceable by, the
Indemnified Party or Tax Indemnitee entitled thereto, without
declaring this Agreement to be in default or taking other action
under this Agreement.
(iii) Lessee acknowledges that the Indemnified Parties or
Tax Indemnitees, or any of them, may authorize Lessor, by notice in
writing to Lessor and Lessee, to make claims and demands under any
indemnity hereunder or under any other Operative Document on behalf
of such Indemnified Parties or Tax Indemnitees, and Lessee shall be
obligated to make all payments pursuant to any such indemnity to
Lessor, to the extent claimed by Lessor on behalf of such
Indemnified Parties or Tax Indemnitees (it being understood that
Lessee is entitled to conclusively rely upon the instructions of
Lessor with respect to the payment of amounts owing to any
Indemnified Party or Tax Indemnitee under the indemnities).
(iv) Each Indemnified Party and Lessee will give prompt
written notice one to the other of any liability of which such
party has knowledge for which Lessee is, or may be, liable under
Section 9(a), provided that failure to give such notice will not
prejudice or otherwise affect any of the rights of the Indemnified
Parties under this Section 9.
(f) GROSS-UP FOR TAXES ON INDEMNITY PAYMENTS. If and to the
extent any sums payable to an Indemnified Party or Tax Indemnitee under this
Section 9 are subject to any Taxes (including any payments made pursuant to
this Section 9(f)), Lessee shall pay to such Indemnified Party or Tax
Indemnitee such sum as will, after the obligation in respect of such Taxes
has been fully satisfied with respect to all sums payable by Lessee under
this Section 9, leave the Indemnified Party or Tax Indemnitee with the same
amount as it would have been entitled to receive in the absence of the
imposition of any such obligation in respect of such Taxes.
48
[Lease Agreement]
SECTION 10. TITLE, REGISTRATION; MAINTENANCE AND OPERATION; INSIGNIA.
(a) TITLE TO THE AIRCRAFT.
(i) Lessee acknowledges that title to the Aircraft
shall at all times be and remain solely and exclusively
vested in Lessor and that this Agreement and the other
Operative Documents constitute an agreement to lease the
Aircraft from Lessor to Lessee and, accordingly, Lessee
shall have no right, title or interest in the Aircraft
except the right to use the Aircraft as provided herein.
(ii) Lessee will not at any time represent or hold
out Lessor or any Indemnified Party as carrying goods or
passengers on the Aircraft or as being in any way connected
or associated with any operation of the Aircraft or
attempt, or hold itself out as having any power, to sell,
charge, lease or otherwise dispose of or encumber the
Aircraft, the Engines or any Part, nor create, incur or
suffer to exist any Lien over the Aircraft, the Engines or
any Part. On all occasions when the ownership of the
Aircraft or any part of it is relevant, Lessee will make
clear to third parties that title to the same is held by
Lessor.
(b) REGISTRATION.
(i) Upon Delivery of the Aircraft pursuant to
Section 2, Lessee shall, at its own cost and expense,
procure that the Aircraft will be duly registered with the
Aviation Authority in the name of Lessor on the register
(except that Lessor and Owner Participant shall be
responsible for ensuring that the Trust Agreement, and all
other documents necessary for filing with the Aviation
Authority to effect registration of the Aircraft in
Lessor's name, are in due form for filing with the Aviation
Authority), and thereafter shall maintain, or procure the
maintenance of, such registration throughout the Lease Term
and shall promptly deliver to Lessor a certified copy of
the Certificate of Registration when issued by the Aviation
Authority and at all times during the Lease Term, Lessee
shall neither cause nor permit the Aircraft to be
registered under the laws of any other jurisdiction.
(ii) Upon the Delivery Date of the Aircraft
pursuant to Section 2, Lessee shall, at its own cost and
expense, procure that, if required by applicable
regulations, any Operative Document as is required
(including, without limitation, this Lease, Lease
Supplement No. 1 and the Trust Agreement) shall be filed
for recording with the Aviation Authority, and shall
promptly (and in any event within five (5) days) after such
registration deliver evidence of such registration to
Lessor. Lessee shall, at its own cost and expense, cause
such recordation to be maintained in good standing at all
times during the Lease Term.
49
[Lease Agreement]
(iii) Lessee will take, or cause to be taken, such
action with respect to the recording, filing, rerecording
and refiling of this Agreement or other documents or
instruments (including, without limitation, Uniform
Commercial Code financing statements) as necessary or
advisable in order to establish, protect, preserve and
perfect, as against Lessee and any third party (excluding
Lessor Liens, Liens arising prior to Delivery of the
Aircraft to Lessee and Liens granted by Lessor to Lessor's
lenders), Lessor's interest in the Aircraft and this
Agreement and each other Operative Document and shall
furnish to Lessor timely notice of the necessity of such
action, together with such documents and instruments, in
execution form, and such other information as may be
necessary or advisable to take such action. Lessee shall
cooperate fully with Lessor, if, notwithstanding the
foregoing, Lessor notifies Lessee that Lessor wishes to
take any of the foregoing actions, in lieu of Lessee taking
any of the foregoing actions.
(iv) Without limiting the effect of the foregoing,
Lessee shall also do or cause to be done at its own expense
any and all acts and things which may be required under the
terms of any agreement, treaty, convention, pact or by any
practice, custom or understanding involving any
jurisdiction in which Lessee may operate, and any and all
acts and things which Lessor may reasonably request, to
establish, perfect, preserve and protect the respective
rights of Lessor in the Aircraft and in this Agreement and
each other Operative Document (excluding Lessor Liens,
Liens arising prior to Delivery of the Aircraft to Lessee
and Liens granted by Lessor to Lessor's lenders).
(v) Lessee shall procure that, at all times during
the Lease Term, the Aircraft possesses a current, legal and
valid Airworthiness Certificate, and all such other
certificates, licenses, permits and authorizations as are
from time to time required for the use and operation of the
Aircraft for the public transport of passengers or cargo by
any Government Entity having jurisdiction in any country,
state, province or other political subdivision in or over
which the Aircraft is flown, including, without limitation,
any aviation authority.
(c) MAINTENANCE. Lessee, at its own cost and expense, shall,
at all times during the Lease Tenn and until the Aircraft is returned in the
condition and manner required by this Agreement:
(i) maintain, service, repair, test, inspect and
overhaul, or cause to be maintained, serviced, repaired,
tested, inspected and overhauled, the Aircraft in
accordance with the Approved Maintenance Program, the
structural repair manual and the rules and regulations of
the Aviation Authority, including, without limitation, FAR
Part 121, subject to the special exemptions permitted Lessee
50
[Lease Agreement]
regarding compliance with Airport Noise and Capacity Act of
1990, as amended, and the regulations promulgated by the
Aviation Authority thereunder, (x) so as to keep the
Aircraft in as good condition (operating and otherwise) as
when delivered on the Delivery Date, ordinary wear and tear
excepted, and in at least the same manner and with at least
substantially the same care and diligence as other aircraft
owned or operated by Lessee (provided, however, that the
foregoing shall not be deemed to expand or otherwise alter
Lessee's obligations pursuant to the express requirements
of any maintenance, repair, modification or return
provision hereunder), (y) so as to keep the Aircraft free
of, or so as to promptly correct, physical damage to the
Airframe, any Engine or any Part which may have resulted
from foreign object damage, from damage caused by ramp
equipment, ramp personnel, operational mishandling, Lessee
staff or pas ssengers or from other means or sources and
(z) so as to keep the Aircraft in such condition as may be
necessary to enable the applicable airworthiness
certification for the Aircraft to be maintained in good
standing at all times under applicable law;
(ii) without limiting Lessee's obligations under
Section 10(c)(i), agree that such maintenance and repairs
will include, but will not be limited to, each of the
following specific items:
(A) to perform in accordance with the
Approved Maintenance Program, and all applicable
rules and regulations of the Aviation Authority,
and, except to the extent in conflict with the
rules and regulations of the Aviation Authority,
all routine and nonroutine maintenance work,
including, without limitation, line maintenance
to be done upon the Aircraft;
(B) without prejudice to the provisions
of Section 7, to comply with all applicable ADS
and all Required SBs that are due for compliance
on such basis at any time during the Lease Term
and within 90 days after the end of the Lease
Term ("Required Modifications");
(C) to incorporate and retain in the
Approved Maintenance Program for the Aircraft an
applicable CPCP, and to carry out such work as
may be required to comply therewith, including
periodic inspection, testing and corrosion
inhibiting treatment to or of fuel tanks,
periodic inspection, cleanup and resealing under
galleys and lavatories, the cleaning and treating
of all mild and moderate corrosion and the
correcting of all severe and exfoliated
corrosion, and the application of corrosion
inhibition compounds to all areas of the Aircraft
recommended by the
51
[Lease Agreement]
Airframe Manufacturer that are manufactured from
aluminum or other metals, in accordance with the
recommendations of the Airframe Manufacturer, the
CPCP, the Airframe Manufacturer structural repair
manual and the Approved Maintenance Program;
(D) to effect any required repair to the
Airframe or any Engine, and any Parts installed
therein or thereon, only (w) by an Aviation
Authority-approved repair station, (x) by
Aviation Authority-licensed mechanics and (y) in
accordance with Lessee's Approved Maintenance
Program, the Airframe Manufacturer's structural
repair manual, the Airframe Manufacturer's
component repair manual, Engine Manufacturer's
repair manuals and the other repair and overhaul
manuals related to the Aircraft or any Part
thereof, in each case, as approved by the
Aviation Authority, and (z) the relevant, if any,
engineering change orders (which shall be
approved by the Aviation Authority);
(E) to maintain, in the English language,
the Aircraft Documentation and to keep the
Aircraft Documentation current and up to date
(with all documents and records unique to the
Aircraft to be maintained unique to the Aircraft,
which Aircraft Documentation shall (i) conform
with the laws of any Government Entity having
jurisdiction over the Aircraft, (ii) accurately
record the amount of time consumed and/or the
cycles of use (as appropriate) by each operation
of the Airframe, each Engine and all Parts and
all work performed thereon, and (iii) accurately
maintain complete back-to-birth records (as
defined by HBAW 92-04 Current FAA Policy
Regarding Aircraft Records, Order 8300.10,
excluding, to the extent applicable, any records
with respect to the period prior to Delivery
which were not delivered to Lessee) of all Life
Limited Components, made available for review by
Lessor or Lessor's designees on reasonable notice
in order to facilitate Lessor's ability
periodically to inspect the Aircraft and monitor
the maintenance of the Aircraft); provided, that
Lessee shall not be responsible for defects in
the Aircraft Documentation that exist and are
documented in writing, signed by Lessor on the
Delivery Date;
(F) to make available for review by
Lessor or Lessor's designees copies of any
written communications with the Aviation
Authority, Airframe Manufacturer, Engine
Manufacturer or other vendors with respect to
incidents, defects or malfunctions of the
Aircraft;
52
[Lease Agreement]
(G) to diligently correct any and all
deficiencies revealed by any inspection of Lessor
by proper cleaning, sealing, repair, replacement,
overhaul and adjustment as required pursuant to
the Approved Maintenance Program;
(H) to ensure that only an Approved
Maintenance Performer services, maintains,
overhauls, repairs or performs any Modifications
on or to the Aircraft or any installed engine or
part;
(I) all parts or materials installed or
used on the Aircraft shall have a current valid
Aviation Authority "serviceable tag" of the
manufacturer or maintenance facility providing
such item to Lessee; and
(J) notwithstanding anything to the
contrary contained herein, to maintain any engine
which is not an Engine but which is installed on
the Airframe as if it were an Engine;
(iii) furnish or cause to be furnished to Lessor
as soon as reasonably practicable and at no cost to Lessee
such information as may be required to enable Lessor to
file on a timely basis any reports required to be filed by
Lessor with any Government Entity because of Lessor's
rights, title and interests in and to the Aircraft or under
this Agreement or any other Operative Document; and
(iv) notwithstanding anything contained herein to
the contrary, provided there is no Default existing and no
Credit Event has occurred and is then continuing, if Lessee
is required by law to meet Stage III noise requirements,
then, with at least nine months' written notice from
Lessee, Lessor will finance a portion of the cost of
purchasing one (1) ship-set of hushkits to be installed on
the Aircraft, in accordance with the parameters set forth
in Exhibit M.
(d) OPERATION.
(i) Lessee shall not maintain, use, service,
repair, overhaul or operate the Aircraft (or permit
maintenance, use, service, overhaul or operation of the
Aircraft) in violation of any law of any Government Entity
having jurisdiction, in violation of any manufacturer's
operating manuals, recommendations or instructions or in
violation of any airworthiness certificate, license or
registration relating to the Aircraft issued by any such
Government Entity.
53
[Lease Agreement]
(ii) Lessee shall not operate the Aircraft or
permit the Aircraft to be operated (y) outside of the
Permitted Jurisdictions or (z) on routes other than those
approved by the government of the State of Registration.
(iii) Lessee shall not knowingly employ, suffer
or cause the Aircraft to be used for the carriage of (w)
livestock, (x) acids, toxic chemicals or other corrosive
materials, unless the same are appropriately packaged in
compliance with applicable law, (y) explosives, nuclear
fuels or wastes, (z) illegal drugs, controlled substances
or the like or any other goods, materials or items of cargo
which are prohibited by law or which could reasonably be
expected or anticipated to cause damage to the Aircraft.
(iv) Lessee will not use, or permit the use of,
the Aircraft for testing or for training, qualifying or
reconfirming the status of flight crew members other than
employees of Lessee, and then only if the use of the
Aircraft for such purpose is not disproportionate to the
use for such purpose of other Airframe Manufacturer model
737 aircraft owned or operated by Lessee.
(v) Notwithstanding anything herein to the
contrary, Lessee shall not install, and shall not permit
the installation of, any Engine on any airframe that is not
an Airframe Manufacturer model 737-200ADV airframe, except
solely to the extent the Aviation Authority has approved
the use of engines of the same model and manufacturer as
such Engine on any Airframe Manufacturer model 737-200
airframe, or, to the extent permitted by Section
10(d)(viii) below, 727 airframe.
(vi) Lessee shall comply with the requirements of
Section 15(l) of this Agreement.
(vii) Lessee shall provide Lessor on the tenth
day of each of January, April, July, October during the
Lease Term with a completed and duly executed Aircraft
Status Report for the preceding three month period
substantially in the form of Exhibit L.
(viii) Lessee may install an Engine on an
Airframe Manufacturer model 727 airframe, in accordance
with the foregoing provisions, so long as the projected
utilization of such airframe shall be not less than 2 1/2
Airframe Flight Hours per Airframe Cycle.
(e) Insignia. Lessee shall affix and maintain in respect of
the Airframe and each Engine a fireproof identification plate of a reasonable
size, in the location specified below, that
54
[Lease Agreement]
contains the following legends or any other legend requested from time to time
by Lessor in writing:
Location: (i) in the case of the Airframe, in the upper sill of the
left-hand forward entry door, adjacent to the Airframe
Manufacturer's plate and (ii) in the case of each Engine,
in a clearly visible place in close proximity to the
manufacturer's plate.
Legend: (y) in the case of the Airframe, "THIS AIRCRAFT IS OWNED BY
FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE,
AND IS HELD UNDER LEASE BY ALOHA AIRLINES, INC.", and
(z) in the case of each Engine, "THIS ENGINE IS OWNED BY
FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE,
AND IS HELD UNDER LEASE BY ALOHA AIRLINES, INC."
Lessee shall promptly replace any such nameplate that becomes illegible, lost,
damaged or destroyed for any reason.
(f) COSTS OF OPERATION. Lessee shall pay all costs incurred
in the operation of the Aircraft for profit or otherwise, including, without
limitation, the costs and expenses of flight crews, cabin personnel, fuel,
oil, lubricants, maintenance, insurance, landing fees, navigation fees,
airport charges, passenger service and any and all other expenses or claims
of any kind or nature (including, without limitation, any and all Taxes)
directly or indirectly incurred or imposed in connection with or related to
the use, movement, operation, maintenance, repair, storage or location of the
Aircraft during the Lease Term.
(g) PAYMENT OF FLIGHT CHARGES. Without limiting the effect
of Section 8, Lessee shall pay during the Lease Term promptly upon the same
becoming due and payable all Flight Charges payable by Lessee during the
Lease Term whether in respect of the Aircraft or any other aircraft of Lessee
and which involve any risk of the imposition of a Lien on the Aircraft or the
confiscation or detention thereof (unless such Flight Charges are being
contested in good faith by appropriate proceedings) and shall indemnify and
hold Lessor and any other Indemnified Party harmless in respect of the same,
which indemnity shall continue in full force and effect notwithstanding the
termination or expiration of the Lease Term or Return of the Aircraft.
(h) LOSS OR DAMAGE.
(i) Without limiting the other provisions of this
Section 10, if the Aircraft or any part thereof suffers loss
or damage not constituting an Event of
55
[Lease Agreement]
Loss of the Aircraft or the Airframe or any Engine (in
respect of which, for the avoidance of doubt, Section 13
shall apply), Lessee shall promptly correct and repair such
loss or damage, including the repair or replacement of all
damaged or lost Parts at its own expense in accordance with
this Agreement in order that the Aircraft is placed in an
airworthy condition and in substantially the same condition
as it was prior to such loss or damage. Any insurance
payments with respect to loss or damage not constituting an
Event of Loss of the Aircraft or the Airframe shall be paid
in accordance with the provisions of Section 15 and applied
in payment for repairs to or for replacement of the
property suffering the loss or damage.
(ii) Lessee shall notify Lessor forthwith of any
such loss or damage to the Aircraft for which the cost of
correction or repairs may exceed $500,000 and shall provide
an explanation or proposal for carrying out the correction
or repair. If after its receipt of such proposal, Lessor
does not agree with Lessee's proposal, Lessor shall
promptly notify Lessee of such disagreement. Lessee and
Lessor shall then consult with the Airframe Manufacturer,
Engine Manufacturer or other relevant manufacturer, and
Lessee and Lessor agree to accept as conclusive, and be
bound by, such Person's directions or recommendations as to
the manner in which to carry out such repairs; provided,
that, in the event more than one direction or
recommendation is provided, Lessee in its sole discretion
may choose the direction or recommendation it shall follow.
SECTION 11. POSSESSION. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, Airframe or an Engine or any Part, or
install an Engine, or permit any such Engine to be installed, on an airframe
other than the Airframe, provided that so long as (1) no Event of Default
shall have occurred and be continuing, (2) the action to be taken shall not
adversely affect, or be of a nature that could reasonably be expected to
adversely affect, Lessor's rights, title and interests in and to the Aircraft
or Airframe, or any Engine or Part, or under this Agreement or any other
Operative Document (including, without limitation, any impairment of title to
or the registration with the then Aviation Authority of, the Aircraft), (3)
all applicable approvals, if any, of the Aviation Authority and any other
Government Entity having jurisdiction shall have been obtained, and (4) the
insurance provisions of Section 15 hereof shall have been complied with,
then, at the cost and expense of Lessee:
(a) MAINTENANCE, ETC. Without the prior consent of Lessor,
Lessee may deliver possession of the Airframe or an Engine or any Part to the
manufacturer thereof, to any Approved Maintenance Performer or to any other
Aviation Authority-approved company acceptable to Lessor for testing,
service, repair, maintenance or overhaul work on the Airframe or
56
[Lease Agreement]
Engine or any Part or for alterations or modifications in or additions to
such Airframe or Engine or Part to the extent required or permitted by the
terms of Section 12(b).
(b) INSTALLATION OF ENGINES ON OTHER AIRFRAMES. Without the
prior consent of Lessor, Lessee may install an Engine on any Airframe
Manufacturer model 737 or, subject to Section 10(d)(vii) hereof, 727 airframe
(other than the Airframe) operated by Lessee so long as no Person will
acquire or claim any right, title or interest in any Engine by reason of such
Engine's being installed on such airframe at any time while such Engine is
owned by Lessor.
(c) SUBLEASE. Lessee will not sublease the Aircraft or any
Engine, or assign its rights or obligations under the Lease, without the
prior written consent of Lessor, such consent not to be unreasonably
withheld. Lessee shall pay Lessor's reasonable expenses relating to review of
Lessee's request to sublease regardless of whether such sublease is approved.
Notwithstanding the foregoing, in the event of any sublease permitted as
described above, (i) Lessee shall remain primarily liable for the payment and
performance of all the terms, conditions and provisions of this Lease and
(ii) any permitted sublease will be expressly subject and subordinate to this
Lease and shall not extend beyond the lease term with respect to the
applicable Aircraft.
(d) TRANSFERS OF POSSESSION IN GENERAL. The rights of any
Person who receives possession by reason of a transfer or sublease permitted
by this Section 11 shall be effectively and expressly subject and
subordinate to all the terms of this Lease, including, without limitation,
the covenants contained in Section 10, this Section 11 and Section 15 and
the rights of Lessor to repossession pursuant to Section 20 and to avoid
transfer upon such possession. No sublease, relinquishment or transfer of
possession of the Aircraft or Airframe, or any Engine or Part, shall in any
way release, discharge or otherwise limit or diminish any of Lessee's
obligations to Lessor (it being agreed that notwithstanding any such transfer
or relinquishment of possession, Lessee shall continue to be primarily liable
and responsible for performance of all of its obligations under this
Agreement and each other Operative Document), or constitute a waiver of
Lessor's rights or remedies hereunder or affect the registration of the
Aircraft with the Aviation Authority. Notwithstanding any other provision of
this Agreement or any other Operative Document, any sublease, relinquishment
or transfer of possession must (x) be consistent with the terms of this
Agreement and the other Operative Documents, and (y) not adversely affect the
rights, title or interests of Lessor in or to the Aircraft or Airframe, or
any Engine or Part, or under this Agreement or any other Operative Document,
and (z) not result in any increases in Taxes to the Lessor which are not
indemnifiable hereunder, or otherwise adversely affect applicable tax
benefits available to Lessor.
SECTION 12. REPLACEMENT OF PARTS, ALTERATIONS, MODIFICATIONS AND
ADDITIONS.
(a) REPLACEMENT OF PARTS.
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[Lease Agreement]
(i) Lessee, at its own expense, will replace or
cause to be replaced as soon as reasonably practicable and
in accordance with applicable manufacturer maintenance
manual limits (and in any event within thirty (30) days of
removal or, if earlier, on the date the Lease Term expires
or terminates) all Parts which may form time to time become
unserviceable, obsolete, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever, except as
otherwise provided in Section 12(b) with respect to
Additional Parts.
(ii) Subject to Section 5(a)(iv), all Parts
incorporated or installed in or attached or added to the
Airframe or any Engine shall (x) be free and clear of all
Liens (except for Permitted Liens), (y) except with respect
to Additional Parts, be in as good operating condition as,
and shall have a value and utility at least equal to, the
Parts replaced, assuming such replaced Parts were in the
condition and repair required to be maintained by the terms
hereof and (z) have a current valid Aviation Authority
"serviceable tag" of the manufacturer or maintenance
facility providing such items to Lessee identifying the
manufacturer, vendor, part number, make, model and serial
number, date and hours and/or cycles and, if such a tag
is issuable with respect to the Parts, indicating that such
Parts are new, serviceable or overhauled. Lessee may
substitute for any Part a part that does not meet the
requirements of the foregoing sentence if a complying Part
cannot be procured or installed within the available ground
time of the Aircraft, provided that the original Part is
reinstalled or the non complying part is removed and
replaced by a complying Part, in each case as soon as
reasonably practicable (and in any event within thirty (30)
days of removal or, if earlier, on the date the Lease Term
expires or terminates).
(iii) Immediately upon any Part's becoming
incorporated in, installed on or attached to the Airframe
or any Engine, as above provided, without further act (x)
title to such Part shall thereupon vest in Lessor, free
and clear of all Liens (other than Permitted Liens), (y)
such Part shall become subject to this Agreement and be
deemed part of such Airframe or such Engine for all
purposes hereof, and (z) title to any replaced Part shall
thereupon vest in Lessee, free and clear of all Lessor
Liens, Liens arising prior to Delivery of the Aircraft to
Lessee and Liens granted by Lessor to Lessor's lenders and
shall no longer be deemed a Part hereunder. All Parts
(other than Additional Parts) at any time removed from the
Airframe or any Engine shall remain the property of Lessor,
no matter where located, until such time as such Parts
shall be replaced by Parts which have been incorporated or
installed in or attached to the Airframe or any Engine and
which meet the requirements set forth in clause (iii)
above. Upon any removal of
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[Lease Agreement]
Additional Parts, title thereto shall, without further act,
vest in Lessee, and such Additional Part shall no longer be
deemed a Part hereunder.
(iv) Notwithstanding any other provision hereof,
no Part that is a life limited part shall be installed on
the Aircraft or any Engine, including, without limitation,
a Replacement Engine, after the Delivery Date unless such
Part is new or Lessee has complete certified, back-to-birth
records for such part.
(b) MODIFICATIONS.
(i) Except as otherwise provided with respect to
Required Modifications in Section 10(c)(ii)(B), Lessee, at
its own expense, will make, or cause to be made, such
Modifications to the Airframe and Engines as may be
required from time to time to meet the applicable standards
of the Aviation Authority, provided that Lessee may, in
good faith, contest the validity or application of any law,
rule, regulation or order in any manner which does not
involve any risk of the sale, forfeiture or loss of the
Aircraft or, in the reasonable judgment of Lessor,
materially adversely affect Lessor or involve any risk of
civil or criminal liability on Lessor or any Indemnified
Party.
(ii) Lessee, at its own expense, may from time to
time add further parts or accessories and make such
Modifications to the Airframe or any Engine as Lessee may
deem desirable in the proper conduct of its business,
provided that:
(y) Lessee shall not, without Lessor's prior
written consent, make any Major Modifications,
including, without limitation, modifications as to
the type or manufacture of the avionics and Cabin
modifications which change the interior layout, to
the Aircraft (it being agreed that Lessee shall, if
requested by Lessor, provide advance copies of
regulatory approvals and all designs, plans,
diagrams, drawings and data used by Lessee in
accomplishing such Major Modifications); provided
that any such Major Modifications that are performed
shall be approved by the Aviation Authority (as
evidenced by the issuance of a supplemental type
certificate or similar data acceptable to the
Aviation Authority and Lessor); and
(z) no such Modification shall reduce the
remaining useful life of the Airframe or such Engine
or diminish the value or utility of the Airframe or
such Engine or impair the condition, airworthiness or
marketability thereof below the remaining useful
life, value, utility, condition, marketability or
airworthiness thereof immediately prior to such
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[Lease Agreement]
Modification, assuming the Airframe or such Engine
was then of the remaining useful life, value and
utility and in the condition and airworthiness
required to be maintained by the terms of this
Agreement. Title to all Parts incorporated or
installed in or attached or added to the Airframe or
an Engine as the result of such Modification (the
"Additional Parts") shall, without further act, vest
in Lessor, and Lessee hereby relinquishes all right,
title and interest thereto.
(iii) Lessor shall not be required under any
circumstances to pay directly or indirectly for any
Modifications. Notwithstanding the foregoing, Lessee may, at
any time during the Lease Term, so long as no Event of
Default shall have occurred and be continuing, remove or
suffer to be removed any such Modification (other than a
Required Modification), provided that such Modification (x)
in the case of an Additional Part, is in addition to, and not
in replacement of or substitution for, any Part originally
incorporated or installed in or attached to the Airframe or
any Engine at the time of delivery thereof or any Part in
replacement of or substitution for any such Part, (y) is not
required to be incorporated or installed in or attached or
added to the Airframe or any Engine pursuant to the terms of
this Section 12 and (z) can be removed from the Airframe or
such Engine without damaging the Airframe or such Engine or
diminishing or impairing the value, utility, condition or
airworthiness which the Airframe or such Engine would have
had at such time had such Modification not occurred, assuming
the Airframe or such Engine was then of the fair market value
and utility and in the condition and airworthiness required
to be maintained by the terms of this Agreement.
(iv) Upon expiration or termination of the Lease
Tenn and the written request of Lessor at least forty-five
(45) days prior to such expiration or termination, Lessee
shall, at its own expense, remove or cause to be removed any
Additional Part. Upon the removal by Lessee of any Additional
Part as provided above, title thereto shall, without further
act, vest in Lessee free and clear of Lessor Liens, Liens
arising prior to Delivery of the Aircraft to Lessee and Liens
granted by Lessor to Lessor's lenders, and such Additional
Part shall no longer be deemed part of the Airframe or Engine
from which it was removed. Any Additional Part not removed by
Lessee as above provided prior to the return of the Airframe
or Engine to Lessor hereunder shall remain the property of
Lessor.
(v) Notwithstanding anything to the contrary
contained herein, Lessee shall not, without Lessor's prior
written consent, remove any Modification which is required by
the Aviation Authority.
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[Lease Agreement]
(c) Notwithstanding anything in this Section 12 to the
contrary, upon Delivery of the Aircraft to Lessee, Lessee shall be entitled
to remove the seats and galleys then installed on the Aircraft, and replace
such seats and galleys with other seats and galleys owned or leased by Lessee
in accordance with Section 5(a)(iv) hereof (so long as such replacement seats
and galleys are in conformity with all applicable Aviation Authority rules
and regulations). Lessee shall be responsible for the removed seats and
galleys during the Lease Tenn; provided that Lessee, as Lessor's agent but at
Lessee's cost and expense (including the payment of any Taxes with respect to
such sale), may sell such seats and galleys and Lessee shall be entitled to
retain all proceeds from such sale. At Return, Lessee shall return the
Aircraft with seats and galleys in serviceable condition installed thereon,
in substantially similar condition to the original seats and galleys when
removed from the Aircraft by Lessee and in the same configuration as the
original seats and galleys prior to their removal from the Aircraft, as
evidenced by an attachment to the Technical Acceptance Certificate.
SECTION 13. RISK OF LOSS, DESTRUCTION, REQUISITION, ETC.
(a) RISK OF LOSS. Throughout the Lease Tenn and until the
Return shall have been effected in accordance with the terms of this
Agreement, Lessee shall bear all risk of loss, damage, theft or destruction
of, or any other Event of Loss with respect to, the Aircraft or to the
Airframe, any Engine or any Part.
(b) EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.
(i) Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and Engines and/or
engines then installed thereon, Lessee shall forthwith (and,
in any event, within three (3) days after such occurrence)
give Lessor written notice of such Event of Loss. By the
earlier of (y) sixty (60) days following the Event of Loss
Date or (z) the date on which the applicable insurance
proceeds are received by the loss payee, Lessee shall pay or
cause to be paid to Lessor in immediately available funds the
Stipulated Loss Value of the Aircraft together with all other
amounts then due and owing by Lessee hereunder.
(ii) Until the date on which the Stipulated Loss
Value and the other amounts referred to in clause (b)(i)
above are paid in full, Lessee shall be obligated to pay all
Basic Rent as scheduled and shall continue to perform all of
its other obligations under the Operative Documents, except
to the extent rendered impossible by the occurrence of such
Event of Loss or rendered, in the opinion of Lessor,
unnecessary. If the Stipulated Loss Value referred to in
clause (b)(i) above is paid on a date other than a Basic Rent
Date, Lessor shall refund or cause to be refunded to Lessee
any paid but unaccrued Basic Rent. Upon receipt of the full
amount of the Stipulated Loss Value and the other amounts
referred to in
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[Lease Agreement]
clause (b)(i) above by Lessor pursuant to this Section 13(b),
and if Lessee has paid all other amounts then due and payable
by Lessee under this Agreement and the other Operative
Documents, then (x) Lessor shall, upon the joint written
request of Lessee and each insurer or their appointed
representatives which contributed to the payment of the
Stipulated Loss Value, transfer to the Person designated in
such request all of Lessor's right, title and interest in the
Aircraft without recourse or warranty (except as to absence
of Lessor Liens, Liens existing prior to Delivery of the
Aircraft to Lessee and Liens granted by Lessor to Lessor's
lenders) and subject to the disclaimer set forth in Section
5(a), and (y) Lessee shall be relieved of its obligations
under Section 7.
(c) EVENT OF LOSS WITH RESPECT TO AN ENGINE.
(i) Upon the occurrence of an Event of Loss with
respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe,
Lessee shall promptly (and, in any event, within seven (7)
days after such occurrence) give Lessor written notice thereof
and shall, as soon as reasonably practicable and, in any
event, within ninety (90) days after the occurrence of such
Event of Loss (or, if earlier the date of expiration or "
termination of the Lease Term) and upon five days' prior
written notice, convey or cause to be conveyed to Lessor, as
replacement for the Engine with respect to which such Event of
Loss occurred, title to a Replacement Engine, free and clear
of all Liens (other than Permitted Liens) and having an
equivalent or greater value, condition, utility,
airworthiness, remaining useful life as, and being in as good
operating condition as, the Engine with respect to which such
Event of Loss occurred, assuming such replaced Engine was in
the condition and repair required to be maintained by the
terms of this Agreement. For all purposes hereof, each such
Replacement Engine shall, after such conveyance, be deemed
part of the property leased hereunder, and shall be deemed an
"Engine."
(ii) Prior to or at the time of any conveyance of a
Replacement Engine, Lessee, at its own expense, shall (t)
furnish Lessor with a full warranty (as to title) xxxx of
sale, in form and substance satisfactory to Lessor, conveying
to Lessor such Replacement Engine, (u) cause supplements to be
executed which shall subject such Replacement Engine to this
Agreement, (v) cause the filing of such instruments as are
necessary or advisable to establish, perfect and protect the
interest of Lessor in any such Engine (including, without
limitation, cause a Lease Supplement, in form and substance
satisfactory to Lessor, to be duly executed by Lessee) (w)
furnish Lessor with such evidence of the transfer of title to
such Replacement Engine to Lessor as Lessor may reasonably
request, including, without limitation, that such Replacement
Engine is free and clear of all Liens of
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[Lease Agreement]
record with the Aviation Authority, except Permitted Liens,
such evidence to include, without limitation, an opinion of
Lessee's counsel addressed to Lessor, and opining that such
title has been so conveyed and that such Replacement Engine
has been duly subjected to this Agreement (such opinion to be
in form and substance, and from counsel, satisfactory to
Lessor), (x) furnish Lessor with such evidence of compliance
with the provisions of Sections 1O(e), 12(a)(v) and 15 with
respect to such Replacement Engine as Lessor may reasonably
request and, (y) furnish Lessor with a certificate signed by
an officer of Lessee certifying that, upon consummation of
such replacement, no Event of Default will exist hereunder
and certifying that such Replacement Engine has a value,
condition, utility, airworthiness and remaining useful life at
least equal to, and is in as good operating condition as, the
Engine so replaced, assuming such Engine was in the condition
and repair required by the terms of this Agreement immediately
prior to the occurrence of such Event of Loss.
(iii) Upon compliance by Lessee with the requirements
of this Section 13(c), if no Event of Default shall have
occurred or be continuing, Lessor shall, upon the joint
written request of Lessee and each insurer which contributed
to the payment of any insurance proceeds with respect to the
lost Engine, transfer to the Person designated in such request
all of Lessor's right, title and interest in such Engine
without recourse or warranty (except as to absence of Lessor
Liens, Liens arising prior to Delivery of the Aircraft to
Lessee and Liens granted by Lessor to Lessor's lenders) and
subject to the disclaimer set forth in Section 5(a), and such
Engine shall thereupon cease to be an Engine leased hereunder.
(iv) No Event of Loss with respect to an Engine shall
result in any reduction in Basic Rent.
(d) APPLICATION OF PAYMENTS FROM ANY GOVERNMENT ENTITY FOR
REQUISITION OF TITLE, ETC. Any payments (other than insurance proceeds the
application of which is provided for in Section 15) received at any time by
Lessor or by Lessee from any Government Entity or other Person with respect to
an Event of Loss will be applied as follows:
(i) if payments are received with respect to the
Airframe (or the Airframe and an Engine or engines then
installed thereon), after reimbursement of Lessor for
reasonable costs and expenses, so much of such payments
remaining as shall not exceed the Stipulated Loss Value
required to be paid by Lessee pursuant to Section 13(b) shall,
unless a Default or any Event of Default shall have occurred
and be continuing, be applied in reduction of Lessee's
obligation to pay such Stipulated Loss Value and such other
amounts of Rent, if not already paid by Lessee, or, if already
paid by Lessee, shall be applied to reimburse Lessee for its
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[Lease Agreement]
payment of such Stipulated Loss Value, and the balance, if
any, of such payments shall be distributed to or retained by
Lessee or
(ii) if such payments are received with respect to an
Engine under circumstances contemplated by Section 13(c),
then so much of such payments remaining after reimbursement of
Lessor for reasonable costs and expenses; up to an amount
equal to Lessee's actual cost of replacing such Engine in
accordance with Section 13(c), shall, unless a Default or
Event of Default shall have occurred and be continuing, be
paid over to, or retained by, Lessee if Lessee shall have
fully performed, or concurrently therewith will perform, the
terms of Section 13(c) with respect to the Event of Loss for
which such payments are made, and the balance' if any, of such
payments shall be distributed to or retained by Lessee.
(e) APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT. Any
amount referred to in this Section 13 which is payable to or retainable by
Lessee shall not be paid to or retained by Lessee if at the time of such
payment or retention a Default or any Event of Default shall have occurred and
be continuing, but shall be held by or paid over to Lessor, as security for the
obligations of Lessee under this Agreement to be held and applied pursuant to
Section 20 and applied against Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Event of
Default, such amount shall be paid to Lessee to the extent not applied in
accordance with the preceding sentence.
SECTION 14. INTENTIONALLY RESERVED.
SECTION 15. INSURANCE.
(a) REQUIREMENTS. At all times during the Lease Term, and
until the Aircraft is returned to Lessor in the condition and manner required
by this Agreement, Lessee shall maintain or cause to be maintained with respect
to the Aircraft, at its own expense, insurance in compliance with the
Insurance Requirements of Exhibit F hereto.
(b) APPLICATION OF PROCEEDS OF XXXX INSURANCE. As between
Lessor and Lessee, it is agreed that all proceeds of insurance maintained in
compliance with this Section 15 (except Section 15(f)) and received as the
result of the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the
Airframe (or the Airframe and the Engines or engines installed
thereon), so much of such payments remaining, after
reimbursement of Lessor for reasonable costs and expenses, as
shall not exceed the Stipulated Loss Value and the other
amounts payable under Section 13(b) shall be applied in
reduction of Lessee's obligation to pay such
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[Lease Agreement]
Stipulated Loss Value and the other amounts payable under
Section 13(b), if not already paid by Lessee, or, if already
paid by Lessee, shall be applied to reimburse Lessee for its
payment of such Stipulated Loss Value, and the balance, if
any, of such payments remaining thereafter shall be paid over
to, or retained by, Lessee; and
(y) if such payments are received with respect to an
Engine under the circumstances contemplated by Section 13(c),
so much of such payments remaining, after reimbursement of
Lessor for reasonable costs and expenses, shall be paid over
to, or retained by, Lessee, provided that Lessee shall have
fully performed or, concurrently therewith, will fully
perform the terms of Section 13(c) with respect to the Event
of Loss for which such payments are made.
As between Lessor and Lessee, the insurance payments with
respect to any property damage loss not constituting an Event of Loss with
respect to the Airframe or an Engine will be applied in payment (or to
reimburse Lessee) for repairs or for replacement property in accordance with
the terms of Sections 10 and 12, if not already paid for by Lessee, and any
balance remaining after compliance with such sections with respect to such loss
shall be paid to Lessee.
(c) INSURANCE FOR INDEMNITIES; CONTINUATION OF LIABILITY
INSURANCE. The insurance referred to in Section 15(a) shall in each case
include and insure (to the extent of the risks covered by the policies) the
indemnity provisions of Section 9. For a period of twenty-four months after
the last day of the Lease Term, or, if earlier, the next C-Check of the
Aircraft, and at Lessee's cost, Lessee shall continue to name each
Indemnified Party as an additional insured under Lessee's comprehensive
airline and war-risk liability insurance described in Exhibit F to the extent
of its interest under the indemnities referred to in the preceding sentence.
(d) REPORTS, ETC. Lessee shall furnish, or cause to be
furnished, to Lessor (x) on or before the Delivery Date and not later than each
renewal date of any insurance, and otherwise upon reasonable request, a
Certificate of Insurance and a report, signed by the Insurance Broker, stating
that (i) it is the Lessee's insurance broker; (ii) in the opinion of such firm
(x) such insurance complies with the terms hereof and (y) such insurance
together with any self-insurance permitted hereby are in such amounts and cover
such perils and are placed with insurers of recognized reputation and
responsibility in the worldwide aviation insurance marketplace so that the
protection afforded thereby is not less than that which would customarily be
maintained for aircraft of a similar character by corporations engaged in the
same or similar business, similarly situated with Lessee; (iii) such Insurance
Broker shall advise Lessor in writing of any act or omission on the part of
Lessee of which the Insurance Broker has knowledge and which has been confirmed
by the insurers as invalidating or rendering unenforceable, in whole or in
part, any insurance on the Aircraft and advise in writing at least 30 days (7
days in the case of war risk and
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[Lease Agreement]
allied perils coverage) prior to the cancellation (but not scheduled expiration
if renewed prior thereto) or material adverse change to any insurance
maintained pursuant to this Section 15 and Exhibit F; and (iv) Lessee is
current on the payment of all insurance premiums; and (v) on the Delivery Date
and no later than five (5) days prior to the date of expiration of any
insurance policy referenced in a previously delivered certificate of insurance
and a report of the Insurance Broker.
(e) SELF-INSURANCE. Lessee may not self-insure the risks
required to be insured against pursuant to this Section 15, provided that
Lessee may self-insure the risks required to be insured against pursuant to
Exhibit F (except total loss) by way of deductible, premium adjustment or
similar provisions, in such amounts as are customarily self-insured with
respect to aircraft of the same type and used in the same manner as the
Aircraft by major international air carriers, but in no event in an amount
greater than the $500,000 per aircraft per occurrence.
(f) ADDITIONAL INSURANCE BY LESSOR. Lessee acknowledges that
Lessor has an insurable interest in the Aircraft. Lessor shall have the right
to obtain insurance in its own name with respect to such insurable interest.
Lessee will render Lessor all reasonable assistance requested by Lessor in
order that Lessor may adequately protect such insurable interest. Lessee
agrees that the maximum amounts payable to it or to others for its account or
to be applied in discharge of its obligations by any underwriter or carrier of
insurance maintained by Lessee upon the occurrence of an Event of Loss with
respect to the Aircraft shall be limited to the Stipulated Loss Value unless
the maintenance of any such insurance in an amount in excess of such Stipulated
Loss Value in respect of Lessee's insurable interest in the Aircraft does not
prejudice Lessor's or any Insured Party's interests under the insurances
otherwise required by this Section 15, or prevent Lessor from obtaining such
insurances as it requires, in which event nothing herein shall prevent Lessee
from effecting such additional insurance for its account.
(g) APPLICATION OF PAYMENTS DURING EXISTENCE OF A DEFAULT. Any
amount referred to in this Section 15 which is payable to or retainable by
Lessee shall not be paid to or retained by Lessee if at the time of such
payment or retention a Default or any Event of Default shall have occurred and
be continuing, but shall be held by or paid over to Lessor as security for the
obligations of Lessee under this Agreement and, if any such Default or Event of
Default shall have occurred and be continuing, applied against Lessee's
obligations hereunder as and when due. At such time as there shall not be
continuing any such Default or Event of Default, such amount shall be paid to
Lessee to the extent not applied in accordance with the preceding sentence.
(j) NEGATIVE UNDERTAKINGS. Lessee shall not (i) act or fail to
act, or cause, permit or suffer an act or failure to act, whereby any insurance
required by this Section 15 would or might reasonably be expected to be limited
or rendered in whole or in part invalid, unenforceable or otherwise not in full
force and effect (including any limitation resulting from inaccuracy of any
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[Lease Agreement]
representation or warranty of Lessee, or any illegal use of the Aircraft), and
(ii) without limiting the foregoing, use, operate, employ or locate the
Aircraft, Airframe, any Engine or any Part, or cause, permit or suffer the
Aircraft, Airframe, any Engine or any Part to be used, operated, employed or
located, in any place or in any manner or for any purpose (x) in any area
excluded from coverage, or in any manner for any purpose that is not covered,
by any insurance policy in effect or required by the terms of this Agreement to
be maintained by Lessee or (y) that might reasonably be expected to be excluded
from coverage under, or to invalidate or in any way limit (including any
limitation with respect to coverage of the specified insured perils, events or
circumstances) any such insurance policy.
(k) FAILURE TO INSURE. If at any time Lessee fails to maintain
insurance in compliance with this Section 15, Lessor shall be entitled but not
bound to do any of the following (without prejudice to any other rights which
it may have under this Agreement by reason of such failure):
(i) to pay any premiums due or effect or maintain such insurance
or otherwise remedy such failure in such manner as Lessor
considers appropriate (and Lessee shall upon demand reimburse
Lessor in full for any amount so expended in that connection)
and/or
(ii) at any time while such failure is continuing, require the
Aircraft to remain at any airport or, as the case may be, upon
provision by Lessor of insurance coverage satisfactory to
Lessee, proceed to and remain at any airport designated by
Lessor, until such failure is remedied to Lessor's
satisfaction.
SECTION 16. INSPECTION.
(a) MAINTENANCE SCHEDULE. During the Lease Term, Lessee shall
furnish Lessor with such information concerning the location, condition, use
and operation of the Aircraft as Lessor may reasonably request. Lessee shall
provide Lessor with maintenance schedules relating to the Aircraft upon
delivery of the Aircraft and from time to time as such schedules are adjusted
or updated. Lessee shall give Lessor reasonable prior notice of the date of,
and any change in the date of, any Major Checks, in order to enable Lessor, or
its agents, representatives or designees, to inspect the Aircraft, including,
without limitation, the Aircraft Documentation (should Lessor choose to do so),
at the time and place any such Major Checks occur and to make a reasonable
number of photocopies of any Aircraft Documentation. Lessee's obligations under
the second and third sentences of this Section 16(a) can be satisfied through
Lessee's provision of the quarterly reports pursuant to Section 10(d)(vii)
hereof.
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[Lease Agreement]
indemnity under this Agreement. In connection with any Transfer, the
following conditions shall apply:
(i) Lessor shall give Lessee written notice of
such Transfer at least 10 Business Days before the date of such
Transfer, specifying the name and address of the proposed purchaser,
assignee or transferee (the "Transferee");
(ii) the Transfer will not adversely affect the
Lessee's rights and interests in the Aircraft and/or this Agreement,
nor subject the Lessee to any Tax, claim, liability or any other
obligation to which it would not have been subject had such
assignment or transfer not taken place;
(iii) the Transferee will be a Citizen of the
United States and have full corporate power and authority to enter
into and perform the transactions contemplated by this Agreement on
the part of "Lessor";
(iv) on the Transfer date the Lessor and the
Transferee shall enter into an agreement or agreements in which the
Transferee confirms that it shall be deemed a party to this
Agreement and agrees to be bound by all the terms of, and to under
take all of the obligations of, the Lessor contained in this
Agreement; and
(v) such Transfer shall not violate any applicable
law including the Federal Aviation Law, the Federal Aviation
Regulations and the Securities Act of 1933, as amended.
(c) Upon any Transfer, the Transferee shall be deemed
Lessor for all purposes of this Agreement, each reference in this Agreement
to the "Lessor" shall thereafter be deemed for all purposes to refer to the
Transferee, and the transferor shall be relieved of all obligations of the
"Lessor" under this Agreement arising after the time of such Transfer except
to the extent attributable to acts or events occurring prior to the time of
such Transfer.
(d) Upon compliance by Lessor and a Transferee with the
terms and conditions of Clause 17(b), except during the continuance of an
Event of Default, Lessee shall at the time of Transfer, at the specific
written request of Lessor and with Lessor paying all of Lessee's
out-of-pocket costs and expenses:
(i) execute and deliver to Lessor and to such
Transferee an agreement, in form and substance satisfactory to
Lessor, Lessee and such Transferee, ed the date of such transfer,
consenting to such transfer, agreeing to pay all or such portion of
the Basic Rent and other Payments under this Agreement to such
Transferee or its designee as such Transferee shall direct, and
agreeing that such Transferee shall be entitled to rely on all
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[Lease Agreement]
representations and warranties made by Lessee in this Agreement or
in any certificate or document furnished by Lessee in connection
with this Agreement as though such Transferee was the original
"Lessor";
(ii) execute and deliver to Lessor or such
Transferee, as the case may be, precautionary Uniform Commercial Code
financing statements or amendments reflecting the interests of such
Transferee in the Aircraft and this Agreement;
(iii) deliver to Lessor and to such Transferee a
certificate, signed by a duly authorized officer or Lessee, dated the
date of such transfer, to the effect that no Event of Default has
occurred and is continuing or, if one is then continuing, describing
such Event of Default;
(iv) cause to be delivered to Lessor and such
Transferee certificates of insurance and broker's letter of
undertaking substantially in the form set out in Exhibits F and G,
detailing the coverage and confirming the insurers' agreement to the
specified insurance requirements of this Agreement and listing the
Lessor and Transferee as additional insureds and the Transferee as
sole loss payee, in accordance with the terms of Exhibit F;
(v) deliver to Lessor and such Transferee
information on the location of the Airframe and Engines at all times
requested by Lessor in order to permit the Transfer to take place at a
time and on a date so as to eliminate or minimize any Taxes applicable
to the Transfer; and
(vi) such other documents as Lessor or such
Transferee may reasonably request, so long as such documents do not
adversely affect the rights or obligations of Lessee under this Lease
or otherwise adversely effect Lessee.
(e) COLLATERAL ASSIGNMENT. Notwithstanding any of the
foregoing, it is understood and agreed that Lessor may, without the prior
written consent of Lessee but with prior notice to the Lessee, mortgage or
pledge and/or assign all or any portion of its right, title and interest in and
to this Agreement, the Aircraft or any Rent due hereunder to any Lender. Lessee
shall acknowledge in writing any such mortgage, pledge or assignment by an
acknowledgment in a form reasonably satisfactory to the Lessee. Upon notice to
the Lessee from any Lender under any such mortgage, pledge or assignment, such
Lender may require that all Rent shall be paid directly to such Lender and/or
that the Aircraft be returned to such Lender, but, in the case of the return of
the Aircraft, only upon completion or termination of this Agreement. Any
acknowledgment from the Lessee shall include, without limitation, an agreement
of the Lessee that:
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[Lease Agreement]
(i) upon such mortgage, pledge or assignment, all rights
of the Lessor hereunder (including without
limitation, all rights to be named as loss payee, in
accordance with the terms of Exhibit F, and an
additional insured under any policies of insurance
maintained pursuant to Section 15 hereof, all rights
to receive monies, reports, certificates and any
other information pursuant to the terms of this
Agreement and all rights to indemnification) shall,
to the extent provided for in the mortgage, pledge
or assignment, be exercisable by such Lender, and
such Lender shall be deemed an Indemnified Party and
a Tax Indemnitee for all purposes of this Agreement;
(ii) the rights of such Lender shall not be subject to
any defense, counterclaim, or set-off that the
Lessee may have or assert against Lessor;
(iii) such Lender shall not be liable for any of Lessor's
obligations hereunder;
(iv) subject to the terms of the mortgage, pledge or
assigninent, such Lender may require that all Rent
be paid directly to such party (or its designee),
and Lessee agrees that upon receipt of such notice,
Lessee shall pay directly to such Lender all Rent
due or to become due hereunder; and
(v) Lessee shall comply, at the Lessor's expense, with
all reasonable requests of Lessor and such Lender in
connection with any such mortgage, pledge or
assignment including, without limitation, the
execution of all consents and amendments in a form
reasonably acceptable to Lessee and the making of
any and all registrations and filings.
(f) SUCCESSORS AND ASSIGNS. Subject to the foregoing, the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of Lessor, Lessee and their respective successors and permitted
assigns.
SECTION 18. EARLY TERMINATION. Lessee may not terminate the Lease
prior to the Expiry Date, except pursuant to Exhibit M hereto.
SECTION 19. EVENTS OF DEFAULT. Lessor and Lessee agree that it is a
fundamental term and condition of this Agreement that none of the following
events shall occur during the Lease Term and that the occurrence of any of the
following events shall constitute a repudiatory breach of this Agreement and an
"Event of Default" (whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or
regulation of any Government Entity):
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[Lease Agreement]
(a) FAILURE TO PAY BASIC RENT. Lessee shall have failed to
make any payment of Basic Rent, Stipulated Loss Value or Early Termination Fee
in accordance with this Agreement and the other Operative Documents when the
same shall have become due and payable and such failure shall continue for
five (5) Business Days from such due date.
(b) FAILURE TO PAY SUPPLEMENTAL RENT. Lessee shall have
failed to make any payment of Supplemental Rent (other than as specified in
paragraph (a) above) in accordance with this Agreement or the other Operative
Documents when the same shall have become due and such failure shall continue
for ten (10) Business Days from such due date.
(c) INSURANCE.
(i) Lessee shall have failed to carry and maintain,
or cause to be carried and maintained, on or with respect to
the Aircraft, any insurance required to be maintained in
accordance with the provisions of Section 15;
(ii) The Aircraft shall be operated at a time when
any insurance required under Section 15 shall not be in
effect.
(d) RETURN. Lessee shall have failed to return the Aircraft
at the end of the Lease Term pursuant to the provisions of, and in the
condition required by, Section 7.
(e) UNAUTHORIZED TRANSFER. There shall be any unauthorized
transfer of possession of the Aircraft, Airframe or any Engine by Lessee.
(f) CERTAIN COVENANTS. Lessee shall have failed to comply
with its obligations under Section 6(a), 6(b), 10(a)(i), 10(b), 10(d)(ii) or
11 (except, with respect to 11(a) and 11(d), for which Section 19(g) shall
apply and 11(b), for which Lessee shall have 5 Business Days to cure the
relevant failure after the earlier of (i) the date of written notice thereof
to Lessee or (ii) the date Lessee obtains actual knowledge of such failure).
(g) OTHER COVENANTS. Lessee shall have failed to comply
with, observe or perform, and shall fail to cause to be complied with,
observed and performed, any of its covenants, agreements or obligations
hereunder or under any other Operative Document, except to the extent provided
above in this Section 19, and such failure shall continue for 30 days after
the earlier of (i) the date of written notice thereof to Lessee or (ii) the
date Lessee obtains actual knowledge of such failure; provided, if Lessee has
not cured such failure with such 30-day period and such failure can be cured
with further reasonable diligence, Lessee, so long as it is proceeding
diligently to cure such failure, shall have an additional 30-day period to
cure such failure at the expiration of the initial 30-day period.
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[Lease Agreement]
(h) REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made by Lessee herein or in any other Operative Document shall have
proven to have been incorrect, inaccurate or untrue in any material respect as
of the time made.
(i) AUTHORIZATIONS. Lessee shall no longer possess the
Authorizations required hereunder or under any other operative document or
otherwise required for the conduct of its business as a commercial passenger
and cargo air carrier in the Lessee Jurisdiction or for the performance of its
obligations hereunder or under any other Operative Document, or any such
Authorizations are revoked, canceled, adversely modified or otherwise
terminated, or the continued use and exercise thereof is prevented.
(j) VOLUNTARY BANKRUPTCY, ETC. Lessee shall have (i)
commenced any proceeding or filed any petition seeking relief under any
applicable bankruptcy, insolvency, liquidation, examination, administration,
receivership or other similar law, (ii) consented to or acquiesced in the
institution of, or failed to contravene in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (iii) applied for or
consented to the appointment of a receiver, examiner, trustee, custodian,
sequestrator or similar official for itself or for a substantial part of its
property or assets, (iv) filed an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) proposed or
entered into any composition or other arrangement, or made a general
assignment, for the benefit of creditors or declared a moratorium on the
payment of indebtedness, (vi) become insolvent or suspended payments on,
become unable to, admitted in writing its inability to or failed generally to
pay, any material portion of its debts as they become due, (vii) sought its
own liquidation, reorganization, dissolution or winding up (other than for
the purposes of a reorganization previously approved by Lessor), (viii)
suspended payment procedures or (ix) taken any corporate action for the
purpose of effecting any of the foregoing.
(k) INVOLUNTARY BANKRUPTCY, ETC. A proceeding shall have been
commenced or a petition shall have been filed, in either case, without the
consent or application of Lessee, seeking (i) relief in respect of Lessee or of
a substantial part of its property or assets under any applicable bankruptcy,
insolvency, liquidation, examination, administration, receivership or similar
law, (ii) the appointment of a receiver, examiner, trustee, custodian,
sequestrator or similar official for Lessee or for a substantial part of its
property or assets or (iii) the liquidation, reorganization, dissolution or
winding up of Lessee; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be issued and shall not immediately be stayed.
(l) GOVERNMENT ACTION. The franchises, concessions, permits,
rights or privileges required for the conduct of the business or operations of
Lessee shall have been revoked, canceled or otherwise terminated or the free
and continued use or exercise thereof curtailed,
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[Lease Agreement]
prevented or modified in a manner that materially adversely affects Lessee's
ability to perform its obligations under any Operative Document.
(m) CROSS DEFAULT:
(i) any Indebtedness of the Lessee or any of
its Affiliates that exceeds $2,000,000 is
not paid when due and any applicable grace
period shall have expired;
(ii) the security for any such Indebtedness is
enforced; or
(iii) any lease, conditional sale, installment
sale or forward purchase agreement of
the Lessee or any of its Affiliates in
respect of an aircraft is terminated as
a consequence of an event of default or
termination event (however described);
provided always, in any such case, it shall not
constitute an Event of Default under this Agreement
if, in connection with Lessee's working lines of
credit and related letters of credit facilities:
(1) the non-payment, acceleration, termination
or event in question is being contested by
the Lessee in good faith and on reasonable
grounds and any declaration of default,
termination of agreement or enforcement of
security has been stayed by a court of
competent jurisdiction; or
(2) the non-payment, acceleration, termination
or event in question is being discussed by
the Lessee with the creditors of such
facilities in good faith and on reasonable
grounds and there has been no declaration
of default, termination of agreement or
enforcement of security.
(n) CHANGE OF OWNERSHIP. Any single person acquires, or group
of persons acquire, control, directly or indirectly, of twenty-five percent
(25%) or more of Lessee's then outstanding voting stock (including by virtue of
control of twenty-five percent (25%) or more of Lessee's direct or indirect
parent's then outstanding voting stock) without the previous consent in writing
of the Lessor (which consent shall not be withheld unless the Lessor is of the
reasonable opinion that such acquisition of control will have a materially
adverse effect on the Lessee's ability to perform its obligations under this
Agreement or the Lessor's rights, title and interest in and to the Aircraft or
under this Agreement), not including (i) persons that are currently in control
of Lessee, (ii) spouses of such persons, (iii) any lineal ancestor or
descendant of such
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[Lease Agreement]
persons, (iv) any spouse of any person covered by clause (iii), or (v) a
partnership or trust set up for the benefit of persons identified in clauses
(i) through (iv).
(p) LETTER OF CREDIT. The Letter of Credit shall be
repudiated by the issuing bank or shall become ineffective, the Lessee shall
fail to replace the Letter of Credit pursuant to Section 3(d)(v) following the
occurrence of a Substitution Event (as defined in said Section 3(d)(v) or,
following any occurrence of an event entitling Lessor to draw on the Letter of
Credit, Lessor shall be prohibited by law from drawing on the Letter of Credit
when Lessor is otherwise entitled to make such a drawing and, within five (5)
Business Days after notice of any of the foregoing by Lessor, Lessee does not
replace the Letter of Credit with a new Letter of Credit meeting the
requirements of Section 3(d)(v).
SECTION 20. REMEDIES. Upon the occurrence of any Event of Default and
so long as the same shall be continuing, Lessor shall have the right, effective
upon notice to Lessee, to terminate this Agreement and all of Lessee's rights
hereunder; and at any time thereafter Lessor may do all or any of the
following, at its option and in its sole discretion (in addition to such other
rights and remedies which Lessor may have under applicable law):
(a) RETAKE POSSESSION. Upon the written demand of Lessor and
at Lessee's expense, cause Lessee to return promptly, and Lessee shall return
promptly, the Airframe and Engines or such part of the Aircraft as Lessor may
so demand to Lessor or its order in the manner and condition required by, and
otherwise in accordance with, all the provisions of, Section 7 as if such
Airframe and Engines were being returned at the expiration of the Lease Term,
or Lessor, acting in its individual capacity or as attorney for Lessee, at its
option, may enter upon the premises where the Airframe or an Engine is located
and take immediate possession of and remove the same (together with any engine
which is not an Engine but which is installed on the Airframe, subject to all
the rights of the owner, lessor, lienor or secured party of such engine, and
such engine shall be held for the account of any such owner, lessor, lienor or
secured party or, if owned by Lessee, may, at the option of Lessor, be
exchanged with Lessee for an Engine in accordance with the provisions of
Section 7(b)) by summary proceedings or otherwise, and Lessee waives any right
it may have under applicable law to a hearing prior to repossession of the
Aircraft, Airframe or any Engine or Part, all without liability accruing to
Lessor for or by reason of such entry or taking of possession or removing
whether for the restoration of damage to property caused by such action or
otherwise. Lessee acknowledges and agrees that its obligation to return the
Aircraft in those instances is incontrovertible without prejudice to its right
to dispute any amounts, damages, interests or other amounts claimed by Lessor
upon termination of this Agreement and as such this Agreement will be
incontrovertible written evidence of such obligation of Lessee to return the
Aircraft which Lessor will be entitled to enforce via injunctive orders.
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[Lease Agreement]
(b) TERMINATION OR ENFORCEMENT. Rescind this Agreement,
terminate this Agreement and/or exercise any other right or remedy which may be
available to it under applicable law or proceed by appropriate court action to
enforce the terms hereof and/or exercise any other power, right or remedy which
may be available to Lessor hereunder or under applicable law. Without limiting
the generality of the foregoing, Lessor shall have the right, without need of
any consent, authorization or action of Lessee, to cause the Aircraft to be
deregistered by the Aviation Authority, and to be made ready for export and to
be exported out of the Lessee Jurisdiction, and to cause all rights of Lessee
in respect of the Aircraft and this Lease under or in connection with or
resulting from the registration of the Aircraft with the Aviation Authority or
otherwise under or in connection with or resulting from any law in the Lessee
Jurisdiction, to be terminated and extinguished. In furtherance of the
foregoing, Lessor shall be entitled and empowered to act in the name and in the
place of Lessee with respect to the Aircraft as may be necessary or desirable,
in Lessor's sole discretion, including, without limitation, with respect to the
execution of documents and instruments, to effect such deregistration,
exportation, termination and exinguishment.
(c) APPLICATION OF FUNDS. Without limiting any other
provision of this Agreement or of any other Operative Document, Lessor shall
have the right to withhold or set off against all amounts otherwise payable to
Lessee hereunder, all as security for Lessee's obligations and liabilities
under this Agreement and the other Operative Documents, and to use and apply in
whole or in part any or all of such amounts and setoffs to and against such
obligations and liabilities of Lessee (in whatever order and according to
whatever priority Lessor may choose), and any such use, application or setoff
shall be absolute, final and irrevocable.
(d) DAMAGES. In addition to Lessor's rights under Section 9,
Lessor may recover from Lessee, and Lessee shall on demand pay, damages to
equal the sum of:
(i) all accrued and unpaid Rent payable hereunder in
respect of any period prior to Return of the Aircraft to
Lessor in the condition and otherwise in the manner required
under Section 7 together with Break Amount, if any;
(ii) all Expenses incurred by Lessor and any other
Indemnified Party in connection with such Event of Default or
the exercise of Lessor's remedies with respect thereto,
including, without limitation, all costs and expenses
incurred in connection with recovering possession of the
Airframe or any Engine or in placing such Airframe or Engine
in the configuration, condition and airworthiness required by
Section 7 and all lost Rent payments during such recovery and
reconditioning;
(iii) all incidental and consequential damages
incurred by Lessor and any other Indemnified Party in
connection with such Event of Default, including,
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[Lease Agreement]
without limitation, all losses (including, without
limitation, reasonable lost profits) suffered by Lessor
because of Lessor's inability to place the Aircraft on lease
with another lessee on terms as favorable to Lessor as this
Agreement or because whatever use, if any, to which Lessor is
able to put the Aircraft upon its return to Lessor, or the
amount received by Lessor upon a sale or other disposal of
the Aircraft, is not as profitable to Lessor as leasing the
Aircraft in accordance with the terms of this Agreement would
have been, including, without limitation, in each case, lost
Rent payments during any remarketing period; and
(iv) all reasonable and actual legal fees and other
reasonable costs and Expenses incurred by Lessor and any
other Indemnified Party by reason of the occurrence of any
Event of Default or the exercise of Lessor's remedies with
respect thereto.
SECTION 21. TRANSACTION EXPENSES. Except as expressly otherwise
provided herein, each of Lessor and Lessee agrees that it shall be responsible
for any and all fees and expenses it incurs in connection with the negotiation,
preparation, execution and delivery of this Agreement and any other documents
or instruments relating to the transaction contemplated hereby, including,
without limitation, legal fees, expenses and disbursements.
SECTION 22. NO SETOFF, COUNTERCLAIM, ETC. This Agreement is a net
lease and Lessee's obligation to pay Rent under this Agreement and each other
Operative Document to which it is a party is and shall be absolute and
unconditional and shall not be abated, suspended, diminished, reduced, delayed,
discontinued or otherwise affected by any condition, circumstance, act or event
of any kind whatsoever, including, without limitation, any of the following:
(i) any right of setoff, deduction, counterclaim, recoupment,
defense, suspension, deferment or other right (including any right of
reimbursement) which Lessee may have against Lessor, Airframe
Manufacturer, Engine Manufacturer, any Insured Party, any Inspecting
Party, any Indemnified Party or any other Person for any reason
whatsoever, including any claim Lessee may have for the foregoing, any
present or future law to the contrary notwithstanding;
(ii) the unavailability, interruption or cessation in use of
the Aircraft for any reason, including (A) any requisition thereof or
any restriction, prohibition or curtailment of, interference with, or
other restriction against, Lessee's use, operation or possession of
the Aircraft (whether by law, any Government Entity or other Person or
otherwise) and (B) any damage to or loss or destruction (including an
Event of Loss except as otherwise expressly provided in Section 13(b))
of or to the Aircraft and (C) the removal of the Aircraft from service
to correct deficiencies described in Section 2 or to permit the Final
Inspection or Return of the Aircraft;
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[Lease Agreement]
(iii) any defect in the title, airworthiness,
merchantability, fitness for any purpose, condition, design,
specification or operation of any kind or nature of the Aircraft, or
the ineligibility of the Aircraft for any particular use or trade or
for registration or documentation under the laws of any jurisdiction;
(iv) any amendment or modification of or supplement to any of
the Operative Documents, any agreements relating to any thereof or any
other instrument or agreement applicable to the Aircraft, the Airframe
or any Engine, or any assignment or transfer of any thereof, or any
furnishing or acceptance of any additional security, or any failure or
inability to perfect any security;
(v) any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership,
administration or similar proceedings by or against Lessee, Lessor,
any Indemnified Party or any other Person;
(vi) the invalidity, unenforceability or impossibility of
performance of this Agreement, any other Operative Document or any of
the terms hereof or thereof, the lack of power or authority of Lessee
to enter into this Agreement or any other Operative Document, or any
other defect in this Agreement or any other Operative Document;
(vii) any breach by Lessor, any Indemnified Party or any
other Person of any representation, warranty or covenant, express or
implied, made or alleged to be made to Lessee;
(viii) any right, claim, xxxx, action or suit whatsoever by
or against or on the part of Lessee, including, without limitation,
whether arising out of legal action or otherwise, at law or in equity,
whether affirmative, negative or defensive in nature for or on account
of the legality, validity, enforceability or otherwise arising as a
result of (x) this Agreement or any other Operative Document or any of
the terms or conditions hereof or thereof, (y) any express or implied
warranty or (z) any contract, agreement or transaction between Lessee
and Lessor or any other Person, whether direct or indirect, written or
oral;
(ix) any waiver, consent, change, extension, indulgence or
any action or inaction under or in respect of any such instrument or
agreement or any exercise or nonexercise of any right, remedy, power
or privilege in respect of any such instrument or agreement or this
Agreement or any other Operative Document;
(x) any transfer of any interest in this Agreement or in the
Aircraft by Lessor or any Indemnified Party or any change of ownership
of Lessor or any Indemnified Party; or
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[Lease Agreement]
(xi) any other circumstance, happening or event whatsoever,
whether or not similar to the foregoing, which but for this
provision would or might have the effect of terminating or in any
other way affecting any obligation of Lessee hereunder, it being the
express intention of Lessor and Lessee that all Rent and other
amounts payable by Lessee hereunder or under any other Operative
Document shall be payable in all events, unless the obligation to
pay the same shall be terminated pursuant to the express provisions
of this Agreement.
Lessee hereby waives, to the extent permitted by applicable law,
any and all rights which it may have or which at any time hereafter may be
conferred upon Lessee, by law or otherwise, to terminate, cancel, quit or
surrender this Agreement or any other Operative Document, or to xxxxx,
suspend, defer, reduce or otherwise fail to comply in full with an obligation
imposed upon Lessee hereunder or thereunder or in relation hereto, except
termination of this Agreement in accordance with the express provisions
hereof. Each Rent payment made by Lessee shall be final, and Lessee shall not
seek to recover all or any part of any such payment for any reason
whatsoever. The foregoing provisions of this Section 22 shall in no event
limit Lessee's ability to seek recovery by independent legal action against
Lessor with respect to any breach by Lessor of its obligations under this
Lease.
SECTION 23. FURTHER ASSURANCES, ETC.
(a) FURTHER ASSURANCES. Without limiting the other
obligations and liabilities of Lessee under this Agreement and the other
Operative Documents, Lessee agrees to promptly and duly execute and deliver
to Lessor such further documents and assurances and take such further action
as Lessor may from time to time reasonably request in order to effectively
carry out the intent and purpose of this Agreement and the other Operative
Documents and to establish, perfect and protect the rights and remedies
created or intended to be created in favor of Lessor or any other Person
hereunder and thereunder, including, without limitation, (x) any
explanations, clarifications or translations (into English) requested by
Lessor relating to the information required to be provided by Lessee under
Section 6(c), and (y) the execution and delivery of supplements or amendments
hereto, in recordable form, rendering subject to this Agreement any
Replacement Engine and the recording or filing of counterparts hereof or
thereof or of other appropriate materials, in accordance with the laws of
such jurisdictions as Lessor may from time to time reasonably deem advisable.
(b) LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee
fails to make any payment of Rent or fails to perform or comply with any
agreement, covenant or obligation contained herein or in any other Operative
Document, Lessor shall have the right, but not the obligation, at its election
and without waiver of any of its rights or remedies against Lessee, to perform
or comply with such covenant, agreement or obligation and/or pay such amount,
and the amount of such payment and any Expenses incurred by Lessor in
connection with such payment
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[Lease Agreement]
or the performance of or compliance with such agreement, covenant or
obligation, as the case may be, together with interest at the Past Due Rate,
shall be payable by Lessee to Lessor upon demand as Supplemental Rent. The
taking of any action by Lessor pursuant to this Section 23(b) shall not
constitute a waiver or release of any obligation of Lessee hereunder nor a
waiver of any Default which may arise out of Lessee's nonperformance of such
obligation, nor an election or waiver by Lessor of any right or remedy
available to Lessor under or in relation to this Agreement.
(c) NO IMPLIED WAIVERS; RIGHTS CUMULATIVE.
(i) No failure on the part of Lessor to exercise
and no delay in exercising any right, power, remedy or
privilege under any Operative Document or provided by
statute or at law or in equity or otherwise shall impair,
prejudice or constitute a waiver of any such right, power,
remedy or privilege or be construed as a waiver of any Event
of Default or as an acquiescence thereto, nor shall any
single or partial exercise of any such right, power, remedy
or privilege impair, prejudice or preclude any other or
further exercise thereof or the exercise of any other right,
power, remedy or privilege. No acceptance of partial payment
or performance shall, whether or not expressly stated, be or
be deemed to be a waiver of any Event of Default then
existing or a waiver or release of full payment and
performance. No notice to or demand on Lessee shall in any
case entitle Lessee to any other or further notice or demand
in other or similar circumstances or constitute a waiver of
the right of Lessor to any other or further action in any
circumstances without notice or demand.
(ii) Nothing contained in any Operative Document
shall be construed to limit in any way any right, power,
remedy or privilege of Lessor hereunder or under any
Operative Document or now or hereafter existing at law or in
equity. Each and every right, power, remedy and privilege of
Lessor under the Operative Documents (x) shall be in
addition to and not in limitation of, or in substitution
for, any other right, power, remedy or privilege under any
Operative Document or at law or in equity, (y) may be
exercised from time to time or simultaneously and as often
and in such order as may be deemed expedient by Lessor and
(z) shall be cumulative and not mutually exclusive, and the
exercise of one shall not be deemed a waiver of the right to
exercise any other.
(iii) Lessee hereby agrees and acknowledges that
nothing contained herein or in any Operative Document shall
be construed to require in any way, Lessor to take any
action, upon a Default by Lessee of this Agreement, or a
breach by Lessee of any provision of any Operative Document,
to limit the damages suffered by Lessor as a result of any
such Default or breach as the case may be.
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[Lease Agreement]
(d) WARRANTIES. Lessor agrees that it will assign to Lessee,
for the duration of the Lease Tenn so long as no Event of Default shall have
occurred and be continuing, the benefit of any assignable warranties
(including, without limitation, any repair warranties on any Engines or Parts)
from the Airframe Manufacturer, Engine Manufacturer or manufacturer or supplier
of any Part for which Lessor has an interest (but only to the extent of such
interest).
SECTION 24. CONFIDENTIALITY. Each of Lessee and Lessor shall keep this
Agreement and each other Operative Document, and all terms and provisions
hereof and thereof, confidential and shall not disclose, or cause to be
disclosed, the same to any Person, without the prior written consent of the
other, except (a) to prospective and permitted transferees of Lessor's or
Lessee's interests or their respective counsel or special counsel, certified
public accountants, independent insurance brokers or other agents, (b) in
connection with any administration or enforcement of any provisions of this
Agreement or any other Operative Document by Lessor or Lessee, (c) to its
Affiliates, (d) to its advisors, insurance brokers and accountants, (e) to
creditors of either Lessee or Lessor, (f) to prospective purchasers of stock of
Lessee or Aloha Airgroup, Inc., or (g) as may be required by any statute, court
or administrative order or decree or governmental ruling or regulation,
including insurance regulatory bodies, banking examiners and other government
officials; provided, however, that any and all disclosures of all or any part
of such documents and provisions which are permitted by this Section 24 shall
be made only to the extent necessary to meet the specific requirements or
needs of the Persons to whom such disclosures are hereby permitted.
SECTION 25. GOVERNING LAW AND JURISDICTION.
(a) GOVERNING LAW. THIS AGREEMENT AND EACH OTHER OPERATIVE
DOCUMENT, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, SHALL IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
(b) NONEXCLUSIVE JURISDICTION IN
NEW YORK. Each of Lessor and
Lessee hereby irrevocably consents that any legal action or proceeding against
it or any of its assets arising out of or relating to this Agreement or any
other Operative Document may be brought in any jurisdiction where it or any of
its assets may be found and in the courts of the State of
New York and U.S.
Federal Courts for the Southern District of
New York and by execution and
delivery of this Agreement each of Lessor and Lessee hereby irrevocably submits
to and accepts with regard to any such action or proceeding, for itself and in
respect of its assets, generally and unconditionally, the jurisdiction of the
aforesaid courts and irrevocably agrees to be bound by any judgment rendered
thereby. Nothing herein shall prevent any party from bringing any legal action
or proceeding or obtaining execution of judgment in any other appropriate
jurisdiction. Lessee and Lessor further agree that a final judgment in any
action or proceeding arising out of
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[Lease Agreement]
or relating to this Agreement or any other Operative Document shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of the indebtedness or liability therein
described, or in any other manner provided by law. Each of Lessee and Lessor
hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or any
other Operative Document brought in any court in
New York, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought
in any court in
New York has been brought in an inconvenient forum. Lessee
shall maintain the process agent specified for it in Section 25(c), or such
other Person located within
New York as may be acceptable to Lessor, as its.
agent for service of process in
New York during the Lease Term, at Lessee's
sole cost and expense. LESSEE AND LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER OPERATIVE DOCUMENT.
SECTION 26. MISCELLANEOUS.
(a) AMENDMENTS. No provision of this Agreement or any other
Operative Document may be amended, changed, waived or discharged orally, but
only by an instrument in writing specifying the provision intended to be
amended, changed, waived or discharged and signed by each party hereto or
thereto; and no provision of this Agreement or any other Operative Document
shall be varied, contradicted or explained by any oral agreement, course of
dealing or performance or other matter not specifically set forth in an
agreement in writing and signed by each party hereto or thereto.
(b) SEVERABILITY. If any provision hereof or of any Operative
Document should be held invalid, illegal or unenforceable in any respect in any
jurisdiction, then, to the extent permitted by law (i) all other provisions
hereof or thereof shall remain in full force and effect in such jurisdiction
and (ii) such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.
(c) COUNTERPARTS. This Agreement, any Operative Document and
any amendments, waivers, consents or supplements hereto or thereto may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, and all of which counterparts, taken together, shall
constitute one and the same instrument.
(d) CHATTEL PAPER. To the extent, if any, that this Agreement
constitutes chattel paper (as defined in the Uniform Commercial Code in effect
from time to time in any applicable jurisdiction) no security interest in this
Agreement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be
82
[Lease Agreement]
identified as the counterpart containing the receipt therefor executed by
Lessor on the signature page thereof.
(e) TIME OF THE ESSENCE. Subject to the periods of grace
referred to in Section 19, time shall be of the essence as regards the
performance by Lessee of its obligations under this Agreement and each other
Operative Document.
(f) Notices. All notices, requests and other communications
to Lessee, Lessor or any other Person hereunder or under any other Operative
Document shall be in writing (for this purpose, "writing" includes telecopy
or similar electronic transmissions), shall refer specifically to this
Agreement or such other Operative Document, as the case may be, and shall be
personally delivered or sent by telecopy or other similar electronic
facsimile transmission, or sent by overnight courier service (e.g., Federal
Express), in each case to the respective address and telecopy number, if any,
specified in Schedule 3 or such other address or telecopy number as such
Person may hereafter specify by notice to the other party or to the parties
hereto. Each such notice, request or other communication shall be effective
when received or, if by telecopier or other similar electronic transmission,
when "confirmed" by the sending telecopy or similar machine and written
evidence of such confirmation is produced by such machine, provided that any
such notice by telecopy so "confirmed" after 6:00 p.m., for the recipient,
shall be effective on the next succeeding local Business Day.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof, and
supersedes all previous proposals, agreements, understandings, negotiations
and other written and oral communications in relation hereto. The parties
acknowledge that there have been no representations, warranties, promises,
guarantees or agreements, express or implied, except as set forth herein.
(h) TRUE LEASE. Lessee and Lessor agree that this Lease is
to be treated as a true operating lease for federal income tax purposes, that
Lessor is the owner of the Aircraft for federal income tax purposes and all
other purposes and that the interest of Lessee in the Aircraft is that of a
lessee only.
* * *
83
[Lease Agreement]
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to
be executed by their respective officers as of the day and year first above
written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee,
Lessor
By: /s/ Xxx X. Xxxxx
---------------------------------------------
Title: VICE PRESIDENT
------------------------------------------
ALOHA AIRLINES, INC.,
Lessee
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
84
[Lease Agreement]
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to
be executed by their respective officers as of the day and year first above
written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee,
Lessor
By:
---------------------------------------------
Title:
------------------------------------------
ALOHA AIRLINES, INC.,
Lessee
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------------
Title: SR. VICE PRESIDENT FINANCE &
PLANNING AND CFO
------------------------------------------
By: /s/ Xxxx Xxxxxxxx
---------------------------------------------
Title: STAFF VICE PRESIDENT - FINANCE
& CONTROLLER
------------------------------------------
84
[Lease Agreement]
Exhibit A-1 to
Lease Agreement
TECHNICAL ACCEPTANCE CERTIFICATE
Lessee hereby acknowledges to Lessor, in accordance with the terms
and conditions of the Lease Agreement, dated as of June 1, 1998 (the
"LEASE"), between First Security Bank, National Association, not
individually but solely as Owner Trustee, and Aloha Airlines, Inc., that the
following Aircraft meets the delivery conditions specified in the Lease and
that we accept the condition of the Aircraft for all purposes of the Lease
(subject to the provisions of Section 2(b)(ii) of the Lease).
Aircraft:
Registration Xxxx: N827AL
Manufacturer's Serial Number: 23913
with two installed JT8D-9A engines, Engine Manufacturer's Serial Numbers:
Position 1: __________
Position 2: __________
A-1-1
[Lease Agreement]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this receipt
to be duly executed on the above date.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee,
as Lessor
By:
---------------------------------------------
Title:
------------------------------------------
ALOHA AIRLINES, INC.,
as Lessee
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
A-1-2
[Lease Agreement]
Exhibit A-2 to
Lease Agreement
FINAL ACCEPTANCE CERTIFICATE
Lessee hereby acknowledges to Lessor, in accordance with the terms
and conditions of the Lease Agreement, dated as of June 1, 1998 (the
"LEASE"), between First Security Bank, National Association, not individually
but solely as Owner Trustee, and Aloha Airlines, Inc., that the following
Aircraft meets the delivery conditions specified in the Lease and that we
accept the condition of the Aircraft for all purposes of the Lease (subject
to the provisions of Section 2(b)(ii) of the Lease).
Aircraft:
Registration Xxxx: N827AL
Manufacturer's Serial Number: 23913
with two installed JT8D-9A engines, Engine Manufacturer's Serial Numbers:
Position 1: __________
Position 2: __________
A-2-1
[Lease Agreement]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this receipt
to be duly executed on the above date.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee,
as Lessor
By:
---------------------------------------------
Title:
------------------------------------------
ALOHA AIRLINES, INC.,
as Lessee
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
A-2-2
[Lease
Agreement]
Exhibit B to
Lease Agreement
BASIC RENT
BASIC RENT DATE RENT PAYMENT BASIC RENT DATE RENT PAYMENT
19-Jul-98 $25,000.00 19-Sep-02 $135,888.00
19-Jul-98 $25,000.00 19-Oct-02 $135,888.00
19-Aug-98 $25,000.00 19-Nov-02 $135,888.00
19-Sep-98 $135,888.00 19-Dec-02 $135,888.00
19-Oct-98 $135,888.00 19-Jan-03 $135,888.00
19-Nov-98 $135,888.00 19-Feb-03 $135,888.00
19-Dec-98 $135,888.00 19-Mar-03 $135,888.00
19-Jan-99 $135,888.00 19-Apr-03 $135,888.00
19-Feb-99 $135,888.00 19-May-03 $135,888.00
19-Mar-99 $135,888.00 19-Jun-03 $135,888.00
19-Apr-99 $135,888.00 19-Jul-03 $135,888.00
19-May-99 $135,888.00 19-Aug-03 $135,888.00
19-Jun-99 $135,888.00 19-Sep-03 $135,888.00
19-Jul-99 $135,888.00 19-Oct-03 $135,888.00
19-Aug-99 $135,888.00 19-Nov-03 $135,888.00
19-Sep-99 $135,888.00 19-Dec-03 $135,888.00
19-Oct-99 $135,888.00 19-Jan-04 $135,888.00
19-Nov-99 $135,888.00 19-Feb-04 $135,888.00
19-Dec-99 $135,888.00 19-Mar-04 $135,888.00
19-Jan-00 $135,888.00 19-Apr-04 $135,888.00
19-Feb-00 $135,888.00 19-May-04 $135,888.00
19-Mar-00 $135,888.00 19-Jun-04 $135,888.00
19-Apr-00 $135,888.00 19-Jul-04 $135,888.00
19-May-00 $135,888.00 19-Aug-04 $135,888.00
19-Jun-00 $135,888.00 19-Sep-04 $135,888.00
19-Jul-00 $135,888.00 19-Oct-04 $135,888.00
19-Aug-00 $135,888.00 19-Nov-04 $135,888.00
19-Sep-00 $135,888.00 19-Dec-04 $135,888.00
19-Oct-00 $135,888.00 19-Jan-05 $135,888.00
19-Nov-00 $135,888.00 19-Feb-05 $135,888.00
19-Dec-00 $135,888.00 19-Mar-05 $135,888.00
19-Jan-01 $135,888.00 19-Apr-05 $135,888.00
19-Feb-01 $135,888.00 19-May-05 $135,888.00
19-Mar-01 $135,888.00 19-Jun-05 $135,888.00
19-Apr-01 $135,888.00 19-Jul-05 $135,888.00
19-May-01 $135,888.00 19-Aug-05 $135,888.00
19-Jun-01 $135,888.00 19-Sep-05 $135,888.00
19-Jul-01 $135,888.00 19-Oct-05 $135,888.00
19-Aug-01 $135,888.00 19-Nov-05 $135,888.00
19-Sep-01 $135,888.00 19-Dec-05 $135,888.00
19-Oct-01 $135,888.00 19-Jan-06 $135,888.00
19-Nov-01 $135,888.00 19-Feb-06 $135,888.00
19-Dec-01 $135,888.00 19-Mar-06 $135,888.00
19-Jan-02 $135,888.00 19-Apr-06 $135,888.00
19-Feb-02 $135,888.00 19-May-06 $135,888.00
B-1
19-Mar-02 $135,888.00 19-Jun-06 $135,888.00
19-Apr-02 $135,888.00 19-Jul-06 $135,888.00
19-May-02 $135,888.00 19-Aug-06 $135,888.00
19-Jun-02 $135,888.00 19-Sep-06 $135,888.00
19-Jul-02 $135,888.00 19-Oct-06 $135,888.00
19-Aug-02 $135,888.00 19-Nov-06 $135,888.00
B-2
[Lease Agreement]
Exhibit C to
Lease Agreement
FINANCIAL REQUIREMENTS
In the event Lessee fails to meet the Minimum Fixed Charge Coverage
Ratio set forth below (the "Financial Requirement") set forth in this Exhibit C
(such failure, a "Credit Event"), Lessee shall increase the Initial Security
Deposit by the amount calculated pursuant to this Exhibit C (in no event shall
such amount be less than USD two hundred fifty thousand ($250,000), plus an
adjustment for the Aircraft's then current condition and half-time) (the
"Adjustment Amount") as security that Lessee shall perform its obligations as
stipulated in-the Lease (the amount available under the Letter of Credit being
referred to hereinafter as the "Security Deposit"). The Adjustment Amount shall
be calculated based on the maintenance status of each Engine on the date of the
occurrence of the applicable Credit Event and shall be recalculated for any
Replacement Engine which is provided after the occurrence and during the
continuance of such (or a subsequent) Credit Event. The Adjustment Amount shall
equal the sum of (I) $50,000 in respect of the Airframe (the "Airframe
Adjustment") plus (II) $75 per Engine per Engine Cycle or Engine Flight Hour,
whichever is more limiting, for which such Engine is below "half-time," which
shall be calculated as Lessee's then current time between engine overhauls
(ESV2s) (based on an average over the last three (3) years), and converting
such time to an equivalent amount of Engine Cycles or Engine Flight Hours, as
applicable, based on Lessee's then current utilization (based on an average
over the last three (3) years); provided, however, if the Aircraft is in a
block D Check structural inspection program at the time of the occurrence of
the applicable Credit Event, then the Airframe Adjustment shall equal $75 per
Aircraft Flight Hour or Airframe Cycle, whichever is more limiting, for which
the Airframe is below "half time" to its next scheduled "D" Check. The Security
Deposit may be reduced following the occurrence of a Credit Event, if either
(i) Lessee demonstrates renewed compliance with the Financial Requirements (in
which case the Security Deposit shall be reduced to USD two hundred fifty
thousand ($250,000)) or (ii) the physical condition of an Engine or, if the
Aircraft is on a block D Check structural inspection program, the Airframe has
been restored (in which case the Security Deposit shall be reduced as follows).
In the event that Lessee at its sole cost and expense (A) restores the physical
condition of an Engine to the condition required by Schedule 5 hereto the
Adjustment Amount portion of the Security Deposit applicable to such Engine
shall be subtracted from the Security Deposit; provided, that, if the condition
of such Engine deteriorates below "half-time" during the continuance of the
applicable Credit Event, Lessee again shall increase the Security Deposit by
the original Adjustment Amount calculated for such Engine and (B) if the
Aircraft is on a block D Check structural inspection program, performs a D
Check on the Airframe, the Airframe Adjustment shall be subtracted from the
Security Deposit; provided, that, if the condition of the Airframe deteriorates
below "half time" during the continuance of the applicable Credit Event, Lessee
shall increase the Security Deposit by the original Airframe Adjustment.
C-1
[Lease Agreement]
MINIMUM FIXED CHARGE COVERAGE RATIO. The Consolidated Group shall at
all times maintain a minimum Fixed Charge Coverage Ratio of not less than 1.05
to 1.
For purposes of this Exhibit C, the following terms shall have the
following meanings:
"CAPITAL LEASE" means any lease of any property (whether real,
personal or mixed) which, in conformity with generally accepted accounting
principles, is or should be accounted for as a Capital Lease on a balance
sheet.
"CASH FLOW" means, with respect to the Consolidated Group, the sum of
(a) the net income of the Consolidate Group (excluding non-recurring gains and
losses), PLUS (b) the sum of the following, to the extent deducted in
determining net income: (i) depreciation and amortization allowances, (ii)
interest expense (including payments in kind and imputed interest on Capital
Leases), and (iii) deferred taxes, and less (c) the change in the excess of
non-cash current assets over current liabilities (other than those pertaining
to unearned transportation revenue and payment of principal, interest or
taxes) calculated on a rolling four quarters basis and computed at the end of
each fiscal quarter.
"CONSOLIDATED GROUP" means Aloha Airgroup, Inc., a Hawaii
corporation, Aloha Airlines, Inc., a Delaware corporation and Aloha IslandAir,
Inc., a Delaware corporation.
"DEBT SERVICE" means the sum of regularly scheduled principal
payments, interest payments, payments under Capital Leases and dividends
declared and payable (if permitted under the provisions of this Agreement) made
by the Lessee, or by the Lessee's parent on a consolidated basis, calculated on
a rolling four quarters basis and computed at the end of each fiscal quarter.
"FIXED CHARGE COVERAIZE RATIO" means, with respect to the Consolidated
Group, Cash Flow divided by Debt Service.
C-2
[Lease Agreement]
Exhibit D to
Lease Agreement
(MSN 23913)
FORM OF LEASE SUPPLEMENT NO. [___]
THIS LEASE SUPPLEMENT NO. [___], dated [_________], (this "LEASE
SUPPLEMENT"), is entered into between Aloha Airlines, Inc., a Delaware
corporation having its principal place of business at 000 Xxxxx Xxxxxx,
Xxxxxxxx, Xxxxxx 00000 ("LESSEE") and First Security Bank, National
Association, not individually but solely as trustee under that certain Trust
Agreement dated as of June 1, 1998 between itself and Sanwa Business Credit
Corporation ("Lessor").
WITNESSETH:
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Lease Agreement dated as of June 1, 1998 (the "Lease"), which provides for the
execution and, delivery from time to time of Lease Supplements (this and all
other capitalized terms used but not defined herein shall have the respective
meanings, and shall be interpreted and construed in the manner set forth or
incorporated by reference in Section 1 of the Lease) substantially in the form
hereof for the purpose of leasing the Aircraft under the Lease as and when
delivered by Lessor to Lessee in accordance with the terms thereof; [and]
(1)WHEREAS, the Lease relates to the airframe and engines described
below, and a counterpart of the Lease is attached to and made a part of this
Lease Supplement; [and]
This Lease Supplement No. [___] has been executed in several
counterparts. To the extent, if any, that this Lease Supplement No. [___]
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in
this Lease Supplement No. [___] may be created through the transfer or
possession of any counterpart other than the original executed counterpart
containing the receipt therefor executed by Lessor or, if Lessor has assigned
its rights to any Person in accordance with the Lease Agreement, such Person
on the signature page thereof.
-------------------------------
(1)This language for Lease Supplement No. 1.
D-1
[Lease Agreement]
(2)The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease, attached and made a party of Lease Supplement
No. 1 dated __________, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on __________, as one document and assigned
Conveyance No. __________.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration the adequacy of receipt of which is
hereby acknowledged, and pursuant to Section [2] [13(c)] [___] of the Lease,
Lessor and Lessee hereby agree as follows:
(3)[1. Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease as hereby supplemented, the
Boeing Model B737-200 aircraft (the "AIRCRAFT"), which consists of the
following components:
(a) Airframe: Registration Xxxx N827AL; Manufacturer's Serial Number 23913;
(b) Two Xxxxx & Xxxxxxx JT8D-9A Engines, initially installed on such airframe
at delivery to Lessee, bearing Engine Manufacturer's Serial Numbers
P707437 and P707445;
(c) Xxxxxxx XX CP85-129 APU bearing Manufacturer's Serial Number 50220; and
(d) Landing Gear bearing the respective Part and Serial Numbers listed below:
Left Main (Part No. 65-73761-83): MC03085P1581
Right Main (Part No. 65-73761-84): MC03086P1581
Nose (Part No. 65-73762-5): T2241-P1581
(e) Lease Expiry Date:__________.
2. The "DELIVERY DATE" for all purposes of the Lease is the date set
forth in the opening paragraph of this Lease Supplement.
3. The Lease Term shall commence on the Delivery Date.
----------------------------------
(2)This language for other Lease Supplements.
(3)This language for Lease Supplement No. 1.
D-2
[Lease Agreement]
4. Lessee hereby confirms its agreement to pay Rent throughout the
Lease Term in the amounts, to the Persons and otherwise in accordance with the
provisions of Section 3 of the Lease and in accordance with the other
provisions of the Lease and the other Operative Documents.
5. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease and the other Operative
Documents.]
[1. The following-described property has been installed on and made a
part of the Aircraft and is the property of Lessor and is hereby made subject
to the Lease:
[Describe property]
[6.][2.] A number of counterparts of this Lease Supplement have
been executed, each of which shall be deemed an original and all of which
together shall constitute but one and the same agreement. To the extent, if
any, that this Lease Supplement constitutes chattel paper (as defined in the
Uniform Commercial Code) no security interest in this Lease Supplement may be
created through the transfer or possession of any counterpart other than the
original executed counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by Lessor or, if Lessor has assigned
its rights to any Person in accordance with the Lease, such Person on the
signature page thereof.
[7.][3.] All of the provisions of the Lease are hereby incorporated
by reference in this Lease Supplement on and as of the date of this Lease
Supplement, to the same extent as if fully set forth herein.
[8.][4.] THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
D-3
[Lease Agreement]
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement No. [_____] to be duly executed on and as of the day and year
first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee, Lessor
By:
---------------------------------------------
Title:
------------------------------------------
ALOHA AIRLINES, INC., as Lessee
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
[THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.]
[RECEIPT OF THIS ORIGINAL COUNTERPART OF THE FOREGOING LEASE SUPPLEMENT NO.
[_____] IS HEREBY ACKNOWLEDGED ON THIS _____ DAY OF _______________, 199__.]
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee, Lessor
By:
-------------------------------------------
Title:
----------------------------------------
D-4
[Lease Agreement]
Exhibit F to
Lease Agreement
(MSN 23913)
INSURANCE REQUIREMENTS
(a) At all times during the Lease Term, and until the
Aircraft is returned to Lessor in the condition and manner required by this
Agreement, Lessee shall maintain or cause to be maintained with respect to
the Aircraft, at its own expense, comprehensive airline liability (including,
without limitation, third-party and passenger, bodily injury, property
damage, product liability, cargo, mail, baggage (checked and unchecked),
premises and hangar keepers' liability) insurance (exclusive of the Airframe
and/or Engine Manufacturer's product liability insurance), (i) in an amount
not less than the greater of (y) the amounts of comprehensive airline
liability insurance from time to time applicable to aircraft owned or leased
and operated by Lessee of the same type as the Aircraft and (z) $350,000,000,
(ii) of the type and covering the same risks usually carried by air carriers
owning or operating similar aircraft and engines and covering risks of the
kind customarily insured against by such air carriers, (iii) with insurers of
recognized reputation and responsibility reasonably acceptable to Lessor and
(iv) that names each Indemnified Party as an additional insured and otherwise
complies with the requirements set forth in, and is consistent with the
issuance of a valid certificate of insurance and a report of the Insurance
Broker.
(b) INSURANCE AGAINST EXPENSE OR DAMAGE TO THE AIRCRAFT. At
all times during the Lease Term, and until the Aircraft is returned to Lessor
in the condition and manner required by this Agreement, Lessee shall maintain
or cause to be maintained, with respect to the Aircraft, at its own expense,
all-risk aircraft hull insurance covering the Aircraft, all-risk property
damage insurance covering Engines and Parts while temporarily removed from
the Aircraft and all-risk spares insurance (i) for an agreed value not less
than the Stipulated Loss Value for the Aircraft in respect of all-risk hull
insurance, (ii) for the full replacement value, in respect of all-risk
property damage insurance, (iii) of the type and covering the same risks
usually carried by air carriers owning or operating similar aircraft and
engines and covering risks of the kind customarily insured against by such
air carriers, (iv) confirming that the insurers shall not be entitled to
replace the Aircraft or Airframe upon the occurrence of an Event of Loss with
respect thereto, (v) with insurers of recognized reputation and
responsibility reasonably acceptable to Lessor and (vi) that, except with
respect to partial losses of less than $500,000, names Lessor as the sole
loss payee up to the Stipulated Loss Value and otherwise complies with the
requirements set forth in, and is consistent with the requirements of Section
15 of the Lease and this Exhibit F and otherwise in form and substance
reasonably satisfactory to Lessor. Lessee agrees that it will not settle any
claim with respect to the insurances provided hereunder without the consent
of Lessor (which consent shall not be unreasonably withheld); provided that,
so long as no Event of
F-1
[Lease Agreement]
Default shall have occurred and be continuing, such consent shall not be
required in respect of claims which do not exceed $500,000.
(c) WAR-RISK, HIJACKING AND RELATED PERILS INSURANCE. At
all times during the Lease Term, and until the Aircraft is returned to Lessor
in the condition and manner required by this Agreement, and, for liability
coverage, Lessee shall maintain or cause to be maintained, with respect to
the Aircraft, at its own expense, worldwide (subject to standard insurance
market geographical limits) coverage of war-risk, hijacking and related
perils insurance of the type and in substantially the amounts carried by air
carriers operating the same or comparable models of aircraft in such areas
(i) in no event in an amount less than (x) $350,000,000 with respect to
liability coverage and (y) the Stipulated Loss Value with respect to hull
coverage and (z) full replacement value with respect to property damage
coverage, (ii) in any event, covering the perils of (u) war, invasion, acts
of foreign enemies, hostilities (whether war be declared or not), civil war,
rebellion, revolution, insurrection, martial law, military or usurped power
or attempts at usurpation of power, (v) strikes, riots, civil commotions or
labor disturbances, (w) any act of one or more Persons, whether or not agents
of a sovereign power, for political or terrorist purposes and whether the
loss or damage resulting therefrom is accidental or intentional, (x) any
malicious act or act of sabotage, (y) confiscation, nationalization, seizure,
restraint, detention, appropriation, requisition for title or use by or under
the order of any government (other than the government of the State of
Registration) (whether civil, military or de facto) or public or local
authority, and (z) hijacking, or any unlawful seizure or wrongful exercise of
control of any aircraft or crew in flight (including any attempt at such
seizure or control) made by any Person or Persons on board any aircraft
acting without the consent of the insured (including if committed by Persons
engaged in a program of irregular warfare for terrorist purposes), (iii) with
insurers of recognized reputation and responsibility reasonably acceptable to
Lessor and (iv) except with respect to partial losses of less than $500,000
that names each Indemnified Party as an additional insured with respect to
liability insurance and, for hull coverage only, names Lessor or its designee
as the sole loss payee up to the Stipulated Loss Value and otherwise complies
with the requirements set forth in, and is consistent with the requirements
of Section 15 of the lease and this Exhibit F. Lessee agrees that it will not
settle any claim with respect to the insurances provided hereunder without
the consent of Lessor (which consent shall not be unreasonably withheld);
provided that, so long as no Event of Default shall have occurred and be
continuing, such consent shall not be required in respect of claims which do
not exceed $500,000.
(d) Comprehensive airline liability, aircraft third party,
contractual liability (as per endorsement), property damage, passenger,
baggage, cargo and mail and airline general third party (including products)
legal liability for a Combined Single Limit (Bodily Injury/Property Damage)
of an amount not less than U.S. $350,000,000 for the time being any one
occurrence. War and Allied Risks are also to be covered under this Policy to
the same extent as set forth above.
F-2
[Lease Agreement]
(e) All required insurance (as specified in paragraphs (a),
(b), (c) and (d) above), shall:
(i) in the case of the insurance required by paragraph
(a), name each Indemnified Party as additional
assureds for their respective rights and
interests, warranted, each as to itself only, no
operational interest;
(ii) in the case of the insurance required by paragraph
(b), provide that any loss shall be settled with
the Lessee and shall for amounts in excess of
$500,000 up to the Stipulated Loss Value be
payable in Dollars to the Lessor as Loss Payee;
provided, that, all amounts up to the Stipulated
Loss Value shall be payable to Lessor in the case
of a total loss;
(iii) in the case of the insurance required by paragraph
(a), include a Severability of Interest Clause
which provides that the insurance shall operate to
give each assured the same protection as if there
were a separate policy issued to each assured;
(iv) in the case of the insurance required by paragraph
(a), contain a provision confirming that the policy
is primary without right of contribution and the
liability of the insurers shall not be affected by
any other insurance of which any Indemnified Party
or Lessee have the benefit so as to reduce the
amount payable to the Additional Insureds under
such policies;
(v) in the case of the insurance required by paragraph
(b) contain a 50/50% clause per AVS 103 or its
equivalent;
(vi) shall provide that in respect of the respective
interests of each Indemnified Party in such
policies the insurance shall not be invalidated or
impaired by any action or inaction of Lessee or any
other Indemnified Party and shall insure the
respective interests of each Indemnified Party, as
they appear, regardless of any breach or violation
of any warranty, declaration or condition contained
in such policies by Lessee or by any other Person;
(vii) be in accordance with normal industry practice of
organizations operating similar aircraft in similar
circumstances;
(viii) provide coverage denominated in Dollars;
(ix) acknowledge the insurer is aware of the Lease and
that the Aircraft is owned by Lessor;
F-3
[Lease Agreement]
(x) provide that the insurers shall hold harmless and
waive any rights of recourse and/or subrogation
against each Indemnified Party;
(xi) provide that an Indemnified Party shall have no
obligation or responsibility for the payment of any
premiums due (but reserve the right to pay the same
should any of them elect so to do) and that the
insurers will not exercise any right of set-off or
counter-claim in respect of any premium due against
the respective interests of an Indemnified Party;
(xii) provide that the Insurances shall continue unaltered
for the benefit of each Indemnified Party for at
least thirty (30) days after written notice by
registered mail or telex of any cancellation,
changes, event of nonpayment of premium or
installment thereof shall have been sent to Lessor,
except in the case of war risks for which seven (7)
days will be given, or in the case of war between
the five great powers or nuclear peril for which
termination is automatic;
(xiii) in the case of the insurance required by paragraph
(a), accept and insure the indemnity provisions of
the Lease (Section 15(c)) to the extent of the risks
covered by the policies; and
(xiv) contain an initial term of at least twelve (12)
months and it (or any replacement policy) shall at
all times have a remaining term of at least one (1)
month in regard to all required insurance.
F-4
[Lease Agreement]
Exhibit G to
Lease Agreement
(MSN 23913)
[INTENTIONALLY RESERVED]
G-1
EXHIBIT H - FORM OF LETTER OF CREDIT
PLEASE REFER TO DOCUMENT NUMBER 1.3
[Lease Agreement]
Exhibit I to
Lease Agreement
(MSN 23913)
Approved Maintenance Performers
Santa Xxxxxxx Aerospace
000-X Xxxxx Xxxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Air New Zealand
Engineering Services
Christchurch, New Zealand
Dalfort Corporation
0000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Tramco
00000 00xx Xxxxxx Xxxx
Xxxxxxx, XX 00000
The Xxx Xxxxxx
0000 Xxxx Xxxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxx 00000
Xxxxx Aviation
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxx, Xxxxxx X0X0X0
I-1
EXHIBIT J
XXXX
XXXXXXXX
ISHII LUM
& CHING
----------------
ATTORNEYS AT LAW
June 17, 1998
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually,
but solely as trustee under
that certain Trust Agreement
dated as of June 1, 1998
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Sanwa Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Re: The LEASE AGREEMENT dated as of June 1, 1998 ("Lease
Agreement") between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely as trustee under
that certain Trust Agreement dated as of June 1,
1998 between itself and SANWA BUSINESS CREDIT CORPORATION
("Lessor") and ALOHA AIRLINES, INC. ("Lessee") relating to
one (1) The Boeing Company 737-200ADV Model Aircraft
bearing manufacturer's serial no. 23913 and U.S.
registration no. N827AL, together with two (2) Xxxxx &
Whitney JTSD-9 Model Engines, bearing manufacturer's serial
nos. 707437 and 707445 (the "Aircraft").
Gentlemen:
We are counsel to Aloha Airlines, Inc.
You have asked us to render an opinion in connection with the transactions
governed by the following documents:
1. Lease Agreement;
2. Lease Supplement No. 1 executed pursuant to the Lease
Agreement; and
3. Delivery Receipt executed pursuant to the Lease Agreement.
Documents 1 and 2 listed above may be collectively referred to as the "Lease
Documents." Documents 1, 2 and 3 listed above may be collectively referred
to as the "Operative Documents."
Except as otherwise expressly stated herein, words and expressions used
herein shall bear the same meanings as defined in the Operative Documents.
In rendering the opinions expressed below, we have examined the (a) the
Operative Documents, (b) the Certificate of Incorporation
XXXX
XXXXXXXX
ISHII LUM
& CHING
----------------
ATTORNEYS AT LAW
First Security Bank, National Association, Trustee
Sanwa Business Credit Corporation
June 17, 1998
Page -2-
and By-Laws of Lessee, (c) certain certificates executed by officers of
Lessee, and (d) other documents, in our judgment and to our knowledge,
necessary or appropriate to examine to enable us to give the opinions
expressed below.
Having reviewed the foregoing described documents, and having regard to the
relevant laws of the State of Hawaii, the United States of America, and the
general corporate laws of the State of Delaware it is our opinion that:
A. Lessee (i) is duly organized under the laws of the State of Delaware; (ii)
to our knowledge without any inquiry except review of a Certificate dated
May 19, 1998 issued by the State of Delaware Office of the Secretary of
State, is validly existing in good standing under the laws of the State of
Delaware; (iii) to our knowledge without any inquiry except review of a
Certificate of Good Standing dated May, 19, 1998 issued by the State of
Hawaii Department of Commerce and Consumer Affairs, is registered and is
in good standing to do business in the State of Hawaii as a foreign
corporation; (iv) to our knowledge and without any inquiry except review
of a certification as to the following provided by Lessee, is qualified to
do business in all other jurisdictions in which the nature of its business
or its properties requires it to be qualified; (v) has full power to carry
on its business as it is now being conducted and to enter into, legally
bind itself by, and perform its obligations under the Lease Documents and
(vi) to our knowledge and without any inquiry except review of a
certification as to the following provided by Lessee, has complied with
all material statutory and other requirements relative to its businesses;
B. All consents, resolutions and authorizations necessary under applicable
law or as required pursuant to the charter documents (including the
Certificate of Incorporation and By-Laws) of Lessee in order for Lessee to
enter into the Lease Documents and to lease the Aircraft in accordance
with the terms and conditions of the Lease Documents have been obtained,
and (ii) no further consents or authorizations are necessary under
applicable law or are required pursuant to the charter documents
(including the Certificate of Incorporation and By-Laws) of Lessee for the
lease of the Aircraft by Lessee pursuant to the provisions of the Lease
Documents and for the performance by Lessee of all of its obligations
pursuant to the provisions of the Lease Documents; and to our knowledge
and without any inquiry except review of a certification as to the
following
XXXX
XXXXXXXX
ISHII LUM
& CHING
----------------
ATTORNEYS AT LAW
First Security Bank, National Association, Trustee
Sanwa Business Credit Corporation
June 17, 1998
Page -3-
provided by Lessee, (y) all other consents, resolutions and authorizations
necessary or advisable in order for Lessee to enter into the Lease
Documents and to lease the Aircraft in accordance with the terms and
conditions of the Lease Documents have been obtained, and (z) no other
consents or authorizations are necessary for the lease of the Aircraft by
Lessee pursuant to the provisions of the Lease Documents and for the
performance by Lessee of all of its obligations pursuant to the provisions
of the Lease Documents;
C. The Lease Documents have been duly authorized, executed and delivered and
(i) constitute valid and binding obligations of Lessee, enforceable
against Lessee in accordance with their respective terms and (ii) are in
full force and effect;
D. The execution and delivery of and the performance of the provisions of the
Lease Documents and of the transactions contemplated thereby do not
contravene any of the charter documents (including the Certificate of
Incorporation and By-Laws) of Lessee or in any material respect any
applicable law or regulation; and to our knowledge and without any inquiry
except review of a certification as to the following provided by Lessee,
the execution and delivery of and the performance of the provisions of the
Lease Documents and of the transactions contemplated thereby do not
contravene in any material respect any applicable decree, order, permit or
contractual or other restriction now existing and binding on Lessee or on
any of the properties of Lessee;
E. To our knowledge and without inquiry except review of certifications as to
the following provided by Lessee, there are no (i) outstanding judgments
against Lessee and (ii) actions, claims, suits or proceedings pending or
threatened against or affecting Lessee or any of its properties before any
court, board of arbitration or administrative agency which might result in
an material adverse change in the business or condition (financial or
otherwise) of Lessee (except as disclosed by Lessee in writing to you);
F. To our knowledge and without inquiry except review of a certifications as
to the following provided by Lessee, Lessee is not in default under any
agreement to which it is a party or by which it may be bound, nor it is in
default of any kind in respect of any financial commitment or obligation
which could have a material adverse effect on the ability of Lessee to
perform its obligations under the Operative Documents nor is there any
fact which by giving of
XXXX
XXXXXXXX
ISHII LUM
& CHING
----------------
ATTORNEYS AT LAW
First Security Bank, National Association, Trustee
Sanwa Business Credit Corporation
June 17, 1998
Page -4-
notice or by lapse of time or otherwise might constitute such default by
Lessee;
G. Except for the filing of appropriate financing statements (UCC-1s) in the
State of Hawaii and State of Delaware, and the filing of the Lease
Documents with the Federal Aviation administration, no further actions are
necessary to record or perfect Lessor's interest in the Lease Agreement in
the United States or in the State of Hawaii or State of Delaware;
H. To our knowledge and without inquiry except review of a certification as
to the following provided by Lessee, Lessee holds an air carrier operating
certificate issued by the United States Secretary of Transportation
pursuant to Chapter 447 of Title 49 of the United States Code.
I. Subject to the qualification in paragraph H above, in the event that
Lessee files a petition for relief under Chapter 11 of the United States
Bankruptcy Code, as amended, or has such a petition filed against it,
Lessor will be entitled to the rights allowed by the applicable bankruptcy
or federal court to a "lessor" under the provisions of Section 1110(a)(1)
of Title 11 of the United States Code.
The opinions expressed above are qualified to the extent that:
1. We are members of the Bar of the State of Hawaii and do not hold ourselves
out as being conversant with, and express no opinion as to, the laws of
any jurisdiction other than those of the State of Hawaii, the United
States of America, and the general corporate laws of the State of
Delaware.
2. The opinions expressed herein are solely for your benefit and may not be
relied upon in any manner or for any purpose by any other person.
3. In conducting our examination, we have assumed the genuineness of all
signatures (other than the signatures of Lessee), the correctness of all
certificates, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies and the authenticity of the
originals of such copies, and the accuracy and completeness of all records
made available to us by Lessee. In making our examination of documents and
instruments, we have assumed that each party to such documents and
instruments (other than Lessee and its
XXXX
XXXXXXXX
ISHII LUM
& CHING
----------------
ATTORNEYS AT LAW
First Security Bank, National Association, Trustee
Sanwa Business Credit Corporation
June 17, 1998
Page -5-
affiliates) has: (i) the power and capacity to enter into and perform all
its obligations under such documents and instruments, (ii) duly authorized
all requisite action with respect to such documents and instruments, and
(iii) duly executed and delivered such documents and instruments.
4. The opinions expressed above are qualified to the extent that (i)
enforceability of the Operative Documents and transactions contemplated
thereby may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application from time to time
affecting the rights of creditors, lessors and secured parties generally
and providing relief for debtors; and (ii) a particular court may refuse
to grant certain equitable or legal remedies, including without limiting
the generality of the foregoing, specific performance or foreclosure, with
respect to the enforcement of any provisions of the Operative Documents.
5. This opinion letter is limited to the matters stated herein and no opinion
may be implied or inferred beyond the matters expressly stated herein.
6. The opinions given herein are as of the date hereof and we assume no
obligation to update or supplement such opinions to reflect any facts or
circumstances which may hereafter come to our attention or any changes in
law which may hereafter occur.
Very truly yours,
XXXX XXXXXXXX XXXXX XXX & XXXXX
/s/ Xxxxxxxxx Xxx Xxxxx
Xxxxxxxxx Xxx Xxxxx
Xxxxxxx X. Xxxxxxxx
CC: Xx. Xxxxxx X. Xxxxxxxxx
Xx. Xxxxx X. Xxxx
Xx. Xxxxxxx Xx
EXHIBIT K
XXXXX XXXXX & XXXXXX
A PROFESSIONAL CORPORATION
EST. JANUARY 1, 1902
XXXXX X. XXXXXXXX ATTORNEYS & COUNSELORS
XXXXXX X. XXXXXXX 1200 XXXXXXXX RENAISSANCE XXX X. XXXXX (1982)
G. XXXXX XXXX 119 NORTH XXXXXXXX XXXXXX X. XXXXX (1984)
XXXX X. XXX, XX. XXXXXXXX XXXX, XXXXXXXX 00000 XXXXXXX X. XXXXXX (1992)
XXXXXX X. XXXX PHONE (000) 000-0000
XXXXXXXX X. XXXXXX FAX (000) 000-0000
----- X-XXXX@xxxxxxxxxx.xxx
XXX X. XXXX
XXXXX X. XXXX
June 23, 1998
Re Boeing model 737-209 aircraft with manufacturer's serial
number 23913 and United States nationality and registration
marks N827AL (the "Aircraft")
Aloha Airlines, Inc.
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxx 00000
First Security Bank, National
Association, as Owner Trustee
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Sanwa Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
This letter confirms that we filed the following described
instruments with the Federal Aviation Administration (the "FAA") today at the
respective times noted below:
(a) AC Form 8050-2 Aircraft Xxxx of Sale dated June 19, 1998
(the "FAA Xxxx of Sale") by Airlease Industries Limited to
First Security Bank, National Association, as Owner Trustee
(the "Owner Trustee"), under the Trust Agreement dated as of
June 1, 1998 (the "Trust Agreement") with Sanwa Business
Credit Corporation as Owner Participant, covering the
Aircraft was filed at 3:11 P.M., C.D.T.;
(b) AC Form 8050-1 Aircraft Registration Application by the
Owner Trustee covering the Aircraft, to which was attached
the Affidavit of the Owner Trustee required by
Page 2
Section 47.7(c)(2)(iii) of Part 47 of the Federal Aviation
Regulations, and the Trust Agreement were filed at 3:11
P.M., C.D.T.; and
(c) Lease Agreement dated as ofJune 1, 1998 (the "Lease")
between the Owner Trustee as lessor and Aloha Airlines, Inc.
as lessee (the "Lessee"), to which was attached Lease
Supplement No. 1 dated June 19, 1998 (the "Lease
Supplement") covering the Aircraft and the Xxxxx & Xxxxxxx
model JT8D-9A aircraft engines with manufacturer's serial
numbers P707437 and P707445 (the "Engines"), was filed at
3:11 P.M., C.D.T.
Based upon our examination of the above described instruments
and of such records of the FAA as we deemed necessary to express the following
opinion and as were made available to us by the FAA, it is our opinion that:
(a) the FAA Xxxx of Sale and the Lease with the Lease Supplement
attached are in due form for recording and have been duly
filed for recordation with the FAA pursuant to and in
accordance with the provisions of Title 49 of the United
States Code (the "Transportation Code");
(b) legal title to the Aircraft is vested in the Owner Trustee
and all instruments necessary to cause the FAA in due course
to issue to the Owner Trustee a Certificate of Aircraft
Registration covering the Aircraft have been duly filed with
the FAA pursuant to and in accordance with the provisions of
the Transportation Code;
(c) the Aircraft and the Engines are free and clear of all Liens
(as such term is defined in the Lease) except such as are
created by the Lease, as supplemented by the Lease
Supplement;
(d) the rights of the Owner Trustee and the Lessee under the
Lease, as supplemented by the Lease Supplement, with respect
to the Aircraft and the Engines are perfected; and
(e) no authorization, approval, consent, license or order of, or
registration or filing with, or the giving of no notice to
the FAA Aircraft Registry is required for the valid
authorization, delivery or performance of the Trust
Agreement, the Lease, or the Lease Supplement, except for
such authorizations, approvals, consents, licenses, orders,
registrations and notices as have been effected.
No opinion is herein expressed as to: (i) laws other than the
federal laws of the United States; or (ii) the record status of the Aircraft
prior to the commencement of its United States registration. Since our
examination was limited to records maintained by the FAA Aircraft Registry, our
opinion does not cover liens which are perfected without the filing of notice
thereof with the
Page 3
FAA, such as federal tax liens, liens arising under Section 1368(a) of Title
29 of the United States Code and possessory artisans' liens, and was subject
to the accuracy of FAA personnel in the filing, indexing and recording of
instruments filed with the FAA and in the search for encumbrance
crossreference index cards for the Engines. In rendering this opinion we have
relied upon the opinion of the Aeronautical Center Counsel dated June 3, 1998
(a copy of which is attached hereto) and upon the past practice. of the FAA
which is consistent with said opinion. Further, said opinion is satisfactory
as to form and scope and you and we are justified in relying thereon.
Very truly yours,
/s/ Xxxxxxxx X. Xxxxxx
----------------------
Xxxxxxxx X. Xxxxxx
[LOGO]
U.S. DEPARTMENT Xxxx Xxxxxxxx P.O. Box 25082
OF TRANSPORTATION Aeronautical Center Xxxxxxxx Xxxx, Xxxxxxxx 00000
FEDERAL AVIATION
ADMINISTRATION
June 3, 1998
Xxxxxxxx X. Xxxxxx, Esq.
Xxxxx, Xxxxx and Xxxxxx
1200 Xxxxxxxx Renaissance
000 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxx, XX 00000
Dear Xx. Xxxxxx:
Aircraft N827AL
As requested in your letter of June 2, 1998, this office has reviewed the Trust
Agreement and Affidavit submitted to support registration of the above
referenced aircraft in the Owner Trustees pursuant to 14 CFR 47.7(c).
You have requested our opinion as to whether:
1. The referenced aircraft is eligible for registration under 49 U.S.C.
Section 44102, in the name of the Owner Trustee upon the filing of the
above described instruments, along with appropriate evidence of
ownership and an Aircraft Registration Application form;
2. The form of the Trust Agreement satisfies the requirements of Section
47.7(c)(2)(i) of the Federal Aviation Regulations (FAR) (14 CFR
47.7(c)(2)(i)); and
3. The form of the Affidavit of Citizenship of the Owner Trustees,
satisfies the requirements of Section 47.7(c)(2)(iii) of the FAR (14
CFR 47.7(c)(2)(iii)).
Based on our review of the documents described above it is our opinion that:
1. The referenced aircraft is eligible for registration in the name of
First Security Bank, N.A., as Owner Trustee, provided there is
sufficient evidence of ownership;
2. The form of the Trust Agreement meets the requirements of Section
47.7(c)(2)(i) of the FAR; and
3. The form of the Affidavit of Citizenship of the Owner Trustee, meets the
requirements of Section 47.7(c)(2)(iii) of the FAR.
As reflected in the Trust Agreement, the Original Owner Participant, Sanwa
Business Credit Corporation, a Delaware corporation, empowers the Owner Trustee,
First Security Bank, N.A., to hold the Trust Estate for the use and benefit of
the Original Owner Participant, and to make application for registration.
(Reference Sections 2.02 and 3.01(f) of the Trust Agreement) We
2
note that the Trust Agreement provides that the Owner Trustee shall be free of
any kind of influence or control whatsoever by the Beneficiary. (Reference
Section 12.02(b)) Additionally, the Owner Trustee may be removed, but only for
cause. (Reference Section 9. 01(a))
Based on our review, it appears that the Trust Agreement meets the requirements
of 14 CFR 47.7(c)(2)(i) and the Owner Trustee's Affidavit of Citizenship meets
the requirements of 14 CFR 47.7(c)(2)(iii), and we so determine.
Your submission of these documents will support registration in the name of
First Security Bank, N.A., as Owner Trustee, provided there is suitable
evidence of ownership.
Sincerely,
Xxxxxx X. Standell
Assistant Chief Counsel
Aeronautical Center
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------
Xxxxxx X. Xxxxxxxxx
General Attorney
[Lease Agreement]
Exhibit L to
Lease Agreement
(MSN 23913)
FORM OF AIRCRAFT STATUS REPORT
REPORT FOR THE CALENDAR MONTH ENDED ________________,
Aircraft Type: B737-200 Actual Registration:
Lessor: BANK, not in its individual capacity, Manufacturer Serial Number: 23913
but solely as Owner Trustee
AIRFRAME DURING PERIOD SINCE NEW SINCE C/D
-------- ------------- --------- ----------
Flight Hours: ______________ ______________ ______________
Cycles: ______________ ______________ ______________
ORIGINAL ENGINES
----------------
POSITION 1 POSITION 2
---------- ----------
Serial Number of Original Engine: __________ __________
Location of Original Engine: __________ __________
Flight Hours Since New: __________ __________
Cycles Since New: __________ __________
Flight Hours During Period: __________ __________
Cycles During Period: __________ __________
Flight Hours Since Last Shop Visit: __________ __________
Cycles Since Last Shop Visit: __________ __________
Engine Cycle Limit: __________ __________
Cycles Remaining for Limit: __________ __________
Serial Number of Engine Installed: __________ __________
LANDING GEAR
------------
During Period Since New Since Overhaul
------------- --------- --------------
Landing Gear Cycles: _____________ _____________ _______________
ORIGINAL APU
Serial Number of Original APU: ________________
L-1
[Lease Agreement]
Location of Original APU:
Flight Hours ________________
During Period:
Flight Cycles During ________________
Period:
Flight Hours Since Last Shop ________________
Visit:
Cycles Since Last Shop Visit: ________________
Serial Number of APU Installed: ________________
TECHNICAL ACTIVITY
------------------
Engine/APU Removals (if any):________________
Off On
--- --
Serial Number: __________ __________
Date: __________ __________
Flight Hours Since New: __________ __________
Flight Cycles Since New: __________ __________
Reason:
___________________________________________________________________________________________________
___________________________________________________________________________________________________
DESCRIBE ANY REPAIRS, MODIFICATIONS, INCIDENTS OR ACCIDENTS TO
--------------------------------------------------------------
AIRCRAFT DURING PERIOD
----------------------
We certify that the above information is true, correct and complete as of the
date hereof, _________________, 19__.
ALOHA AIRLINES, INC.
By: _________________________________
Title: ______________________________
By: _________________________________
Title: ______________________________
L-2
[Lease Agreement]
Exhibit M to
Lease Agreement
(MSN 23913)
TERMS OF HUSH KITTING FINANCING
(A) The cost of the hush kitting shall not be incurred by Lessor
prior to July 30, 2000.
(B) The maximum amount to be financed by the Owner Participant
shall be US$1,000,000 (provided that, if the cost of such
hush kitting is in excess of $1,000,000, the Owner
Participant shall request an increase in its commitment from
Owner Participant's Credit Committee).
(C) There shall remain at least 36 months of the Lease Term
from the time of the hush kit installation; provided, if
less than 36 months remain (and Lessee wishes to obtain
financing pursuant to this Exhibit M), at the option of
Lessor, Lessee shall extend the Lease Term, in increments of
not less than one (1) year, as required to ensure that there
are at least 36 months remaining on the Lease Term at the
end of the hush kit installation; PROVIDED, HOWEVER, during
the remainder of the Lease Term or extended Lease Term, each
payment of Basic Rent shall be increased by an amount equal
to 2.5% of the acquisition cost of the hush kits; PROVIDED,
FURTHER, however, if there remain less than 36 months of the
Lease Term from the time hush kit installation is required,
Lessee shall have the option to put the Aircraft in the
condition required by the Return Conditions and return the
Aircraft to Lessor (without the hush kits financed or
installed) and pay Lessor the then present value of the
remaining Basic Rent due Lessor (discounted at 6% per annum)
as if the Lease would have continued through the Lease Term.
(D) In the event that Lessor is not willing to finance the
full cost of the hush kitting and Lessee elects to pay the
difference between Lessor's financing amount and the full
cost of hush kitting (the "Lessee Cost"), Lessor, on Return
of the Aircraft to Lessor, shall repay to Lessee the
difference between (i) Lessee's Cost (up to a maximum of
$1,000,000) minus (ii) 1/84th of Lessee's Cost for each
month of the Lease Term between the installation of the hush
kit and the Return of the Aircraft.
(E) If the Lease Tenn is extended pursuant to clause (C)
above, all of the per Hour/Cycle adjustment amounts in
Section 7(d)(ii) and Schedule 5 shall be increased by 3% per
annum (adjusted for the number of months of the extension)
to account for such extension.
M-1
[Lease Agreement]
Schedule 1 to
Lease Agreement
(MSN 23913)
PERMITTED JURISDICTIONS
Anywhere in the world, other than (1) those areas excluded pursuant to
Section 15(1) of the Lease Agreement, (2) Afghanistan, Chad, Ethiopia, Iran,
Iraq, Lebanon, Libya, Mali, Niger, Nigeria, Pakistan, Somalia, Sudan, Syria,
Yemen (North and South), Yugoslavia (as was) and Zaire and (3) any other
jurisdiction that shall become subject to a U.S. or United Nations sanction
or prohibition.
Sch. 1-1
[Lease Agreement]
Schedule 2 to
Lease Agreement
(MSN 23913)
DELIVERY CONDITIONS
The Aircraft shall be delivered by Lessor to Lessee with all items of
equipment, Engines, APU's, systems and appliances fully functional and
operating in accordance with manufacturer specifications. At the time of
delivery, the Aircraft shall conform to the following standards:
A. The Aircraft shall be delivered in AS-IS, WHERE-IS condition and shall
have completed its C Check and shall be within a mutually acceptable
tolerance of half-time remaining prior to the next structural
inspection (D Check or equivalent). Lessee shall be permitted to
observe such C Check on a non-interference basis with the current
operator's activities.
B. Any materially adverse deviations from Boeing MPD tasks shall be
brought into compliance with the MPD prior to delivery.
C. The Aircraft shall be delivered with a valid and current Transport
Category Airworthiness Certificate issued by the Malaysian Aviation
Authority. The aircraft shall be delivered with a current and valid
Malaysian Export Certificate of Airworthiness. The Aircraft shall be
accompanied by its respective complete documentation, manuals and
records (in the English language), as set forth on Attachment 2
hereto, and shall have been maintained in accordance with FAR Part 121
or its equivalent
D. The Aircraft shall have all temporary repairs replaced by permanent
repairs or with continued repetitive inspections per the
manufacturer's repair manual. The Aircraft shall be free of
significant dents, abrasions and loose or pulled rivets which are not
acceptable to OEM maintenance, overall manuals including OEM/FAA
bulletins and notices.
E. There shall be no evidence of untreated, improperly treated or
noticeable corrosion. All CPCP inspections will be current and up to
date, in accordance with manufacturer specifications and Aviation
Authority requirements. Lessor will ensure that the current operator
will open areas of the Aircraft upon reasonable request of Lessee.
F. The Aircraft shall be in compliance with all Malaysian Department of
Civil Aviation (MDCA) requirements for operation as a transport
category aircraft and all Aviation
Sch. 2-1
[Lease Agreement]
Authority airworthiness directives ("AD's") and SBs that are issued
prior to the Delivery Date and are applicable to the Aircraft,
without special deferment, exemption or Alternate Means of Compliance
(AMOC), with terminating action accomplished for all AD's and SBs
which require that the terminating action be accomplished prior to
the Delivery Date. The Aircraft shall conform to its Type Certificate
Data Sheet. All major modifications and repairs accomplished on the
Aircraft shall have been performed in accordance with FAA or MDCA
approved data that is to be redelivered with the Aircraft Records.
G. There shall be no open, outstanding, or deferred maintenance items,
scheduled or unscheduled, routine or non-routine, against the
Aircraft. Minor non-airworthiness cabin defects shall be mutually
considered and accepted.
H. The Aircraft shall be clean, cosmetically acceptable, all compartments
reasonably free of foreign objects, accumulated dirt, grime, grease
and liquids, and be prepared for immediate placement into
commercial service. Any deterioration of paint or other protective
coatings due to leakage, impact damage or other presence of foreign
materials or liquids shall be repaired and replaced per manufacturer
specifications.
I Each Engine shall be delivered in serviceable condition with
maintenance records that meet all Aviation Authority or MDCA
requirements.
J. Each Engine shall have at least 6000 Airframe Cycles remaining until
next scheduled Shopvisit based upon disk life limits or other
hard-time requirements per Transmile's MDCA approved list.
K. Each Engine shall pass power assurance performance tests without
operational limitations in accordance with the manufacturer's
maintenance manual. The Aircraft and its Engine's shall be capable of
certificated full rated performance without limitations throughout
the entire operating envelope as defined by the Aviation Authority
approved Aircraft Flight Manual.
L. Each Engine shall pass a complete video boroscope inspection,
conducted by Lessor or its designee, of all accessible Engine
sections (accessible whether by borescope port or other means) in
accordance with manufacturer specifications.
M. No Engine shall be on engineering watch or on a reduced interval
inspection of any nature that could lead to premature removal of the
Engine. If Engine historical records, engine power assurance runs,
boroscope inspection or trend monitoring date indicate a level of
performance deterioration or oil consumption, or acceleration in
performance deterioration or oil consumption, which based on
Transmile's or manufacturer's specifications and/or experience
(including Transmile's or industry mean time to first
Sch. 2-2
[Lease Agreement]
Shopvisit and mean time between Shopvisits) would require shop
maintenance to be performed prior to delivery, Transmile shall
correct or cause to be corrected, such conditions as necessary to
rectify all Engine performance parameters in accordance with
manufacturer specifications.
N. All Landing Gear, at a minimum, shall have not less than 50% of their
normal overhaul interval remaining before next scheduled overhaul.
Landing Gear components will have "back-to-birth" documentation per
FAA requirements and Lessor shall replace certain un serialized parts
that are hard timed in the Lessee's maintenance program.
O. The APU shall be delivered "as is, where is" in serviceable
condition. Lessor shall ensure that MSN P35990 is installed at
Delivery.
P. The Components that are controlled by calendar time, Airframe Flight
Hours or Airframe Cycles shall be delivered "as is, where is" and in
serviceable condition. All such Components shall be supported by
maintenance records which satisfy all Aviation Authority requirements
(including records of last overhaul for those items requiring to be
overhauled per Seller's maintenance program and/or per the Boeing
MPD).
Q. Complete and current maintenance records (to be specified during the
drafting of final documents) which comply with all Aviation Authority
or MDCA requirements shall be delivered with the Aircraft.
Maintenance records required to be maintained by the Aviation
Authority shall be in the English language and include complete
documentation for all airworthiness directives, life limited parts
(including back-to-birth records for all internal engine life limited
parts) and major repairs and alterations in accordance with Aviation
Authority requirements. For each AD that is applicable to the
Aircraft, the records shall include the current status of the
Aircraft, the date of compliance, and the method of compliance with
appropriate supporting documentation. Any deficiencies with Aviation
Authority requirements are to be corrected prior to delivery of the
Aircraft at Seller's cost.
R. Any manufacturer no-charge service bulletin parts which Seller has
received but not installed for the Aircraft shall be delivered to
Purchaser with the Aircraft.
S. All windows shall be free of delamination, blemishes, and crazing
that is beyond maintenance manual limits.
T. All doors shall be free moving, correctly rigged and fitted with
serviceable seals.
U. All ceiling, sidewall and bulkhead panels shall be clean and free
from significant or unserviceable damage. All seats shall be
serviceable and in fair overall condition.
Sch. 2-3
[Lease Agreement]
V. All flight control surfaces and wing leading edges shall be free from
damage that is beyond serviceable limits.
W. All cargo compartment floor, sidewall and ceiling panels shall be in
serviceable condition in accordance with Boeing maintenance manual
limits.
X. The entire fuselage, vertical stabilizer including wing to body
fairings, Engine cowls and wheel well doors shall have any
identifying marks or designators removed or painted-out in a
xxxxxxx-like manner.
Y. BRIDGING MAINTENANCE WORK. As an incentive for Lessee to enter into
the Lease, Lessor shall provide Lessee with up to Two Hundred
Forty-Two Thousand Dollars ($242,000) to reimburse Lessee for
one-half (1/2) Lessee's costs incurred to complete certain bridging
maintenance work (the "Bridging Maintenance Work"). Such incentives
shall be provided by Lessor to Lessee upon Delivery of the Aircraft
(the "Incentives").
(A) Lessor shall reimburse Lessee for one-half
(1/2) of Lessee's costs associated with accomplishing
airframe bridging maintenance work on the Aircraft;
(B) Lessor shall reimburse Lessee for one-half
(1/2) of Lessee's costs associated with accomplishing
miscellaneous other bridging maintenance work, including,
without limitation, relative to hard time components on the
Aircraft;
(C) Lessor shall reimburse Lessee for one-half
(1/2) of Lessee's costs associated with painting the
Aircraft's, exterior;
(D) Lessor shall reimburse Lessee for one-half
(1/2) of Lessee's costs associated with acquisition and
installation of a DFDR on the Aircraft compatible with
Lessee's existing fleet. Notwithstanding the actual costs of
such acquisition and installation, upon installation the
DFDR will be considered part of the Aircraft and Lessor's
property;
(E) Lessor shall reimburse Lessee one-half (1/2) of
for Lessee's costs associated with acquisition and
installation of a TCAS on the Aircraft. Notwithstanding the
actual costs of such acquisition and installation, upon
installation TCAS will be considered part of the Aircraft
and Lessor's property; and
(F) Lessor shall reimburse Lessee for one-half
(1/2) of Lessee's costs associated with acquisition and
installation of windshear detection equipment on
Sch. 2-4
[Lease Agreement]
the Aircraft compatible with Lessee's existing fleet.
Notwithstanding the actual costs of such acquisition and
installation, upon installation such windshear detection
equipment will be considered part of the Aircraft and
Lessor's property.
Lessee shall provide invoices, or other evidence, reasonably
satisfactory to Lessor, for the work accomplished in relation to the above
incentives subsequent to completion of such work.
Z. Following completion of the Bridging Maintenance Work, Lessee and
Lessor shall execute a certificate (the "Bridging Certificate")
noting thereon the amounts paid to Lessee by Lessor pursuant to
clauses (A), (B) and (C) of Paragraph Y of this Schedule 2 (the
"Repayment Amount") by virtue of the Bridging Maintenance Work.
AA. On the Delivery Date, the Aircraft shall be in the same condition,
ordinary wear and tear, and any damage which occurs during the Ferry
Flight excepted, as at the time of Lessee's inspection of the
Aircraft.
Sch. 2-5
[Lease Agreement]
Annex A to Schedule 2
(Delivery Conditions)
DELIVERY RECEIPT
----------------
Lessee hereby accepts and acknowledges receipt from Lessor, in
accordance with the terms and conditions of the Lease Agreement (MSN 23913),
dated as of June 1, 1998 (the "LEASE"), between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually but solely as Owner Trustee, and Aloha
Airlines, Inc. of one (1) Boeing Model B737-200.
Aircraft:
Registration Xxxx: [_____]
Manufacturer's Serial Number: 23913
with two installed JT8D-9A engines, Engine Manufacturer's Serial Numbers:
Position 1: P707437
Position 2: P707445
with the operating times and cycles as accumulated on the Aircraft up to the
time of delivery as described in Attachment 1 hereto together with the
Aircraft Documentation described in Attachment 2 hereto, in [place] on [Date],
at ___/a.m.//p.m./
Sch. 2-A-1
[Lease Agreement]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
receipt to be duly executed on the above date.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee, Lessor
By:_____________________________________________
Title:__________________________________________
ALOHA AIRLINES, INC., as Lessee
By:_____________________________________________
Title:__________________________________________
By:_____________________________________________
Title:__________________________________________
Sch. 2-A-2
[Lease Agreement]
Attachment 1 to
Annex A to Schedule 2
(Delivery Conditions)
Aircraft Status As Of __________________
Aircraft Type: B737-200
Manufacturer Serial/Registration Number: 23913 / [REG#]
AIRFRAME
--------
During Since
Period New
---------- -----------
Airframe Flight Hours: __________ ___________
Airframe Cycles: __________ ___________
ENGINES
-------
Position 1 Position 2
---------- -----------
Serial Number of Original Engine*: __________ ___________
Present Location of Original Engine*: __________ ___________
Engine Flight Hours Since New: __________ ___________
Cycles Since New: __________ ___________
Engine Flight Hours Performed
During Period: __________ ___________
Engine Cycles Flown During Period: __________ ___________
Date of Last Shop Visit: __________ ___________
Engine Flight Hours Since
Last Shop Visit: __________ ___________
Engine Cycles Flown Since
Last Shop Visit: __________ ___________
Serial Number of Installed Engine: __________ ___________
* or Replacement Engine, if applicable
Sch. 2-A-1-1
[Lease Agreement]
LANDING GEAR
------------
During Since
Period New
---------- -----------
Main __________ ___________
Main __________ ___________
Nose __________ ___________
APU
---
Serial Number of APU:
Present __________ ___________
Location of APU: __________ ___________
Serial Number of Installed APU: __________ ___________
During Since
Period New
---------- -----------
APU Flight Hours (Original APU): __________ ___________
APU Cycles (Original APU): __________ ___________
Date of Last Shop Visit: __________ ___________
APU flight Hours Since
Last Shop Visit: __________ ___________
APU Cycles Since Last Shop Visit: __________ ___________
TECHNICAL ACTIVITY
------------------
Engine Removals (if any)
Serial Number: __________
Date: __________
Hours: __________
Cycles: __________
Storage Location (if any) __________
REASON
MAINTENANCE CHECKS COMPLETED
----------------------------
Number Date Hours Cycles
------ ---- ----- ------
Sch. 2-A-1-2
[Lease Agreement]
-A Check __________ __________ __________ __________
S-A Check __________ __________ __________ __________
-C Check __________ __________ __________ __________
S-C Check __________ __________ __________ __________
SI Check __________ __________ __________ __________
NEXT CHECKS DUE
---------------
Number (E) Date (E) Hours (E) Cycles Q
---------- ---------- ---------- ----------
-C Check* __________ __________ __________ __________
S-C Check* __________ __________ __________ __________
SI Check __________ __________ __________ __________
AD's AND SB's INCORPORATED
Number Date Compliance
------- ----- ------------
DESCRIBE ANY REPAIRS. MODIFICATIONS, INCIDENTS OR ACCIDENTS TO
--------------------------------------------------------------
AIRCRAFT DURING PERIOD
----------------------
Sch. 2-A-1-3
[Lease Agreement]
Attachment 2 to Annex A
to Schedule 2 (Delivery
Conditions)
AIRCRAFT DOCUMENTATION
A. Certificates
1. Certificate of Airworthiness
2. Noise Certificate
3. Radio License Certificate
4. Export Statement of Airworthiness (on delivery only)
5. Original Export Certificate of Airworthiness from FAA delivered
in connection with original delivery of Aircraft from Boeing
6. Certificate of Sanitary Construction of Galleys
B. Aircraft Status Records
1. Technical Log Books
2. Airframe Maintenance Status Report
3. Manufacturer's Service Bulletin Status Report
4. Airworthiness Directive Compliance Report (terminated and
repetitive)
5. Local Modification Status Report List
6. Last Weighing Report
7. Last Compass Swing
C. Aircraft Maintenance Records
1. Test Flight Reports
2. All Boeing "C" Checks and last lower level maintenance check
3. Work Cards for each C-Check multiple (or segment)
4. Modification records including accomplishing documents
5. CPCP compliance report
6. Aging Aircraft compliance report
D. Aircraft History Records
1. Aircraft Structural Repair History (if applicable)
2. Service Difficulty Report (if applicable)
3. Accident or Incident Report (if applicable)
4. Damage Chart
Sch.2-A-2-1
[Lease Agreement]
E. Engine Records
1. Log Books
2. Last overhaul and repair documents for each module
3. Airworthiness Directive Compliance Report (terminated and
repetitive)
4. Manufacturer's Service Bulletin Status Report
5. Engine Disk Sheet
6. Engine Data Submittal Sheet
7. Condition Monitoring Status Report
F. APU Records
1. Log Book
2. Last overhaul and repair documents
3. Manufacturer's Service Bulletin Status Report
G. Component Records (including components installed on Engines and APU)
1. Time Monitored Component Status Report with installed part
numbers, serial numbers, remaining hours and cycles (if
applicable)
2. Serviceability tags or back-up documentation for components
replaced since delivery from Boeing
3. Serialized latest shop records on the JAR Form 1, as applicable,
including all serviceable tags, release to service, and repair
orders detailing maintenance checks, inspections, tests, repairs,
replacements, restorations, overhauls, modifications and
refurbishments
H. Manuals
1. Airplane Flight Manual
2. Quick Reference Handbook
3. Aircraft Operating Manual
4. Weight and Balance Manual Supplement
5. Wiring Diagram Manual (microfilm)
6. Illustrated Parts Catalog (microfilm)
7. Aircraft Maintenance Manual (microfilm)
8. CFMI Illustrated Parts Catalog
9. Systems Schematic Manual
10. Minimum Equipment List
I. Miscellaneous Technical Documents
1. Maintenance Program Specifications/Requirements/Schedule
2. Interior Configuration Drawings
3. Loose Equipment Inventory List
Sch. 2-A-2-2
[Lease Agreement]
Schedule 3 to
Lease Agreement
(MSN 27833)
ADDRESSES AND ACCOUNTS
LESSEE
Aloha Airlines, Inc. Acct. No.: 01-063820
P.O. Box 30028 First Hawaiian Bank
Xxxxxxxx, Xxxxxx 00000 X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: Senior Vice President Finance - ABA No.: 000000000
Chief Financial Officer
Facsimile: (000) 000-0000
Telephone:(000) 000-0000
Sch. 3-1
[Lease Agreement]
LESSOR
First Security Bank, National Association
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Corporate Trust Dept.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxx Trust and Savings Bank
Chicago, Illinois
ABA #000000000
Account #401689-5
with a copy to:
Sanwa Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Aircraft Finance Division
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Sch. 3-2
[Lease Agreement]
Schedule 4 to
Lease Agreement
(MSN 23913)
FILINGS AND RECORDINGS
DOCUMENT AUHORITY
Lease FAA
Lease Supplement No. 1 FAA
Application for Aircraft Registration FAA
UCC-1 Financing Statement Hawaii Secretary of State
Sch. 4-1
[Lease Agreement]
Schedule 5 to
Lease Agreement
(MSN 23913)
RETURN CONDITIONS
The Aircraft shall be returned by Lessee to Lessor with all items of
equipment, Engines, APU's, systems and appliances fully functional and
operating in accordance with manufacturer specifications. At the time of
Return (the "Return Date"), the Aircraft shall conform to the following
standards:
A. The Aircraft shall be delivered in AS-IS, WHERE-IS condition and
shall have completed its C Check and shall,
(i) in the event that immediately prior to Return, the Aircraft is
being operated on an Approved Maintenance Program that has
incorporated a block D Check, the Aircraft shall have at least
twenty-five percent (25%) of time remaining to performance of the
next block D Check pursuant to such Approved Maintenance Program;
provided, if the Aircraft does not have at least fifty percent
(50%) of time remaining to the performance of the next block D
Check pursuant to such Approved Maintenance Program, Lessee shall
pay Lessor an adjustment amount equal to, the product of (a) the
number of Airframe Flight Hours or Airframe Cycles (whichever is
applicable and most limiting) by which the Airframe is less than
50% of the interval between D Checks, multiplied by (b) $75; and
(ii) in the event that immediately prior to Return, the Aircraft is
being operated on an Approved Maintenance Program that has
incorporated a phased program combining structural inspection
required work cards with CPCP required work cards ("Integrated
Program"); and if the Aircraft has less than "X" years remaining
to the performance of the next structural inspection work card
required under the Integrated Program (where "X" equals fifty
percent (50%) of the calendar interval for the work card under
the Integrated Program that has, as of termination of the Lease,
the longest interval of all work cards in the Integrated
Program), Aloha shall pay an amount equal to seventy-five dollars
($75.00) per Airframe Cycle or Airframe Flight Hour, whichever is
more limiting, for every Airframe Flight Hour or Airframe Cycle,
as applicable, that the Airframe is below "X" years to the
performance of the next structural inspection work card under the
Integrated Program (where the differential between the actual
years remaining to the performance of the next structural
inspection work card required under the Integrated Program at
return and X shall be converted to an equivalent number of
Airframe Flight Hours or Airframe Cycles, as applicable, based on
Lessee's then current utilization (based on an average over the
last three (3)
Sch. 5-1
[Lease Agreement]
years)); provided, however, in no event shall the Aircraft be
returned with less than one-half (1/2) of "X" remaining until the
next structural inspection work card required under the
Integrated Program.
B. Any materially adverse deviations from Boeing MPD tasks shall be brought
into compliance with the MPD prior to delivery.
C. The Aircraft shall be delivered with a valid and current Transport
Category Airworthiness Certificate issued by the Aviation Authority. The
Aircraft shall be accompanied by its respective complete documentation,
manuals and records (in the English language; provided, however, Lessee
shall not be required to translate documentation, manuals and records
which were delivered by Lessor in a language other than English), as set
forth on Attachment 2 hereto, and shall have been maintained in
accordance with FAR Part 121 or its equivalent, including having
installed thereon the TCAS and DFDR installed during the Delivery as part
of Lessee's Bridging Maintenance Work.
D. The Aircraft shall have all temporary repairs replaced by permanent
repairs or with continued repetitive inspections per the manufacturer's
repair manual. The Aircraft shall be free of significant dents, abrasions
and loose or pulled rivets which are not acceptable to OEM maintenance,
overall manuals including OEM/FAA bulletins and notices.
E. There shall be no evidence of untreated, improperly treated or noticeable
corrosion. All CPCP inspections will be current and up to date, in
accordance with manufacturer specifications and Aviation Authority
requirements. Lessor will ensure that the current operator will open
areas of the Aircraft that are either (i) ordinarily opened during "C"
Checks or (ii) reasonably requested by Lessor based on indicia of damage
otherwise found or revealed during Lessor's inspection.
F. The Aircraft shall be in compliance with all Aviation Authority
requirements for operation as a transport category aircraft including all
Aviation Authority airworthiness directives ("AD's") and SBs that are
issued prior to the Return Date and are applicable to the Aircraft,
without special deferment, exemption or Alternate Means of Compliance
(AMOC), with terminating action accomplished for all AD's and Sbs which
require that the terminating action be accomplished prior to the Return
Date. The Aircraft shall conform to its Type Certificate Data Sheet. All
major modifications and repairs accomplished on the Aircraft shall have
been performed in accordance with Aviation Authority approved data that
is to be redelivered with the Aircraft Records.
G. There shall be no open, outstanding, or deferred maintenance items,
scheduled or unscheduled, routine or non-routine, against the Aircraft.
Minor non-airworthiness cabin defects shall be mutually considered and
accepted.
Sch. 5-2
[Lease Agreement]
H. The Aircraft shall be clean, cosmetically acceptable, all compartments
reasonably free of foreign objects, accumulated dirt, grime, grease and
liquids, and be prepared for immediate placement into commercial service.
Any deterioration of paint or other protective coatings due to leakage,
impact damage or other presence of foreign materials or liquids shall be
repaired and replaced per manufacturer specifications.
I. Each Engine shall be delivered in serviceable condition with maintenance
records that meet all Aviation Authority requirements.
J. Each Engine shall have at least 6000 Airframe Cycles remaining until next
scheduled Shopvisit based upon disk life limits or other hard-time
requirements per Lessee's Aviation Authority approved list; provided,
however, each Engine may be delivered with less than 6000 Engine Cycles
remaining (but in no event less than 2,500 Engine Hours or Cycles
remaining, whichever is more limiting) until next scheduled Shopvisit
and, under such circumstances, Lessee shall pay to Lessor $75 per Engine
Hour or Cycle, as applicable (per Engine) for each Engine Hour or Cycle,
as applicable, below 6,000 which such Engine has remaining until next
scheduled Shopvisit.
K. Each Engine shall pass power assurance performance tests without
operational limitations in accordance with the manufacturer's maintenance
manual. The Aircraft and its Engine's shall be capable of certificated
full rated performance without limitations throughout the entire
operating envelope as defined by the Aviation Authority approved Aircraft
Flight Manual.
L. Each Engine shall pass a complete video borescope inspection, conducted
by Lessor or its designee, of all accessible Engine sections (accessible
whether by borescope port or other means) in accordance with manufacturer
specifications which borescope can inspect the C6, C7, C13 and T1
stages, the T1 blades and the burner cans.
M. No Engine shall be on engineering watch or on a reduced interval
inspection of any nature that could lead to premature removal of the
Engine. If Engine historical records, engine power assurance runs,
boroscope inspection or trend monitoring data indicate a level of
performance deterioration or oil consumption, or acceleration in
performance deterioration or oil consumption, which based on Lessee's or
manufacturer's specifications would require shop maintenance to be
performed prior to return, Lessee shall correct or cause to be corrected,
such conditions as necessary to rectify all Engine performance parameters
in accordance with manufacturer specifications. In addition, no Engine,
based on Lessee's or, if appropriate Lessee data is unavailable, industry
mean time to first Shopvisit and mean time between Shopvisits would
require shop maintenance to be performed prior to return.
Sch. 5-3
[Lease Agreement]
N. All Landing Gear, at a minimum, shall have not less than 50% of their
normal overhaul interval remaining before next scheduled overhaul;
provided, however, each Landing Gear may be delivered with less than 50%
of its normal overhaul remaining (but in no event less than 2,500
Airframe Hours or Cycles, whichever is more limiting remaining until
overhaul) before next scheduled overhaul and, under such circumstances
Lessee shall pay to Lessor $6 (in the case of either main landing gear)
or $5 (in the case of the nose landing gear) per Airframe Hour or Cycle,
as applicable for each Airframe Hour or Cycle, as applicable, below 50%
of Lessee's the current overhaul interval, which such Landing Gear has
remaining until next scheduled overhaul. Landing Gear components will
have "back-to-birth" documentation per FAA requirements and Lessee shall
replace certain un-serialized parts that are hard timed in the Lessee's
maintenance program.
0. The APU shall be delivered "as is, where is" in serviceable condition.
P. The Components that are controlled by calendar time, Airframe Flight
Hours or Airframe Cycles shall be delivered "as is, where is" and in
serviceable condition. All such Components shall be supported by
maintenance records which satisfy all Aviation Authority requirements
(including records of last overhaul for those items requiring to be
overhauled per Lessee's maintenance program and/or per the Boeing MPD).
Q. Complete and current maintenance records (to be specified during the
drafting of final documents) which comply with all Aviation Authority
requirements shall be delivered with the Aircraft. Maintenance records
required to be maintained by the Aviation Authority shall be in the
English language and include complete documentation for all airworthiness
directives, life limited parts (including back-to-birth records for all
internal engine life limited parts) and major repairs and alterations in
accordance with Aviation Authority requirements. For each AD that is
applicable to the Aircraft, the records shall include the current status
of the Aircraft, the date of compliance, and the method of compliance
with appropriate supporting documentation. Any deficiencies with Aviation
Authority requirements are to be corrected prior to delivery of the
Aircraft at Lessee's cost.
R. Any manufacturer no-charge service bulletin parts which Lessee has
received but not installed for the Aircraft shall be delivered to
Purchaser with the Aircraft.
S. All windows shall be free of delamination, blemishes, and crazing that is
beyond maintenance manual limits.
T. All doors shall be free moving, correctly rigged and fitted with
serviceable seals.
Sch. 5-4
LEASE SUPPLEMENT NO. 1
THIS LEASE SUPPLEMENT NO. 1, dated June 19, 1998, (this "LEASE
SUPPLEMENT"), is entered into between Aloha Airlines, Inc., a Delaware
corporation having its principal place of business at 000 Xxxxx Xxxxxx,
Xxxxxxxx, Xxxxxx 00000 ("LESSEE") and First Security Bank, National
Association, not individually but solely as trustee under that certain Trust
Agreement dated as of June 1, 1998 between itself and Sanwa Business Credit
Corporation ("LESSOR").
WITNESSETH:
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Lease Agreement dated as of June 1, 1998 (the "LEASE"), which provides for the
execution and delivery from time to time of Lease Supplements (this and all
other capitalized terms used but not defined herein shall have the respective
meanings, and shall be interpreted and construed in the manner set forth or
incorporated by reference in Section 1 of the Lease) substantially in the form
hereof for the purpose of leasing the Aircraft under the Lease as and when
delivered by Lessor to Lessee in accordance with the terms thereof; and
WHEREAS, the Lease relates to the airframe and engines described
below, and a counterpart of the Lease is attached to and, made a part of this
Lease Supplement; and
This Lease Supplement No. 1 has been executed in several counterparts.
To the extent, if any, that this Lease Supplement No. 1 constitutes chattel
paper (as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction), no security interest in this Lease Supplement No.
1 may be created through the transfer or possession of any counterpart other
than the original executed counterpart containing the receipt therefor executed
by Lessor or, if Lessor has assigned its rights to any Person in accordance
with the Lease Agreement, such Person on the signature page thereof.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration the adequacy of receipt of which is
hereby acknowledged, and pursuant to the Lease, Lessor and Lessee hereby agree
as follows:
1 . Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease as hereby supplemented, the
Boeing Model B737-200 aircraft (the "AIRCRAFT"), which consists of the
following components:
(a) Airframe: Registration Xxxx N827AL; Manufacturer's Serial Number 23913;
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
No. 1 to be duly executed on and as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By: Xxx X. Xxxxx
-----------------------------------
Title: VICE PRESIDENT
-----------------------------------
ALOHA AIRLINES, INC., as Lessee
By:
-----------------------------------
Title:
-----------------------------------
By:
-----------------------------------
Title:
-----------------------------------
3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement No. 1 to be duly executed on and as of the day and year first above
written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By:
-----------------------------------
Title:
-----------------------------------
ALOHA AIRLINES, INC., as Lessee
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Title: SR. VICE PRESIDENT, FINANCE &
PLANNING AND CFO
--------------------------------
By: Xxxx Xxxxxxxx
-----------------------------------
Title: STAFF VICE-PRESIDENT - FINANCE
& CONTROLLER
--------------------------------
3
EXECUTION VERSION
FIRST AMENDMENT TO LEASE
AGREEMENT
BETWEEN
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
F/K/A FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, except as expressly stated herein,
but solely as Owner Trustee,
as Lessor
AND
ALOHA AIRLINES, INC,
as Lessee
----------------------------------
One Boeing B737-200 Aircraft
Manufacturer's Serial Number 23913
U.S. Registration Number N827AL
----------------------------------
This Lease Agreement has been executed in several counterparts. To the extent,
if any, that this Lease Agreement constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease Agreement may be created
through the transfer of possession of any counterpart other than the original
executed counterpart containing the receipt executed by Lessor or, if Lessor
has assigned its rights to a third party in accordance with this Lease
Agreement, such third party on the signature page of this Lease Agreement.
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "AMENDMENT"), dated as
of November 12, 2001, is by and between Xxxxx Fargo Bank Northwest, National
Association, a national banking association, f/k/a First Security Bank,
National Association ("XXXXX FARGO") not in its individual capacity but solely
as Owner Trustee, as lessor ("LESSOR"), and Aloha Airlines, Inc., a Delaware
corporation, as lessee ("LESSEE"). Capitalized terms used herein shall have the
meanings assigned to such terms (whether by reference to another document or
otherwise) in Section 1 hereof.
WITNESSETH:
WHEREAS, Lessee and Lessor entered into that certain Lease Agreement
dated as of June 1, 1998 (the "LEASE"), pursuant to which Lessee leased from
Lessor that certain Boeing Model B737-200 airframe bearing manufacturer's serial
number 23913 and FAA registration number N827AL, together with two (2) Xxxxx &
Whitney JT8D-9A engines bearing manufactuers serial numbers P707437 and P707445
(each of which engine has 750 or more rated takeoff horsepower or the
equivalent of such horsepower);
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained and of other good and valuable
consideration, the receipt and adequacy of which aye hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS. The capitalized terms used in this Amendment
shall have the respective meanings assigned to such terms in the Lease, unless
otherwise herein defined or the context hereof shall otherwise require.
SECTION 2. CONDITION PRECEDENT TO AMENDMENT. The effectiveness of this
Amendment is conditioned upon Lessor drawing down the Letter of Credit in the
amount of US$250,000 in accordance with Section 3(d)(v) of the Lease and
applying such amount evenly to Lessee's obligation to pay Basic Rent on
September 19, 2001, October 19, 2001, November 19, 2001 and December 19, 2001.
SECTION 3. AMENDMENTS TO LEASE.
3.1 AMENDMENTS TO SECTION 1.
(a) The definition of "Expiry Date" contained in Section 1 of the
Lease is hereby amended to be and read in its entirety as follows:
"`EXPIRY DATE' shall mean the date one hundred and four (104) months
and fifteen (15) days following the Delivery Date."
(b) The definition of "Stipulated Loss Value" contained in
Section 1 of the Lease is hereby amended to be and read in its entirely as
follows:
[First Amendment to Lease Agreement]
"STIPULATED LOSS VALUE shall mean US$9,000,000."
3.2 AMENDMENT TO SECTION 3.
Section 3(b) of the Lease is hereby amended by replacing "one hundred
and two (102)" with "one hundred and four and one half (104-1/2)" and by adding
to the end thereof, the following:
"Lessee's obligation to pay US$73,388 of Basic Rent on September 19,
2001, October 19, 2001, November 19, 2001 and December 19, 2001 shall be
deferred (the "Deferred Rent") and Lessee shall be obligated to pay to Lessor
the Deferred Rent in two (2) equal installments of US$146,776 plus interest
accrued on each such payment from September 19, 2001 through the relevant date
of payment at a rate of 10% interest per annum compounded on each Basic Rent
Date. The first installment of Deferred Rent shall be due no later than February
28, 2002 and the second installment of Deferred Rent shall be due no later than
June 28, 2002."
3.3 AMENDMENT TO SECTION 10.
Section 10(c)(iv) of the Lease is hereby deleted in its entirety.
3.4 AMENDMENTS TO SECTION 19.
(a) Section 19(a) of the Lease is hereby amended by adding after
"Basic Rent" in the second line, "Deferred Rent,".
(b) Section 19(p) of the Lease is hereby amended by adding at the
end of the last sentence thereof, the following:
"or Lessee shall fail, following an event described in Section
3(d)(iv) that entitles Lessor to draw on the Letter of Credit for the payment of
Rent, to restore the full amount of the Security Deposit (which may be provided
as cash or a Letter of Credit) in accordance with the requirements of Section
3(d) on or prior to June 28, 2002."
3.5 AMENDMENT TO EXHIBITS
(a) Exhibit B to the Lease is hereby amended by adding at the
end of the final column the following:
19-Dec-06 $135,888.00
19-Jan-07 $135,888.00
19-Feb-07 $67,944.00
(b) The first sentence of Exhibit C to the Lease is hereby
amended in its entirety to be and read as follows:
"In the event Lessee fails to meet the Minimum Fixed Charge Coverage
Ratio set forth below (the "Financial Requirement" in this Exhibit C, at any
time after June 28, 2003 (such failure, a "Credit Event"), Lessee shall
increase the Initial Security Deposit by the amount
2
[First Amendment to Lease Agreement]
calculated pursuant to this Exhibit C (in no event shall such amount be less
than USD two hundred fifty thousand ($250,000), plus an adjustment for the
Aircraft's then current condition and half-time) (the "Adjustment Amount") as
security that Lessee shall premform its obligations as stipulated in the Lease
(the amount available under the Letter of Credit being referred to hereinafter
as the "Security Deposit")."
(c) Exhibit M to the Lease is hereby deleted in its entirety.
SECTION 4. RATIFICATION Except as expressly amended hereby, the Lease
as heretofore supplemented, amended, assigned and modified shall continue and
shall remain in full force and effect in all respects. From and after the date
hereof, any and all references to the "Lease" in any of the Operative Documents
shall be deemed to refer to the Lease as amended hereby.
SECTION 5. GOVERNING LAW. This Amendment is being delivered in the
state of
New York and shall be governed by and construed and enforced in
accordance with the laws of the state of New York.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
(a) CORPORATE AUTHORITY. The execution, delivery and performance
by Lessee of this Amendment has been duly authorized by all necessary corporate
action on the part of Lessee, does not require any stockholder or shareholder
approval, or approval or consent of any trustee or holders of any indebtedness
or obligations of Lessee.
(b) NO BREACH. Neither the execution and delivery of this Amendment
by Lessee nor the consummation by Lessee of the transactions contemplated
hereby nor compliance by Lessee with any of the terms or provisions hereof will
(x) violate any of the provisions of the organizational or charter documents or
bylaws of Lessee, (y) conflict with or contravene, or result in the creation,
perfection or enforcement of any Lien under, any law applicable to or binding
upon the Aircraft, Lessee or any property of Lessee or (z) conflict with or
result in any breach of any of the terms or provisions of, or constitute any
default under, or result in or require the creation of any Lien upon any
property of Lessee under, any indenture, mortgage, deed of trust, conditional
sales contract, note, loan, credit agreement or other agreement or instrument to
which Lessee is a party or by which Lessee or its properties or assets may be
bound or affected.
(c) LEGAL, VALID AND BINDING AGREEMENT. This Amendment has been
duly executed and delivered by Lessee and constitutes the legal, valid, binding
and enforceable obligation of Lessee.
SECTION 7. MISCELLANEOUS
(a) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, and
all of which counterparts, taken together, shall constitute one and the same
instrument.
(b) HEADINGS. All section headings contained herein are for
convenience of reference only and are not a substantive part of this Amendment.
3
[First Amendment to Lease Agreement]
(c) FURTHER ASSURANCES. In addition, LESSEE AGREES to promptly
and duly execute and deliver to Lessor such further documents and assurances
and take such further action as Lessor from time to Time reasonably requests in
order to carry out the intent and purpose of this Amendment and to establish,
perfect and protect the rights and remedies created or intended to be created
in favor of Lessor hereunder, including the execution and delivery of
supplements or amendments hereto, in recordable form, and the recording or
filing of counterparts hereof or thereof, in accordance with the laws of such
jurisdictions as the Lessor from time to time reasonably deems advisable.
(d) SEVERABILITY. If any provision of this Amendment should be
held invalid, illegal or unenforceable in any respect in any jurisdiction, then,
to the extent permitted by law (i) all other provisions hereof or thereof shall
remain in full force and effect in such jurisdiction and (ii) such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of such provision in any other jurisdiction.
(e) Lessor and Lessee shall share equally in the costs and
expenses associated with this Amendment, including without limitation, the legal
fees of Xxxxxx Price Xxxxxxx and Kammholz.
* * *
[This Page Intentionally Left Blank]
4
(First Amendment to Lease Agreement]
IN WITNESS WHEREOF, each of Lessor and Lessee has caused this
Amendment to be executed and delivered by its duly authorized officer as of the
date first above written.
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
f/k/a First Security Bank, National Association,
not in its individual capacity, except as
expressly stated herein, but solely as Owner
Trustee, as Lessor
By:____________________________________________
Name:
Title:
ALOHA AIRLINES, INC.,
as Lessee
By:_____________________________________________
Name:
Title:
By:_____________________________________________
Name:
Title:
5
[First Amendment to Lease Agreement]
IN WITNESS WHEREOF, each of Lessor and Lessee has caused this
Amendment to be executed and delivered by its duly authorized officer as of the
date first above written.
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
f/k/a First Security Bank, National Association,
not in its individual capacity, except as
expressly stated herein, but solely as Owner
Trustee, as Lessor
By: /s/ Xxx X. Xxxxx
----------------------------------
Name: Xxx X. Xxxxx
Title: Vice President
ALOHA AIRLINES, INC.,
as Lessee
By:_____________________________________________
Name:
Title:
By:_____________________________________________
Name:
Title:
5
[First Amendment to Lease Agreement]
IN WITNESS WHEREOF, each of Lessor and Lessee has caused this
Amendment to be executed and delivered by its duly authorized officer as of the
date first above written.
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
f/k/a First Security Bank, National Association,
not in its individual capacity, except as
expressly stated herein, but solely as Owner
Trustee, as Lessor
By:____________________________________________
Name:
Title:
ALOHA AIRLINES, INC.,
as Lessee
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------------
Name: XXXXXX X. XXXXXXXXX
Title: EXECUTIVE VICE PRESIDENT & CFO
By: /s/ Xxxxx X. Xxxx
--------------------------------------------
Name: XXXXX X. XXXX
Title: SENIOR VICE PRESIDENT PLANNING
AND BUSINESS DEVELOPMENT
