EXHIBIT 10.2
LEASE AGREEMENT
Dated as of December 17, 1998
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually,
but solely as Owner Trustee
under the Aviation Sales Trust 1998-1
as Lessor
and
AVIATION SALES COMPANY, as Lessee
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This Lease Agreement is subject to a security interest in favor of NationsBank,
National Association, as Administrative Agent (the "Agent") under a Security
Agreement dated as of December 17, 1998, among First Security Bank, National
Association, not individually except as expressly stated therein, but solely as
Owner Trustee under the Aviation Sales Trust 1998-1, the Lenders and the Agent,
as amended, modified, supplemented, restated or replaced from time to time. 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
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof.
TABLE OF CONTENTS
ARTICLE I.........................................................................................................1
1.1 Definitions.................................................................................1
ARTICLE II........................................................................................................1
2.1 Property....................................................................................1
2.2 Lease Term..................................................................................2
2.3 Title.......................................................................................2
2.4 Lease Supplements...........................................................................2
ARTICLE III.......................................................................................................2
3.1 Rent........................................................................................2
3.2 Payment of Basic Rent.......................................................................3
3.3 Supplemental Rent...........................................................................3
3.4 Performance on a Non-Business Day...........................................................3
3.5 Rent Payment Provisions.....................................................................3
ARTICLE IV........................................................................................................4
4.1 Utility Charges; Taxes......................................................................4
ARTICLE V.........................................................................................................4
5.1 Quiet Enjoyment.............................................................................4
ARTICLE VI........................................................................................................4
6.1 Net Lease...................................................................................4
6.2 No Termination or Abatement.................................................................5
ARTICLE VII.......................................................................................................5
7.1 Ownership of the Properties.................................................................5
ARTICLE VIII......................................................................................................6
8.1 Condition of the Properties.................................................................6
8.2 Possession and Use of the Properties........................................................7
ARTICLE IX........................................................................................................8
9.1 Compliance with Legal Requirements and Insurance Requirements...............................8
ARTICLE X.........................................................................................................8
10.1 Maintenance and Repair; Return..............................................................8
10.2 Environmental Inspection....................................................................9
ARTICLE XI.......................................................................................................10
11.1 Modifications..............................................................................10
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ARTICLE XII......................................................................................................11
12.1 Warranty of Title..........................................................................11
ARTICLE XIII.....................................................................................................11
13.1 Permitted Contests Other Than in Respect of Indemnities....................................11
ARTICLE XIV......................................................................................................12
14.1 Public Liability and Workers' Compensation Insurance.......................................12
14.2 Hazard and Other Insurance.................................................................12
14.3 Coverage...................................................................................13
14.4 Additional Insurance Requirements..........................................................13
ARTICLE XV.......................................................................................................14
15.1 Casualty and Condemnation..................................................................14
15.2 Environmental Matters......................................................................15
15.3 Notice of Environmental Matters............................................................16
ARTICLE XVI......................................................................................................16
16.1 Termination Upon Certain Events............................................................16
16.2 Procedures.................................................................................16
ARTICLE XVII.....................................................................................................17
17.1 Lease Events of Default....................................................................17
17.2 Surrender of Possession....................................................................19
17.3 Reletting..................................................................................19
17.4 Damages....................................................................................19
17.5 Final Liquidated Damages...................................................................20
17.6 Waiver of Certain Rights...................................................................21
17.7 Assignment of Rights Under Contracts.......................................................21
17.8 Environmental Costs........................................................................21
17.9 Remedies Cumulative........................................................................21
17.10 Notice of Default or Event of Default......................................................21
ARTICLE XVIII....................................................................................................21
18.1 Lessor's Right to Cure Lessee's Lease Defaults.............................................21
ARTICLE XIX......................................................................................................22
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option............................22
19.2 No Termination With Respect to Less than All of a Property.................................22
ARTICLE XX.......................................................................................................22
20.1 Purchase Prior to End of Term; Purchase or Sale Option at End of Term......................22
20.2 Accounting Changes.........................................................................23
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ARTICLE XXI......................................................................................................24
[INTENTIONALLY LEFT BLANK.].............................................................................24
ARTICLE XXII.....................................................................................................24
22.1 Sale Procedure.............................................................................24
22.2 Application of Proceeds of Sale............................................................26
22.3 Indemnity for Excessive Wear...............................................................26
22.4 Appraisal Procedure........................................................................26
22.5 Certain Obligations Continue...............................................................27
ARTICLE XXIII....................................................................................................27
23.1 Holding Over...............................................................................27
ARTICLE XXIV.....................................................................................................27
24.1 Risk of Loss...............................................................................27
ARTICLE XXV......................................................................................................28
25.1 Assignment.................................................................................28
25.2 Subleases..................................................................................28
ARTICLE XXVI.....................................................................................................29
26.1 No Waiver..................................................................................29
ARTICLE XXVII....................................................................................................29
27.1 Acceptance of Surrender....................................................................29
27.2 No Merger of Title.........................................................................29
ARTICLE XXVIII...................................................................................................29
28.1 Reporting Covenants........................................................................29
28.2 Affirmative Covenants......................................................................37
28.3 Negative Covenants.........................................................................39
28.4 Financial Covenants........................................................................42
ARTICLE XXIX.....................................................................................................43
29.1 Notices....................................................................................43
ARTICLE XXX......................................................................................................45
30.1 Miscellaneous..............................................................................45
30.2 Amendments and Modifications...............................................................45
30.3 Successors and Assigns.....................................................................45
30.4 Headings and Table of Contents.............................................................45
30.5 Counterparts...............................................................................45
30.6 GOVERNING LAW..............................................................................45
30.7 Calculation of Rent........................................................................45
30.8 Memoranda of Lease and Lease Supplements...................................................45
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30.9 Allocations between the Lenders and the Holders............................................45
30.10 Limitations on Recourse....................................................................46
30.11 WAIVERS OF JURY TRIAL......................................................................46
30.12 Original Leases............................................................................46
30.13 Mortgage Grant and Remedies................................................................46
30.14 Exercise of Lessor Rights..................................................................46
EXHIBITS.........................................................................................................38
EXHIBIT A Lease Supplement No. __............................................................38
EXHIBIT B Form of Memorandum of Lease and Lease Supplement...................................48
EXHIBIT C Form of Compliance Certificate.....................................................48
SCHEDULES........................................................................................................38
Schedule I Litigation.........................................................................38
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LEASE AGREEMENT
THIS LEASE AGREEMENT (as amended, supplemented or modified from time to
time, this "Lease"), dated as of December 17, 1998, is between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, having its principal
office at 00 Xxxxx Xxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxx 00000, not individually,
but solely as Owner Trustee under the Aviation Sales Trust 1998-1, as lessor
(the "Lessor"), and AVIATION SALES COMPANY, a Delaware corporation, having its
principal place of business at 0000 XX 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000 as
lessee (the "Lessee").
W I T N E S S E T H:
A. WHEREAS, subject to the terms and conditions of the Participation
Agreement and Agency Agreement, Lessor will (i) purchase or ground lease various
parcels of real property, some of which may have existing Improvements thereon,
from one or more third parties designated by the Construction Agent and (ii)
fund the development, refurbishment, installation and construction by the
Construction Agent of Improvements on such real property; and
B. WHEREAS, the Basic Term shall commence with respect to each Property
upon the date set forth in SECTION 2.2 hereof; and
C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to
lease from Lessor, each Property;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 DEFINITIONS. Capitalized terms used but not otherwise defined in
this Lease have the respective meanings specified in APPENDIX A to the
Participation Agreement of even date herewith (as such may be amended, modified,
supplemented, restated and/or replaced from time to time, the "Participation
Agreement") among Aviation Sales Company, as Construction Agent, the Lessee,
First Security Bank, National Association, not individually, except as expressly
stated therein, as Owner Trustee under the Aviation Sales Trust 1998-1, the
Holders party thereto, the Lenders party thereto, and the Agent.
ARTICLE II
2.1 PROPERTY. Subject to the terms and conditions hereinafter set forth
and contained in the respective Lease Supplement relating to each Property,
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor, each
Property.
2.2 LEASE TERM. The term of this Lease with respect to each Property
(the "Basic Term" or "Term") shall begin upon the earlier to occur of (i) the
Property Closing Date for such Property or (ii) the date the Lessor takes title
to such Property (such earlier date being referred to as the "Basic Term
Commencement Date" or the "Term Commencement Date" for such Property) and shall
end on December 17, 2003 (the "Basic Term Expiration Date"), unless the Term is
earlier terminated in accordance with the provisions of this Lease.
2.3 TITLE. Each Property is leased to Lessee without any representation
or warranty, express or implied, by Lessor and subject to the rights of parties
in possession (if any), the existing state of title (including, without
limitation, the Permitted Exceptions) and all applicable Legal Requirements.
Lessee shall in no event have any recourse against Lessor for any defect in
Lessor's title to any Property other than for Lessor Liens.
2.4 LEASE SUPPLEMENTS. On or prior to each Basic Term Commencement
Date, Lessee and Lessor shall each execute and deliver a Lease Supplement for
the Property to be leased effective as of such Basic Term Commencement Date in
substantially the form of EXHIBIT A hereto. Lessee hereby irrevocably appoints
Lessor as Lessee's attorney-in-fact, with power of substitution, in the name of
Lessor or the name of Lessee or otherwise, to execute any Lease Supplement which
Lessee fails or refuses to sign in accordance with the terms of this SECTION
2.4.
ARTICLE III
3.1 RENT.
(a) Lessee shall pay Basic Rent on each Payment Date, and on
any date on which this Lease shall terminate with respect to any or all
Properties during the Term; provided, however, with respect to each
individual Property Lessee shall have no obligation to pay Basic Rent
with respect to such Property until the earlier of (i) the Completion
Date for such Property or (ii) if such Property is a Construction
Period Property as of the date of any Agency Agreement Event of
Default, the date of such Agency Agreement Event of Default (in each
case, such earlier date being referred to as the "Basic Rent
Commencement Date").
(b) Basic Rent shall be due and payable in lawful money of the
United States and shall be paid in immediately available funds on the
due date therefor (or within the applicable grace period) to such
account or accounts as Lessor shall from time to time direct.
(c) Lessee's inability or failure to take possession of all or
any portion of any Property when delivered by Lessor, whether or not
attributable to any act or omission of the Lessor, the Construction
Agent, Lessee, or any other Person, or for any other reason whatsoever,
shall not delay or otherwise affect Lessee's obligation to pay Rent for
such Property in accordance with the terms of this Lease.
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3.2 PAYMENT OF BASIC RENT. Basic Rent shall be paid absolutely net to
Lessor or its designee, so that this Lease shall yield to Lessor the full amount
of Basic Rent, without setoff, deduction or reduction.
3.3 SUPPLEMENTAL RENT. Lessee shall pay to Lessor or its designee or to
the Person entitled thereto any and all Supplemental Rent promptly as the same
shall become due and payable, and if Lessee fails to pay any Supplemental Rent,
Lessor shall have all rights, powers and remedies provided for herein or by law
or equity or otherwise in the case of nonpayment of Basic Rent. Without limiting
the generality of the definition of "Supplemental Rent," Lessee shall pay to
Lessor as Supplemental Rent, among other things, on demand, to the extent
permitted by applicable Legal Requirements, (a) any and all unpaid Unused Fees,
Holder Unused Fees, Owner Trustee fees, other fees, charges, prepayment
penalties, Taxes, insurance costs, indemnities, expenses, payments and other
obligations (except the obligations of Lessor to pay the principal amount of the
Loans and the Holder Amount) due and owing by Lessor under the Credit Agreement,
the Trust Agreement or any other Operative Agreement (including specifically
without limitation any amounts owing to the Lenders under SECTION 2.11 or
SECTION 2.12 of the Credit Agreement and any amounts owing to the Holders under
SECTION 3.9 or SECTION 3.10 of the Trust Agreement) and (b) interest at the
applicable Overdue Rate on any installment of Basic Rent not paid when due
(subject to the applicable grace period) for the period for which the same shall
be overdue and on any payment of Supplemental Rent not paid when due or demanded
by the appropriate Person for the period from the due date or the date of any
such demand, as the case may be, until the same shall be paid. The expiration or
other termination of Lessee's obligations to pay Basic Rent hereunder shall not
limit or modify the obligations of Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease, in the event of any failure
on the part of Lessee to pay and discharge any Supplemental Rent as and when
due, Lessee shall also promptly pay and discharge any fine, penalty, interest or
cost which may be assessed or added, pursuant to any Operative Agreement or
otherwise, in each case for nonpayment or late payment of such Supplemental
Rent, all of which shall also constitute Supplemental Rent.
3.4 PERFORMANCE ON A NON-BUSINESS DAY. If any Basic Rent is required
hereunder on a day that is not a Business Day, then such Basic Rent shall be due
on the corresponding Scheduled Interest Payment Date. If any Supplemental Rent
is required hereunder on a day that is not a Business Day, then such
Supplemental Rent shall be due on the next succeeding Business Day.
3.5 RENT PAYMENT PROVISIONS. Lessee shall make payment of all Basic
Rent and Supplemental Rent when due regardless of whether any of the Operative
Agreements pursuant to which same is calculated and is owing shall have been
rejected, avoided or disavowed in any bankruptcy or insolvency proceeding
involving any of the parties to any of the Operative Agreements. Such provisions
of such Operative Agreements and their related definitions are incorporated
herein by reference and shall survive any termination, amendment or rejection of
any such Operative Agreements.
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ARTICLE IV
4.1 UTILITY CHARGES; TAXES. Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on a Property and related
real property during the Term. Lessee shall be entitled to receive any credit or
refund with respect to any utility charge paid by Lessee, PROVIDED THAT Lessee
must collect any such credit or refund from Lessor or the respective utility
company (as the case may be) and shall not be entitled to offset any such amount
owed to Lessee against Rent payable by the Lessee hereunder. Unless a Lease
Default or Lease Event of Default shall have occurred and be continuing, the
amount of any credit or refund received by Lessor on account of any utility
charges paid by Lessee, net of the costs and expenses incurred by Lessor in
obtaining such credit or refund, shall be promptly paid over to Lessee. In
addition, Lessee shall pay or cause to be paid all taxes or taxes assessments
against a Property. All charges for utilities and all taxes or tax assessments
imposed with respect to a Property for a billing period (or in the cases of tax
assessments, a tax period) during which this Lease expires or terminates shall
be adjusted and prorated on a daily basis between Lessor and Lessee, and each
party shall pay or reimburse the other for such party's pro rata share thereof.
ARTICLE V
5.1 QUIET ENJOYMENT. Subject to the rights of Lessor contained in
SECTIONS 17.2 AND 17.3 and the other terms of this Lease and the other Operative
Agreements and so long as no Lease Event of Default shall have occurred and be
continuing, Lessee shall peaceably and quietly have, hold and enjoy each
Property for the applicable Term, free of any claim or other action by Lessor or
anyone rightfully claiming by, through or under Lessor (other than Lessee) with
respect to any matters arising from and after the applicable Basic Term
Commencement Date.
ARTICLE VI
6.1 NET LEASE. This Lease shall constitute a net lease. Any present or
future law to the contrary notwithstanding, this Lease shall not terminate, nor
shall Lessee be entitled to any abatement, suspension, deferment, reduction,
setoff, counterclaim, or defense with respect to the Rent, nor shall the
obligations of Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) by
reason of: (a) any damage to or destruction of any Property or any part thereof;
(b) any taking of any Property or any part thereof or interest therein by
Condemnation or otherwise; (c) any prohibition, limitation, restriction or
prevention of Lessee's use, occupancy or enjoyment of any Property or any part
thereof, or any interference with such use, occupancy or enjoyment by any Person
or for any other reason; (d) any title defect, Lien or any matter affecting
title to any Property; (e) any eviction by paramount title or otherwise; (f) any
default by Lessor hereunder; (g) any action for bankruptcy, insolvency,
reorganization, liquidation, dissolution or other proceeding relating to or
affecting the Agent, any Lender, Lessor, Lessee, any Holder or any Governmental
Authority; (h) the impossibility or illegality of performance by Lessor, Lessee
or both; (i) any action of any Governmental Authority or any other Person; (j)
Lessee's acquisition of ownership of all or part of any Property; (k) breach of
any warranty or representation with respect to any Property or any Operative
Agreement; (l) any defect in the condition, quality or fitness for use of any
Property or any part thereof; or (m) any other cause or
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circumstance whether similar or dissimilar to the foregoing and whether or not
Lessee shall have notice or knowledge of any of the foregoing. The foregoing
clause (j) shall not prevent the termination of the Lease in accordance with the
terms hereof if the Lessee purchases all of the Properties pursuant to SECTION
20.1. The parties intend that the obligations of Lessee hereunder shall be
covenants, agreements and obligations that are separate and independent from any
obligations of Lessor hereunder and shall continue unaffected unless such
covenants, agreements and obligations shall have been modified or terminated in
accordance with an express provision of this Lease. Lessor and Lessee
acknowledge and agree that the provisions of this SECTION 6.1 have been
specifically reviewed and subject to negotiation.
6.2 NO TERMINATION OR ABATEMENT. Lessee shall remain obligated under
this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting Lessor, any other Person or any Governmental Authority, or
any action with respect to this Lease or any Operative Agreement which may be
taken by any trustee, receiver or liquidator of Lessor, any other Person or any
Governmental Authority or by any court with respect to Lessor, any other Person
or any Governmental Authority. Lessee hereby waives all right (a) to terminate
or surrender this Lease (except as permitted under the terms of the Operative
Agreements) or (b) to avail itself of any abatement, suspension, deferment,
reduction, setoff, counterclaim or defense with respect to any Rent. Lessee
shall remain obligated under this Lease in accordance with its terms and Lessee
hereby waives any and all rights now or hereafter conferred by statute or
otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound
by all of the terms and conditions contained in this Lease.
ARTICLE VII
7.1 OWNERSHIP OF THE PROPERTIES.
(a) Lessor and Lessee intend that for federal and all state
and local income tax purposes and other tax purposes, for bankruptcy
purposes, creditor's rights purposes, environmental law purposes, for
purposes of exercising remedies against the Lessee, the Construction
Agent or the Properties, and for all other legal purposes (A) this
Lease will be treated as a loan and financing arrangement and not a
true lease, (B) Lessee will be treated as the owner of the Properties
and will be entitled to all tax benefits ordinarily available to owners
of property similar to the Properties for such tax purposes, and (C)
all payments of Basic Rent shall be deemed to be interest payments.
Consistent with the foregoing, Lessee intends to claim depreciation and
cost recovery deductions associated with the Property, and Lessor
agrees not to take any inconsistent position on its income tax returns.
Neither Lessor, the Agent, any Lender, any Holder nor NMS makes any
representation or warranty with respect to the foregoing matters
described in this SECTION 7.1 and will assume no liability for the
Lessee's accounting treatment of this transaction.
(b) Lessor and Lessee further intend and agree that, for the
purpose of securing Lessee's obligations hereunder, (i) this Lease
shall be deemed to be a security agreement and
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financing statement within the meaning of Article 9 of the Uniform
Commercial Code respecting each of the Properties to the extent such is
personal property and an irrevocable grant and conveyance of a lien and
mortgage on each of the Properties to the extent such is real property;
(ii) the acquisition of title (or to the extent applicable, a leasehold
interest) in each Property referenced in ARTICLE II shall be deemed to
be (A) a grant by Lessee to Lessor of a lien on and security interest
in all of Lessee's right, title and interest in and to each Property
and all proceeds (including without limitation insurance proceeds) of
any of the Property, whether in the form of cash, investments,
securities or other property, and (B) an assignment by Lessee to Lessor
of all rents, profits and income produced by any of the Property; and
(iii) notifications to Persons holding such property, and
acknowledgments, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of Lessee shall be
deemed to have been given for the purpose of perfecting such security
interest under applicable law. Lessor and Lessee shall promptly take
such actions as may be necessary or advisable in either party's opinion
(including without limitation the filing of Uniform Commercial Code
Financing Statements or Uniform Commercial Code Fixture Filings) to
ensure that the lien and security interest in each Property will be
deemed to be a perfected lien and security interest of first priority
under applicable law and will be maintained as such throughout the
Term.
(c) The Lessor agrees that it will not assert against any
inventory or equipment of the Lessee (other than equipment constituting
Collateral under the Operative Agreements) any statutory or possessory
lien including, without limitation, rights of levy or distraint for
rent, all of which it hereby waives. The foregoing notwithstanding, the
Lessor retains the right to assert any such liens and rights against
any property of the Lessee that constitutes Collateral (including
without limitation any Property, Land, Equipment and Improvements, and
any proceeds of the foregoing).
ARTICLE VIII
8.1 CONDITION OF THE PROPERTIES. LESSEE ACKNOWLEDGES AND AGREES THAT IT
IS LEASING EACH PROPERTY "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT
(EXPRESS OR IMPLIED) BY LESSOR AND IN EACH CASE SUBJECT TO (A) THE EXISTING
STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY),
(C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT
SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL
REQUIREMENTS WHICH MAY EXIST ON THE DATE OF THE APPLICABLE LEASE SUPPLEMENT.
NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER HAS MADE OR SHALL BE
DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE,
VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NEITHER LESSOR NOR THE AGENT
NOR ANY LENDER NOR ANY HOLDER SHALL BE LIABLE FOR ANY
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LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF ANY PROPERTY, OR ANY
PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. THE LESSEE HAS OR WILL HAVE
BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE IMPROVEMENTS
THEREON (IF ANY), IS OR WILL BE (INSOFAR AS THE LESSOR, THE AGENT, EACH LENDER
AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS INSPECTIONS AND
IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN
INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING
SENTENCE, AS BETWEEN THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS, ON THE
ONE HAND, AND THE LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE.
8.2 POSSESSION AND USE OF THE PROPERTIES.
(a) At all times during the Term with respect to each
Property, such Property shall be used by Lessee in the ordinary course
of its business. Lessee shall pay, or cause to be paid, all charges and
costs required in connection with the use of the Properties as
contemplated by this Lease. Lessee shall not commit or permit any waste
of the Properties or any part thereof.
(b) Lessee represents and warrants that the address stated in
SECTION 29.1 of this Lease is the chief place of business and chief
executive office of Lessee (as such terms are used in Section 9-103 of
the Uniform Commercial Code of any applicable jurisdiction), and Lessee
will provide Lessor with prior written notice of any change of location
of its chief place of business or chief executive office. Regarding
each Property, Lessee represents and warrants that each Lease
Supplement correctly identifies the initial location of the related
Equipment and Improvements and contains an accurate legal description
for the related parcel of Land. Lessee has no other places of business
where the Equipment or Improvements will be located other than those
identified on the applicable Lease Supplement.
(c) Lessee will not attach or incorporate any item of
Equipment to or in any other item of equipment or personal property or
to or in any real property (except the Land identified in the Lease
Supplement in which such Equipment is also described) in a manner that
could give rise to the assertion of any Lien (other than a Permitted
Lien) on such item of Equipment by reason of such attachment or the
assertion of a claim that such item of Equipment has become a fixture
and is subject to a Lien in favor of a third party that is prior to the
Liens thereon created by the Operative Agreements.
(d) Each Lease Supplement delivered under the terms of this
Lease shall contain, in regard to the relevant Property, an Equipment
Schedule that has a complete description of each item of Equipment, an
Improvement Schedule that has a complete description of each
Improvement and a legal description of the Land, to be leased hereunder
as of such date. Simultaneously with the execution and delivery of each
Lease Supplement, such Equipment, Improvements and Land shall be deemed
to have been accepted by Lessee for all purposes of this Lease and to
be subject to this Lease.
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(e) At all times during the Term with respect to each
Property, Lessee will comply with all obligations under, and (to the
extent no Event of Default has occurred and is continuing and provided
that such exercise will not impair the value of such Property) shall be
permitted to exercise all rights and remedies under, all operation and
easement agreements and related or similar agreements applicable to
such Property.
ARTICLE IX
9.1 COMPLIANCE WITH LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS.
Subject to the terms of ARTICLE XIII relating to permitted contests, Lessee, at
its sole cost and expense, shall (i) comply in all material respects with all
Legal Requirements (including without limitation all Environmental Laws), and
all Insurance Requirements relating to the Properties, including the use,
development, construction, operation, maintenance, repair, refurbishment and
restoration thereof, whether or not compliance therewith shall require
structural or extraordinary changes in the Improvements or interfere with the
use and enjoyment of the Properties, and (ii) procure, maintain and comply in
all material respects with all licenses, permits, orders, approvals, consents
and other authorizations required for the construction, use, maintenance and
operation of the Properties and for the use, development, construction,
operation, maintenance, repair and restoration of the Improvements.
ARTICLE X
10.1 MAINTENANCE AND REPAIR; RETURN.
(a) Lessee, at its sole cost and expense, shall maintain each
Property in good condition, repair and working order (ordinary wear and
tear excepted) and make all necessary repairs thereto, of every kind
and nature whatsoever, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural, or foreseen or unforeseen,
in each case as required by all Legal Requirements, Insurance
Requirements, and manufacturer's specifications and standards and on a
basis consistent with the operation and maintenance of properties or
equipment comparable in type and function to the applicable Property
and in compliance with standard industry practice, subject, however, to
the provisions of ARTICLE XV with respect to Condemnation and Casualty.
(b) Lessee shall not use or locate any component of any
Property outside of any Approved State. Lessee shall not move or
relocate any component of any Property beyond the boundaries of the
Land described in the applicable Lease Supplement without Lessor's
prior written consent, which consent shall not be unreasonably withheld
or delayed.
(c) If any material component of any Property becomes worn
out, lost, destroyed, damaged beyond repair or otherwise permanently
rendered unfit for use, Lessee, at its own expense, will within a
reasonable time replace such component with a replacement component
which is free and clear of all Liens (other than Permitted Liens) and
has a value, utility and useful life at least equal to the component
replaced. All components which are added to any Property shall
immediately become the property of, and title thereto shall vest in,
Lessor, and
8
shall be deemed incorporated in such Property and subject to the terms
of this Lease as if originally leased hereunder.
(d) Upon reasonable advance notice, Lessor and its agents
shall have the right to inspect each Property and all maintenance
records with respect thereto at any reasonable time during normal
business hours but shall not materially disrupt the business of Lessee.
(e) If, at any time, because of a condemnation, casualty or
other event or condition, Lessor has reason to believe that the
appraised value of any Property has materially decreased, then the
Lessor or the Agent (at Lessee's sole expense) may cause an additional
Appraisal (addressed to the Lessor and the Agent) to be prepared. In
addition, Lessor or the Agent (at Lessee's sole expense) may cause to
be prepared (at Lessee's sole expense) any additional Appraisals (or
reappraisals) as Lessor or the Agent may deem appropriate (i) if an
Event of Default has occurred and is continuing, or (ii) if any one of
Lessor, the Agent, any Lender or any Holder is required pursuant to any
applicable Legal Requirement to obtain such an Appraisal (or
reappraisal).
(f) Lessor shall under no circumstances be required to build
any improvements on any Property, make any repairs, replacements,
alterations or renewals of any nature or description to any Property,
make any expenditure whatsoever in connection with this Lease or
maintain any Property in any way. Lessor shall not be required to
maintain, repair or rebuild all or any part of any Property, and Lessee
waives the right to (i) require Lessor to maintain, repair, or rebuild
all or any part of any Property (unless such repairs are needed to cure
damage to a Property caused by the gross negligence or willful
misconduct of the Lessor), or (ii) make repairs at the expense of
Lessor pursuant to any Legal Requirement, Insurance Requirement,
contract, agreement, covenants, condition or restriction at any time in
effect.
(g) Lessee shall, upon the expiration of the Term or earlier
termination of this Lease with respect to a Property, if Lessee shall
not have exercised its Purchase Option with respect to such Property,
surrender such Property to Lessor, or the third party purchaser, as the
case may be, subject to Lessee's obligations under this Lease
(including without limitation SECTIONS 9.1, 10.1(A)-(F), 10.2, 11.1,
12.1, 22.1 AND 23.1).
10.2 ENVIRONMENTAL INSPECTION. If (a) Lessee has not given notice of
the exercise of its Purchase Option on the Expiration Date pursuant to SECTION
20.1(B), or (b) Lessee has given notice, pursuant to SECTION 20.1(B) of its
election to remarket the Properties on the Expiration Date or a Payment Date
pursuant to SECTION 22.1 then, in either case, not more than one hundred twenty
(120) days nor less than sixty (60) days prior to such Expiration Date or
Payment Date, Lessee shall, at its sole cost and expense, provide to Lessor and
the Agent a report by a reputable environmental consultant selected by Lessee,
which report shall be in form and substance reasonably satisfactory to Lessor
and the Agent and shall include without limitation a "Phase I" environmental
report (or update of a prior "Phase I" report that was previously delivered to
the Lessor and the Agent) on each of the Properties. If the report delivered
pursuant to the preceding sentence recommends that a "Phase II" report or other
supplemental report be obtained, the Lessee shall, at its own cost and expense,
not
9
less than thirty (30) days prior to such Expiration Date or Payment Date,
provide to Lessor and the Agent such "Phase II" or other report, in form and
substance reasonably satisfactory to Lessor and the Agent. If Lessee fails to
provide such Phase I, Phase II or other supplemental reports with respect to any
Property within the time periods required by this SECTION 10.2, or if such
report or reports are not satisfactory in scope or content to the Agent or the
Lessor (in their sole discretion), then notwithstanding any other provision of
this Lease, Lessor may require Lessee to purchase all of the Properties on such
Expiration Date or Payment Date for the Termination Value thereof, plus all Rent
due and payable, and all other amounts due and owing under any Operative
Agreement.
ARTICLE XI
11.1 MODIFICATIONS.
(a) Lessee at its sole cost and expense, at any time and from
time to time without the consent of Lessor may make alterations,
renovations, improvements and additions to any Property or any part
thereof and substitutions and replacements therefor (collectively,
"Modifications") (and shall make any Modification required by
applicable Legal Requirements); PROVIDED, that: (i) except for any
Modification required to be made pursuant to a Legal Requirement, no
Modification shall materially impair the value, utility or useful life
of any Property from that which existed immediately prior to such
Modification; (ii) the Modification shall be done expeditiously and in
a good and workmanlike manner; (iii) Lessee shall comply with all
material Legal Requirements (including all Environmental Laws) and
Insurance Requirements applicable to the Modification, including
without limitation the obtaining of all permits and certificates of
occupancy, and the structural integrity of any Property shall not be
adversely affected; (iv) to the extent required by SECTION 14.2(A),
Lessee shall maintain builders' risk insurance at all times when a
Modification is in progress; (v) subject to the terms of ARTICLE XIII
relating to permitted contests, Lessee shall pay all costs and expenses
and discharge any Liens (other than Permitted Liens) arising with
respect to the Modification; (vi) such Modification shall comply with
the requirements of this Lease (including without limitation SECTIONS
8.2 AND 10.1); and (vii) no Improvements shall be demolished unless
Lessee shall finance the proposed Modification outside of this lease
facility. Modifications that (y) are not required for any Property or
any part thereof pursuant to any Legal Requirement or otherwise and (z)
are severable from the applicable Property without damage or other loss
of value to such Property shall become property of the Lessee, and
title to such Modifications shall rest with the Lessee. Except as set
forth in the immediately preceding sentence, all Modifications shall
become property of the Lessor and shall be subject to this Lease, and
title to any component of any Property comprising any such
Modifications shall immediately vest in Lessor.
(b) The construction process provided for in the Agency
Agreement is acknowledged by Lessor and the Agent to be consistent with
and in compliance with the terms and provisions of this ARTICLE XI.
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ARTICLE XII
12.1 WARRANTY OF TITLE.
(a) Lessee agrees that, except as otherwise provided herein
and subject to the terms of ARTICLE XIII relating to permitted
contests, Lessee shall not directly or indirectly create or allow to
remain, and shall promptly discharge at its sole cost and expense, (i)
any Lien, defect, attachment, levy, title retention agreement or claim
upon any Property or any Modifications or (ii) any Lien, attachment,
levy or claim with respect to the Rent or with respect to any amounts
held by the Agent pursuant to the Credit Agreement, in each case other
than Permitted Liens and Lessor Liens. Lessee shall promptly notify
Lessor in the event it receives actual knowledge that a Lien other than
a Permitted Lien or Lessor Lien has occurred with respect to a
Property, and Lessee represents and warrants to, and covenants with,
Lessor that the Liens in favor of the Lessor created by the Operative
Agreements are first priority perfected Liens subject only to Permitted
Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied, to
or for the performance by any contractor, mechanic, laborer,
materialman, supplier or vendor of any labor or services or for the
furnishing of any materials for any construction, alteration, addition,
repair or demolition of or to any Property or any part thereof. NOTICE
IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR
TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER
LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR,
SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR
IN AND TO ANY PROPERTY.
ARTICLE XIII
13.1 PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES. Except to
the extent otherwise provided for in SECTION 13 of the Participation Agreement,
Lessee, on its own or on Lessor's behalf but at Lessee's sole cost and expense,
may contest, by appropriate administrative or judicial proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any Legal Requirement, or utility charges payable pursuant to
SECTION 4.1 or any Lien, attachment, levy, encumbrance or encroachment, and
Lessor agrees not to pay, settle or otherwise compromise any such item, provided
that (a) the commencement and continuation of such proceedings shall suspend the
collection of any such contested amount from, and suspend the enforcement
thereof against, the applicable Properties, Lessor, each Holder, the Agent and
each Lender; (b) there shall not be imposed a Lien (other than Permitted Liens)
on any Property and no part of any Property nor any Rent shall be in any danger
of being sold, forfeited, lost or deferred; (c) at no time during the permitted
contest shall there be a risk of the imposition of criminal liability or
material civil liability on Lessor, any Holder, the Agent or any Lender for
failure to comply therewith; and (d) in the event that, at any time, there shall
be a material risk of extending the application of such item beyond the end of
the Term, then Lessee shall deliver to Lessor an Officer's
11
Certificate certifying as to the matters set forth in clauses (a), (b) and (c)
of this SECTION 13.1. Lessor, at Lessee's sole cost and expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
ARTICLE XIV
14.1 PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE. During the
Term of each Property, Lessee shall procure and carry, at Lessee's sole cost and
expense, commercial general liability insurance for claims for injuries or death
sustained by persons or damage to property while on the Properties or the
premises where the Equipment is located and such other public liability
coverages as are then customarily carried by similarly situated companies
conducting business similar to that conducted by Lessee. Such insurance shall be
on terms and in amounts (and with deductibles and limitations on coverage) that
are (a) reasonably satisfactory to Lessor and the Agent and (b) no less
favorable than insurance maintained by Lessee with respect to similar properties
and equipment that it owns and are then carried by similarly situated companies
conducting business similar to that conducted by Lessee. The policies shall be
endorsed to name Lessor, the Agent, the Lenders and the Holders as additional
insureds. The policies shall also specifically provide that such policies shall
be considered primary insurance which shall apply to any loss or claim before
any contribution by any insurance which Lessor, any Holder, the Agent or any
Lender may have in force. Lessee shall, in the operation of the Properties,
comply with the applicable workers' compensation laws and protect Lessor, each
Holder, the Agent and each Lender against any liability under such laws.
14.2 HAZARD AND OTHER INSURANCE.
(a) During the Term for each Property, Lessee shall keep, or
cause to be kept, such Property insured against loss or damage by fire
and all other risks and shall maintain builders' risk insurance during
construction of any Improvements or Modifications in amounts not less
than the replacement value from time to time of such Property and on
terms that (i) are no less favorable than insurance covering other
similar properties owned by Lessee and (ii) are then carried by
similarly situated companies conducting business similar to that
conducted by Lessee. Lessee shall not be required to maintain separate
builder's insurance solely by reason of the Modifications to a Property
if the cost of such Modifications will not exceed $25,000 in the
aggregate. The policies shall be endorsed to name Lessor and the Agent
(for itself and on behalf of the Lenders and the Holders), to the
extent of their respective interests, as additional insureds and loss
payees; PROVIDED, that so long as no Lease Event of Default has
occurred and is continuing, any loss payable under the insurance
policies required by this Section will be paid to Lessee.
(b) If, during the Term with respect to a Property the area in
which such Property is located is designated a "flood-prone" area
pursuant to the Flood Disaster Protection Act of 1973, or any
amendments or supplements thereto, then Lessee shall comply with the
National Flood Insurance Program as set forth in the Flood Disaster
Protection Act of 1973. In addition, Lessee will fully comply with the
requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as each may be amended from
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time to time, and with any other Legal Requirement concerning flood
insurance to the extent that it may apply to any such Property.
14.3 COVERAGE.
(a) As of the date of this Lease and annually thereafter,
Lessee shall furnish Lessor and the Agent with certificates prepared by
the insurers or insurance broker of Lessee showing the insurance
required under SECTIONS 14.1 AND 14.2 to be in effect, naming (except
with respect to workers' compensation insurance) Lessor, the Agent,
each Lender and each Holder as an additional insured on all insurance
described in SECTION 14.1, and the Agent (for itself and on behalf of
the Lenders and the Holders) as additional insured and loss payee on
all insurance described in SECTION 14.2, and in each case evidencing
the other requirements of this ARTICLE XIV. All such insurance shall be
at the cost and expense of Lessee and provided by nationally
recognized, financially sound insurance companies. Such certificates
shall include a provision for thirty (30) days' advance written notice
by the insurer to Lessor and the Agent in the event of cancellation or
material alteration of such insurance. If a Lease Event of Default has
occurred and is continuing and Lessor so requests, Lessee shall deliver
to Lessor copies of all insurance policies required by SECTIONS 14.1
AND 14.2.
(b) Lessee agrees that any insurance policy required by
SECTIONS 14.1, 14.2(A) AND 14.2(B) shall include an appropriate
provision that such policy will not be invalidated should Lessee waive,
at any time, any or all rights of recovery against any party for losses
covered by such policy or due to any breach of warranty, fraud, action,
inaction or misrepresentation by Lessee or any Person acting on behalf
of Lessee. Lessee hereby waives any and all such rights against the
Lessor, the Holders, the Agent and the Lenders to the extent of
payments made to any such Person under any such policy.
(c) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with
any insurance required under this ARTICLE XIV, except that Lessor may
carry separate liability insurance at Lessor's sole cost so long as (i)
Lessee's insurance is designated as primary and in no event excess or
contributory to any insurance Lessor may have in force which would
apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this
ARTICLE XIV to be subject to a coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for the
insurance required by SECTION 14.1 AND SECTION 14.2, shall renew or
replace each policy prior to the expiration date thereof, and shall
otherwise maintain the coverage required by such Sections without any
lapse in coverage.
14.4 ADDITIONAL INSURANCE REQUIREMENTS. Without limiting the generality
of SECTIONS 14.1 through 14.3 above or any other provision of any Operative
Agreement, Lessee shall obtain any and all additional insurance policies with
regard to the Properties or otherwise with respect to the transactions
contemplated by the Operative Agreements, as requested from time to time by
Lessor.
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ARTICLE XV
15.1 CASUALTY AND CONDEMNATION.
(a) Subject to the provisions of this ARTICLE XV and ARTICLE
XVI (in the event Lessee delivers, or is obligated to deliver, a
Termination Notice), and prior to the occurrence and continuation of a
Lease Default or Lease Event of Default, Lessee shall be entitled to
receive (and Lessor hereby irrevocably assigns to Lessee all of
Lessor's right, title and interest in) any award, compensation or
insurance proceeds under SECTIONS 14.2(A) OR (B) hereof to which Lessee
or Lessor may become entitled by reason of their respective interests
in a Property (i) if all or a portion of such Property is damaged or
destroyed in whole or in part by a Casualty or (ii) if the use, access,
occupancy, easement rights or title to such Property or any part
thereof is the subject of a Condemnation; PROVIDED, HOWEVER, if a Lease
Default or Lease Event of Default shall have occurred and be continuing
such award, compensation or insurance proceeds shall be paid directly
to Lessor or, if received by Lessee, shall be held in trust for Lessor,
and shall be paid over by Lessee to Lessor and held in accordance with
the terms of this paragraph (a). All amounts held by Lessor hereunder
on account of any award, compensation or insurance proceeds either paid
directly to Lessor or turned over to Lessor shall be held as security
for the performance of Lessee's obligations hereunder.
(b) Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At Lessee's reasonable
request, and at Lessee's sole cost and expense, Lessor and the Agent
shall participate in any such proceeding, action, negotiation,
prosecution or adjustment. Lessor and Lessee agree that this Lease
shall control the rights of Lessor and Lessee in and to any such award,
compensation or insurance payment.
(c) If Lessee shall receive notice of a Casualty or a possible
Condemnation of a Property or any interest therein where damage to the
affected Property is estimated to equal or exceed ten percent (10%) of
the Property Cost of such Property, Lessee shall give notice thereof to
the Lessor and to the Agent promptly after the receipt of such notice.
(d) In the event of a Casualty or a Condemnation (regardless
of whether notice thereof must be given pursuant to paragraph (c)),
this Lease shall terminate with respect to the applicable Property in
accordance with SECTION 16.1 if Lessee, within thirty (30) days after
such occurrence, delivers to Lessor and the Agent a Termination Notice
to such effect.
(e) If, pursuant to this SECTION 15.1, this Lease shall
continue in full force and effect following a Casualty or Condemnation
with respect to the affected Property, Lessee shall, at its sole cost
and expense and using, if available, the proceeds of any award,
compensation or insurance with respect to such Casualty or Condemnation
(including, without limitation, any such award, compensation or
insurance which has been received by the Agent and which should be
turned over to Lessee pursuant to the terms of the Operative
14
Agreements, and if not available or sufficient, using its own funds),
promptly and diligently repair any damage to the applicable Property
caused by such Casualty or Condemnation in conformity with the
requirements of SECTIONS 10.1 AND 11.1, using the as-built plans and
specifications or manufacturer's specifications for the applicable
Improvements or Equipment (as modified to give effect to any subsequent
Modifications, any Condemnation affecting the Property and all
applicable Legal Requirements), so as to restore the applicable
Property to substantially the same condition, operation, function and
value as existed immediately prior to such Casualty or Condemnation. In
such event, title to the applicable Property shall remain with Lessor.
(f) In no event shall a Casualty or Condemnation with respect
to which this Lease remains in full force and effect under this SECTION
15.1 affect Lessee's obligations to pay Rent pursuant to SECTION 3.1.
(g) Notwithstanding anything to the contrary set forth in
SECTION 15.1(A) OR SECTION 15.1(E), if during the Term with respect to
a Property a Casualty occurs with respect to such Property or Lessee
receives notice of a Condemnation with respect to such Property, and
following such Casualty or Condemnation, (i) the applicable Property
cannot reasonably be restored, repaired or replaced on or before the
180th day prior to the Expiration Date (if such Casualty or
Condemnation occurs during the Term) to substantially the same
condition as existed immediately prior to such Casualty or
Condemnation, or (ii) on or before such day such Property is not in
fact so restored, repaired or replaced, then Lessee shall be required
to purchase such Property on the next Payment Date and pay Lessor the
Termination Value for such Property, plus any and all Rent then due and
owing, plus all other amounts then due and owing (including without
limitation amounts described in clause FIRST of SECTION 22.2).
15.2 ENVIRONMENTAL MATTERS. Promptly upon Lessee's actual knowledge of
the presence of Hazardous Substances in any portion of any Property (or in any
other property that is not subject to this Lease if Lessee has reason to believe
that such Hazardous Substances may be caused by an emission from or on, or a
condition on, any Property) in concentrations and conditions that constitute an
Environmental Violation and as to which, in the reasonable opinion of Lessee,
the cost to undertake any legally required response, clean up, remedial or other
action might result in a cost to Lessee or loss in the value of such Property of
more than $100,000, Lessee shall notify Lessor in writing of such condition. In
the event of any Environmental Violation (regardless of whether notice thereof
must be given to Lessor pursuant to the preceding sentence), Lessee shall, not
later than sixty (60) days after Lessee has actual knowledge of such
Environmental Violation, either deliver to Lessor a Termination Notice with
respect to the applicable Property or Properties pursuant to SECTION 16.1, if
applicable, or, at Lessee's sole cost and expense, promptly and diligently
undertake and complete any response, clean up, remedial or other action
necessary to remove, cleanup or remediate the Environmental Violation in
accordance with all Environmental Laws. If Lessee does not deliver a Termination
Notice with respect to such Property pursuant to SECTION 16.1, Lessee shall,
upon completion of remedial action by Lessee, cause to be prepared by a
reputable environmental consultant acceptable to Lessor a report describing the
Environmental Violation and the actions taken by Lessee (or its agents) in
response to such Environmental Violation, and a statement by the
15
consultant that the Environmental Violation has been remedied in full compliance
with applicable Environmental Law.
15.3 NOTICE OF ENVIRONMENTAL MATTERS. Promptly, but in any event within
thirty (30) days from the date Lessee has actual knowledge thereof, Lessee shall
provide to Lessor written notice of any pending or threatened Environmental
Claim involving any Environmental Law or any Release on or in connection with
any Property. All such notices shall describe in reasonable detail the nature of
the claim, action or proceeding and Lessee's proposed response thereto. In
addition, Lessee shall provide to Lessor, within five (5) Business Days of
receipt, copies of all material written communications with any Governmental
Authority relating to any Environmental Law in connection with any Property.
Lessee shall also promptly provide such detailed reports of any such material
Environmental Claims as may reasonably be requested by Lessor.
ARTICLE XVI
16.1 TERMINATION UPON CERTAIN EVENTS. If any of the following occur:
(i) if the requirements of SECTION 15.1(C) are satisfied, or (ii) if the
requirements of SECTION 15.1(D) are satisfied and Lessee has determined pursuant
to such section that following the applicable Casualty or Condemnation this
Lease shall terminate with respect to the affected Property, or (iii) Lessee has
determined pursuant to the second sentence of SECTION 15.2 that, due to the
occurrence of an Environmental Violation, this Lease shall terminate with
respect to the affected Property, then Lessee shall be obligated to deliver,
within sixty (60) days of its receipt of notice of the applicable Condemnation
or the occurrence of the applicable Casualty or Environmental Violation, a
written notice to the Lessor in the form described in SECTION 16.2(A) (a
"Termination Notice") of the termination of this Lease with respect to the
applicable Property.
16.2 PROCEDURES.
(a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the affected Property on a
Payment Date not more than sixty (60) days after Lessor's receipt of
such Termination Notice (the "Termination Date"); and (ii) a binding
and irrevocable agreement of Lessee to pay the Termination Value for
the applicable Property, any and all Rent then due and owing and all
other amounts then due and owing from Lessee under any of the Operative
Agreements (including without limitation amounts described in clause
FIRST of SECTION 22.2) and purchase such Property on such Termination
Date.
(b) On each Termination Date, Lessee shall pay to Lessor the
Termination Value for the applicable Property, any and all Rent then
due and owing and all other amounts then due and owing from Lessee
under any of the Operative Agreements (including without limitation
amounts described in clause FIRST of SECTION 22.2), and Lessor shall
convey such Property, or the remaining portion thereof, if any, to
Lessee (or Lessee's designee), all in accordance with SECTION 19.1.
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ARTICLE XVII
17.1 LEASE EVENTS OF DEFAULT. If any one or more of the following
events (each a "Lease Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic Rent
(except as set forth in clause (ii)) within three (3) days after the
same has become due and payable or (ii) any Termination Value, on the
date any such payment is due, or any payment of Basic Rent or
Supplemental Rent due on the due date of any such payment of
Termination Value, or any amount due on the Expiration Date;
(b) Lessee shall fail to make payment of any Supplemental Rent
(other than Supplemental Rent referred to in SECTION 17(A)(II)) due and
payable within three (3) days after receipt of notice that such payment
is due;
(c) Lessee shall fail to maintain insurance as required by
ARTICLE XIV of this Lease;
(d) Lessee or any Guarantor shall fail to observe or perform
any term, covenant or provision of Lessee or Guarantor under this Lease
or any other Operative Agreement to which Lessee or Guarantor is a
party other than those set forth in SECTIONS 17.1(A), (B) (C) OR (G)
hereof, and such failure shall remain uncured for a period of thirty
(30) days after the earlier of receipt of written notice from Lessor
thereof or a Responsible Officer of Lessee becomes aware of such
failure;
(e) An Agency Agreement Event of Default shall have occurred
and be continuing;
(f) (i) Any default, which is not waived, in the payment of
any principal, interest, premium or other amount with respect to any
Indebtedness (other than obligations under the Operative Agreements) of
Lessee or any Guarantor in an amount not less than $500,000 in the
aggregate outstanding, or (ii) any default, which is not waived, in the
performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which any
such Indebtedness referred to in clause (i) may have been issued,
created, assumed, guaranteed or secured by Lessee, or (iii) any other
event of default as specified in any agreement or instrument under or
pursuant to which any such Indebtedness may have been issued, created,
assumed, guaranteed or secured by Lessee, and any such default or event
of default specified in clauses (i), (ii) or (iii) shall continue for
more than the period of grace, if any, therein specified, or such
default or event of default shall permit the holder of any such
Indebtedness (or any agent or trustee acting on behalf of one or more
holders) to accelerate the maturity thereof; or
(g) The breach of any financial covenant set forth or
incorporated by reference in ARTICLE XXVIII hereof (including without
limitation any covenant set forth in SECTIONS 28.4(A)-(D));
17
(h) The Lessee or any Guarantor shall be unable to pay its
debts generally as they become due; file a petition to take advantage
of any insolvency statute; make an assignment for the benefit of its
creditors; commence a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or of the whole or any
substantial part of its property; file a petition or answer seeking
liquidation, reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute;
(i) A court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Lessee or any Guarantor or of the
whole or any substantial part of the properties of the Lessee or any
Guarantor, and such order, judgment or decree continues unstayed and in
effect for a period of sixty (60) days, or approve a petition filed
against the Lessee or any Guarantor seeking liquidation, reorganization
or arrangement or similar relief under the federal bankruptcy laws or
any other applicable law or statute of the United States of America or
any state, which petition is not dismissed within sixty (60) days; or
if, under the provisions of any other law for the relief or aid of
debtors, a court of competent jurisdiction shall assume custody or
control of the Lessee or of the whole or any substantial part of its
properties, which control is not relinquished within sixty (60) days;
or if there is commenced against the Lessee or any Guarantor any
proceeding or petition seeking liquidation, reorganization, arrangement
or similar relief under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
which proceeding or petition remains undismissed for a period of sixty
(60) days; or if the Lessee or any Guarantor takes any action to
indicate its consent to or approval of any such proceeding or petition;
(j) The entering of any order in any proceedings against
Lessee or any Guarantor decreeing the dissolution, divestiture or
split-up of Lessee or any Guarantor, and such order remains in effect
for more than sixty (60) days;
(k) Any representation, warranty or statement of fact
contained in any Operative Agreement or in any writing, report,
certificate, or statement at any time furnished to Lessor, the Agent,
any Holder or any Lender, by or on behalf of Lessee or any Guarantor
pursuant to or in connection with this Lease or any other Operative
Agreement or otherwise, shall be false or misleading in any material
respect when given;
(l) One or more judgments or orders where the amount not
covered by insurance (or the amount as to which the insurer) is found
not to be liable for) is in excess of $500,000 is rendered against
Lessee or any Guarantor, or (ii) there is any attachment, injunction or
execution against any of the Lessee's or any Guarantor's properties for
any amount in excess of $500,000 in the aggregate; and such judgment,
attachment, injunction or execution remains unpaid, unstayed,
undischarged, unbonded or undismissed for a period of thirty (30) days;
or
(m) Any material Environmental Violation shall have occurred
and be continuing;
(n) Any Aviation Sales Credit Agreement Event of Default, or
any default under the Subordinated Debt, shall have occurred and be
continuing;
18
(o) Any Operative Agreement shall cease to be in full force
and effect; or
(p) Any material adverse change in (i) the business, condition
(financial or otherwise) assets, liabilities or operations of Aviation
Sales or any of its Subsidiaries, (ii) the ability of the Lessee, the
Construction Agent or any of their Subsidiaries to perform its
respective obligations under any Operative Agreement to which it is a
party, (iii) the validity or enforceability of any Operative Agreement
or the rights and remedies of the Agent, the Lenders, the Holders, or
the Lessor thereunder, or (iv) the validity, priority or enforceability
of any Lien on any Property created by any of the Operative Agreements,
then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this ARTICLE XVII and in SECTION 18.1, terminate this
Lease by giving Lessee fifteen (15) days notice of such termination, and this
Lease shall terminate, and all rights of Lessee under this Lease shall cease.
Lessee shall, to the fullest extent permitted by law, pay as Supplemental Rent
all costs and expenses incurred by or on behalf of Lessor, including without
limitation reasonable fees and expenses of counsel, as a result of any Lease
Event of Default hereunder.
17.2 SURRENDER OF POSSESSION. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to SECTION 17.1, Lessee shall, upon thirty (30) days written
notice, surrender to Lessor possession of the Properties. Lessor may enter upon
and repossess the Properties by such means as are available at law or in equity,
and may remove Lessee and all other Persons and any and all personal property
and Lessee's equipment and personalty and severable Modifications from the
Properties. Lessor shall have no liability by reason of any such entry,
repossession or removal performed in accordance with applicable law. Upon the
written demand of Lessor, Lessee shall return the Properties promptly to Lessor,
in the manner and condition required by, and otherwise in accordance with the
provisions of, SECTION 22.1(C) hereof.
17.3 RELETTING. If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
SECTION 17.1, Lessor may, but shall be under no obligation to, relet any or all
of the Properties, for the account of Lessee or otherwise, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may determine, and
Lessor may collect, receive and retain the rents resulting from such reletting.
Lessor shall not be liable to Lessee for any failure to relet any Property or
for any failure to collect any rent due upon such reletting.
17.4 DAMAGES. Neither (a) the termination of this Lease as to all or
any of the Properties pursuant to SECTION 17.1; (b) the repossession of all or
any of the Properties; nor (c) the failure of Lessor to relet all or any of the
Properties, the reletting of all or any portion thereof, nor the failure of
Lessor to collect or receive any rentals due upon any such reletting, shall
relieve Lessee of its liabilities and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. If any Lease Event of
Default shall have occurred and be continuing and notwithstanding any
termination of this Lease pursuant to SECTION 17.1, Lessee shall forthwith pay
to Lessor all Rent and other sums due and payable hereunder to and including the
date of such termination. Thereafter,
19
on the days on which the Basic Rent or Supplemental Rent, as applicable, are
payable under this Lease or would have been payable under this Lease if the same
had not been terminated pursuant to SECTION 17.1 and until the end of the Term
hereof or what would have been the Term in the absence of such termination,
Lessee shall pay Lessor, as current liquidated damages (it being agreed that it
would be impossible accurately to determine actual damages) an amount equal to
the Basic Rent and Supplemental Rent that are payable under this Lease or would
have been payable by Lessee hereunder if this Lease had not been terminated
pursuant to SECTION 17.1, provided that Lessee's obligation to make payments of
Basic Rent and Supplemental Rent under this SECTION 17.4 shall continue only so
long as Lessor shall not have received the amounts specified in SECTION 17.5.
The amount of Lessee's liabilities and obligations under this Lease shall not be
reduced or offset by any proceeds Lessor may receive from any reletting of any
Property, EXCEPT THAT the net proceeds, if any, which are actually received by
Lessor from reletting of any Property shall be offset against the final
liquidated damages amount specified in SECTION 17.5. In calculating the amount
of such net proceeds from reletting, there shall be deducted all of Lessor's,
any Holder's, the Agent's and any Lender's reasonable expenses in connection
therewith, including repossession costs, brokerage or sales commissions, fees
and expenses of counsel and any necessary repair or alteration costs and
expenses incurred in preparation for such reletting. To the extent Lessor
receives any damages pursuant to this SECTION 17.4, such amounts shall be
regarded as amounts paid on account of Rent. Lessee specifically acknowledges
and agrees that its obligations under this SECTION 17.4 shall be absolute and
unconditional under any and all circumstances and shall be paid or performed, as
the case may be, without notice or demand and without any abatement, reduction,
diminution, setoff, defense, counterclaim or recoupment whatsoever.
17.5 FINAL LIQUIDATED DAMAGES. If a Lease Event of Default shall have
occurred and be continuing, whether or not this Lease shall have been terminated
pursuant to SECTION 17.1 and whether or not Lessor shall have collected any
current liquidated damages pursuant to SECTION 17.4, Lessor shall have the right
to recover, by demand to Lessee and at Lessor's election, and Lessee shall pay
to Lessor, as and for final liquidated damages, but exclusive of the indemnities
payable under SECTION 13 of the Participation Agreement, and in lieu of all
current liquidated damages beyond the date of such demand (it being agreed that
it would be impossible accurately to determine actual damages) the sum of (a)
the Termination Value for all Properties remaining under this Lease, PLUS (b)
all other amounts owing in respect of Rent, Supplemental Rent and other amounts
then due and payable under this Lease or any other Operative Agreement. It is
intended and agreed that the foregoing amount is and will be liquidated damages
and not a penalty. Upon payment of the amount specified pursuant to the first
sentence of this SECTION 17.5, Lessee shall be entitled to receive from Lessor,
either at Lessee's request or upon Lessor's election, in either case at Lessee's
cost, an assignment of Lessor's entire right, title and interest in and to the
Properties, the Improvements, Fixtures, Modifications and Equipment, in each
case in recordable form and otherwise in conformity with local custom and free
and clear of the Lien of this Lease (including the release of any memoranda of
Lease or the Lease Supplement recorded in connection therewith) and any Lessor
Liens. The Properties shall be conveyed to Lessee "AS IS" "WHERE IS" and in
their then present physical condition. If any statute or rule of law shall limit
the amount of such final liquidated damages to less than the amount agreed upon,
Lessor shall be entitled to the maximum amount allowable under such statute or
rule of law; PROVIDED, HOWEVER, Lessee shall not be entitled to receive an
assignment of Lessor's interest in the Properties, the Improvements, Fixtures,
Modifications or Equipment or
20
documents unless Lessee shall have paid in full the Termination Value and all
other amounts due and owing hereunder and under the other Operative Agreements.
Lessee specifically acknowledges and agrees that its obligations under this
SECTION 17.5 shall be absolute and unconditional under any and all circumstances
and shall be paid or performed, as the case may be, without notice or demand
(except as otherwise specifically provided herein) and without any abatement,
reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever.
17.6 WAIVER OF CERTAIN RIGHTS. If this Lease shall be terminated
pursuant to SECTION 17.1, Lessee waives, to the fullest extent permitted by law,
(a) any notice of re-entry or the institution of legal proceedings to obtain
re-entry or possession; (b) any right of redemption, re-entry or possession; (c)
the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt; and (d) any other rights which might otherwise
limit or modify any of Lessor's rights or remedies under this ARTICLE XVII.
17.7 ASSIGNMENT OF RIGHTS UNDER CONTRACTS. If a Lease Event of Default
shall have occurred and be continuing, and whether or not this Lease shall have
been terminated pursuant to SECTION 17.1, Lessee shall upon Lessor's demand
immediately assign, transfer and set over to Lessor all of Lessee's right, title
and interest in and to each agreement executed by Lessee in connection with the
purchase, construction, development, use or operation of the Properties
(including, without limitation, all right, title and interest of Lessee with
respect to all warranty, performance, service and indemnity provisions), as and
to the extent that the same relate to the purchase, construction, use and
operation of the Properties.
17.8 ENVIRONMENTAL COSTS. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to SECTION 17.1, Lessee shall pay directly to any third
party (or at Lessor's election, reimburse Lessor) for the cost of any
environmental testing or remediation work undertaken respecting any Property as
such testing or work is deemed appropriate in the reasonable judgment of Lessor.
Lessee shall pay all amounts referenced in the immediately preceding sentence
within ten (10) days of any request by Lessor for such payment.
17.9 REMEDIES CUMULATIVE. The remedies herein provided shall be
cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise, including, without limitation, any
mortgage foreclosure remedies.
17.10 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Lessee shall promptly
notify the Lessor and the Agent if any Responsible Officer of Lessee has
received notice, or has actual knowledge, of any Default or Event of Default.
ARTICLE XVIII
18.1 LESSOR'S RIGHT TO CURE LESSEE'S LEASE DEFAULTS. Lessor, without
waiving or releasing any obligation or Lease Event of Default, may (but shall be
under no obligation to) remedy any Lease Event of Default for the account and at
the sole cost and expense of Lessee, including the failure by
21
Lessee to maintain the insurance required by ARTICLE XIV, and may, to the
fullest extent permitted by law, and notwithstanding any right of quiet
enjoyment in favor of Lessee, enter upon any Property, or real property owned or
leased by Lessee, take all such action thereon as may be necessary or
appropriate therefor, and inspect or copy any records relating to any Property
or the transactions contemplated hereby (and Lessee shall make available to
Lessor, for inspection thereof, any such records). No such entry shall be deemed
an eviction of any lessee. All reasonable out-of-pocket costs and expenses so
incurred (including without limitation reasonable fees and expenses of counsel),
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid by Lessor, shall be paid by Lessee to Lessor on
demand.
ARTICLE XIX
19.1 PROVISIONS RELATING TO LESSEE'S EXERCISE OF ITS PURCHASE OPTION.
Subject to SECTION 19.2, in connection with any termination of this Lease with
respect to any Property pursuant to the terms of SECTION 16.2, or in connection
with Lessee's exercise of its Purchase Option or its option to purchase all
Properties pursuant to SECTION 20.1, upon the date on which this Lease is to
terminate with respect to a Property or all of the Properties, and upon tender
by Lessee of the amounts set forth in SECTIONS 16.2(B) OR 20.1, as applicable,
Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's
cost and expense an assignment of Lessor's entire interest in the applicable
Property, in each case in recordable form and otherwise in conformity with local
custom and free and clear of the Lien of this Lease and any Lessor Liens
attributable to Lessor but without any other warranties (of title or otherwise)
from the Lessor. The Lessor's interest in the applicable Property shall be
conveyed to Lessee "AS IS" "WHERE IS" and in then present physical condition. In
addition, Lessor shall, upon Lessee's request and at Lessee's expense, execute
and deliver any documents (including any appropriate releases of or amendments
to financing statements or recorded memoranda of this Lease) necessary to
release the Lien of this Lease on the applicable Property.
19.2 NO TERMINATION WITH RESPECT TO LESS THAN ALL OF A PROPERTY. Lessee
shall not be entitled to exercise its Purchase Option separately with respect to
Property consisting of Land, Equipment and Improvements but shall be required to
exercise its Purchase Option with respect to an entire Property.
ARTICLE XX
20.1 PURCHASE PRIOR TO END OF TERM; PURCHASE OR SALE OPTION AT END OF
TERM.
(a) PURCHASE OPTION PRIOR TO END OF TERM. Provided no Default
or Event of Default shall have occurred and be continuing and provided
that the Election Notice referred to in SECTION 20.1(B) has not been
delivered, Lessee shall have the option, exercisable by giving the
Agent and Lessor no more than one hundred twenty (120) days and no less
than thirty (30) days written notice of Lessee's election to exercise
such option, to purchase all (but not less than all) of the Properties
on a Scheduled Interest Payment Date as identified in such written
notice, at a price equal to the Termination Value for such Properties
and all Rent then due and owing and all other amounts then due and
owing (by the Lessee or the Construction Agent) under this Lease or
under any other Operative Agreement (including
22
without limitation amounts, if any, described in clause FIRST of
SECTION 22.2) (which the parties do not intend to be a "bargain"
purchase price); and, upon receipt of such amount, Lessor shall
transfer to Lessee all Lessor's right, title and interest in and to
such Properties in accordance with SECTION 19.1 as of the Business Day
on which such purchase occurs; and the Expiration Date shall be deemed
to have occurred on such date.
(b) PURCHASE OR SALE OPTION AT END OF TERM. Not less than 120
days and no more than 180 days prior to the Expiration Date, Lessee may
give Lessor and Agent irrevocable written notice (the "Election
Notice") that Lessee is electing to exercise either (a) the option to
purchase all, but not less than all, of the Properties on the
Expiration Date (the "Purchase Option") or (b) the option to remarket
all of the Properties and cause a sale of all of the Properties
pursuant to the terms of SECTION 22.1 (the "Sale Option"), such sale to
occur on the Expiration Date. If Lessee does not give an Election
Notice indicating the Sale Option at least 120 days and not more than
180 days prior to the Expiration Date, then Lessee shall be deemed to
have elected the Purchase Option for the Expiration Date. Lessor shall
have no obligation to sell any Property unless all of the Properties
are sold on the Expiration Date. If Lessee shall (i) elect (or be
deemed to elect) to exercise the Purchase Option, or (ii) elect to
remarket all of the Properties pursuant to SECTION 22.1 and fail to
deliver the environmental report required by SECTION 10.2 at the time
specified in such Section, or (iii) elect to remarket all of the
Properties pursuant to SECTION 22.1 and fail to cause all of the
Properties to be sold in accordance with the terms of SECTION 22.1 on
the Expiration Date on which such a sale of all of the Properties is
required in connection with such election, then in each case, Lessee
shall pay to Lessor on the Expiration Date or Payment Date an amount
(the "Purchase Option Price") equal to the Termination Value for all
the Properties (which the parties do not intend to be a "bargain"
purchase) plus all Rent and other amounts then due and payable under
this Lease or under any other Operative Agreement (including without
limitation the amounts described in clause FIRST of SECTION 22.2), and,
upon receipt of such amount, Lessor shall transfer to Lessee all of
Lessor's right, title and interest in and to the Properties in
accordance with SECTION 19.1. Lessee may not elect the Sale Option, and
Lessor shall have no obligation to sell any Property pursuant to
SECTION 22.1, if a Lease Event of Default has occurred and is
continuing on the date of the Election Notice or the Sale Date.
20.2 ACCOUNTING CHANGES. Although neither Lessor, the Agent, NMS, nor
any Lender or Holder makes any representation or warranty with respect to the
Lessee's accounting treatment of this transaction, Lessee represents that a
material incentive for Lessee to enter into this Lease is the advice of the
Lessee's independent auditors that this Lease may be treated as an operating
lease for financial accounting purposes under the applicable rules and
interpretations of the Financial Accounting Standards Board and/or the
Securities Exchange Commission (the "Lease Accounting Rules") in effect as of
the date of this Lease. In the event that Lessee's independent auditors shall
determine that any subsequent change in the Lease Accounting Rules will preclude
the Lessee (or raise a substantial question as to whether the Lessee is
precluded) from continuing to account for this Lease as an operating lease with
substantially the same financial accounting benefits as before the change in
Lease Accounting Rules, then the Lessee shall so notify the Lessor and the Agent
in writing of such determination by its auditors; and Lessee may elect (by
delivery of irrevocable written notice of such election to the Lessor and the
Agent) to purchase all of the Properties or to cause all of the
23
Properties to be transferred to a third party transferee designated by Lessee
(such purchase or transfer to be consummated on a date (the "Accounting Change
Transfer Date") specified by Lessee in such notice and in any event within sixty
(60) days after the date of such notice). On the Accounting Change Transfer Date
(whether the Properties are to be purchased by Lessee or transferred to a third
party), Lessee shall pay to Lessor an amount equal to the Termination Value for
all the Properties (which the parties do not intend to be a "bargain" purchase)
plus all Rent and other amounts then due and payable under this Lease or under
any other Operative Agreement (including without limitation the amounts
described in clause FIRST of SECTION 22.2), and, upon receipt of such amount,
Lessor shall transfer to Lessee (or to the third party designated by Lessee) all
of Lessor's right, title and interest in and to the Properties in accordance
with SECTION 19.1 and the Expiration Date shall be deemed to have occurred on
the date of such transfer (without giving Lessee the right to remarket
Properties pursuant to Section 22.1).
ARTICLE XXI
[INTENTIONALLY LEFT BLANK.]
ARTICLE XXII
22.1 SALE PROCEDURE.
(a) During the Marketing Period, Lessee, on behalf of the
Lessor, shall obtain bids for the cash purchase of all of the
Properties in connection with a sale to one or more purchasers (other
than Lessee or any Subsidiary or Affiliate of Lessee) to be consummated
on the Expiration Date for the highest price available, shall notify
Lessor promptly of the name and address of each prospective purchaser
and the cash price which each prospective purchaser shall have offered
to pay for any Property and shall provide Lessor with such additional
information about the bids and the bid solicitation procedure as Lessor
may reasonably request from time to time. Lessor may reject any and all
bids and may assume sole responsibility for obtaining bids by giving
Lessee written notice to that effect; PROVIDED, HOWEVER, that
notwithstanding the foregoing, Lessor may not reject the highest bids
for the Properties submitted by the Lessee if (i) such bids, in the
aggregate, are greater than or equal to the sum of the Limited Recourse
Amount for all of the Properties, plus all reasonable costs and
expenses referred to in clause FIRST of SECTION 22.2 and represent bona
fide offers from one or more third party purchasers, and (ii) prior to
Lessor's acceptance of any such bid, Lessee has delivered to the Agent
cash collateral in an amount not less than the anticipated Deficiency
Balance (as defined in SECTION 22.1(B) below) as determined by the
Agent. If the price which a prospective purchaser or purchasers shall
have offered to pay for the Properties is less than the sum of the
Limited Recourse Amount plus all reasonable costs and expenses referred
to in clause FIRST of SECTION 22.2, Lessor may elect to retain the
Properties by giving Lessee prior written notice of Lessor's election
to retain the Properties, and upon receipt of such notice, Lessee shall
surrender the Properties to Lessor pursuant to SECTION 10.1. Unless
Lessor shall have elected to retain the Properties pursuant to the
preceding sentence, Lessee shall arrange for Lessor to sell the
Properties free and clear of the Lien of this Lease and any Lessor
Liens attributable to it, without recourse or warranty (of
24
title or otherwise), for cash on the last day of the Marketing Period
(such date being hereafter referred to as the "Sale Date") to the
purchaser or purchasers identified by Lessee or Lessor, as the case may
be; PROVIDED, HOWEVER, solely as to Lessor or the Trust Company, in its
individual capacity, any Lessor Lien shall not constitute a Lessor Lien
so long as Lessor or the Trust Company, in its individual capacity, is
diligently contesting such Lessor Lien by appropriate proceedings in
good faith; and PROVIDED FURTHER that Lessor shall have no obligation
to sell any Property if a Lease Event of Default has occurred and is
continuing on the Date of the Election Notice or the Sale Date. Lessee
shall surrender the Property so sold or subject to such documents to
each purchaser in the condition specified in SECTION 10.1. Lessee shall
not take or fail to take any action which would have the effect of
unreasonably discouraging bona fide third party bids for any Property.
Lessor shall have no obligation to sell any Property on the Sale Date
unless all of the Properties are sold (and Lessor has received full
payment therefor in cash in the amount required pursuant to this
SECTION 22.1) on the Sale Date. If all of the Properties are not either
(i) sold on the Sale Date in accordance with the terms of this SECTION
22.1, or (ii) retained by the Lessor pursuant to an affirmative
election made by the Lessor pursuant to the third sentence of this
SECTION 22.1(A), then the Lessee shall be obligated to pay the Lessor
on the Sale Date an amount equal to the Termination Value for all of
the Properties (plus all Rent and other amounts then due and payable
under this Lease and any other Operative Agreements) in accordance with
the terms of SECTION 20.2.
(b) If the Properties are sold on the Sale Date to one or more
third party purchasers in accordance with the terms of SECTION 22.1(A)
and the aggregate purchase price paid for the Properties minus the sum
of all costs and expenses referred to in clause FIRST of SECTION 22.2
is less than the sum of the aggregate Termination Values for all of the
Properties plus all Rent and other amounts then due and payable under
this Lease and under any other Operative Agreements (hereinafter such
difference shall be referred to as the "Deficiency Balance"), then the
Lessee hereby unconditionally promises to pay to the Lessor on the Sale
Date the lesser of (i) the Deficiency Balance, or (ii) the Maximum
Residual Guarantee Amount for all of the Properties. If the Properties
are retained by the Lessor pursuant to an affirmative election made by
the Lessor pursuant to the third sentence of SECTION 22.1(A), then the
Lessee hereby unconditionally promises to pay to the Lessor on the Sale
Date an amount equal to the Maximum Residual Guarantee Amount for all
of the Properties.
(c) In the event that the Properties are either sold to one or
more third party purchasers on the Sale Date or retained by the Lessor
in connection with an affirmative election made by the Lessor pursuant
to the third sentence of SECTION 22.1(A), then in either case on the
Sale Date the Lessee shall provide Lessor or such third party
purchasers with (i) all permits, certificates of occupancy,
governmental licenses and authorizations necessary to use and operate
such Property for its intended purposes, (ii) such easements, licenses,
rights-of-way and other rights and privileges in the nature of an
easement as are reasonably necessary or desirable in connection with
the use, repair, access to or maintenance of such Property for its
intended purpose or otherwise as the Lessor shall reasonably request,
and (iii) a services agreement covering such services as Lessor or such
third party purchaser may
25
request in order to use and operate a Property for its intended
purposes at such rates (not in excess of arm's-length fair market
rates) as shall be acceptable to Lessee and Lessor or such third party
purchaser. All assignments, licenses, easements, agreements and other
deliveries required by clauses (i) and (ii) of this paragraph (c) shall
be in form reasonably satisfactory to the Lessor or such third party
purchaser, as applicable, and shall be fully assignable (including both
primary assignments and assignments given in the nature of security)
without payment of any fee, cost or other charge.
22.2 APPLICATION OF PROCEEDS OF SALE. The Lessor shall apply the
proceeds of sale of any Property in the following order of priority:
(a) FIRST, to pay or to reimburse Lessor for the payment of
all reasonable costs and expenses incurred by Lessor in connection with
the sale;
(b) SECOND, so long as the Participation Agreement, the Credit
Agreement or the Trust Agreement is in effect and any Loan, Holder
Advance or any other amount is owing to the Lenders, the Holders or any
other Person under any Operative Agreement, to the Agent to be applied
pursuant to inter-creditor provisions between the Lenders and the
Holders contained in the Operative Agreements; and
(c) THIRD, to the Lessee.
22.3 INDEMNITY FOR EXCESSIVE WEAR. If the proceeds of the sale
described in SECTION 22.1 with respect to the Properties, less all expenses
incurred by Lessor in connection with such sale, shall be less than the Limited
Recourse Amount with respect to the Properties, and at the time of such sale it
shall have been reasonably determined (pursuant to the Appraisal Procedure) that
the Fair Market Sales Value of the Properties, shall have been impaired by
greater than expected wear and tear during the term of the Lease, Lessee shall
pay to Lessor within ten (10) days after receipt of Lessor's written statement
(i) the amount of such excess wear and tear determined by the Appraisal
Procedure or (ii) the amount of the Net Sale Proceeds Shortfall, whichever
amount is less.
22.4 APPRAISAL PROCEDURE. For determining the Fair Market Sales Value
of any Property or any other amount which may, pursuant to any provision of any
Operative Agreement, be determined by an appraisal procedure, Lessor and Lessee
shall use the following procedure (the "Appraisal Procedure"). Lessor and Lessee
shall endeavor to reach a mutual agreement as to such amount for a period of ten
(10) days from commencement of the Appraisal Procedure under the applicable
section of the Lease, and if they cannot agree within ten (10) days, then two
qualified appraisers, one chosen by Lessee and one chosen by Lessor, shall
mutually agree thereupon, but if either party shall fail to choose an appraiser
within twenty (20) days after notice from the other party of the selection of
its appraiser, then the appraisal by such appointed appraiser shall be binding
on Lessee and Lessor. If the two appraisers cannot agree within twenty (20) days
after both shall have been appointed, then a third appraiser shall be selected
by the two appraisers or, failing agreement as to such third appraiser within
(30) days after both shall have been appointed, by the American Arbitration
Association. The decisions of the three appraisers shall be given within twenty
(20) days of the appointment of the third appraiser and the decision of the
appraiser most different from the
26
average of the other two shall be discarded and such average shall be binding on
Lessor and Lessee; PROVIDED that if the highest appraisal and the lowest
appraisal are equidistant from the third appraisal, the third appraisal shall be
binding on Lessor and Lessee. The fees and expenses of the appraiser appointed
by Lessee shall be paid by Lessee; the fees and expenses of the appraiser
appointed by Lessor shall be paid by Lessor (such fees and expenses not being
indemnified pursuant to SECTION 13 of the Participation Agreement); and the fees
and expenses of the third appraiser shall be divided equally between Lessee and
Lessor.
22.5 CERTAIN OBLIGATIONS CONTINUE. During the Marketing Period, the
obligation of Lessee to pay Rent with respect to the Properties (including the
installment of Basic Rent due on the Expiration Date) shall continue
undiminished until payment in full to Lessor of the sale proceeds, if any, the
Maximum Residual Guarantee Amount, the amount due under SECTION 22.3, if any,
and all other amounts due to Lessor with respect to all Properties. Lessor shall
have the right, but shall be under no duty, to solicit bids, to inquire into the
efforts of Lessee to obtain bids or otherwise to take action in connection with
any such sale, other than as expressly provided in this ARTICLE XXII.
ARTICLE XXIII
23.1 HOLDING OVER. If Lessee shall for any reason remain in possession
of a Property after the expiration or earlier termination of this Lease as to
such Property (unless such Property is conveyed to Lessee), such possession
shall be as a tenancy at sufferance during which time Lessee shall continue to
pay Supplemental Rent that would be payable by Lessee hereunder were the Lease
then in full force and effect with respect to the Property and Lessee shall
continue to pay Basic Rent at 110% of the Basic Rent that would otherwise be due
and payable at such time. Such Basic Rent shall be payable from time to time
upon demand by Lessor and such additional 10% amount shall be applied by the
Lessor to the payment of the Loans pursuant to the Credit Agreement and the
Holder Advances pursuant to the Trust Agreement pro rata between the Loans and
the Holder Advances. During any period of tenancy at sufferance, Lessee shall,
subject to the first sentence of this paragraph, be obligated to perform and
observe all of the terms, covenants and conditions of this Lease, but shall have
no rights hereunder other than the right, to the extent given by law to tenants
at sufferance, to continue their occupancy and use of such Property. Nothing
contained in this ARTICLE XXIII shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease as to any Property (unless such Property is conveyed
to Lessee) and nothing contained herein shall be read or construed as preventing
Lessor from maintaining a suit for possession of such Property or exercising any
other remedy available to Lessor at law or in equity.
ARTICLE XXIV
24.1 RISK OF LOSS. During the Term, unless Lessee shall not be in
actual possession of the Property in question solely by reason of Lessor's
exercise of its remedies of dispossession under ARTICLE XVII, the risk of loss
or decrease in the enjoyment and beneficial use of such Property as a result of
the damage or destruction thereof by fire, the elements, casualties, thefts,
riots, wars or otherwise is assumed by Lessee, and Lessor shall in no event be
answerable or accountable therefor.
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ARTICLE XXV
25.1 ASSIGNMENT.
(a) Lessee may not assign, mortgage, pledge or encumber this
Lease or any of its rights or obligations hereunder in whole or in part
to any Person without the prior written consent of the Agent, the
Lessor and the Lenders, with such consent to be given or withheld in
the sole discretion of each such party.
(b) No such assignment or other relinquishment of possession
to any Property shall in any way discharge or diminish any of the
obligations of Lessee to Lessor hereunder and Lessee shall remain
directly and primarily liable under this Lease.
25.2 SUBLEASES.
(a) Except as set forth in this Section 25.2(a), Lessee may
not sublet any Property or portion thereof without first obtaining the
prior written consent of the Lessor and the Agent, which consent may be
given or withheld in the sole discretion of each such party.
(b) Lessee may, without the consent of Lessor or the Agent,
sublet a Property only if:
(i) Lessee remains fully liable for all obligations
(including without limitation all Rent and other obligations
with respect to such subleased Properties and any other
Properties) under this Lease, each Lease Supplement and the
other Operative Agreements;
(ii) Such sublease is in writing and is expressly
subject and subordinate to the rights of the Lessor, the
Agent, the Lenders and the Holders under this Lease, the
Security Agreement, each Mortgage Instrument and all other
Operative Agreements; and
(iii) Such sublease is on commercially reasonable
terms and at market rates, and has a term that does not extend
past the Expiration Date, and such Property is at all times
used for the purposes set forth in this paragraph and in the
definition of "Property."
(c) No sublease or other relinquishment of possession to any
Property shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder and Lessee shall remain directly and
primarily liable under this Lease as to the Property so sublet.
28
(d) Each insurance policy carried by Lessee pursuant to
ARTICLE XIV hereof shall be endorsed to name each sublessee under any
such sublease as an additional insured. Prior to the effectiveness of
any such sublease, Lessee shall deliver a copy thereof to the Lessor
and the Agent.
(e) Promptly but in any event within five (5) days following
the execution and delivery of any sublease permitted by this ARTICLE
XXV, Lessee shall notify Lessor and the Agent of the execution of such
sublease. As of the date of each Lease Supplement, Lessee shall lease
the respective Properties described in such Lease Supplement from
Lessor, and (without limiting the generality of SECTIONS 25.2(A) - (D))
any existing tenant respecting such Property shall automatically be
deemed to be a subtenant of Lessee and not a tenant of Lessor.
ARTICLE XXVI
26.1 NO WAIVER. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
upon a default hereunder, and no acceptance of full or partial payment of Rent
during the continuance of any such default, shall constitute a waiver of any
such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
ARTICLE XXVII
27.1 ACCEPTANCE OF SURRENDER. No surrender to Lessor of this Lease or
of all or any portion of any Property or of any part of any thereof or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by Lessor and the Agent, and no act by Lessor or the Agent or any
representative or agent of Lessor or the Agent, other than a written acceptance,
shall constitute an acceptance of any such surrender.
27.2 NO MERGER OF TITLE. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) any right, title or interest in any Property, (c) any
Notes, or (d) a beneficial interest in Lessor.
ARTICLE XXVIII
28.1 REPORTING COVENANTS. The Lessee covenants and agrees that, until
the obligations of the Lessee, the Construction Agent and the Guarantors under
the Operative Agreements have been paid and satisfied in full and the Operative
Agreements have been terminated in accordance with the terms thereof, unless the
Lessor and the Majority Lenders shall otherwise give their prior written consent
thereto:
29
(a) FINANCIAL STATEMENTS. The Lessee shall maintain, and cause
each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business
practices to permit preparation of consolidated and consolidating Fin-
ancial Statements in conformity with GAAP and each of the Financial
Statements described below shall be prepared from such system and
records. The Lessee shall deliver or cause to be delivered to the
Agent, each Lender, each Holder and (upon Lessor's request) the Lessor:
(i) QUARTERLY REPORTS. As soon as practicable, and in
any event within forty-five (45) days after the end of each
fiscal quarter in each Fiscal Year, the consolidated and
consolidating balance sheets of the Lessee and its
Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income,
shareholders' equity and cash flow of the Lessee and its
Subsidiaries for the period from the beginning of the then
current Fiscal Year to the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the financial forecast
for the current Fiscal Year delivered on the Initial Closing
Date or pursuant to SECTION 28.1(A)(V), as applicable,
certified by the chief financial officer of the Lessee as
fairly presenting the respective consolidated and
consolidating financial positions, as applicable, of the
Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods
indicated in accordance with GAAP, subject to normal year end
adjustments. Notwithstanding the foregoing, in the event (A)
the filing of the Lessee's Form 10-Q with the SEC with respect
to any fiscal quarter is delayed for any reason and Lessee has
provided the Lessor and the Agent with written notice of such
delay by the due date for the reports required for such
quarter under this CLAUSE (I) and (B) the Lessee shall deliver
either the required reports or interim good faith estimates of
the information required to be reported under this CLAUSE (I)
within fifty-five (55) days after the end of such fiscal
quarter, upon delivery of such required reports or interim
estimates within such period the Lessee shall be deemed to
have complied with the requirements of this CLAUSE (I) with
respect to such quarter PROVIDED THAT Lessee delivers the
required reporting substantially concurrently with Lessee's
filing of its Form 10-Q with the SEC.
(ii) ANNUAL REPORTS. As soon as practicable, and in
any event within ninety (90) days after the end of each Fiscal
Year, (A) the consolidated and consolidating balance sheets of
the Lessee and its Subsidiaries as at the end of such Fiscal
Year and the related consolidated and consolidating statements
of income, shareholders' equity and cash flow of the Lessee
and its Subsidiaries (the "Financial Statements"), setting
forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding
figures from the financial forecast for the current Fiscal
Year delivered on the Initial Closing Date or pursuant to
SECTION 28.1(A)(V), as applicable, and (B) a report on such
Financial Statements of the Lessee and its Subsidiaries of
Xxxxxx Xxxxxxxx LLP or other National Accounting Firm which
may be selected from time to time by the Lessee (or other
independent certified public accountants acceptable to the
Lessor and the Agent), which report shall be unqualified
30
and shall state that such Financial Statements fairly present
the consolidated and consolidating financial position of the
Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods
indicated in conformity with GAAP applied on a basis
consistent with prior years (except for changes with which
Xxxxxx Xxxxxxxx LLP or any such other independent certified
public accountants, if applicable, shall concur and which
shall have been disclosed in the notes to the Financial
Statements) and that the examination by such accountants in
connection with such Financial Statements has been made in
accordance with generally accepted auditing standards.
Notwithstanding the foregoing, in the event (1) the filing of
the Lessee's annual report with the SEC with respect to any
Fiscal Year is delayed for any reason and the Lessee has
provided the Lessor and the Agent with written notice of such
delay by the due date for the reports required for such Fiscal
Year under this CLAUSE (II) and (2) the Lessee shall deliver
either the required reports or interim good faith estimates of
the information required to be reported under this CLAUSE (II)
within one hundred (100) days after the end of each Fiscal
Year, upon delivery of such required reports or interim
estimates within such period the Lessee shall be deemed to
have complied with the requirements of this CLAUSE (II) with
respect to such Fiscal Year PROVIDED THAT the Lessee delivers
the required reporting substantially concurrently with
Lessee's filing of its annual report with the SEC.
(iii) OFFICER'S CERTIFICATE. Together with each
delivery of any Financial Statement pursuant to this SECTION
28.1(A), (A) an Officer's Certificate on behalf of the Lessee
substantially in the form of EXHIBIT C hereto stating that the
Person signatory thereto has reviewed the terms of the
Operative Agreements, and has made, or caused to be made under
his/her supervision, a review in reasonable detail of the
transactions and financial condition of the Lessee and its
Subsidiaries during the accounting period covered by such
Financial Statements, that such review has not disclosed the
existence during or at the end of such accounting period, and
that such Person does not have knowledge of the existence as
at the date of such Officer's Certificate, of any condition or
event which constitutes an Event of Default or Default, or, if
any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the
Lessee or any Subsidiary has taken, is taking and proposes to
take with respect thereto; and (B) a certificate (the
"Compliance Certificate"), signed by the Lessee's chief
financial officer, setting forth calculations (with such
specificity as the Lessor or the Agent may reasonably request)
for the period then ended which demonstrate compliance, when
applicable, with the provisions of SECTION 28.4.
(iv) ACCOUNTANT'S STATEMENT AND PRIVITY LETTER.
Together with each delivery of the Financial Statements
referred to in SECTION 28.1(A)(I), a written statement, in
form and substance satisfactory to the Lessor and the Agent,
of the firm of independent certified public accountants
giving the report thereon (A) stating that their audit
examination has included a review of the terms of this
Agreement as it relates to accounting matters, (B) stating
whether, in connection with their audit examination, any
condition or event which constitutes an Event of Default or
Default has come to
31
their attention, and if such condition or event has come to
their attention, specifying the nature and period of existence
thereof; PROVIDED THAT such accountants shall not be liable by
reason of any failure to obtain knowledge of any such
condition or event that would not be disclosed in the course
of their audit examination, and (C) stating that based on
their audit examination nothing has come to their attention
which causes them to believe that the information contained in
either or both of the certificates delivered therewith
pursuant to SECTION 28.1(A)(III) (as the information contained
in such certificates relates to financial covenants set forth
in SECTION 28.4) is not correct or that the matters set forth
in the Compliance Certificate delivered therewith pursuant to
SECTION 28.1(A)(III)(B) for the applicable Fiscal Year are not
stated in accordance with the terms of this Agreement. The
statement referred to above shall be accompanied by (1) a copy
of the management letter or any similar report delivered to
the Lessee or any Subsidiary or to any officer or employee
thereof by such accountants in connection with such Financial
Statements and (2) a letter in substantially the form of
EXHIBIT M attached to the Existing Aviation Sales Credit
Agreement and made a part hereof from the Lessee to such
accountants informing such accountants that the Agent, the
Lessor, the Holders and the Lenders are relying upon the
Financial Statements audited by such accountants and delivered
to the Agent the Lessor, the Lenders and the Holders pursuant
to SECTION 28.1(A)(II). The Agent or the Lessor may, with the
written consent of the Lessee (which consent shall not be
unreasonably withheld or delayed), communicate directly with
such accountants.
(v) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS.
As soon as practicable and in any event not later than thirty
(30) days prior to the commencement of each Fiscal Year for
each of the Fiscal Years ending in 1999 and thereafter, (A) a
quarterly budget for the Lessee and its Subsidiaries for such
Fiscal Year; (B) an annual business plan for the Lessee and
its Subsidiaries for such Fiscal Year, substantially in the
form of the business plans heretofore delivered to the Lessor,
the Agent, the Lenders or the Holders, accompanied by a report
reconciling all changes and departures from the business plans
delivered to the Lessor, the Agent, the Lenders or the Holders
for the preceding Fiscal Year; and (C) a plan and financial
forecast, prepared in accordance with the Lessee's normal
accounting procedures applied on a consistent basis, for each
succeeding Fiscal Year until the Maturity Date, including,
without limitation, (1) forecasted consolidated and
consolidating balance sheets and statements of cash flow of
the Lessee and its Subsidiaries for each Fiscal Year, (2)
forecasted consolidated and consolidating balance sheets,
statements of earnings and retained earnings, and cash flow of
the Lessee and its Subsidiaries for and as of the end of each
fiscal quarter of the immediately succeeding Fiscal Year and
for and as of the end of each such Fiscal Year thereafter, (3)
the amount of forecasted Capital Expenditures for such Fiscal
Year, and (4) forecasted compliance with the provisions of
SECTION 28.4.
(b) EVENTS OF DEFAULT. Promptly upon any of the chief
executive officer, chief operating officer, chief financial officer,
treasurer or controller of the Lessee obtaining knowledge (i) of any
condition or event which constitutes an Event of Default or Default, or
becoming aware that the Lessor, the Agent, any Lender or any Holder has
given any notice
32
with respect to a claimed Event of Default or Default, (ii) that any
Person has given any notice to the Lessee or taken any other action
with respect to a claimed default or event or condition of the type
referred to in SECTION 17.1(F), or (iii) of any condition or event
which has resulted, or is reasonably likely to result, in a Material
Adverse Effect, the Lessee shall deliver to the Agent and the Lessor an
Officer's Certificate specifying (A) the nature and period of existence
of any such claimed default, Event of Default, Default, condition or
event, (B) the notice given or action taken by such Person in
connection therewith, and (C) what action the Lessee has taken, is
taking and proposes to take with respect thereto.
(c) LAWSUITS.
(i) INSTITUTION OF PROCEEDINGS. Promptly upon the
Lessee obtaining knowledge of the institution of, or written
threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Lessee
or any Subsidiary, or any Asset not previously disclosed
pursuant to SECTION 7.3(D) of the Participation Agreement or
on Schedule I hereto, which action, suit, proceeding,
governmental investigation or arbitration exposes, or in the
case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same general
allegations or circumstances which expose, in the Lessee's
reasonable judgment, the Lessee and/or any Subsidiary to
liability in an amount aggregating $3,000,000 or more
(exclusive of claims covered by insurance policies of the
Lessee and its Subsidiaries unless the insurers of such claims
have disclaimed coverage or reserved the right to disclaim
coverage on such claims), the Lessee shall give written notice
thereof to the Lessor, the Agent, the Lenders and the Holders
and provide such other information as may be reasonably
available to enable each of the Lessor, the Agent, the Lenders
and the Holders and its counsel to evaluate such matters.
(ii) QUARTERLY REPORTS. As soon as practicable and in
any event within forty-five (45) days after the end of each
fiscal quarter of the Lessee, the Lessee shall provide a
written quarterly report to the Lessor, the Agent, the Lenders
and the Holders covering the institution of, or written threat
of, any action, suit, proceeding, governmental investigation
or arbitration (not previously reported) against or affecting
the Lessee or its Subsidiaries, or any Asset not previously
disclosed by the Lessee to the Lessor or the Agent, and shall
provide such other information at such time as may be
reasonably available to enable each of the Lessor, the Agent,
the Lenders and the Holders and its counsel to evaluate such
matters.
(iii) ADDITIONAL REPORTS UPON REQUEST. In addition to
the requirements set forth in CLAUSES (I) and (II) of this
SECTION 28.1(C), the Lessee, upon the request of the Lessor,
the Agent or the Majority Lenders, shall promptly give written
notice of the status of any action, suit, proceeding,
governmental investigation or arbitration covered by a report
delivered pursuant to either of such CLAUSES (I) or (II) and
provide such other information as may be reasonably available
to it to enable each of the Lessor, the Agent, the Lenders and
the Holders and their counsel to evaluate such matters.
33
(d) ERISA NOTICES. The Lessee shall deliver or cause to be
delivered the Lessor, the Agent, the Lenders and the Holders, at the
Lessee's expense, the following information and notices as soon as
reasonably possible, and in any event:
(i) within ten (10) Business Days after any Borrower
or any ERISA Affiliate knows or has reason to know that a
Termination Event has occurred, a written statement of the
chief financial officer of the Lessee describing such
Termination Event and the action, if any, which the Lessee or
any ERISA Affiliate has taken, is taking or proposes to take
with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after the Lessee
knows or has reason to know that an assessment of a prohibited
transaction excise tax under Section 4975 of the Code has
occurred, a statement of the chief financial officer of the
Lessee describing such transaction and the action which such
Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto;
(iii) within three (3) Business Days after the filing
of the same with the DOL, IRS or PBGC, copies of each annual
report (form 5500 series), including Schedule B thereto, filed
with respect to each Benefit Plan;
(iv) within three (3) Business Days after receipt by
the Lessee or any ERISA Affiliate of each actuarial report for
any Benefit Plan or Multiemployer Plan and each annual report
for any Multiemployer Plan, copies of each such report;
(v) within three (3) Business Days after the filing
of the same with the IRS, a copy of each funding waiver
request filed with respect to any Benefit Plan and all
communications received by the Lessee or any ERISA Affiliate
with respect to such request;
(vi) within three (3) Business Days after the
occurrence any material increase in the benefits of any
existing Benefit Plan or the establishment of any new Benefit
Plan or the commencement of contributions to any Benefit Plan
to which the Lessee or any ERISA Affiliate was not previously
contributing, notification of such increase, establishment or
commencement;
(vii) within three (3) Business Days after the Lessee
or any ERISA Affiliate receives notice of the PBGC's intention
to terminate a Benefit Plan or to have a trustee appointed to
administer a Benefit Plan, copies of each such notice;
34
(viii) within three (3) Business Days after the
Lessee or any ERISA Affiliate receives notice of any
unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code,
copies of each such notice and letter;
(ix) within three (3) Business Days after the Lessee
or any ERISA Affiliate receives notice from a Multiemployer
Plan regarding the imposition of withdrawal liability, copies
of each such notice;
(x) within three (3) Business Days after the Lessee
or any ERISA Affiliate fails to make a required installment or
any other required payment under Section 412 of the Code on or
before the due date for such installment or payment, a
notification of such failure; and
(xi) within three (3) Business Days after the Lessee
or any ERISA Affiliate knows (A) a Multiemployer Plan has been
terminated, (B) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan,
or (C) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan.
For purposes of this SECTION 28.1(D), the Lessee and each ERISA
Affiliate shall be deemed to know all facts known by the Administrator
of any Plan of which the Lessee or any ERISA Affiliate is the plan
sponsor.
(e) ENVIRONMENTAL NOTICES. Without limiting the generality of
any other provision of any Operative Agreement, and other than with
respect to environmental matters described in the Schedules to the
Existing Aviation Sales Credit Agreement, the Lessee shall notify the
Lessor, the Agent, each Holder and each Lender in writing, promptly
upon the Lessee's learning thereof, of any:
(i) notice or claim to the effect that the Lessee or
any Subsidiary is or may be liable to any Person as a result
of the Release or threatened Release of any Contaminant into
the environment which could reasonably result in an
expenditure by the Lessees and/or any Subsidiary over
$500,000;
(ii) notice that the Lessee or any Subsidiary is
subject to investigation by any Governmental Authority
evaluating whether any Remedial Action is needed to respond to
the Release or threatened Release of any Contaminant into the
environment which could reasonably result in an expenditure by
the Lessee and/or any Subsidiary over $500,000;
(iii) notice that any Asset is subject to an
Environmental Lien;
(iv) notice to the Lessee or any Subsidiary of any
material violation of any Environmental, Health or Safety
Requirement of Law;
35
(v) condition which might reasonably result in a
material violation of any Environmental, Health or Safety
Requirement of Law;
(vi) commencement or threat of any judicial or
administrative proceeding alleging a material violation by the
Lessee or any Subsidiary (or any predecessor in interest
thereof) of any Environmental, Health or Safety Requirement of
Law;
(vii) new or proposed changes to any existing
Environmental, Health or Safety Requirement of Law that could
result in a Material Adverse Effect;
(viii) any proposed acquisition of stock, assets,
real estate, or leasing of property, or any other action by
the Lessee or any Subsidiary that could subject the Borrower
or such Subsidiary to environmental, health or safety
Liabilities and Costs which could reasonably result in an
expenditure by the Borrowers and/or any Guarantor over
$500,000; or
(ix) any filing or report made by the Lessee or any
Subsidiary with any Governmental Authority with respect to any
unpermitted Release or threatened Release of a Contaminant
which could reasonably result in an expenditure by the Lessee
and/or any Subsidiary over $500,000.
(f) LABOR MATTERS. The Lessee shall notify the Lessor, the
Agent, each Holder and each Lender in writing, promptly upon the
Lessee's learning thereof, of (i) any material labor dispute to which
the Lessee or any Subsidiary may become a party, including, without
limitation, any strikes, lockouts or other grievances relating to the
Lessee's or any Subsidiary's plants and other facilities and (ii) any
liability relating to its employees incurred with respect to the
closing of any plant or other facility of the Lessee or any Subsidiary.
(g) SEC REPORTING. Promptly after the same are available, the
Lessee shall deliver to the Lessor, the Agent, each Holder and each
Lender copies of all Financial Statements, reports and notices,
registration statements and proxy statements or other filings, if any,
sent or made available generally by the Lessee and/or any Subsidiary to
its respective Securities holders or filed with the SEC or other
securities exchange.
(h) OTHER INFORMATION. Promptly upon receiving a request
therefor from the Lessor or the Agent, the Lessor shall prepare and
deliver to the Lessor, the Agent, each Holder and each Lender such
other information with respect to the Lessee and its Subsidiaries as
from time to time may be reasonably requested by the Lessor or the
Agent.
(i) YEAR 2000. The Lessee covenants and agrees that its and
its Subsidiaries' computer systems and equipment containing embedded
microchips (including systems and equipment supplied by others, with
which such systems interface or on which such Persons rely) will
function properly on December 31, 1999 and thereafter and the Lessee is
taking all necessary and appropriate action to reasonably ensure the
same.
36
(j) ACCOMMODATION OBLIGATIONS. Promptly upon becoming aware of
any actual or potential "Accommodation Obligation" (as defined in the
Existing Aviation Sales Credit Agreement) of the Lessor or any of its
Subsidiaries (other than "Permitted Existing Accommodation Obligations"
(as defined in the Existing Aviation Sales Credit Agreement)), the
Lessee shall deliver notice of such actual or potential Accommodation
Obligation to the Lessor and the Agent.
28.2 AFFIRMATIVE COVENANTS. Without limiting the generality of any
other provision of any Operative Agreement, until the obligations of the Lessee,
the Construction Agent and the Guarantors under the Operative Agreements have
been paid and satisfied in full and the Operative Agreements have been
terminated in accordance with the terms thereof, unless the Lessor and the
Majority Lenders and the Agent shall otherwise consent in writing.
(a) EXISTENCE, ETC. The Lessee shall at all times maintain,
and cause each of its Subsidiaries to maintain, its corporate existence
and preserve and keep, or cause to be preserved and kept, in full force
and effect their respective rights and franchises material to their
respective businesses.
(b) CORPORATE POWERS; CONDUCT OF BUSINESS. The Lessee shall,
and shall cause each of its Subsidiaries to, qualify and remain
qualified to do business and maintain its good standing in each
jurisdiction in which the nature of its business and the ownership of
its Assets requires it to be so qualified and in good standing.
(c) COMPLIANCE WITH LAWS, ETC. The Lessee shall, and shall
cause each of its Subsidiaries to, (i) comply with all Requirements of
Law and all restrictive covenants affecting it or its business, Assets,
or operations, and (ii) obtain as needed all Permits necessary for its
operations and maintain such Permits in good standing, except in the
case where noncompliance with either CLAUSE (I) or (II) above is not
reasonably likely to result in a Material Adverse Effect.
(d) PAYMENT OF TAXES AND CLAIMS. The Lessee shall, and shall
cause each of its Subsidiaries to, file all tax returns and reports as
and when required by the related Governmental Authority and pay (i) all
taxes, assessments and other governmental charges imposed upon it or on
any of its Assets or in respect of any of its franchises, business,
income or Assets before any penalty or interest accrues thereon and
(ii) all "Claims" (as defined in the Existing Aviation Sales Credit
Agreement) (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and
which by law have or may become a Lien (other than a Lien permitted by
SECTION 28.3(C)) upon any of such Assets of the Lessee or any
Subsidiary of the Lessee, prior to the time when any penalty or fine
shall be incurred with respect thereto; PROVIDED, HOWEVER, that no such
taxes, assessments and governmental charges referred to in CLAUSE (I)
above or "Claims" referred to in CLAUSE (II) above need be paid if
being contested in good faith by appropriate proceedings diligently
instituted and conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall
have been made therefor.
37
(e) INSURANCE. The Lessee and its Subsidiaries shall maintain
insurance with responsible insurance companies on such of its
properties, in such amounts and against such risks as is customarily
maintained by similar businesses operating in the same vicinity,
specifically to include fire and extended coverage insurance covering
all assets, business interruption insurance, workers compensation
insurance and liability insurance, all to be with such companies and in
such amounts as customary and usual with respect to insurance on its
Assets.
(f) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
The Lessee shall permit, and shall cause each of its Subsidiaries to
permit, any authorized representative(s) designated by either the
Lessor, the Agent, any Lender or any Holder to visit and inspect,
whether by access to the Lessee's or its Subsidiaries' MIS or
otherwise, any of the Assets, to examine, audit, check and make copies
of the Lessee's or its Subsidiaries' financial and accounting records,
books, journals, orders, receipts and any correspondence (other than
privileged correspondence with legal counsel) and other data relating
to their respective businesses or the transactions contemplated hereby
or referenced herein (including, without limitation, in connection with
environmental compliance, hazard or liability), and to discuss their
affairs, finances and accounts with their management personnel and
independent certified public accountants, all upon reasonable written
notice and at such reasonable times during normal business hours, as
often as may be reasonably requested. Each such visitation and
inspection (i) by or on behalf of the Lessor, any Lender or any Holder
(other than by the Agent) shall be at the Lessor's, such Lender's or
such Holder's expense and (ii) by or on behalf of the Agent shall be at
the Lessee's expense. The Lessee shall keep and maintain, and cause
each of its Subsidiaries to keep and maintain, in all material respects
on its MIS and otherwise proper books of record and account in which
entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its respective businesses and activities.
If an Event of Default has occurred and is continuing and an
Acceleration has occurred, the Lessee, upon the Lessor's or the Agent's
request in connection with efforts to enforce the rights and remedies
of the Agent, the Lenders or the Holders under the Operative
Agreements, shall turn over, and cause each of its Subsidiaries to turn
over, any such records requested by the Lessor or the Agent to the
Lessor or the Agent or their representatives; PROVIDED, HOWEVER, that
the Lessee may, in its discretion, retain copies of such records.
(g) ERISA COMPLIANCE. The Lessee shall, and shall cause each
of its Subsidiaries and its/their ERISA Affiliates to, establish,
maintain and operate all Plans to comply in all material respects with
the provisions of ERISA, the Code, all other applicable laws, and the
regulations and interpretations thereunder and the respective
requirements of the governing documents for such Plans.
(h) MAINTENANCE OF ASSETS. The Lessee shall, and shall cause
each of its Subsidiaries to, maintain in all material respects all of
its owned and leased Assets in good, safe and insurable condition and
repair, and not permit, commit or suffer any waste or abandonment of
any such Assets and from time to time shall make or cause to be made
all material repairs, renewal and replacements thereof, including,
without limitation, any capital
38
improvements which may be required; PROVIDED, HOWEVER, that, subject to
the terms of the Operative Agreements, such Assets may be altered or
renovated in the ordinary course of the Lessee's or a Subsidiary's
business.
28.3 NEGATIVE COVENANTS. Without limiting the generality of any other
provision of any Operative Agreement, the Lessee covenants and agrees that it
shall, and shall cause each of its Subsidiaries to, comply with the following
covenants until the obligations of the Lessee, the Construction Agent and the
Guarantors under the Operative Agreements have been paid and satisfied in full
and the Operative Agreements have been terminated in accordance with the terms
thereof, unless the Lessor and the Majority Lenders shall otherwise give prior
written consent:
(a) INDEBTEDNESS. The Lessee shall not, nor shall it permit
any of its Subsidiaries to, directly or indirectly create, incur,
assume or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness, except:
(i) Indebtedness under the Operative Documents (to
the extent the obligations of the Lessee thereunder are
determined to constitute Indebtedness); and
(ii) Indebtedness permitted under SECTION 10.01 of
the Existing Aviation Sales Credit Agreement.
(b) SALES OF ASSETS. The Lessee shall not, nor shall it permit
any of its Subsidiaries to, sell, assign, transfer, lease, convey or
otherwise dispose of any of its Assets, whether now owned or hereafter
acquired, or any income or profits therefrom, or enter into any
agreement to do so, except:
(i) any sale of such Assets specifically permitted
by the terms of the Operative Agreements;
(ii) the sale of such Assets permitted under SECTION
10.02 of the Existing Aviation Sales Credit Agreement; and
(iii) the sale of Assets (A) to any Guarantor, (B) to
any Person upon arm's-length terms in the ordinary course of
business, or (C) to any Person upon arm's-length terms to the
extent such sale does not materially alter the business of the
Lessor and its Subsidiaries or otherwise have a Material
Adverse Effect.
(c) LIENS. The Lessee shall not, nor shall it permit any of
its Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist any Lien on or with respect to any of their respective
Assets except:
(i) Permitted Liens; and
39
(ii) Liens permitted under SECTION 10.03 of the
Existing Aviation Sales Credit Agreement, subject, however, to
any other provisions on Liens set forth in the Operative
Agreements.
(d) INVESTMENTS. The Lessee shall not, nor shall it permit any
of its Subsidiaries to, directly or indirectly make or own any
Investments except Investments permitted under SECTION 10.04 of the
Existing Aviation Sales Credit Agreement.
(e) ACCOMMODATION OBLIGATIONS. The Lessee shall not, nor shall
it permit any of its Subsidiaries to, directly or indirectly create or
become or be liable with respect to any Accommodation Obligation,
except Accommodation Obligations permitted under SECTION 10.05 of the
Existing Aviation Sales Credit Agreement
(f) RESTRICTED JUNIOR PAYMENTS. The Lessee shall not, nor
shall it permit any of its Subsidiaries to, declare or make any
Restricted Junior Payment, except Restricted Junior Payments permitted
under SECTION 10.06 of the Existing Aviation Sales Credit Agreement.
(g) CONDUCT OF BUSINESS. The Lessee shall not, nor shall it
permit any of its Subsidiaries to, engage in any business other than
(i) the businesses engaged in by the Lessee or such Subsidiaries on the
date hereof, (ii) any business or activities which are substantially
similar, related, incidental or complimentary thereto, including,
without limitation, the business of repair of aircraft spare parts, and
(iii) the business of new parts distribution, parts manufacturing,
related engineering or inventory management services.
(h) TRANSACTIONS WITH AFFILIATES. The Lessee shall not, nor
shall it permit any of its Subsidiaries to, directly or indirectly
enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Lessee, on
terms that are less favorable to the Lessee or such Subsidiary than
those that might be obtained in an arm's length transaction at the time
from Persons who are not such an Affiliate. Nothing contained in this
SECTION 28.3(H) shall prohibit (i) any transaction expressly permitted
by SECTION 28.3(F); (ii) increases in compensation and benefits for
officers and employees of the Lessee or its Subsidiaries which are
customary in the industry; PROVIDED THAT no Event of Default or Default
has occurred and is continuing; (iii) payment of customary officers'
and directors' indemnities; or (iv) the sale or other transfer of
Inventory of the Lessee or a Subsidiary to a Guarantor; PROVIDED THAT
the sale or other transfer of such Inventory is otherwise permissible
under the terms of SECTION 10.02(E) of the Existing Aviation Sales
Credit Agreement.
(i) RESTRICTION ON FUNDAMENTAL CHANGES. The Lessee shall not
(i) enter into any merger or consolidation with respect to which it is
not the surviving corporation, (ii) permit any Foreign Subsidiary to
enter into any merger or consolidation, (iii) permit any of its
Subsidiaries to enter into any merger or consolidation or (iv)
repurchase or redeem any of its Capital Stock other than as required
with respect to the Permitted Equity Securities Options. The Lessee
shall not liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution), or convey, lease, sell, transfer or otherwise dispose of,
in one transaction or a series of trans-
40
actions, all or substantially all of its business or Assets, whether
now or hereafter acquired, except in connection with transactions
permitted under SECTION 28.3(B) or permit any of its Subsidiaries to
(a) liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution) or (b) convey, lease, sell, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or
substantially all of their respective businesses or Assets, whether now
or hereafter acquired, except in connection with transactions permitted
under SECTION 28.3(B), but in each case subject to any other provisions
of the Operative Agreements.
(j) SALES AND LEASEBACKS. Except for the Guaranty or any other
guaranties contained in the Operative Agreements, the Lessee shall not,
nor shall it permit any of its Subsidiaries to, become liable,
directly, by assumption or by Accommodation Obligation, with respect to
any lease, whether an Operating Lease or a Capital Lease, of any Assets
(whether real or personal property or mixed property) which it (a) sold
or transferred or is to sell or transfer to any other Person, or (b)
intends to use for substantially the same purposes as any other Asset
which has been or is to be sold or transferred by it to any other
Person, in either instance, in connection with such lease.
(k) ERISA. The Lessee shall not:
(i) engage, or permit any ERISA Affiliate to engage,
in any prohibited transaction described in Sections 406 of
ERISA or 4975 of the Internal Revenue Code for which a
statutory or class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding
deficiency (as defined in Sections 302 of ERISA and 412 of the
Internal Revenue Code), with respect to any Benefit Plan,
whether or not waived;
(iii) fail, or permit any ERISA Affiliate to fail, to
pay timely required contributions or annual installments due
with respect to any waived funding deficiency to any Benefit
Plan;
(iv) terminate, or permit any ERISA Affiliate to
terminate, any Benefit Plan which would result in any
liability of any Borrower or any ERISA Affiliate under Title
IV of ERISA;
(v) fail to make any contribution or payment to any
Multiemployer Plan which any Borrower or any ERISA Affiliate
may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto;
(vi) fail, or permit any ERISA Affiliate to fail, to
pay any required installment or any other payment required
under Section 412 of the Code on or before the due date for
such installment or other payment; or
41
(vii) amend, or permit any ERISA Affiliate to amend,
a Benefit Plan resulting in an increase in current liability
for the plan year such that the Borrower or any ERISA
Affiliate is required to provide security to such Plan under
Section 401(a)(29) of the Code;
if such event results, either singly or in the aggregate, after taking
into account all other such events and any liabilities associated
therewith, in an aggregate liability of the Lessee and its Subsidiaries
in excess of $500,000.
(l) ISSUANCE OF EQUITY SECURITIES. The Lessee shall not permit
any of its Subsidiaries to issue any equity Securities.
(m) ORGANIZATIONAL DOCUMENTS; FINANCE AFFILIATE INDEBTEDNESS.
The Lessee shall not, nor shall it permit any of its Subsidiaries to,
amend, modify or otherwise change any of the terms or provisions in any
of (a) its Organizational Documents as in effect on the Initial Closing
Date, except amendments to effect a change of name of the Lessee or a
Subsidiary, written notice of which change of name shall have provided
the Lessor and the Agent within sixty (60) days prior to the effective
date of any such name change, or (b) the agreements and instruments
evidencing the Finance Affiliate Indebtedness as in effect on the
Effective Date or (c) the agreements and instruments evidencing loans
and advances comprising part of the Leasing Affiliate Liabilities or
other loans and advances comprising intercompany loans.
(n) CHANGE OF CONTROL. The Lessee shall not permit any Change
of Control to occur.
28.4 FINANCIAL COVENANTS. Until the obligations of the Lessee, the
Construction Agent and the Guarantors under the Operative Agreements have been
paid and satisfied in full, and the Operative Agreements have been terminated in
accordance with the terms thereof, unless the Majority Lenders and the Agent
shall otherwise consent in writing, the Lessee will not, nor will it permit any
Subsidiary to:
(a) CONSOLIDATED TANGIBLE NET WORTH. Permit Consolidated
Tangible Net Worth to be less than (i) $78,779,000 as of September 30,
1998 and at the Initial Closing Date, and (ii) as at the last day of
each succeeding fiscal quarter of Lessee and until (but excluding the
last day of the next following fiscal quarter of Lessee, the sum of (A)
the amount of Consolidated Tangible Net Worth required to be maintained
pursuant to this Section as at the end of the immediately preceding
fiscal quarter, plus (B) 75% of Consolidated Net Income (with no
reduction for net losses during any period) for the fiscal quarter of
Lessee ending on such day (including within "Consolidated Net Income"
certain items otherwise excluded, as provided for in the definition of
"Consolidated Net Income"), plus (C) 100% of the aggregate amount of
all increases in the stated capital and additional paid-in capital
accounts of Lessee resulting from the issuance of equity securities or
other capital investments.
42
(b) CONSOLIDATED FUNDED DEBT-TO-EBITDA RATIO. Permit the
Consolidated Funded Debt-to-EBITDA Ratio as of the end of any
Four-Quarter Period to be greater than that set forth below opposite
each such period:
CONSOLIDATED FUNDED
DEBT-TO-EBITDA
FOUR-QUARTER PERIOD ENDING ON RATIO MUST BE LESS THAN
Any date from September 30, 1998 5.50 to 1.00
through June 30, 1999
September 30, 1999 through 5.00 to 1.00
June 30, 2000
September 30, 2000 or any date 4.50 to 1.00
thereafter
(c) CONSOLIDATED SENIOR DEBT-TO-EBITDA RATIO. Permit the ratio
of Consolidated Senior Debt to Consolidated EBITDA as of the end of any
Four-Quarter Period to be greater than that set forth below opposite
each such period:
CONSOLIDATED SENIOR
DEBT-TO-EBITDA
FOUR-QUARTER PERIOD ENDING ON RATIO MUST BE LESS THAN
Any date from September 30, 1998 3.50 to 1.00
through June 30, 2000
September 30, 2000 or any date 3.25 to 1.00
thereafter
(d) CONSOLIDATED FIXED CHARGE RATIO. Permit the Consolidated
Fixed Charge Ratio during any Four-Quarter Period to be less than 1.25
to 1.00.
(e) CAPITAL EXPENDITURES. Permit Capital Expenditures made by
the Lessee and its Subsidiaries during any Fiscal Year, beginning with
the Fiscal Year commencing on January 1, 1999, to exceed an aggregate
amount of $15,000,000.
ARTICLE XXIX
29.1 NOTICES. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing and delivered personally or
by a nationally recognized overnight courier service or mailed (by registered or
certified mail, return receipt requested, postage prepaid) or telecopied with a
confirming notice, addressed to the respective parties, as follows:
43
If to Lessee:
Aviation Sales Company
0000 XX 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
With a copy to:
Akerman, Senterfitt & Xxxxxx, P.A.
SunTrust International Center, 00xx Xxxxx
Xxx Xxxxxxxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
provided, however, that the failure to deliver such copy shall not
affect the validity of any notice otherwise delivered in accordance
with this section.
If to Lessor:
First Security Bank, National Association
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxx X. Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to the Agent:
(i) if by certified or registered mail:
NationsBank, National Association
X.X. Xxx 000000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx Xxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(ii) if by hand-delivery, courier service or telecopy:
44
NationsBank, National Association
Xxx Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
or such additional parties or other address as such party may hereafter
designate, and shall be effective upon receipt or refusal thereof.
ARTICLE XXX
30.1 MISCELLANEOUS. Anything contained in this Lease to the contrary
notwithstanding, all claims against and liabilities of Lessee or Lessor arising
from events commencing prior to the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination. If any provision of
this Lease shall be held to be unenforceable in any jurisdiction, such
unenforceability shall not affect the enforceability of any other provision of
this Lease and such jurisdiction or of such provision or of any other provision
hereof in any other jurisdiction.
30.2 AMENDMENTS AND MODIFICATIONS. Neither this Lease, any Lease
Supplement nor any provision hereof may be amended, waived, discharged or
terminated except by an instrument in writing in recordable form signed by
Lessor and Lessee.
30.3 SUCCESSORS AND ASSIGNS. All the terms and provisions of this Lease
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
30.4 HEADINGS AND TABLE OF CONTENTS. The headings and table of contents
in this Lease are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
30.5 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
30.6 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS, EXCEPT TO THE EXTENT THE LAWS OF THE
STATE IN WHICH A PROPERTY IS LOCATED MAY GOVERN MATTERS RELATING TO THE
PERFECTION, FORECLOSURE AND ENFORCEMENT OF LIENS ON SUCH PROPERTY.
30.7 CALCULATION OF RENT. All calculation of Rent payable hereunder
shall be computed based on the actual number of days elapsed over a year of 360
days.
30.8 MEMORANDA OF LEASE AND LEASE SUPPLEMENTS. This Lease shall not be
recorded; provided Lessor and Lessee shall promptly record a Memorandum of this
Lease and of the applicable
45
Lease Supplement (in substantially the form of EXHIBIT B attached hereto)
regarding each Property promptly after the acquisition thereof in the local
filing office with respect thereto in all cases at Lessee's cost and expense,
and as required under applicable law to sufficiently evidence this Lease or any
such Lease Supplement in the applicable real estate filing records.
30.9 ALLOCATIONS BETWEEN THE LENDERS AND THE HOLDERS. Notwithstanding
any other term or provision of this Lease to the contrary, the allocations of
the proceeds of the Properties and any and all other Rent and other amounts
received hereunder shall be subject to the inter-creditor provisions between the
Lenders and the Holders contained in the Operative Agreements (or as otherwise
agreed among the Lenders and the Holders from time to time).
30.10 LIMITATIONS ON RECOURSE. Notwithstanding anything contained in
this Lease to the contrary, Lessee agrees to look solely to Lessor's estate and
interest in the Properties for the collection of any judgment requiring the
payment of money by Lessor in the event of liability by Lessor, and no other
property or assets of Lessor or any shareholder, owner or partner (direct or
indirect) in or of Lessor, or any director, officer, employee, beneficiary,
Affiliate of any of the foregoing shall be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Lessee under or
with respect to this Lease, the relationship of Lessor and Lessee hereunder or
Lessee's use of the Properties or any other liability of Lessor to Lessee,
EXCEPT to the extent expressly provided in SECTION 10.2(A) or 14.11(B) of the
Participation Agreement. Nothing in this Section shall be interpreted so as to
limit the terms of SECTIONS 6.1 OR 6.2.
30.11 WAIVERS OF JURY TRIAL. THE LESSOR AND THE LESSEE IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS LEASE OR ANY COUNTERCLAIM THEREIN.
30.12 ORIGINAL LEASES. The single executed original of this Lease
marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature
page thereof and containing the receipt of the Agent therefor on or following
the signature page thereof shall be the original executed counterpart of this
Lease (the "Original Executed Counterpart"). To the extent that this Lease
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 may be created through the transfer or possession of any counterpart other
than the Original Executed Counterpart.
30.13 MORTGAGE GRANT AND REMEDIES. Without limiting any other remedies
set forth in this Lease, in the event that a court of competent jurisdiction
rules that this Lease constitutes a mortgage, deed of trust, security deed or
other secured financing, as is the intent of the parties, then the Lessor and
the Lessee agree that the Lessee hereby grants, bargains, sells, conveys,
mortgages, and grants a security interest in each Property to Lessor WITH POWER
OF SALE to secure the payment of all sums due and owing by Lessee or the
Construction Agent hereunder or under any other Operative Agreement, and that,
upon the occurrence of any Event of Default, the Lessor shall have the power and
authority, to the extent provided by law or the Operative Agreements, after
prior notice and lapse of such time as may be required by law, to foreclose its
interest (or cause such interest to be foreclosed) in all or any part of any
Property, to appoint or obtain the appointment of a receiver for
46
all or any part of the Property, and to exercise any other right or remedy that
may be available under applicable law to the holder of a mortgage, deed of
trust, security deed or other secured financing.
30.14 EXERCISE OF LESSOR RIGHTS. The Lessee hereby acknowledges and
agrees that the rights and powers of the Lessor under this Lease have been
collaterally assigned to the Agent pursuant to the terms of the Security
Agreement and the other Operative Agreements, and that the Lessor has encumbered
the Properties by various Mortgage Instruments made by the Lessor in favor of
the Agent, all as security for certain indebtedness and obligations described
therein of the Lessor to the Agent, the Lenders and the Holders under the
Operative Agreements. Lessee hereby consents to said assignment and said
Mortgage Instruments in favor of the Agent and further acknowledges and agrees
as follows:
(a) In the event that a court of competent jurisdiction rules
that this Lease constitutes a mortgage, deed of trust, security deed or
other secured financing as is the intent of the parties, then the
Lessor and the Lessee agree that the Lessor's collateral assignment of
this Lease to the Agent shall be deemed to be a collateral assignment
of such mortgage, deed of trust, security deed or other secured
financing, and the Agent as such collateral assignee shall be entitled
to exercise any and all rights and remedies of the Lessor set forth
herein during the existence of any Event of Default, including without
limitation the Lessor's rights to obtain a receiver, to obtain
possession of the Properties and the rents and revenues thereof, to
foreclose this Lease, to sell the Lessee's interest in the Properties,
and to exercise any other rights or remedies that may then be available
to the Lessor under applicable law on account of such Event of Default.
(b) Lessee's interest in the Properties is junior and
subordinate to the lien of any Mortgage Instruments made by the Lessor
in favor of the Agent against the respective Properties from time to
time in connection with the Operative Agreements; provided, however,
that for so long as no Event of Default shall have occurred and be
continuing, (i) the Agent shall not disturb Lessee's possession of the
Properties through any foreclosure or other remedial action against the
Properties under any Mortgage Instrument, and (ii) if Lessor's interest
in any Property shall be transferred to any Person other than the
Lessee as the result of the Agent's foreclosure or other remedial
action under any Mortgage Instrument, the Lessee shall (upon request of
the Agent) attorn to such transferee and recognize the transferee as
the Lessee's landlord under this Lease.
(c) During the existence of an Event of Default, the Agent as
holder of the Mortgage Instruments and as collateral assignee of this
Lease may exercise any and all rights and remedies that may then be
available under applicable law to the Agent in either or both
capacities, whether exercised singly, successively or concurrently.
Without limiting the generality of the foregoing, the Agent as
collateral assignee may enforce the Lessee's payment obligations under
this Lease (regardless of whether this Lease shall be deemed a
mortgage, deed of trust, security deed or other secured financing) even
if Lessee's interest and estate in any Property under this Lease shall
have been extinguished or forfeited under applicable law through the
foreclosure or other enforcement of any Mortgage Instrument.
47
IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.
WITNESS: AVIATION SALES COMPANY, as Lessee
By:_________________________ By:_____________________________________
Name:_______________________ Name:___________________________________
Title:__________________________________
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely
as Owner Trustee under the Aviation Sales
WITNESS: Trust 1998-1, as Lessor
By:_________________________ By:_____________________________________
Name:_______________________ Name:___________________________________
Title:__________________________________
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as of the date hereof
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent
By:_________________________
Name:_______________________
Title:______________________
48
[MAY BE MODIFIED, IF AGREEABLE TO LESSEE, LESSOR AND AGENT TO
CONFORM TO REQUIREMENTS OF LOCAL LAW WHERE PROPERTY IS LOCATED]
EXHIBIT A TO THE LEASE
LEASE SUPPLEMENT NO. __
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
[__________] between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee under the Aviation Sales Trust 1998-1,
as lessor (the "Lessor"), and AVIATION SALES COMPANY, as lessee (the "Lessee").
WHEREAS, the Lessor is the owner or will be the owner of the Property
described on SCHEDULE I hereto (the "Leased Property") and wishes to lease the
same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in APPENDIX A to the Participation Agreement,
dated as of December 17, 1998, among Aviation Sales Company, as Construction
Agent, Lessee, the Lessor, not individually, except as expressly stated therein,
but solely as Owner Trustee under the Aviation Sales Trust 1998-1, the Holders
party thereto, the Lenders party thereto, and NationsBank, National Association,
as Agent for the Lenders (as such agreement may be amended, modified,
supplemented or restated from time to time).
SECTION 2. THE PROPERTIES. Attached hereto as Schedule I is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a
legal description of the Land for such Project attached hereto as Schedule I-C.
Effective upon the execution and delivery of this Lease Supplement by the Lessor
and the Lessee, the Leased Property shall be subject to the terms and provisions
of the Lease.
SECTION 3. USE OF PROPERTY. At all times during the Term with respect
to each Property, Lessee will comply with all obligations under and (to the
extent no Event of Default has occurred and is continuing and provided that such
exercise will not impair the value of such Property) shall be permitted to
exercise all rights and remedies under, all operation and easement agreements
and related or similar agreements applicable to such Property.
SECTION 4. RATIFICATION. Except as specifically modified hereby, the
terms and provisions of the Lease and the Operative Agreements are hereby
ratified and confirmed and remain in full force and effect.
49
SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement 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 may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. AS TO MATTERS RELATING TO THE CREATION,
PERFECTION, AND FORECLOSURE OF LIENS, AND ENFORCEMENT OF RIGHTS AND REMEDIES
AGAINST THE LEASED PROPERTY, THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF ________________ WITHOUT
REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THIS LEASE
SUPPLEMENT SHALL IN ALL OTHER RESPECTS BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.
SECTION 7. MORTGAGE GRANT AND REMEDIES. Without limiting any other
remedies set forth in the Lease, in the event that a court of competent
jurisdiction rules that the Lease constitutes a mortgage, deed of trust,
security deed or other secured financing as is the intent of the parties, then
the Lessor and the Lessee agree that the Lessee hereby grants, bargains, sells,
conveys, mortgages, and grants a security interest in each Property to Lessor
WITH POWER OF SALE to secure the payment of all sums due and owing by Lessee or
the Construction Agent hereunder or under any other Operative Agreement, and
that, upon the occurrence of any Event of Default, the Lessor shall have the
power and authority, to the extent provided by law or the Operative Agreements,
after prior notice and lapse of such time as may be required by law, to
foreclose its interest (or cause such interest to be foreclosed) in all or any
part of any Property, to appoint or obtain the appointment of a receiver for all
or any part of the Property, and to exercise any other right or remedy that may
be available under applicable law to the holder of a mortgage, deed of trust,
security deed or other secured financing.
SECTION 8. EXERCISE OF LESSOR RIGHTS. The Lessee hereby acknowledges
and agrees that the rights and powers of the Lessor under the Lease have been
collaterally assigned to the Agent pursuant to the terms of the Security
Agreement and the other Operative Agreements, and that the Lessor has encumbered
the Properties by various Mortgage Instruments made by the Lessor in favor of
the Agent, all as security for certain indebtedness and obligations described
therein of the Lessor to the Agent, the Lenders and the Holders under the
Operative Agreements. Lessee hereby consents to said assignment and said
Mortgage Instruments in favor of the Agent and further acknowledges and agrees
as follows:
(i) In the event that a court of competent jurisdiction rules
that the Lease constitutes a mortgage, deed of trust, security deed or
other secured financing as is the intent of the parties, then the
Lessor and the Lessee agree that the Lessor's collateral assignment of
the Lease to the Agent shall be deemed to be a collateral assignment of
such mortgage, deed of
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trust, security deed or other secured financing, and the Agent as such
collateral assignee shall be entitled to exercise any and all rights
and remedies of the Lessor set forth herein during the existence of any
Event of Default, including without limitation the Lessor's rights to
obtain a receiver, to obtain possession of the Properties and the rents
and revenues thereof, to foreclose the Lease, to sell the Lessee's
interest in the Properties, and to exercise any other rights or
remedies that may then be available to the Lessor under applicable law
on account of such Event of Default.
(ii) Lessee's interest in the Properties is junior and
subordinate to the lien of any Mortgage Instruments made by the Lessor
in favor of the Agent against the respective Properties from time to
time in connection with the Operative Agreements; provided, however,
that for so long as no Lease Event of Default shall have occurred and
be continuing, (i) except to the extent permitted by SECTION 5.1 of the
Lease, the Agent shall not disturb Lessee's possession of the
Properties through any foreclosure or other remedial action against the
Properties under any Mortgage Instrument, and (ii) if Lessor's interest
in any Property shall be transferred to any Person other than the
Lessee as the result of the Agent's foreclosure or other remedial
action under any Mortgage Instrument, the Lessee shall (upon request of
the Agent) attorn to such transferee and recognize the transferee as
the Lessee's landlord under the Lease.
(iii) During the existence of an Event of Default, the Agent
as holder of the Mortgage Instruments and as collateral assignee of the
Lease may exercise any and all rights and remedies that may then be
available under applicable law to the Agent in either or both
capacities, whether exercised singly, successively or concurrently.
Without limiting the generality of the foregoing, the Agent as
collateral assignee may enforce the Lessee's payment obligations under
the Lease (regardless of whether the Lease shall be deemed a mortgage,
deed of trust, security deed or other secured financing) even if
Lessee's interest and estate in any Property under this Lease shall
have been extinguished or forfeited under applicable law through the
foreclosure or other enforcement of any Mortgage Instrument.
SECTION 9. COUNTERPART EXECUTION. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely as Owner
Trustee under the Aviation Sales Trust 1998-1,
as Lessor
By:_____________________________________
Name:___________________________________
Title:__________________________________
LESSEE:
AVIATION SALES COMPANY, as Lessee
By:_____________________________________
Name:___________________________________
Title:__________________________________
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Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as the date hereof.
NATIONSBANK, NATIONAL ASSOCIATION, as
Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
53
STATE OF ________________ )
) ss:
COUNTY OF ____________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County and State aforesaid of this ____ day of
___________, 199_, by _________ ______________, as __________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as Owner Trustee under the Aviation Sales Trust 1998-1, on behalf of
the Owner Trustee.
[Notarial Seal] ______________________________
Notary Public
My commission expires:__________
STATE OF ________________ )
) ss:
COUNTY OF ____________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County and State aforesaid this ____ day of
__________, 199_, by ____________ ________________, as _____________ of AVIATION
SALES COMPANY, a Florida corporation, on behalf of the corporation.
[Notarial Seal] ______________________________
Notary Public
My commission expires:__________
STATE OF _________________ )
) ss:
COUNTY OF _____________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County and State aforesaid this ____ day of
__________, 199_, by ____________ _________________, as _______________ of
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent.
[Notarial Seal] ______________________________
Notary Public
My commission expires:__________
54
