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EXHIBIT 10.37(a)
AIRCRAFT LEASE AGREEMENT
Dated as of
February 1, 1997
between
MIMI LEASING CORP.
as
Lessor
and
AIR SOUTH AIRLINES, INC.
as
Lessee
in respect of One Boeing Model 737-247 Aircraft
Serial Number 19607,
Federal Aviation Administration
Registration No. N4510W
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INDEX
SECTION PAGE
------- ----
1. INTERPRETATION ............................................................. 1
1.1 DEFINITIONS ........................................................... 1
1.2 CONSTRUCTION ......................................................... 14
2. REPRESENTATIONS AND WARRANTIES ............................................ 15
2.1 Lessee's Representations and Warranties .............................. 15
2.2 Lessee's Further Representations and Warranties ...................... 17
2.3 Survival.............................................................. 18
2.4 Lessor's Representations and Warranties .............................. 18
3. CONDITIONS PRECEDENT ...................................................... 20
3.1 Lessor's Conditions Precedent ........................................ 20
3.2 Further Conditions Precedent ......................................... 21
3.3 Waiver ............................................................... 22
4. COMMENCEMENT .............................................................. 22
4.1 Leasing .............................................................. 22
4.2 Acceptance and Delivery ...............................................22
4.3 Not Used ............................................................. 22
4.4 Licenses ............................................................. 22
5. PAYMENTS .................................................................. 23
5.1 Aircraft Deposit...................................................... 23
5.2 Rental Periods ....................................................... 23
5.3 Rent.................................................................. 23
5.4 Maintenance Reserves.................................................. 23
5.5 Payments ............................................................. 24
5.6 Not Used ............................................................. 24
5.7 Taxation.............................................................. 24
5.8 Information .......................................................... 24
5.9 Taxation of Indemnity Payments ....................................... 25
5.10 Payment Date; Default Interest ....................................... 25
5.11 Contest............................................................... 26
5.12 Absolute and Conditional Obligations of Lessee ....................... 26
5.13 Security ............................................................. 27
6. MANUFACTURER'S WARRANTIES ................................................. 28
6.1 Assignment ........................................................... 28
6.2 Proceeds ............................................................. 28
6.3 Parts ................................................................ 29
6.4 Agreement............................................................. 29
7. LESSOR'S COVENANTS ........................................................ 29
7.1 Quiet Enjoyment ...................................................... 29
7.2 Maintenance Contribution ............................................. 29
7.3 Lessor Obligations Following Expiration Date ......................... 30
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8. LESSEE'S COVENANTS ....................................................... 31
8.1 Duration ............................................................ 31
8.2 Information ......................................................... 31
8.3 Lawful and Safe Operation ........................................... 32
8.4 Other Payments....................................................... 34
8.5 Sub-Leasing ......................................................... 35
8.6 Inspection .......................................................... 35
8.7 Ownership; Property Interests; Related Matters ...................... 35
8.8 General ............................................................. 37
8.9 Records ............................................................. 39
8.10 Protection .......................................................... 39
8.11 Maintenance and Repair ...............................................40
8.12 Removal of Engines and Parts ........................................ 42
8.13 Installation of Engines and Parts ................................... 42
8.14 Non-Installed Engines and Parts ..................................... 43
8.15 Pooling of Engines and Parts ........................................ 44
8.16 Equipment Changes ................................................... 44
8.17 Title on an Equipment Change ........................................ 45
8.18 Third Party ......................................................... 45
9. INSURANCE ................................................................ 45
9.1 Insurance ........................................................... 45
9.2 Requirements ........................................................ 46
9.3 Change .............................................................. 46
9.4 Insurance Covenants ................................................. 46
9.5 Failure to Insure ................................................... 47
9.6 Continuing Indemnity ................................................ 48
9.7 Application of Insurance Proceeds ................................... 48
10. INDEMNITY ................................................................ 49
10.1 General ............................................................. 49
10.2 Duration ............................................................ 49
10.3 Subrogation ......................................................... 49
10.4 Notice and Cooperation .............................................. 50
11. EVENTS OF LOSS ........................................................... 50
11.1 Events of Loss ...................................................... 50
11.2 Requisition ......................................................... 51
12. RETURN OF AIRCRAFT........................................................ 52
12.1 Return .............................................................. 52
12.2 Final Inspection .................................................... 53
12.3 Non-Compliance ...................................................... 53
12.4 Not Used ............................................................ 54
12.5 Acknowledgement ..................................................... 53
12.6 Maintenance Program ................................................. 53
12.7 Not Used ............................................................ 54
12.8 Aircraft Storage .................................................... 54
13. DEFAULT .................................................................. 54
13.1 Events of Default ................................................... 54
13.2 Rights .............................................................. 57
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13.3 Deregistration ..................................................... 58
13.4 Default Payments ................................................... 58
14. ASSIGNMENT .............................................................. 59
15. ILLEGALITY .............................................................. 60
16. MISCELLANEOUS ........................................................... 60
16.1 Waivers, Remedies Cumulative ....................................... 60
16.2 Delegation ......................................................... 60
16.3 Appropriation ...................................................... 60
16.4 NOT USED............................................................ 61
16.5 NOT USED............................................................ 61
16.6 Set-off ............................................................ 61
16.7 Severability ....................................................... 61
16.8 Remedy ............................................................. 61
16.9 Expenses ........................................................... 61
16.10 Time of Essence ................................................... 62
16.11 Notices ........................................................... 62
16.12 Law and Jurisdiction .............................................. 62
16.13 Entire Agreement .................................................. 63
16.14 Indemnities ....................................................... 63
16.15 Counterparts ...................................................... 64
17. DISCLAIMERS AND WAIVERS ................................................. 64
17.1 Exclusion .......................................................... 64
17.2 Waiver ............................................................. 64
17.3 Confirmation ....................................................... 64
18. TRUE LEASE ...............................................................65
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THIS AIRCRAFT LEASE AGREEMENT (this "Agreement") is made as of the 1st
day of February, 1997 between MIMI LEASING CORP., a corporation incorporated
under the laws of the State of Iowa whose principal office is at 000 Xxxxxx
Xxxxx, Xxxxxxx, Xxxx 00000, its successors and assigns ("Lessor"), and AIR SOUTH
AIRLINES, INC., a company incorporated under the laws of the State of Delaware
whose chief executive office is at 0000 Xx. Xxxxxx Xxxxx, Xxxxxxxx, Xxxxx
Xxxxxxxx 00000 ("Lessee")
WHEREAS, Lessor and Lessee are parties to a certain Aircraft Lease No. 1
dated as of October 31, 1994, with Lease Schedule to Aircraft Lease No. 1 and
Delivery and Acceptance Certificate, dated November 8, 1994, attached, recorded
by the FAA on February 7, 1995, as conveyance number AA51144, as amended through
the date hereof (the "Original Lease") relative to the lease by Lessor to Lessee
of the Aircraft (as defined herein); and
WHEREAS, notwithstanding the terms of the Original Lease, Lessee has
requested that Lessor, at its expense, engage AAR Oklahoma of Oklahoma City,
Oklahoma and other third party vendors to improve and upgrade the Aircraft by
performing a certain mutually agreed upon work scope (the "Work") in respect of
the Aircraft; and
WHEREAS, subject to the condition that Lessee would enter into a new
lease for the Aircraft, Lessor agreed to engage such parties to perform the Work
in respect of the Aircraft; and
WHEREAS, Lessor and Lessee now desire to enter into this Agreement to
satisfy such condition.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements of the parties herein set forth, Lessor and Lessee agree as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the following terms have the meanings set forth below:
ACCEPTANCE LOCATION Oklahoma City, Oklahoma
AGREED MAINTENANCE
PERFORMER Lessee (up to and including B Check) or any
FAA-certified maintenance/ overhaul facility (for C
Check and higher) or any other person agreed to from
time to time in writing by
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Lessor (such agreement not to be
unreasonably withheld).
AGREED MAINTENANCE Lessee's FAA-approved Continuous
PROGRAM Airworthiness Maintenance Program and
General Maintenance Manual, as amended from
time to time with the prior written
agreement of Lessor (such agreement not to
be unreasonably withheld); provided, that
such agreement of Lessor shall not be
required with respect to amendments to the
Agreed Maintenance Program which are
required by law, including any rule,
regulation, order or directive of the FAA or
other Government Entity having jurisdiction
over the maintenance and operation of the
Aircraft.
AGREED VALUE Has the meaning specified in Letter
Agreement No. 1.
AIR AUTHORITY The FAA.
AIRCRAFT The aircraft described in Part 1 of Schedule
1 (which term includes, where the context
permits, a separate reference to all
Engines, Parts and Aircraft Documents).
AIRCRAFT DEPOSIT The amount payable pursuant to Section 5.1.
AIRCRAFT DOCUMENTS The documents, data and records identified
in Part 2 of Schedule 1 (all of which are
presently in the possession of Lessee) and
all additions, renewals, revisions and
replacements from time to time made in
accordance with this Agreement.
AIRFRAME The Aircraft, excluding the Engines and
Aircraft Documents.
APU The auxiliary power unit installed on the
Aircraft on the Delivery Date and any
replacement auxiliary power unit installed
in accordance with this Agreement.
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BANKS Such financial institution(s) which from
time to time finance(s) the Aircraft for
Lessor and/or for whose benefit security
over, or rights relating to, the Aircraft
and/or this Agreement is granted by Lessor.
BOEING The Boeing Company, a Delaware corporation
with its principal office in Seattle,
Washington.
BUSINESS DAY A day (other than a Saturday or Sunday or a
legal holiday) on which business of the
nature required by this Agreement is carried
out in the States of Iowa and South Carolina
or where used in relation to payments on
which banks are open for banking business in
Dubuque, Iowa and Columbia, South Carolina.
CERTIFICATEDR Any corporation (except the United States
CARRIER Government) domiciled in the United States
of America and holding a Certificate of
Public Convenience and Necessity issued
under 49 U.S.C. Section 41102 by the
Department of Transportation or any
predecessor or successor agency thereto and
an Air Carrier Certificate issued by the FAA
under 49 U.S.C. Section 44705, or, in the
event such Certificates shall no longer be
issued, any corporation (except the United
States Government) domiciled in the United
States of America and legally engaged in the
business of transporting for hire passengers
or cargo by air predominantly to, from or
between points within the United States of
America, and, in either event, operating
commercial jet aircraft, which also is
certificated so as to fall within the
purview of Section 1110 of Title 11 of the
United States Code or any similar statute.
CIVIL RESERVE AIR The Civil Reserve Air Fleet Program
FLEET PROGRAM currently administered by the United States
Air Force Air Mobility
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Command pursuant to Sections 951 et seq. of
Title 10 of the United States Code, or any
substantially similar program.
COLD SECTION The completion of the following tasks with
REFURBISHMENT respect the an Engine: completely unstack
both high and low compressors and accomplish
complete visual inspection; de-blade disks
as necessary; accomplish visual inspections
of all disks; measure to assure all snap
diameters on disks are within limits;
inspect blades for proper chord dimensions
and cracking; repair or replace blades below
minimums; inspect and repair stators as
necessary; blade up disks using new lock
plates; assemble compressor rotors; balance
both rotors; and install rotors in such
Engine.
CYCLE One take-off and landing of the Aircraft.
DAMAGE NOTIFICATION Has the meaning set forth in Letter
THRESHOLD Agreement No. 1.
DEFAULT Any Event of Default and any event or
condition which with the giving of notice or
lapse of time would constitute an Event of
Default.
DELIVERY DATE The date hereof.
DELIVERY LOCATION Oklahoma City, Oklahoma.
DOLLARS AND $ The lawful currency of the United States of
America.
ENGINE Whether or not installed on the Aircraft:
(a) each engine of the manufacture
and model specified in Part 1 of
Schedule 1 which Lessor
constructively delivers to
Lessee with the Aircraft on the
Delivery Date, such
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engines being described as to
serial numbers on the
certificate of acceptance to be
executed by Lessee upon delivery
of the Aircraft; or
(b) any engine which has replaced
that engine, title to which has
passed to Lessor in accordance
with this Agreement;
and in each case includes all
modules and Parts from time to
time belonging to or installed
in that engine but excludes any
properly replaced engine, title to
which has passed to Lessee
pursuant to this Agreement.
EVENT OF DEFAULT An event or condition specified in Section
13.1.
EVENT OF LOSS With respect to the Aircraft, Airframe or
any Engine, any of the following events:
(a) the actual or constructive total
loss (including any damage which
results in an insurance
settlement on the basis of a
total loss, or requisition for
use or hire which results in an
insurance settlement on the
basis of a total loss); or
(b) it being destroyed, damaged
beyond repair or permanently
rendered unfit for normal use
for any reason whatsoever; or
(c) the requisition of title, or
other compulsory acquisition,
capture, seizure, deprivation,
confiscation or detention for
any reason by the government of
the State of Registration or
other competent authority
(whether de jure or de facto)
for a period in excess of 60
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days or such shorter period
ending on the date which an
insurance settlement on the
basis of total loss shall occur,
but excluding requisition for
use or hire not involving
requisition of title; or
(d) the hijacking, theft,
condemnation, confiscation,
seizure or requisition for use
or hire for a period in excess
of 60 days, or such shorter
period ending on the date on
which an insurance settlement on
the basis of total loss shall
occur.
An Event of Loss with respect to the
Aircraft shall be deemed to have occurred if
an Event of Loss has occurred with respect
to the Airframe.
EXCUSABLE DELAY With respect to delivery of the Aircraft,
delay or non-performance due to or arising
out of acts of God or public enemy, civil
war, insurrection or riot, fire, flood,
explosion, earthquake, accident, epidemic,
quarantine restriction, any act of
government, governmental priority,
allocation, regulation or order affecting
directly or indirectly, the Aircraft, any
vendor, Lessor or any materials or
facilities which are necessary for the
delivery of the Aircraft in accordance with,
and in the condition required by this
Agreement, strike or labor dispute causing
cessation, slowdown or interruption of work
which are necessary for the delivery of the
Aircraft in accordance with, and in the
condition required by this Agreement,
inability after due and timely diligence to
procure equipment, data or materials which
are necessary for the delivery of the
Aircraft in accordance with, and
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in the condition required by this Agreement
from manufacturers, suppliers, any existing
owner, seller or lessee in a timely manner,
damage to the Aircraft, destruction or loss
of the Aircraft, or any other cause to the
extent that such cause is beyond the control
of Lessor.
EXPIRATION DATE Subject to Section 12.l(b), the day
preceding the numerically corresponding day
36 months after the Delivery Date or, if
earlier, the date on which:
(a) the Aircraft has been redelivered
in accordance with this Agreement;
or
(b) Lessor receives the Agreed Value
following an Event of Loss
involving the Airframe.
FAA The Federal Aviation Administration of the
United States of America and any successor
agency thereof.
FEDERAL AVIATION ACT 49 U.S.C. Subtitle VII, as amended, or any
similar legislation of the United States of
America enacted in substitution or
replacement thereof.
FINANCING STATEMENTS Uniform Commercial Code Financing Statements
in respect of this Agreement and the
collateral described therein prepared in a
form acceptable for filing with the
applicable Government Entities in the
Habitual Base, the State in which the chief
executive office (as that term is defined in
Article 9 of the Uniform Commercial Code as
in effect in the State of South Carolina)
and such other jurisdiction as Lessor shall
reasonably require.
FLIGHT HOUR Each hour or part thereof (rounded to one
decimal place) elapsing from the moment the
wheels of the Aircraft leave the ground on
take
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off until the wheels of the Aircraft next
touch the ground.
GOVERNING LAW The laws of the State of Iowa.
GOVERNMENT ENTITY Any of the following:
(a) any national government, state
government, political subdivision
of either thereof, or local
jurisdiction therein;
(b) any instrumentality, board,
commission, court or agency of
any thereof, however
constituted; and
(c) any association, organization,
or institution of which any of
the above is a member or to
whose jurisdiction any thereof
is subject or in whose
activities any of the above is a
participant.
HABITUAL BASE The State of South Carolina, or, subject to
the prior written consent of Lessor, any
other state, country or countries in which
the Aircraft is for the time being
habitually based.
HOT SECTION The complete visual inspection and repair as
REFURBISHMENT necessary of the combustion section of an
Engine. In conductine such inspection and
repair, the engine shop must completely
unstack the high pressure turbine and
accomplish complete visual inspection;
de-blade disks as necessary; accomplish
visual inspections of ail disks; measure to
assure all snap diameters on disks are
within limits; inspect blades for proper
chord dimensions and cracking; repair or
replace blades below minimums; inspect and
repair stators as necessary; blade up disks
using new lock plates; assemble compressor
rotors, balance both
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rotors; and install rotors in such Engine.
INDEMNITEES Each of Lessor and Banks including any of
their respective successors and assigns,
shareholders, subsidiaries, affiliates,
partners, contractors, directors, officers,
servants, agents and employees.
LANDING GEAR The landing gear assembly of the Aircraft
excluding any rotable components.
LEASE Means this agreement as is may be amended
from time to time in accordance with its
terms.
LESSOR LIEN Any of the following:
(a) any security interest whatsoever
from time to time created by or
through Lessor or its affiliates
in connection with the financing
of the Aircraft;
(b) any other security interest in
respect of the Aircraft which
results from acts or omissions of
or claims against Lessor or any
affiliate of Lessor not related to
the transactions contemplated by
or permitted under this Agreement;
(c) claims against Lessor or any
affiliate arising out of the
voluntary transfers of all or any
part of its interest in the
Aircraft, other than a transfer
pursuant to Sections 11 and 13
hereof; and
(d) liens in respect of the Aircraft
for Lessor Taxes.
LESSOR TAXES Taxes:
(a) imposed as a result of activities
of Lessor or any affiliate in the
jurisdiction
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imposing the liability unrelated to
Lessor's (or an affiliate's)
dealings with Lessee with respect
to the Aircraft or to the
transactions contemplated by this
Agreement or the operation of the
Aircraft by Lessee; or
(b) imposed on or measured by the gross
revenues or net income, profits,
capital, franchises, net worth or
gains of Lessor or an affiliate by
any Government Entity; or
(c) imposed with respect to (i) any
period prior to the Delivery Date,
(ii) any event occurring prior to
the Delivery Date (other than the
execution of this Agreement), or
(iii) any period commencing or
event occurring after the
Expiration Date; or
(d) which are penalties, surcharges,
fines or interest (i) which relate
to Lessor Taxes or (ii) which are
imposed as a direct result of (A)
the failure of Lessor to timely and
properly file a tax return or to
pay any Taxes which are required to
be filed or paid by Lessor; or (B)
the failure by Lessor to timely and
properly furnish to Lessee any
information, document or signature
required by Lessee in order for
Lessee to timely and properly file
a tax return or to pay any Taxes on
behalf of Lessor which Lessee is
obligated to do hereunder; or
(e) imposed on Lessor or an affiliate
as a direct result of an
assignment or disposition by
Lessor of the Aircraft, an Engine,
or any
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part of either thereof, any
interest in or with respect to the
Aircraft, an Engine or any part of
either thereof, or any interest in
or with respect to this Agreement
or the Rent; or
(f) imposed on, resulting from, or
which would not have occurred but
for a Lessor Lien; or
(g) imposed against a transferee of
Lessor (or any subsequent
transferee) to the extent of the
excess of such Taxes over the
amount of such Taxes which would
have been imposed had there not
been a transfer by Lessor of any
interest of Lessor in the
Aircraft, an Engine or the Lease;
or
(h) which arise out of or are caused
by (x) the gross negligence, fraud
or willful misconduct of Lessor or
any affiliate thereof or (y) the
breach or inaccuracy of the repre-
sentation of Lessor contained in
Section 2.4(a); or
(i) imposed by section 4975 of the
Internal Revenue Code of 1986 (or
any successor provision thereto);
or
(j) which are United States with-
holding taxes imposed on payments
to a foreign person.
LETTER AGREEMENT
NO. 1 Letter Agreement of even date herewith
between Lessor and Lessee in respect of the
Aircraft, the terms of which constitute an
integral part of this Agreement.
LETTER AGREEMENT
NO. 2 Letter Agreement of even date herewith
between Lessor and Lessee in respect of the
Aircraft, the
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terms of which, subject to the conditions
set forth therein, constitute an integral
part of this Agreement.
LIEN Any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set off
or any agreement or arrangement having the
effect of creating a security interest other
than a Permitted Lien, or any agreement to
create the foregoing other than a Permitted
Lien.
MAINTENANCE RESERVES All amounts payable under section 5.4.
MAJOR CHECKS Any C-Check, multiple C-Check, or heavy
maintenance visit or segment thereof
suggested for commercial aircraft of the
same model as the Aircraft by its
manufacturer (however denominated) as set
out in the Agreed Maintenance Program.
MANUFACTURER Boeing.
MINIMUM LIABILITY
COVERAGE Has the meaning set forth in Letter
Agreement No. 1.
NEW EXPIRATION DATE Has the meaning set forth in Section
12.1(b).
OTHER AGREEMENTS Any agreement (other than this agreement)
made or to be made between Lessor (or an
affiliate or subsidiary of Lessor) and
lessee (or an affiliate or Subsidiary of
Lessee).
PART Whether or not installed on the Aircraft:
(a) any component, furnishing or
equipment (other than a complete
Engine) furnished with the
Aircraft on the Delivery Date; and
(b) any other component, furnishing or
equipment (other
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than a complete engine) title to
which has passed to Lessor
pursuant to this Agreement;
but excludes any such items, title to which
has passed to Lessee pursuant to this
Agreement.
PERMITTED LIEN Has the meaning specified in Section 8.7(e)
hereof.
PERSON Any individual person, corporation,
partnership, limited liability company or
partnership, firm, joint stock company,
joint venture, trust, estate, unincorporated
organization, association, Government
Entity, or organization or association of
which any of the above is a member or a
participant.
PRIME RATE The rate of interest most recently announced
by Mercantile Bank of Dubuque, Iowa, as its
prime rate, as in effect from time to time.
REDELIVERY LOCATION Lessee's principal maintenance facility, or
such other location within the continental
United States, as the parties may agree.
RENT All amounts payable pursuant to section 5.3.
RENTAL PERIOD Each calendar month (or portion
thereof) in accordance with section 5.2.
RENT DATE The Delivery Date and the first day of
each calendar month thereafter.
STAGE 3 REQUIREMENTS Has the meaning specified in Section 5.12(c)
hereof.
STATE OF INCORPORATION The State of Delaware.
STATE OF REGISTRATION The United States of America.
SUBSIDIARY (a) in relation to any reference to
financial statements, any company
whose accounts are consolidated
with the accounts
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of Lessee in accordance with
United States accounting
principles generally accepted
under accounting standards in the
United States; and
(b) for any other purpose an entity
from time to time:
(i) of which another has
direct or indirect
control or owns directly
or indirectly more than
fifty (50) percent of
the voting share
capital; or
(ii) which is a direct or
indirect subsidiary of
another under the laws
of the jurisdiction of
its incorporation.
TAXES Taxes, duties and the like of all kinds and
any other amount corresponding to any
taxation, together with any penalties,
fines, surcharge or interest thereon, which
are imposed by any Government Entity or
other competent authority having power to
collect public charges.
TERM The period commencing on February 1, 1997
and ending on the Expiration Date.
WORK Has the meaning specified in the recitals
and more particularly described in a certain
letter agreement dated October 28, 1996
between Lessor and Lessee.
1.2 CONSTRUCTION
(a) In this Agreement, unless a contrary intention is
expressly stated, a reference to:
(i) each of "Lessor" or "Lessee" or any other person
includes without prejudice to the provisions of this Agreement any successor in
title to such Person and any permitted assignee;
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(ii) words importing the plural shall include the
singular and vice versa;
(iii) any document shall include that document as amended,
modified, novated or supplemented;
(iv) a law [A] includes any statute, decree,
constitution, regulation, order, judgment or directive of any Government
Entity; [B] includes any treaty, pact, compact or other agreement to
which any Government Entity is a signatory or party; [C] includes any
judicial or administrative interpretation or application thereof and (4)
is a reference to that provision as amended, substituted or re-enacted;
(v) a Section or a Schedule is a reference to a section
of or a schedule to this Agreement; and
(b) The headings in this Agreement are for convenience only
and shall not be considered part of any Section for purposes of construing this
Agreement.
2. REPRESENTATIONS AND WARRANTIES
2.1 LESSEE'S REPRESENTATIONS AND WARRANTIES: Lessee represents and
warrants to Lessor that:
(a) STATUS. Lessee is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Incorporation
and has the corporate power to own its assets and carry on its business as it is
being conducted and is the holder of all necessary licenses required in
connection therewith and with the use and operation of the Aircraft;
(b) POWER AND AUTHORITY. Lessee has the corporate power to
enter into and perform, and has taken all necessary corporate action to
authorize the entry into, performance and delivery of, this Agreement and the
transactions contemplated by this Agreement;
(c) LEGAL VALIDITY. This Agreement constitutes Lessee's legal,
valid and binding obligation, enforceable against Lessee in accordance with its
terms;
(d) NO CONFLICTS, ETC. The entry into and performance by Lessee
of, and the transactions contemplated by, this Agreement do not and will not:
(i) conflict with any laws binding on Lessee; or
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(ii) conflict with any provisions of the organizational
documents of Lessee, or
(iii) conflict with or result in default under any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, bank loan or credit agreement or other agreement which
is binding upon Lessee or any of its assets nor result in creation of
any Lien over any of its assets;
(e) AUTHORIZATIONS. All authorizations, consents, registrations
and notifications required in connection with the entry into, performance,
validity, and enforceability of, this Agreement and the transactions
contemplated by this Agreement, have been (or will on or before the Delivery
Date have been) obtained by Lessee or effected (as appropriate) and are (or will
on their being obtained or effected be) in full force and effect;
(f) NO IMMUNITY.
(i) Lessee is subject to civil U.S. commercial law with
respect to its obligations under this Agreement; and
(ii) neither Lessee nor any of its assets is entitled to
any right of immunity and the entry into and performance of this
Agreement by Lessee constitute private and commercial acts;
(g) FINANCIAL STATEMENTS; ABSENCE OF CHANGES.
(i) The audited financial statements of Lessee most
recently delivered to Lessor:
[A] have been prepared in accordance with United
States generally accepted accounting principles applied
consistently with the past practices of Lessee; and
[B] fairly present the consolidated
financial condition of Lessee as at the date thereof; and
(ii) There has been no material adverse change in the
financial condition of Lessee since the date of the financial statements
most recently delivered to Lessor;
(h) CHIEF EXECUTIVE OFFICE. Lessee's chief executive
office (as that term is defined in Article 9 of the Uniform Commercial Code as
in effect in the State of South Carolina) is located at 0000 Xx. Xxxxxx Xxxxx,
0xx Xxxxx, Xxxxxxxx, Xxxxx Xxxxxxxx 00000.
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(i) CERTIFICATED AIR CARRIER. Lessee is a Certificated Air
Carrier and Lessor, as lessor of the Aircraft to Lessee, is entitled to the
benefits of Section 1110 of Title 11 of the United States Code with respect to
the Aircraft; and
(j) CITIZEN OF THE UNITED STATES. Lessee is a "citizen of the
United States" as defined in 49 U.S.C. section 40102(a)(15) of the Federal
Aviation Act.
2.2 LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES: Lessee further
represents and warrants to Lessor that:
(a) NO DEFAULT. NO Default has occurred and is continuing or
might result from the entry into or performance of this Agreement.
(b) REGISTRATION. Except for the filing of this Agreement with
the FAA and the Financing Statements and related documents with the Secretary of
State of South Carolina, it is not necessary to make any other filing or
recordation in order to ensure the validity, effectiveness and enforceability of
this Agreement.
(c) LITIGATION. No litigation, arbitration, administrative
proceedings or investigation are pending or to Lessee's knowledge threatened
against Lessee which, if adversely determined, would have a material adverse
effect upon its financial condition or business or its ability to perform its
obligations under this Agreement, provided that it is understood and agreed that
Lessee is subject to periodic investigations (i) by the U.S. Department of
Transportation relating to its "continuing fitness" within the meaning of the
Federal Aviation Act and (ii) by the FAA relating to its operations and
compliance thereof with applicable laws and regulations;
(d) PARI PASSU. The obligations of Lessee under this Agreement
rank at least pari passu with all other present unsecured and unsubordinated
obligations of Lessee, with the exception of such obligations as are mandatorily
preferred by law and not by virtue of any contract;
(e) TAXES. Lessee has delivered all necessary returns and
payments due to the tax authorities in all jurisdictions in which Lessee is
required to pay taxes and/or file tax returns or tax reports (unless Lessee has
been granted an extension of time for such filings by the appropriate tax
authority or the taxes are being contested in good faith by appropriate
proceedings and adequate reserves have been established by Lessee), the failure
of which is reasonably likely to result in the creation or imposition of a Lien
in the Aircraft or otherwise have a material adverse effect on Lessee's ability
to perform its obligations under this Agreement and on its financial condition;
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(f) ERISA. To the best knowledge of Lessee, Lessee is not
engaged in any transaction in connection with which it could be subjected to
either a civil penalty assessed pursuant to Section 502(c) of ERISA or any tax
imposed by Section 4975 of the Internal Revenue Code of 1986, as amended; no
material liability of the Pension Benefit Guaranty Corporation has been or is
expected by Lessee to be incurred with respect to any employee pension benefit
plan (as defined in Section 3 of ERISA) maintained by Lessee; there has been no
reportable event (as defined in Section 4043(b) of ERISA) with respect to any
such employee pension benefit plan. There is no event of termination of any such
employee pension benefit plan by the Pension Benefit Guaranty Corporation; and
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Internal Revenue Code), whether or not waived, exists with respect to
any such employee pension benefit plan; and
(g) MAINTENANCE PROGRAM. The Agreed Maintenance Program for the
Aircraft complies with all FAA requirements, is approved by the FAA and is in
full force and effect, and is based on the Boeing MPD.
(h) INFORMATION. To Lessee's knowledge, the financial and other
information furnished by Lessee in connection with this Agreement does not
contain any untrue statement or omit to state facts, the omission of which makes
the statement therein, in the light of the circumstances under which they were
made, misleading, nor omits to disclose any material matter to Lessor and all
forecasts and opinions contained therein were honestly made on reasonable
grounds after due and careful inquiry by Lessee.
2.3 SURVIVAL. The representations and warranties in Sections 2.1 and
2.2 will survive the execution of this Agreement will be deemed to be remade by
Lessee on the Delivery Date with reference to the facts and circumstances then
existing. The representations and warranties contained in clause 2.1 will be
deemed to be remade by Lessee on each Rent Date as if made with reference to the
facts and circumstances then existing.
2.4 LESSOR'S REPRESENTATIONS AND WARRANTIES. Lessor represents and
warrants to Lessee that:
(a) STATUS. Lessor is a corporation duly incorporated and
validly existing under the laws of the State of Iowa and has the corporate power
to own its assets and carry on its business as it is now being conducted and is
the holder of all necessary air transportation licenses required in connection
with the ownership of the Aircraft;
(b) POWER AND AUTHORITY. Lessor has the corporate power to
enter into and perform, and has taken all necessary
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corporate action to authorize the entry into, performance and delivery of, this
Agreement and the transactions contemplated by this Agreement;
(c) LEGAL VALIDITY. This Agreement constitutes Lessor's legal,
valid and binding obligation, enforceable against Lessor in accordance with its
terms;
(d) NO CONFLICTS. The entry into and performance by Lessor of,
and the transactions contemplated by, this Agreement do not and will not:
(i) conflict with any laws binding on Lessor; or
(ii) conflict with the organizational documents of
Lessor; or
(iii) conflict with or result in default under any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, bank loan or credit agreement or other agreement which
is binding upon Lessor or any of its assets;
(e) AUTHORIZATIONS. All authorizations, consents,
registrations and notifications required in connection with the entry into,
performance, validity and enforceability of, and the transactions contemplated
by, this Agreement by Lessor have been (or will on or before the Delivery Date
have been) obtained by Lessor or effected (as appropriate) and are (or will on
their being obtained or effected be) in full force and effect;
(f) NO IMMUNITY
(i) Lessor is subject to civil U.S. commercial law with
respect to its obligations under this Agreement; and
(ii) neither Lessor nor any of its assets is entitled to
any right of immunity and the entry into and performance of this
Agreement by Lessor constitute private and commercial acts; and
(g) CITIZEN OF THE UNITED STATES. Lessor is a "citizen of the
United States" as defined in 49 U.S.C. Section 40102 (a)(15) of the Federal
Aviation Act.
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3. CONDITIONS PRECEDENT
3.1 LESSOR'S CONDITIONS PRECEDENT. Lessor's obligation to deliver and
lease the Aircraft to Lessee under this Agreement is subject to satisfaction of
each of the following conditions:
(a) Receipt by Lessor from Lessee on the Delivery Date of the
following, reasonably satisfactory in form and substance to Lessor:
(i) ORGANIZATIONAL DOCUMENTS. A copy of the
organizational documents of Lessee, certified by the Secretary or an
Assistant Secretary of Lessee;
(ii) RESOLUTIONS. A copy of resolutions of the board of
directors of Lessee, certified by the Secretary or an Assistant Secretary
of Lessee, approving the terms of, and the transactions comtemplated by,
this Agreement, resolving that it enter into this Agreement, and
authorizing a specified person or persons to execute this Agreement and
accept delivery of the Aircraft on its behalf;
(iii) OPINION. An opinion, dated the Delivery Date, by
legal counsel for Lessee (which shall be Lessee's general counsel), as to
such matters and in form and substance reasonably acceptable to Lessor;
(iv) FAA OPINION. An opinion of Xxxxxxx X. Boston &
Associates, special FAA counsel for Lessee, acceptable to Lessor, in form
and substance reasonably acceptable to Lessor (which opinion will be
delivered as promptly as practicable following the Delivery Date);
(v) BANKRUPTCY OPINION. An opinion of Xxxxxxxx, Xxxxxxx
and Xxxxx Chartered, special counsel for Lessee, as to Lessor's
entitlement to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Aircraft, in form and substance
reasonably acceptable to Lessor;
(vi) APPROVALS. Each approval, license and consent which
may be required in relation to the performance by Lessee of any of its
obligations hereunder;
(vii) CERTIFICATE. A certificate of the Secretary or an
Assistant Secretary of Lessee:
(a) Secting out a specimen of each signature
referred to in Section 3.1(a)(ii); and
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(b) Certifying that each copy of a document
specified in this Section is correct, complete and in full force and
effect;
(viii) GENERAL. Such other documents as Lessor
may reasonably request;
(b) The receipt by Lessor on or before the Delivery Date of:
(i) OPINIONS. A signed original of each of the opinions
referred to in Sections 3.l(a)(iii) and (v);
(ii) PAYMENTS. All sums due to Lessor under this
Agreement on or before the Delivery Date, including, without limitation,
the first payment of Rent;
(iii) INSURANCE. A report from Lessee's insurance brokers
and a certificate of insurance, both in substance reasonably satisfactory
to Lessor, demonstrating that Lessee has complied with the provisions of
this Agreement as to Insurance effective on and after the Delivery Date;
(iv) FINANCIAL STATEMENTS. The latest available financial
statements of Lessee as described in sections 8.2(b)(i) and (ii);
(v) NOT USED.
(vi) GENERAL. Such other documents as Lessor may
reasonably request;
(c) Receipt by Lessor of such information and documents
relating to the Agreed Maintenance Program as Lessor may reasonably require; and
(d) Evidence that (i) a Financing Statement on Form UCC-1,
prepared in form satisfactory to Lessor, has been duly filed with the Secretary
of State of the State of South Carolina and (ii) a Lease Supplement,
substantially in the form set forth in Schedule 1, Part 1, hereof has been
filed, along with this Lease, with the FAA's aircraft registry in Oklahoma City,
Oklahoma.
3.2 FURTHER CONDITIONS PRECEDENT. The obligations of Lessor to deliver
and lease the Aircraft under this Agreement are subject to the further
conditions precedent that:
(a) The representations and warranties of Lessee under Sections
2.1 and 2.2 are correct and remain correct on the
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Delivery Date as if remade on delivery of the Aircraft under this Agreement;
and
(b) No Default has occurred and is continuing or might result
from the leasing of the Aircraft to Lessee under this Agreement.
3.3 WAIVER. Tile conditions specified in Sections 3.1 and 3.2 are for
the sole benefit of Lessor and may be waived in whole or in part and with or
without conditions by Lessor. If any of those conditions are not satisfied on
the Delivery Date and Lessor (in its absolute discretion) nonetheless agrees to
deliver the Aircraft to Lessee, Lessee will ensure that those conditions are
satisfied within fifteen (15) days after the Delivery Date and Lessor may treat
as an Event of Default the failure of Lessee to do so.
4. COMMENCEMENT
4.1 LEASING. Lessor will lease the Aircraft to Lessee, and Lessee will
lease the Aircraft from Lessor, in accordance with this Agreement for the
duration of the Term.
4.2 ACCEPTANCE AND DELIVERY.
(a) As of February 1, 1997, the Aircraft will be deemed to be
constructively delivered to Lessee at AAR Oklahoma's facility at the Acceptance
Location. Lessee will effect acceptance of the Aircraft by execution and
delivery of a Lease Supplement in the form, of Part 1 of Schedule 1.
Notwithstanding the foregoing to the contrary, the parties acknowledge that the
Aircraft was delivered to AAR Oklahoma for accomplishment of the work. In the
event that the work is not complete at the time of execution of this Agreement,
Lessor shall, at its cost and expense, use its reasonable efforts to cause AAR
Oklahoma to promptly complete the Work; provided that Lessee shall have
delivered to AAR Oklahoma for temporary installation on the Aircraft a
serviceable Xxxxx & Xxxxxxx JT8D-9A engine with QEC (Quick Engine Change)
components.
(b) After delivery, the Aircraft and every Part will be in
every respect at the sole risk of Lessee, who will hear all risk f loss, theft,
damage or destruction to the Aircraft from any cause whatsoever.
4.3 NOT USED.
4.4 LICENSES. Lessee will at its expense obtain and maintain all
licenses, permits and approvals, if any, which may be necessary to ferry the
Aircraft from the Delivery Location.
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5. PAYMENTS
5.1 AIRCRAFT DEPOSIT. In order to secure its obligations hereunder,
Lessee shall pay to Lessor on or before May 1, 1997 an Aircraft Deposit in the
amount set forth in paragraph 1 of the Letter Agreement. Unless this Lease
Agreement shall have been earlier terminated pursuant to Section 13.2, and
provided that no Default shall have occurred and be continuing, the Aircraft
Deposit shall be returned by Lessor to Lessee on (i) the Expiration Date, (ii)
prior to the Expiration Date if this Lease Agreement is terminated by reason of
Lessor's breach of its covenant in Section 7.1 or (iii) as provided in Section
7.3(b)(ii) in connection with an Event of Loss.
5.2 RENTAL PERIODS. The Term will be divided into Rental Periods. The
first Rental Period will commence on the Delivery Date and end on the last day
of the calendar month during which the Delivery Date occurs, and the second
Rental Period will commence on the first day of the month next following. Each
subsequent Rental Period will commence on the first day of each calendar month
and will end on the last day of that month, except that if a Rental Period would
otherwise overrun the Expiration Date, it will end on the Expiration Date, in
which event the amount of Rent payable shall be prorated on a daily basis.
5.3 RENT. Lessee will pay to Lessor or its order on each Rent Date,
Rent, in advance, in immediately available funds in the amount set forth in
paragraph 2 of Letter Agreement No. 1. If a Rental Period begins on a
non-Business Day, the Rent payable in respect of that Rental Period shall be
paid on the Business Day immediately following the date on which such Rental
Period commences.
5.4 MAINTENANCE RESERVES. Lessee will pay to Lessor Maintenance
Reserves in relation to each Rental Period (including without limitation the
last Rental Period of the Term) on the 10th day following the end of each Rental
Period as follows:
(a) in respect of the Airframe, the amount set forth in
paragraph 3(i) of Letter Agreement No. 1 in respect of each Flight Hour or
Cycle, whichever is higher, operated by the Aircraft during such Rental Period
("Airframe Maintenance Reserves");
(b) in respect of each Engine, the amount set forth in
paragraph 3(ii) of Letter Agreement No. 1 in respect of each Flight Hour or
Cycle, whichever is higher, operated by that Engine during that Rental Period
("Engine Refurbishment Maintenance Reserves");
(c) in respect of the APU, the amount set forth in paragraph
3(iii) of Letter Agreement No. 1 in respect of each
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Flight Hour or Cycle, whichever is higher, operated by that APU during that
Rental Period ("APU Refurbishment Maintenance Reserves"); and
(d) in respect of each Landing Gear, the amount set forth in
paragraph 3(iv) of Letter Agreement No. 1 in respect of each Flight Hour or
Cycle, whichever is higher, operated by that Landing Gear during that Rental
Period ("Landing Gear Maintenance Reserves").
If the 10th day following the end of a Rental Period is a non-Business Day, the
Maintenance Reserves in respect of such Rental Period shall be paid on the
Business Day immediately following the date on which such payment was otherwise
due.
5.5 PAYMENTS. All payments by Lessee to Lessor under this Agreement will
be made on the due date in Dollars and in immediately available funds by wire
transfer to Mercantile Bank of Dubuque, Dubuque, Iowa (Acct. No. 28100164518),
ABA No. 000000000, or such other account as Lessor may direct in writing from
time to time.
5.6 NOT USED.
5.7 TAXATION. Lessee will pay and indemnify Lessor against all Taxes
(other than Lessor Taxes) levied or imposed against or upon Lessor or Lessee and
relating to or attributable to Lessee, this Agreement or the Aircraft directly
or indirectly in connection with the leasing, subleasing, delivery, possession,
use, operation, repair, maintenance, overhaul, transportation, landing, storage
or redelivery of the Aircraft or any part thereof or any rent, receipts,
insurance proceeds, income or other amounts arising therefrom.
5.8 INFORMATION. If Lessee is required by any applicable law to deliver
any report or return in connection with any Taxes for which indemnification is
required pursuant to Section 5.7, Lessee will complete the same on a timely
basis and Lessee will, on request supply a copy of the report or return to
Lessor, provided that Lessor shall have furnished Lessee, at Lessee's request,
with such information (if any), not within the control of Lessee, as is in
Lessor's control and is reasonably available to Lessor and reasonably necessary
to file such report or return, and provided, further that if any report or
return is to be prepared by Lessor, upon written request of Lessor, Lessee shall
supply to Lessor such information (if any), not within the control of Lessor, as
is reasonably available to Lessee and is reasonably necessary to enable Lessor
to prepare such report or return. Any information disclosed pursuant to this
Section shall be treated as confidential and shall not be disclosed to any
person other than to the extent reasonably necessary to enable
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the Lessee or Lessor to fulfill its tax return filing obligations.
5.9 TAXATION OF INDEMNITY PAYMENTS.
(a) If and to the extent that any sums payable to Lessor by
Lessee pursuant to Section 5.7 or Section 10.1 are insufficient, by reason of
any Taxes (other than Lessor Taxes) payable in respect of those sums, for Lessor
to discharge the corresponding liability to the relevant party (including any
taxation authority), or to reimburse Lessor for the cost incurred by it to a
third party (other than Lessor Taxes) (including any taxation authority), Lessee
will pay to Lessor such sum as will after the tax liability has been fully
satisfied leave Lessor with the same amount as it would have been entitled to
receive in the absence of that liability (taking into account the anticipated
realization by Lessor of tax benefits resulting from the Taxes or transaction to
which such indemnity is related, and the present value of any anticipated future
tax benefits to be realized by Lessor as a result of deducting or crediting such
Tax or as a result of the matters immediately giving rise thereto, based on tax
rates in effect on the date payment pursuant to this Section 5.9 is made and a
discount rate for purposes of calculations of present value of 8% per annum
compounded semiannually); and
(b) If and to the extent that any sums constituting (directly
or indirectly) an indemnity to Lessor pursuant to Section 5.7 or Section 10.1
but paid by Lessee to any person other than Lessor are treated as taxable in the
hands of Lessor (other than Lessor Taxes), Lessee will pay to Lessor such sum as
will after the tax liability has been fully satisfied indemnify Lessor to the
same extent as it would have been indemnified in the absence of such liability
(taking into account the anticipated realization by Lessor of tax benefits
resulting from the Taxes or transaction to which such indemnity is related, and
the present value of any anticipated future tax benefits to be realized by
Lessor as a result of deducting or crediting such Tax or as a result of the
matters immediately giving rise thereto, based on tax rates in effect on the
date payment pursuant to this Section 5.9 is made and a discount rate for
purposes of calculations of present value of 8% per annum compounded
semiannually)
5.10 PAYMENT DATE; DEFAULT INTEREST. Any amount payable to Lessor
pursuant to Section 5.7 shall be paid within 30 days after receipt of a written
demand therefor from Lessor accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable, provided that such amount need not be paid prior to the time such
Taxes are paid. If Lessee fails to pay any amount payable under this Agreement
on the due date, Lessee will pay on demand
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from time to time to Lessor interest (both before and after judgment) on that
amount, from the due date to the date of payment in full by Lessee to Lessor, at
the rate calculated by Lessor to be the Prime Rate plus five percent (5%) per
annum. All such interest will be compounded monthly and calculated on the basis
of the actual number of days elapsed and a 360 day year.
5.11 CONTEST. Lessee may, at its own cost and expense, either in its
own name or in Lessor's name, contest the validity, applicability or assessment
of any Taxes by (i) resisting payment thereof, (ii) paying same under protest,
or (iii) using reasonable efforts to obtain a refund thereof in appropriate
proceedings. If Lessee disputes the payment of any Taxes payable by Lessor for
which Lessee is responsible under this Agreement, Lessor will take such action
as Lessee may reasonably request, at Lessee's expense, to contest that payment
but will not be obliged to take any such action:
(a) If such action to be taken will result in the risk of an
imposition of criminal penalties or in a material risk of any sale, forfeiture
or loss of the Aircraft or an Engine (except if Lessee shall have adequately
bonded any Lien that results in such risk or otherwise made adequate provision
to protect the interests of Lessor); or
(b) Which Lessor considers does not have a reasonable prospect
of success, unless Lessee furnishes an opinion of independent tax counsel,
reasonably satisfactory to Lessor, that Lessee has a reasonable prospect of
success in connection with such proceedings.
If Lessor shall obtain a refund or credit of any amount paid by Lessee pursuant
to Sections 5.7 or 5.10 (including any gross-up amount paid by Lessee), Lessor
shall pay Lessee the amount of such refund or credit together with any interest
actually received or accrued by Lessor on account of such refund or credit.
5.12 ABSOLUTE AND CONDITIONAL OBLIGATIONS OF LESSEE. Lessee's
obligations to pay all Rent, Maintenance Reserves and other amounts payable and
perform each of its other obligations under this Agreement are absolute and
unconditional and shall not be affected by any circumstance or contingency
whatsoever including (but not limited to):
(a) Any right of set-off, counterclaim, recoupment, defense or
other right which either party to this Agreement may have against the other;
(b) Any unavailability of the Aircraft for any reason,
including, but not limited to, a requisition of the Aircraft or
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any prohibition or interruption of or interference with or other
restriction against Lessee's use, operation or possession of the
Aircraft;
(c) Any lack, invalidity of or defect in airworthiness,
merchantability, fitness for any purpose, condition, design, or operation of any
kind or nature of the Aircraft for any particular use or trade (including, but
not limited to, the failure of the Airframe or any Engine to comply with the
Stage 3 noise standards of 14 C.F.R. Part 36 of the Federal Aviation Regulations
as such standards may be modified or amended from time to time (the "Stage 3
Requirements") or for registration or documentation under the laws of any
relevant jurisdiction, or any Event of Loss in respect of or any damage to the
Aircraft;
(d) Any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceedings by or
against Lessor or Lessee;
(e) Any invalidity or unenforceability or lack of due
authorization of, or other defect in, this Agreement; and
(f) Any other cause which but for this provision would or might
otherwise have the effect of terminating or in any way affecting any obligation
of Lessee under this Agreement.
5.13 SECURITY.
(a) It is intended by Lessor and Lessee that the Maintenance
Reserves payable to Lessor pursuant to Section 5.4 are amounts paid by Lessee to
Lessor in consideration for the use of the Aircraft by Lessee and the
satisfaction of Lessee's obligations under this Agreement and that, once paid,
those monies irrevocably and unconditionally shall be the property of Lessor.
Notwithstanding that stated intent, if and to the extent that those monies or
any thereof, under any applicable law or otherwise, are determined to be
security deposits or otherwise the property of Lessee or if it is so determined
those monies are a debt owed to Lessee or that Lessee shall have any interest in
those monies (the "Maintenance Reserve Account"), the parties agree that
subsections (c), (d) and (e) below shall apply.
(b) It is further intended by Lessor and Lessee that Aircraft
Deposit payable by Lessee to Lessor pursuant to Section 5.1 and, if applicable,
the Insurance Security Deposit contemplated by the first paragraph of Schedule 4
(collectively the "Deposits") are security deposits to faithfully secure the
satisfaction by Lessee of its obligations under the Agreement.
(c) To the fullest extent permitted by law and by way of
continuing security, Lessee grants to Lessor a security
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interest in the Maintenance Reserve Account and the Deposits and all rights of
Lessee to payment thereof, the debt represented thereby and/or any and all
interest of Lessee therein to Lessor by way of first priority security interest
as security for Lessee's obligations and liabilities under this Agreement and
the Other Agreements (the "Secured Liabilities"). Except as expressly permitted
under Section 7.2 of this Agreement, Lessee will not be entitled to payment of
the Maintenance Reserve Account. Lessee will not assign, transfer or otherwise
dispose of all or part of its rights in the Maintenance Reserve Account or the
Deposits, and Lessee agrees that it will enter into any additional documents and
instruments necessary or reasonably requested by Lessor to evidence, create or
perfect Lessor's rights to the Maintenance Reserve Account and the Deposits.
(d) If Lessee fails to comply with any provision of this
Agreement or any Event of Default has occurred and is continuing Lessor may
immediately or at any time thereafter, without prior notice to Lessee:
(i) Set-off all or any part of the Secured Liabilities
against the liabilities of Lessor in respect of the Maintenance Reserve Account
and/or the Deposits;
(ii) Apply or appropriate the Maintenance Reserve Account
and/or the Deposits in or towards the payment or discharge of the Secured
Liabilities in such order as Lessor sees fit; and
(e) If Lessor has exercised the set-off described in sub-clause
(d) above, Lessee shall, following a demand in writing from Lessor, promptly
restore the Maintenance Reserve Account and/or the Deposits to the level at
which they stood immediately prior to such set-off.
6. MANUFACTURER'S WARRANTIES
6.1 ASSIGNMENT. Notwithstanding this Agreement, Lessor will remain
entitled to the benefit of each warranty, express or implied, with respect to
the Aircraft, any Engine or Part so far as concerns any manufacturer, vendor,
subcontractor or supplier or any seller from whom Lessor acquired the Aircraft.
Except to the extent Lessor otherwise directs, Lessor hereby authorizes Lessee
to pursue any claim against any manufacturer, vendor, subcontractor or supplier
(but not any seller of the Aircraft) in relation to defects affecting the
Aircraft, any Engine or Part and Lessee agrees diligently to pursue any such
claim which arises at its own cost. Lessee will notify Lessor promptly upon
becoming aware of any such claim.
6.2 PROCEEDS. Except to the extent Lessor otherwise agrees in a
particular case, all proceeds of any such claim will be paid
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directly to Lessor, except, but if and to the extent that such claim relates:
(a) To defects affecting the Aircraft which Lessee has
rectified; or
(b) To compensation for loss of use of the Aircraft, an Engine
or any Part during the Term; and
provided no Default described in Sections 13.1(a) or 13.1(h)-(l) has occurred
and is continuing, the proceeds will be paid to Lessee by Lessor but in the case
of (a) only on receipt of evidence satisfactory to Lessor that Lessee has
rectified the relevant defect.
6.3 PARTS. Except to the extent Lessor otherwise agrees in a
particular case, Lessee will procure all engines, components, furnishings or
equipment provided by the manufacturer, vendor, subcontractor or supplier in
replacement of a defective Engine or Part pursuant to the terms of any warranty,
all of which will be installed promptly by Lessee such that title thereto free
of Liens vests in Lessor. On installation those items will be deemed to be an
Engine or Part hereunder, as applicable.
6.4 AGREEMENT. To the extent any warranties relating to the Aircraft
are made available under an agreement between any manufacturer, vendor,
subcontractor or supplier and Lessee, this Section 6 is subject to that
agreement. However Lessee will:
(a) Pay the proceeds received by Lessee of any claim thereunder
to Lessor to be applied pursuant to Section 6.2 and pending such payment will
hold the claim and the proceeds on trust for Lessor; and
(b) Lessee will take all such steps as are necessary at the end
of the Term to ensure the benefit of any of those warranties which have not
expired are vested in Lessor.
7. LESSOR'S COVENANTS
7.1 QUIET ENJOYMENT. Lessor agrees that, notwithstanding any other
provision of this Agreement, but without limiting Lessor's rights under Section
8.6, so long as Lessee is in compliance with its obligations under this
Agreement (including applicable grace periods) and no Event of Default has
occurred and is continuing, Lessee shall quietly enjoy the Aircraft and all
rents, revenues, profits and income thereto, and including without limitation,
the right to possession and use of the Aircraft, without interference from
Lessor.
7.2 MAINTENANCE CONTRIBUTION. Provided no Default described in
Sections 13.1(a) or Sections 13.1(h)-(1) has
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occurred and is continuing, Lessor will pay promptly to third party vendors,
suppliers, maintenance shops, service facilities or other contractors, by way of
contribution to the cost of maintenance of the Aircraft, upon submission by
Lessee to Lessor, within one hundred eighty (180) days after the completion of
that maintenance (but not later than thirty (30) days after the Expiration Date,
unless an invoice is being contested and Lessee has given Lessor notice of such
invoice and the pendency of such contest within such thirty (30) day period), of
an invoice and supporting documentation reasonably satisfactory to Lessor,
evidencing with respect to (x) the Airframe, any "C" checks, or (y) any Engine
or APU, the performance in accordance with this Agreement of a Hot Section
Refurbishment, a Cold Section Refurbishment and/or the replacement of Life
Limited Parts or (z) any Landing Gear, work in the nature of overhaul requiring
removal and disassembly (in each case, other than (i) repairs arising as a
result of foreign object damage or operational or maintenance mishandling;
and/or (ii) removal, installation, maintenance and repair of QEC (Quick Engine
Change) kits; and/or (iii) the performance of airworthiness directives) the
lesser of (a) the amount of that invoice and (b) an amount equal to the
aggregate amount of Maintenance Reserves paid in respect of the Airframe that
Engine or APU or that Landing Gear, as applicable, under this Agreement at the
time of commencement of such maintenance less the aggregate amount previously
paid in respect of the Airframe, that Engine or APU or the Landing Gear, as
applicable, by Lessor under this subsection.
7.3 LESSOR OBLIGATIONS FOLLOWING EXPIRATION DATE. Within five (5)
Business Days after:
(a) Redelivery of the Aircraft to Lessor in accordance
with and in the condition required by this Agreement; or
(b) Payment to Lessor of the Agreed Value following an Event of
Loss after the Delivery Date;
or in each case such later time as Lessor is satisfied Lessee has irrevocably
paid to Lessor all amounts which may then be outstanding or become payable under
this Agreement and provided that no Default shall have occurred and is
continuing, Lessor will pay to Lessee:
(i) the amount of any Rent received in respect of any
period falling after the date of redelivery of the Aircraft or payment
of the Agreed Value, as the case may be; and
(ii) the Aircraft Deposit.
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8. LESSEE'S COVENANTS
8.1 DURATION. The obligations in this Section and in Section 12 will:
(a) Except as otherwise stated, be performed at the expense of
Lessee; and
(b) Remain in force until the Expiration Date in accordance
with this Agreement and thereafter to the extent of any accrued rights of Lessor
in relation to those obligations.
8.2 INFORMATION. Lessee will:
(a) Notify Lessor forthwith of the occurrence of any Default or
any other event which might materially adversely affect Lessee's ability to
perform any of its obligations under this Agreement;
(b) Furnish to Lessor:
(i) 60 days after the last day of each fiscal quarter,
the consolidated unaudited financial statements of Lessee (comprising a
balance sheet and profit and loss statement) prepared for the most recent
previous fiscal quarter, certified by Lessee's chief financial officer as
being true and correct;
(ii) as soon as available but not in any event later than
one hundred twenty (120) days after the last day of each fiscal year of
Lessee, its audited consolidated financial statements for the year ending
on such day;
(iii) at the same time the same are issued to the
shareholders or creditors of Lessee generally, a copy of each report to
or filing with the SEC; and
(iv) on request from time to time, such other
information relevant to the transactions contemplated by this Agreement
regarding Lessee and its business and affairs as Lessor may reasonably
request;
(c) Keep Lessor informed as to any engine installed on the
Aircraft;
(d) Promptly furnish to Lessor all information Lessor from time to
time reasonably requests regarding the Aircraft, any Engine or any Part, its
use, location and condition including, without limitation, the hours available
on the Aircraft and any Engine until the next scheduled check, inspection,
overhaul or shop visit, as the case may be;
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(e) Not used.
(f) On request, furnish to Lessor evidence satisfactory to
Lessor that all Taxes and charges incurred by Lessee with respect to the
Aircraft, including without limitation all payments due to the relevant air
traffic control authorities: the nonpayment of which could give rise to the
imposition of a Lien on the Aircraft, have been paid and discharged in full;
(g) Provide Lessor with a monthly report on the Flight Hours
and Cycles accumulated in respect of each Engine and APU during the preceding
month in the form required from time to time by Lessor;
(h) Give Lessor not less than thirty (30) days' written notice
as to the time and location of all Major Checks and allow Lessor or its
authorized representatives to be present at such Check and inspect any area of
the Aircraft which is normally inspected during such a Check; and
(i) Notify Lessor within five (5) days of:
(i) Any loss, theft, damage or destruction to the
Aircraft, any Engine or any Part, or any modification to the Aircraft if
the potential cost may exceed the Damage Notification Threshold; and
(ii) Any occurrence reasonably likely to give rise to a
claim under the Insurance (but in the case of an occurrence with respect
to the hull, only claims in excess of the Damage Notification Threshold)
and details of any negotiations with the insurance brokers over any such
claim.
8.3 LAWFUL AND SAFE OPERATION. Lessee will:
(a) Comply with all laws in force in any country or
jurisdiction in which the Aircraft may be located or operated or, so far as
concerns the use and operation of the Aircraft or an owner or operator thereof
and take all reasonable steps to ensure that the Aircraft is not used for any
illegal purpose;
(b) Not use the Aircraft in any manner contrary to any
recommendation of the manufacturer of the Aircraft, any Engine or any Part or
any recommendation or regulation of the Air Authority or for any purpose for
which the Aircraft is not designed or reasonably suitable;
(c) Ensure that the crew and engineers employed by it in
connection with the operation and maintenance of the Aircraft have the
qualifications and hold the licenses required by the Air Authority and
applicable law;
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(d) Use the Aircraft solely in commercial or other operations
for which Lessee is duly authorized by the Air Authority and applicable law;
(e) Not use the Aircraft for the carriage of:
(i) whole animals living or dead except in the cargo
compartments according to I.A.T.A. regulations, and except domestic pet
animals carried in a suitable container to prevent the escape of any
liquid and to ensure the welfare of the animal;
(ii) acids, toxic chemicals, other corrosive materials,
explosives, nuclear fuels, nuclear wastes, or any nuclear assemblies or
components, except as permitted for passenger aircraft under the
"Restriction of Goods" schedule issued by I.A.T.A. from time to time and
provided that all the requirements for packaging or otherwise contained
therein are fulfilled;
(iii) any other goods, materials or items of cargo which
could reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the Insurances; or
(iv) any illegal item or substance;
(f) Not utilize the Aircraft for purposes of training,
qualifying or reconfirming the status of cockpit personnel except for the
benefit of Lessee's cockpit personnel, and then only if the use of the Aircraft
for such purpose is not disproportionate to the use for such purpose of other
aircraft of the same type operated by Lessee;
(g) Not cause or permit the Aircraft to proceed to, or remain
at, any location which is then the subject of a prohibition order (or any
similar order or directive), sanctions or restrictions by:
(i) the United Nations Security Council, the U.S.
International Economic Emergency Powers Act or U.N. Security Council
directives or the U.S. Export Administration Act Regulations (15 C.F.R.
Parts 730-799), except as may be permitted by operating in accordance
with the conditions specified by the U.S. Export Administration
Regulations, General License GATS (15 C.F.R. Part 771.19);
(ii) any Government Entity of the State of Registration;
(iii) any Government Entity of the country in which such
location is situated; or
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(iv) any Government Entity having jurisdiction over
Lessor, the Banks or the Aircraft;
(h) Obtain and maintain in full force all certificates,
licenses, permits and authorizations required for the use and operation of the
Aircraft;
(i) Not operate or locate the Aircraft or suffer or permit the
Aircraft to be operated or located during the Term in any area excluded from
coverage by any insurance policy issued pursuant to the requirements of this
Agreement unless such operation or location is pursuant to a Civil Reserve Air
Fleet Program requisition or other use of the Aircraft by the United States
Government, and Lessee has obtained, prior to the operation and location of the
Airframe or any Engine in such area, indemnification from the United States
Government, or other insurance, against the risks and In the amounts required
by, and in compliance with, Section 9 hereof covering such area (and naming
Lessor, and the Banks, if any, as loss payees in respect of the indemnification
or insurance payable in respect to casualties to the Aircraft) or unless the
Aircraft is only temporarily located in such area as a result of an isolated
occurrence attributable to hijacking, medical emergency, equipment malfunction,
weather conditions, navigational error or similar unforeseen circumstances and
Lessee is using its good faith efforts to remove the Aircraft from such area;
and
(j) Not operate or locate the Aircraft in or to or over any
country which is (x) the subject of sanctions under the U.S. International
Economic Emergency Powers Act or United Nations Security Council Directives
and/or (y) restricted under the United States Trading with the Enemy Act or the
United States Export Administration Act except as may be permitted by operating
in accordance with the conditions specified by the United States Export
Administration Regulations, General License GATS (15 CFR Part 771.19)
8.4 OTHER PAYMENTS. Lessee will promptly pay:
(a) All license and registration fees, and other amounts of any
nature (other than Taxes) imposed by any Government Entity with respect to the
Aircraft, including without limitation the delivery, leasing, possession, use,
operation, return of the Aircraft; and
(b) All rent, fees, charges, and other amounts in respect of
any premises (other than Taxes) where the Aircraft or any Part thereof is
located from time to time;
except to the extent that such payment is being contested in good faith by
appropriate proceedings, in respect of which adequate reserves have been
provided by Lessee and non-payment of which
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does not give rise to any material likelihood of the Aircraft or any interest
therein being sold, forfeited or otherwise lost or of criminal liability on the
part of Lessor or any Bank.
8.5 SUB-LEASING. LESSEE WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR, SUB-LEASE OR OTHERWISE PART WITH POSSESSION OF THE AIRCRAFT, THE ENGINES
OR ANY PART EXCEPT THAT LESSEE MAY PART WITH POSSESSION (A) WITH RESPECT TO THE
AIRCRAFT, THE ENGINES OR ANY PART TO THE RELEVANT MANUFACTURERS FOR TESTING OR
SIMILAR PURPOSES OR TO THE AGREED MAINTENANCE PERFORMER FOR SERVICE, REPAIR,
MAINTENANCE OR OVERHAUL WORK, OR ALTERATIONS, MODIFICATIONS OR ADDITIONS TO THE
EXTENT REQUIRED OR PERMITTED BY THIS AGREEMENT, AND (B) WITH RESPECT TO AN
ENGINE OR PART, AS EXPRESSLY PERMITTED BY THIS AGREEMENT.
8.6 INSPECTION.
(a) Lessor and any qualified person designated by Lessor may at
any time visit, inspect and survey the Aircraft, any Engine or any Part;
(b) Lessee will pay to Lessor on demand all reasonable
out-of-pocket expenses (but not including the salaries of Lessor's employees)
incurred by Lessor in connection with each such visit, inspection or survey
which takes place during the continuance of a Default; and
(c) Lessor will have no duty or liability to make, or arising
out of any such visit, inspection or survey; and
(d) So long as no Default has occurred and is continuing,
Lessor will not exercise such right other than on reasonable notice and during
normal business hours and so as not to disrupt unreasonably the commercial
operations of Lessee.
8.7 OWNERSHIP; PROPERTY INTERESTS; RELATED MATTERS. Lessee will:
(a) Not do or knowingly permit to be done or omit or knowingly
permit to be omitted to be done any act or thing which might reasonably be
expected to jeopardize the rights of Lessor as owner and lessor of the Aircraft;
(b) On all occasions when the ownership of the Aircraft, any
Engine or any Part is relevant, make clear to third parties that title is held
by Lessor;
(c) Not at any time (i) represent or hold out Lessor or the
Banks as carrying goods or passengers on the Aircraft or as being in any way
connected or associated with any operation or carriage (whether for hire or
reward or gratuitously) which may
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be undertaken by Lessee or (ii) pledge the credit of Lessor or the Banks;
(d) Ensure that there is always affixed, and not removed or in
any way obscured, a fireproof plate (having dimensions of not less than 10 cm. x
7 cm.) in a reasonably prominent position in the cockpit of the Aircraft
adjacent to the certificate of airworthiness and on each Engine stating:
"This Aircraft/Engine is owned by MIMI Leasing Corp.
and is leased to Air South Airlines, Inc.
(e) Not during the Term directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Airframe or any
Engine or title thereto or any interest therein, or in this Agreement, except
(a) the respective rights of Lessor and Lessee as provided herein and the rights
of the Banks, if any; (b) Liens for Taxes either not yet due or being contested
in good faith by appropriate proceedings in respect of which adequate reserves
have been established by Lessee, so long as neither the nonpayment of such taxes
pending the outcome of such proceedings nor such proceedings involve any
material likelihood of the sale, forfeiture or loss of the Airframe or Engine,
(c) suppliers', mechanics', workers', repairers', employees' or other like liens
arising in the ordinary course of business and for amounts the payment of which
is either not yet delinquent or is being contested in good faith (and for the
payment of which adequate reserves have been provided) by appropriate
proceedings, so long as neither the nonpayment of such amounts pending the
outcome of such proceedings nor such proceedings involve any material likelihood
of the sale, forfeiture or loss of the Airframe or any Engine; (d) Liens arising
out of judgments or awards against Lessee with respect to which at the time an
appeal or proceeding for review is being prosecuted in good faith and there
shall have been secured a stay of execution pending such appeal or proceeding
for review; (e) Lessor's Liens; and (f) salvage and similar rights of insurers
under policies of insurance maintained with respect to the Aircraft. Liens
described in clauses (a) through (f) above are referred to herein as "Permitted
Liens." Lessee shall promptly, at its own expense, take such action as may be
necessary to duly discharge any Lien other than a Permitted Lien if the same
shall arise at any time;
(f) Not do or permit to be done anything which may reasonably
be expected to expose the Aircraft, any Engine or any Part to penalty,
forfeiture, impounding, detention, appropriation, damage or destruction and
without prejudice to the foregoing, if any such penalty, forfeiture, impounding,
detention or appropriation, damage or destruction occurs give Lessor notice and
use best endeavors to procure the immediate release of the Aircraft, any Engine
or the Part, as the case may be;
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(g) Not abandon the Aircraft, the Engine or any Part;
(h) Pay and discharge or cause to be paid and discharged when
due and payable or make adequate provision by way of security or otherwise for
all debts, damages, claims and liabilities which have given or might give rise
to a Lien over or affecting the Aircraft, any Engine or any Part; and
(i) Not attempt, or hold itself out as having any power, to
sell, lease or otherwise dispose of the Aircraft, any Engine or any Part.
8.8 GENERAL. Lessee will:
(a) Not liquidate or dissolve and Lessee shall not
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and other assets, whether in one or series of related transactions nor
consolidate with or merge into any other corporation, unless in the case of any
such consolidation merger, conveyance, transfer, lease or other disposition:
(i) the corporation formed by or surviving such
consolidation or merger (the "Successor Entity"):
(A) shall be a corporation organized and existing
under the laws of the United States of America or any state
thereof;
(B) immediately after giving effect to such
transaction, shall be Lessee or shall have acquired or succeeded
to all or substantially all of the property and other assets
(including, without limitation, all or substantially all of
Lessee's property and other assets) as an entity; and
(C) shall execute and deliver to Lessor an
agreement, in form and substance reasonably satisfactory to
Lessor, which is a legal, valid, binding and enforceable
assumption by such Successor Entity of the due and punctual
performance and observance of each covenant and condition of this
Agreement and agreement to be bound thereby, and shall execute,
deliver and/or file such recordations and filings with any
Government Entity and such other documents as Lessor shall
reasonably deem to be necessary or advisable (including, without
limitation, to preserve and protect the interests of Lessor) to
evidence, or in connection with, such consolidation, merger, sale,
lease, transfer or other disposition or acquisition and an
officer's certificate from a responsible officer of the Successor
Entity confirming
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the legal, valid, binding and enforceable nature of such
assumption, and to the effect that the other requirements of this
paragraph have been satisfied, and a legal opinion from counsel
confirming the legal, valid, binding and enforceable nature of
such assumption and otherwise in such form and substance
reasonably satisfactory to Lessor; and
(ii) prior to and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
No such permitted transaction involving a Successor Entity shall relieve or
release Lessee of or from any obligations hereunder which arose or existed prior
to such transaction. Promptly following the closing of such transaction, Lessee
shall provide Lessor with a certificate signed by Lessee's chief financial
officer to the effect that such transaction, will not have a material adverse
effect on Lessee's ability to perform its obligations under this Agreement;
(b) ensure that no change will occur in the Habitual Base of
the Aircraft without the prior written consent of Lessor. Lessor agrees that it
shall not withhold its consent to a change in the Habitual Base to another state
of the United States of America, provided that Lessee promptly do all things
required of it under Section 8.10 to insure the protection of the interests of
Lessor and the Banks in the Aircraft and this Lease; and
(c) not, without giving Lessor 30 days prior notice (in
accordance with this Agreement), change its chief executive office (as such term
is defined in Article 9 of the Uniform Commercial Code as in effect in the State
of South Carolina) from 0000 Xx. Xxxxxx Xxxxx, 0xx Xxxxx, Xxxxxxxx, Xxxxx
Xxxxxxxx 00000;
(d) remain a Certificated Air Carrier and maintain, without
limitation, its status so as to fall within the purview of Section 1110 of Title
11 of the United States Code or any analogous Statute;
(e) remain a "citizen of the United States" as defined in 49
U.S.C. Section 40102(a)15) of the Federal Aviation Act;
(f) ensure that no change will occur in the Habitual Base of
the Aircraft without the prior written notice to Lessor; and
(g) Not, without giving Lessor thirty (30) days prior notice
(in accordance with this Agreement), change its chief executive office (as such
term is defined in Article 9 of the Uniform Commercial Code as in effect in the
State of South
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Carolina) from 0000 Xx. Xxxxxx Xxxxx, 0xx Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx;
8.9 RECORDS. Lessee will:
(a) Cause accurate, complete and current records of all flights
made by, and all maintenance carried out on, the Aircraft (including in relation
to each Engine and Part subsequently installed, before the installation) to be
kept in such manner as the Air Authority may from time to time require. The
records will form part of the Aircraft Documents; and
(b) Maintain its own or procure access to a revision service in
respect of, and will maintain with appropriate revisions, all Aircraft
Documents, records, logs, and other materials in respect of the Aircraft
required by applicable laws and customary practice of United States air carriers
operating under Part 121 of the Federal Aviation Regulations.
8.10 PROTECTION: Lessee will:
(a) Maintain the registration of the Aircraft with the Air
Authority in the name of Lessor and, to the extent permitted under the laws of
the State of Registration, reflecting the interests of Lessor and not do or
suffer to be done anything which might adversely affect that registration; and
(b) Do all acts and things (including, without limitation,
making any filing or registration with the Air Authority or any other Government
Entity) and execute and deliver, notarize, file, register and record all
documents (including, without limitation, any amendment of this Agreement, other
than an amendment which would alter any of the material terms hereof in a manner
adverse to Lessee) as may be reasonably required by Lessor, which shall be at
Lessor's cost with respect to item (i) and at Lessee's cost with respect to
items (ii) and (iii) below:
(i) following any change or proposed change in the
ownership or financing of the Aircraft or in the manner of securing
Lessor's obligations to the Banks; or
(ii) following any modification of the Aircraft, any
Engine or any Part or the permanent replacement of any Engine or Part in
accordance with this Agreement, so as to ensure that the rights of Lessor
as owner and lessor of the Aircraft and under this Agreement apply with
the same effect as before; or
(iii) to establish, maintain, preserve, perfect and
protect the rights of Lessor under this
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Agreement or the interest of Lessor as owner of the Aircraft.
8.11 MAINTENANCE AND REPAIR. Lessee will:
(a) Keep the Aircraft airworthy in all respects and in good
repair and condition;
(b) Not change the Agreed Maintenance Program or the schedule
of the Agreed Maintenance Program without the written consent of Lessor;
provided, that such agreement of Lessor shall not be required with respect to
amendments to the Agreed Maintenance Program which are required by law,
including any rule, regulation, order or directive of the FAA or other
Government Entity having jurisdiction over the maintenance and operation of the
Aircraft
(c) Maintain the Aircraft in accordance with the Agreed
Maintenance Program through Agreed Maintenance Performers and perform (at the
respective intervals provided in the Agreed Maintenance Program) all Major
Checks;
(d) Maintain the Aircraft in accordance with FAA Federal
Aviation Regulations Part 121 and any other rules and regulations of the FAA as
may be applicable to passenger category aircraft and in at least the same manner
and with at least the same care, [including, without limitation, maintenance
scheduling, modification status and technical condition,] as is the case with
respect to similar aircraft owned or otherwise operated by Lessee including,
without limitation, all maintenance to the Airframe, any Engine or any Part
required to maintain all warranties, performance guarantees or service life
policies in full force and effect and will not discriminate in the care,
scheduling, scope, status or technical condition of maintenance of the Aircraft
as compared with other aircraft included in Lessee's fleet of Boeing 737
Aircraft;
(e) Comply with all mandatory inspection and modification
requirements, airworthiness directives and similar requirements applicable to
the Aircraft, any Engine or Part having a compliance date during the Term or
within sixty (60) days after the Expiration Date and which are required by the
Air Authority (each of the foregoing being hereinafter referred to as a
"Relevant AD").
The cost of compliance with any single Relevant AD shall be
allocated among Lessor and Lessee as follows:
(i) Lessee shall be responsible for the first $100,000 of such
cost;
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(ii) Lessor and Lessee shall share, on an equal basis, the
portion of such cost (if any) which exceeds $100,000 up to and including
$200,000; and
(iii) Lessor shall be wholly responsible for the portion of such
cost (if any) which exceeds $200,000 (subject always to the provisions of
the following paragraph.
Notwithstanding the foregoing, in the event that the total
cost of any single Relevant AD (such total cost to be mutually agreed, in good
faith, between Lessor and Lessee) exceeds $200,000 (the "Threshold Amount"),
Lessor may elect not to make its contribution to the cost of compliance with
such Relevant AD as described in (iii) above. If Lessor shall so elect, Lessee
shall be entitled, by giving prior written notice to Lessor, to terminate this
Agreement and redeliver the Aircraft to Lessor in accordance with the terms of
Sections 12.1 through 12.8 and Schedule 3 (except for compliance with the
Relevant AD which gave rise to such termination) on the earlier of (x) the date
which is 30 days after the date of such notice from Lessee to Lessor or (y) the
date on which the Aircraft is required to be removed from service by reason of
non-compliance with the applicable Relevant AD. Such notice shall specify the
proposed redelivery date of the Aircraft by Lessee and, upon the receipt of such
notice by Lessor, the then current definition of Expiration Date shall be deemed
to have been amended accordingly. Upon any termination of this Agreement
pursuant to this Section 8.11(e), neither party shall be under any further
obligation in the other hereunder except for (x) accrued and outstanding
obligations of Lessee hereunder; and (y) obligations hereunder which are
expressed to continue notwithstanding the expiration of the Term; provided,
however, that Lessor shall, if applicable having regard to the provisions of
Section 7.3, make the payments described in Section 7.3(b) but shall be under no
obligation to repay, rebate or otherwise refund any Maintenance Reserves
previously paid by Lessee under this Agreement.
(f) Comply with all applicable laws and the regulations of
the Air Authority and other aviation authorities with jurisdiction over Lessee
or the Aircraft, any Engine or Part regardless of upon whom such requirements
are imposed and which relate to the maintenance, condition, use or operation of
the Aircraft or require any modification or alteration to the Aircraft, any
Engine or Part;
(g) Maintain in good standing a current certificate of
airworthiness (in the appropriate category for the nature of the operations of
the Aircraft) for the Aircraft issued by the Air Authority except where (i) the
Aircraft is undergoing maintenance, modification or repair required or permitted
by this Agreement or (ii) the Aircraft's Certificate of Airworthiness is
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46
withdrawn by the Air Authority for all Aircraft of the same model as the
Aircraft, and will from time to time provide to Lessor a copy of such
certificate of airworthiness on request;
(h) If required by the Air Authority, maintain a current
certification as to maintenance issued by or on behalf of the Air Authority in
respect of the Aircraft and will from time to time provide to Lessor a copy on
request; and
(i) Procure promptly the replacement of any Engine or Part
which has become time, cycle or calendar expired, lost, stolen, seized,
confiscated, destroyed, damaged beyond repair, unserviceable or permanently
rendered unfit for use, with an engine or part complying with the conditions set
out in Section 8.13(a).
8.12 REMOVAL OF ENGINES AND PARTS. Lessee will ensure that no Engine
or Part installed on the Aircraft is at any time removed from the Aircraft other
than:
(a) If replaced as expressly permitted by this Agreement; or
(b) If the removal is of an obsolete item and is in accordance
with the Agreed Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or the Aircraft, as the case may be;
or
(ii) as part of a normal engine or part rotation program;
or
(iii) for the purpose of making such modifications to the
Engine or the Aircraft, as the case may be, as are permitted under this
Agreement;
and then in each case only if it is reinstalled or replaced by an engine
or part complying with Section 8.13(a) as soon as practicable and in any
event no later than the Expiration Date.
8.13 INSTALLATION OF ENGINES AND PARTS. Lessee will:
(a) Ensure that, except as permitted by this Agreement, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the
same model as, or an improved or advanced version of the Engine it
replaces, which has a value and utility (based on but not limited to all
life limited engine components and time since the last Hot Section
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47
Refurbishment) and is in as good or better operating condition and has
substantially similar or greater hours available until the next scheduled
checks, inspections, overhauls and shop visits, as determined by Lessor
in its reasonable judgment;
(ii) in the case of a part, it is in as good operating
condition, has substantially similar hours available until the next
scheduled checks, inspections, overhauls and shop visits, is of the same
or a more advanced make and model and is of the same interchangeable
modification status as the replaced Part;
(iii) in each case, it has become and remains the property
of Lessor free from Liens and on installation on the Aircraft will
without further act be subject to this Agreement;
(iv) in each case, Lessee has sufficient details as to
its source and maintenance records to assure compliance with all
applicable Air Authority requirements;
(b) If no Default has occurred which is continuing, be entitled
to install any engine or part on the Aircraft by way of replacement
notwithstanding Section 8.13(a) if:
(i) there is not available to Lessee at the time and in
the place that that engine or part is required to be installed on the
Aircraft, a replacement engine or, as the case may be, part complying
with the requirements of Section 8.13(a);
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft and/or the business of Lessee to ground the
Aircraft until an engine or part, as the case may be, complying with
Section 8.13(a) becomes available for installation on the Aircraft; and
(iii) as soon as practicable after installation of the
same on the Aircraft but, in any event, no later than the earlier of
thirty (30) days after [A] installation on the Aircraft or [B] the
Expiration Date, Lessee removes any such engine or part and replaces it
with the Engine or Part replaced by it or by an engine or part, as the
case may be, complying with Section 8.13(a).
8.14 NON-INSTALLED ENGINES AND PARTS. Lessee will:
(a) Ensure that any Engine or Part which is not installed on
the Aircraft (or any other aircraft as permitted by this Agreement) is, except
as expressly permitted by this Agreement, properly and safely stored, and kept
free from Liens;
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48
(b) Notify Lessor whenever any Engine is removed from the
Aircraft and, from time to time, on request procure that any person to whom
possession of an Engine is given acknowledges in writing to Lessor, in form and
substance satisfactory to Lessor, that it will respect the interests of Lessor
and as owner of the Engine and will not seek to exercise any rights whatsoever
in relation to it;
(c) Notwithstanding the foregoing provisions of this
subsection, be permitted, if no Default has occurred and is continuing, to
install any Engine or Part on an aircraft, or in the case of a Part, an engine:
(i) owned and operated by Lessee free from Liens; or
(ii) leased or hired to Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on terms whereby
Lessee has full operational control of that aircraft or engine; or
(iii) acquired by Lessee and/or financed or refinanced,
and operated by Lessee, on terms that ownership of that aircraft or
engine, as the case may be, pursuant to a lease or conditional sale
agreement, or a Lien therein, is vested in or held by any other person;
provided that in the case of (ii) and (iii):
(l) the terms of any such lease, conditional sale
agreement or Lien will not have the effect of prejudicing the
interests of Lessor as owner and lessor of that Engine or Part;
and
(2) the lessor under such lease, the seller under
such conditional sale agreement or the holder of such Lien, as the
case may be, has confirmed and acknowledged in writing to Lessor,
in form and substance satisfactory to Lessor, that it will respect
the interest of Lessor as owner and lessor of that Engine or Part
and that it will not seek to exercise any rights whatsoever in
relation thereto.
8.15 POOLING OF ENGINES AND PARTS. Lessee will not enter into nor
permit any pooling agreement or arrangement in respect of an Engine or Part
without the prior written consent of Lessor.
8.16 EQUIPMENT CHANGES.
(a) Lessee will not make any modification or addition to the
Aircraft (each an "Equipment Change."), except for an
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Equipment change which is expressly permitted by Letter Agreement No. 2.
8.17 TITLE ON AN EQUIPMENT CHANGE.
(a) Title to all Engines and Parts installed on the Aircraft
whether by way of replacement, as the result of an Equipment Change or otherwise
(except those installed pursuant to Section 8.13(b)) will on installation,
without further act, vest in Lessor subject to this Agreement free and clear of
all Liens. Lessee will at its own expense take all such steps and execute, and
procure the execution of, all such instruments as Lessor may require and which
are necessary to ensure that title so passes to Lessor according to all
applicable laws. At any time when requested by Lessor, Lessee will provide
evidence to Lessor's satisfaction (including the provision, if required, to
Lessor of one or more legal opinions) that title has so passed to Lessor;
(b) Lessor may require Lessee to remove any Equipment Change
and to restore the Aircraft to its condition prior to that Equipment Change at
the end of the Term; and
(c) Except as referred to in Section 8.17(b) any Engine or Part
at any time removed from the Aircraft will remain the property of Lessor until a
replacement has been made in accordance with this Agreement and until title in
that replacement has passed, according to applicable laws, to Lessor subject to
this Agreement free of all Liens whereupon title to the replaced Engine or Part
will pass to Lessee.
8.18 THIRD PARTY. Lessee will use its best efforts to ensure that no
person (other than Lessor or any Bank) will act in any manner inconsistent with
its obligations under this Agreement and that all persons will comply with those
obligations as if references to "Lessee" included a separate reference to those
persons.
9. INSURANCE
9.1 INSURANCE. Lessee will maintain in full force during the Term
insurance in respect of the Aircraft in form and substance satisfactory to
Lessor (the "Insurance", which expression includes, where the context so admits,
any relevant re-insurance(s)) through such brokers and with such insurers and
having such deductibles and being subject to such exclusions as may be approved
by Lessor. The Insurance will be effected either: (a) on a direct basis with
insurers of recognized standing who normally participate in aviation insurance
in the leading United States and/or international insurance markets and led by
reputable underwriter(s) reasonably approved by Lessor; or (b) with a single
insurer or group of insurers reasonably approved by Lessor who does not retain
the risk but effects
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substantial reinsurance with reinsurers in the leading international insurance
markets and through brokers each of recognized standing and acceptable to Lessor
for a percentage acceptable to Lessor of all risks insured (the "Reinsurance").
9.2 REQUIREMENTS. Lessor's current requirements as to required
Insurance are as specified in this Section and in Schedule 4 and in Letter
Agreement No. 1. Lessor may from time to time stipulate other requirements for
the Insurance so that the scope and level of cover is maintained in line with
commercially accepted industry practice and the interests of Lessor protected.
9.3 CHANGE. If at any time Lessor reasonably determines that it is
necessary to revoke its approval of any insurer, reinsurer, insurance or
reinsurance, Lessor and/or its brokers, in order to protect the interests of the
parties insured, Lessor will first consult with Lessee and Lessee's brokers (as
for the time being approved by Lessor) regarding whether that approval should be
revoked to protect the interests of the parties insured. If, following the
consultation, Lessor reasonably determines that any change should be made to
protect the interests of the Lessor and the parties insured, Lessee will then
arrange or procure the arrangement of alternative cover satisfactory to Lessor.
9.4 INSURANCE COVENANTS. Lessee will:
(a) Ensure that all legal requirements as to insurance of the
Aircraft, any Engine or any Part which may from time to time be imposed by the
laws of the State of Registration or any state which can assert jurisdiction
over the Lessee, its business or the Aircraft, in so far as they affect or
concern the operation of the Aircraft, are complied with and in particular those
requirements compliance with which is necessary to ensure that (i) the Aircraft
is not in danger of detention or forfeiture, (ii) the Insurance remain valid and
in full force and effect, and (iii) the interests of the Indemnitees in the
Insurance and the Aircraft or any Part are not thereby prejudiced;
(b) Not use, cause or permit the Aircraft, any Engine or any
Part to be used for any purpose or in any manner not covered by the Insurance or
outside any geographical limit imposed by the Insurance except as provided by
Section 8.3(i);
(c) Comply with the terms and conditions of each policy of the
Insurance and not do, consent or agree to any act or omission which:
(i) invalidates or may invalidate the Insurance; or
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(ii) renders or may render void or voidable the whole or
any part of any of the Insurance; or
(iii) brings any particular liability within the scope of
an exclusion or exception to the Insurance;
(d) Not used.
(e) Commence renewal procedures within a reasonable period
prior to expiration of any of the Insurance and provide to Lessor:
(i) if requested by Lessor, a written status report of
renewal negotiation 14 days prior to each expiration date;
(ii) facsimiled confirmation of completion of renewal
prior to each expiration date;
(iii) certificates of insurance and broker's (and any
reinsurance brokers') letter of undertaking in a form acceptable to
Lessor, detailing the coverage and confirming the insurers' (and any
reinsurers') agreement to the specified insurance requirements of this
Agreement within seven (7) days after each renewal date;
(f) On reasonable request, provide to Lessor a certificate of
insurance issued by Lessee's insurance brokers;
(g) On reasonable request, provide to Lessor evidence that the
Insurance premiums have been paid;
(h) Not make any modification or alteration to the Insurance
material and adverse to the interests of any of the Indemnitees;
(i) Be responsible for any deductible under the Insurance; and
(j) Provide any other insurance and reinsurance related
information, or assistance, in respect of the Insurance as Lessor may reasonably
require.
9.5 FAILURE TO INSURE. If Lessee fails to maintain THE Insurance in
compliance with this Agreement, each of the Indemnitees will be entitled but not
bound (without prejudice to any other rights of Lessor under this Agreement):
(a) To pay the premiums due or to effect and maintain insurance
satisfactory to it or otherwise remedy Lessee's failure in such manner
(including, without limitation to effect and maintain an "owner's interest"
policy) as it considers
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52
appropriate. Any sums so expended by it will become immediately due and payable
by Lessee to Lessor together with interest thereon at the rate specified in
Section 5.10, from the date of expenditure by it up to the date of reimbursement
by Lessee; and
(b) At any time while such failure is continuing to require the
Aircraft to remain at any airport or to proceed to and remain at any airport
designated by it until the failure is remedied to its satisfaction.
9.6 CONTINUING INDEMNITY. Lessor may require Lessee to effect and to
maintain insurance after the Expiration Date with respect to its liability under
the indemnities in Section 10 for such period as Lessor may reasonably require
(but in any event not more than three (3) years) which provides for each
Indemnitee to be named as additional insured. Lessee's obligation in this
Section shall not be affected by Lessee ceasing to be lessee of the Aircraft
and/or any of the Indemnitees ceasing to have any interest in respect of the
Aircraft.
9.7 APPLICATION OF INSURANCE PROCEEDS. As between Lessor and Lessee:
(a) All insurance payments received as the result of an Event
of Loss occurring during the Term will be paid to Lessor, and Lessor will pay
the balance of those amounts to Lessee after deduction of all amounts which may
be or become payable by Lessee to Lessor under this Agreement (including under
Sections 11.1(b) and 11.1(c));
(b) All insurance proceeds of any property damage or loss to
the Aircraft, any Engine or any Part occurring during the Term not constituting
an Event of Loss and in excess of the Damage Notification Threshold will be paid
to Lessor and applied in payment (or to reimburse Lessee) for repairs or
replacement property upon Lessor being satisfied that the repairs or replacement
have been effected in accordance with this Agreement. Insurance proceeds in
amounts below the Damage Notification Threshold may be paid by the insurer
directly to Lessee. Any balance remaining may be retained by Lessor;
(c) All insurance proceeds in respect of third party liability
will, except to the extent paid by the insurers to the relevant third party, be
paid to Lessor to be paid directly in satisfaction of the relevant liability or
to Lessee in reimbursement of any payment so made; and
(d) Notwithstanding Sections 9.7(a), (b) or (c), if at the time
of the payment of any such insurance proceeds a Default has occurred and is
continuing, all such proceeds will be paid to or retained by Lessor to be
applied toward payment of any amounts
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53
which may be or become payable by Lessee in such order as Lessor sees fit or as
Lessor may elect.
10. INDEMNITY
10.1 GENERAL. Lessee agrees to assume liability for, defend, indemnify
and hold harmless the Indemnitees on an after tax basis from and against any and
all claims, proceedings, losses, liabilities, damages (whether direct, indirect,
special, incidental or consequential) suits, judgments, costs, expenses
(including, without limitation, reasonable legal fees and expenses), penalties
(whether civil or criminal) or fines (each a "Claim") (regardless of whether
such Claim is made during or after the Term (but not before)):
(a) Which may at any time be suffered or incurred directly or
indirectly as a result of or in any manner connected with Lessee's possession,
delivery, performance, management, registration, control, maintenance,
condition, service, repair, overhaul, leasing, use, operation or return of the
Aircraft, any Engine or Part (either in the air or on the ground), whether or
not the Claim may be attributable to any defect in the Aircraft, any Engine or
any Part or to its design, testing or use or otherwise, and regardless of
whether it arises out of or is attributable to any act or omission, negligent or
otherwise, of any Indemnitee except as otherwise provided herein; or
(b) Which arise out of any act or omission which invalidates or
which renders voidable any of the Insurance; or
(c) Which results from Lessee's breach of any of its
representations or warranties or any other Event of Default under this
Agreement;
but excluding any Claim in relation to a particular Indemnitee to the extent
that that Claim is covered pursuant to another indemnity provision of this
Agreement or to the extent it arises as a RESULT OF THE GROSS NEGLIGENCE OR
wilful misconduct of that Indemnitee, Taxes or a Lessor Lien, or to the extent
it arises out of facts or circumstances occurring prior to the Delivery Date or
after the Expiration Date, where such facts or circumstances do not result from
acts or omissions of Lessee.
10.2 DURATION. Lessee's obligations arising under this Section 10 will
continue in full force after the Expiration Date.
10.3 SUBROGATION. Lessee shall be subrogated to an Indemnitee's rights
to any matter with respect to which Lessee has reimbursed such Indemnitee for
amounts expended or incurred by it or has paid such amount directly pursuant to
Section 10.1.
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10.4 NOTICE AND COOPERATION. In case any action, suit or proceeding is
brought against an Indemnitee in connection with any Claim indemnified against
under this Agreement, such Indemnitee will: promptly after receipt of notice of
such action, suit or proceeding, notify Lessee thereof, enclosing a copy of all
papers served upon such Indemnitee. Lessee may resist or defend such action,
suit or proceeding The Indemnitee shall take all actions reasonably requested by
Lessee, at Lessee's cost and expense, in connection with Lessee's defense or
resistance of such action, suit or proceeding.
11. EVENTS OF LOSS
11.1 EVENTS OF LOSS.
(a) If an Event of Loss occurs with respect to the Aircraft
prior to delivery of the Aircraft to Lessee, this Agreement will immediately
terminate and, except as expressly stated in this Agreement, neither party will
have any further obligation or liability under this Agreement except that Lessor
will refund to Lessee the amount of any Aircraft Deposit paid under this
Agreement; and
(b) If an Event of Loss occurs with respect to the Aircraft
after delivery of the Aircraft to Lessee, Lessee will pay the Agreed Value to
Lessor on or prior to the later of (i) five (5) Business Days after the Event of
Loss and (ii) the date of receipt of insurance proceeds in respect of that Event
of Loss, but no later than sixty (60) days after the Event of Loss occurs.
Subject to the rights of any insurers and reinsurers or other third party, upon
irrevocable payment in full to Lessor of that amount and all other amounts which
may be or become payable to Lessor under this Agreement, Lessor will without
recourse or warranty (except as to Lessor's Liens) and without further act, be
deemed to have transferred to Lessee all of Lessor's rights to any Engine and
Parts not installed when the Event of Loss occurred, all on an as-is where-is
basis, and will at Lessee's expense, execute and deliver such bills of sale and
other documents and instruments as Lessee may reasonably request to evidence (on
the public record or otherwise) the transfer and the vesting of Lessor's rights
in such Parts in Lessee, free and clear of all rights of Lessor and Lessor
Liens.
(c) If an Event of Loss occurs with respect to an Engine under
circumstances in which there has not occurred an Event of Loss with respect to
the Aircraft:
(i) Lessee shall forthwith (and in any event within five
(5) days after such occurrence) give Lessor written notice thereof, and Lessor
and Lessee shall proceed diligently and cooperate fully with each other in the
recovery of any and all proceeds of insurance applicable thereto.
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(ii) Subject to satisfaction of the conditions set forth
in Clause (iii) below, as soon as practicable but in no event later than sixty
(60) days after the occurrence of such Event of Loss, Lessor shall substitute a
Replacement Engine (as defined herein) for the Engine as to which such Event of
Loss has occurred. In such event, immediately upon the effectiveness of such
substitution, the Replacement Engine shall become subject to this Lease
Agreement and be deemed part of the Aircraft for all purposes thereof to the
same extent as the Engine which is replaced. Upon such substitution, Lessor and
Lessee shall execute and deliver such documents and instruments (including
appropriate filings with the FAA's Aircraft Registry) to evidence such
substitution of the Engine in question by the Replacement Engine.
(iii) Lessor shall retain all insurance proceeds up to the
full amount of the purchase price for the Replacement Engine. In the event that
the insurance proceeds are less than the full amount of the purchase price for
the Replacement Engine, Lessee shall reimburse Lessor for any such shortfall. In
the event that the insurance proceeds exceed such purchase price for the
Replacement Engine, Lessor shall return to Lessee the amount of any such excess.
Notwithstanding the foregoing terms and conditions to the contrary, Lessor's
obligation to provide a Replacement Engine or to refund, return or repay to
Lessee such excess insurance proceeds are subject to the condition that no
Default described in Sections 13.l(a) or (b) or Sections 13.1(h)-(1) shall have
occurred and be continuing.
(iv) For purposes of this Section 11.1(c), the term
"Replacement Engine means a Xxxxx and Xxxxxxx Model JT8D-9A engine (or an engine
of the same manufacturer of a comparable or improved model that is suitable and
certificated by the FAA, for installation and use on the Aircraft) which has a
value and utility (based on but not limited to all life-limited engine
components and time since last Hot Section Refurbishment), and is in as good
operating condition as the Engine it is replacing, assuming such Engine was in
the condition and repair as required by the terms hereof immediately prior to
the occurrence of such Event of Loss.
11.2 REQUISITION. During any requisition for use or hire of the
Aircraft, any Engine or Part which does not constitute an Event of Loss:
(a) The Rent, Maintenance Reserves and other charges payable
under this Agreement will not be suspended or abated either in whole or in part,
and Lessee will not be released from any of its other obligations under the
Agreement (other than operational obligations with which Lessee is unable to
comply solely by virtue of the requisition); and
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(b) So long as no Default has occurred and is continuing,
Lessee will be entitled to any hire or other compensation paid by the
requisitioning authority in respect of the Term. Lessee will, as soon as
practicable after the end of any such requisition, cause the Aircraft to be put
into the condition required by this Agreement. Lessor will be entitled to all
compensation payable by the requisitioning authority in respect of any change in
the structure, state or condition of the Aircraft arising during the period of
requisition, and Lessor will apply such compensation in reimbursing Lessee for
the cost of complying with its obligations under this Agreement in respect of
any such change, but so that, if any Default has occurred and is continuing,
Lessor may apply the compensation or hire in or towards settlement of any
amounts owing by Lessee under this Agreement.
12. RETURN OF AIRCRAFT.
12.1 RETURN. (a) On the Expiration Date or earlier termination of the
lease of the Aircraft under this Agreement unless an Event of Loss has occurred,
Lessee will, at its expense, redeliver the Aircraft and Aircraft Documents to
Lessor at the Redelivery Location or such other airport as is mutually
acceptable to the parties hereto, in a condition complying with Schedule 3, free
and clear of all Liens, including Permitted Liens (but excluding Lessor Liens)
and in a condition qualifying for immediate certification of airworthiness by
the FAA or as otherwise agreed by Lessor and Lessee.
(b) Provided that (x) no Default shall have occurred and is
continuing; and (y) there shall have been no material adverse change in Lessee's
financial condition since the Delivery Date, Lessee shall have the option (the
"C Check Option") to extend the Term for up to 2 months provided that such
extension of the Term is required by Lessee so as to enable Lessee to perform
the C Check required by paragraph 1 (e) of Schedule 3 at the time at which such
check would otherwise fall to be performed pursuant to the Agreed Maintenance
Program in the absence of the requirement contained in such section. The C Check
Option shall be exercised, if at all, by Lessee delivering an irrevocable
written notice (a "C Check Notice") to Lessor not later than one hundred eighty
(180) days prior to the New Expiration Date (as defined below) proposed by
Lessee which notice shall state whether Lessee desires to extend the Term and
the proposed date of performance and completion of the aforementioned C Check.
Upon the receipt by Lessor of the C Check Notice, (xx) Lessee shall be obliged
to lease the Aircraft from Lessor until the date (the "New Expiration Date") of
completion of the aforementioned C Check in accordance with the terms and
conditions of this Agreement; and (yy) the definition of "Expiration Date" shall
be deemed to have been amended so as to refer to the New Expiration Date and the
Aircraft shall be redelivered to Lessor on that date
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(or, as may be applicable, any other date contemplated by such definition) in
accordance with the terms and conditions of this Agreement.
12.2 FINAL INSPECTION. Immediately prior to redelivery of the Aircraft,
Lessee will make the Aircraft available to Lessor for inspection ("Final
Inspection") in order to verify that the condition of the Aircraft complies with
this Agreement. The Final Inspection will be long enough to permit Lessor to:
(a) Inspect the Aircraft Documents;
(b) Inspect the Aircraft and uninstalled Parts;
(c) Inspect the Engines, including without limitation (i) at
Lessor's expense, a video boroscope inspection of (A) the low pressure and high
pressure compressors and (B) turbine area and (ii) at Lessee's expense, on-wing
engine condition runs; and
(d) Observe a two (2) hour demonstration flight (with up to
three (3) of Lessor's representatives as on-board observers)
Provided, however, that such Final Inspection will not exceed three (3)
consecutive days.
12.3 NON-COMPLIANCE. To the extent that, at the time of Final
Inspection, the condition of the Aircraft does not comply with this Agreement,
Lessee will at Lessor's option:
(a) Immediately rectify the non-compliance and to the extent
the non-compliance extends beyond the Expiration Date, the Term will be
automatically extended and this Agreement will remain in force until the
non-compliance has been rectified; or
(b) Redeliver the Aircraft to Lessor and indemnify Lessor, and
provide to Lessor's satisfaction cash as security for that indemnity, against
the cost of putting the Aircraft into the condition required by this Agreement.
For the avoidance of doubt, nothing in this Agreement shall be
construed to require Lessor or Lessee to modify the Airframe or any Engine at
any time during the Term or upon redelivery of the Aircraft in order to bring
such equipment into compliance with the Stage 3 Requirements.
12.4 NOT USED.
12.5 ACKNOWLEDGMENT. Provided Lessee has complied with its obligations
under this Agreement, upon redelivery of the Aircraft by Lessee to Lessor at the
Redelivery Location, Lessor will deliver to Lessee an acknowledgment confirming
that Lessee has
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redelivered the Aircraft to Lessor in accordance with this
Agreement.
12.6 MAINTENANCE PROGRAM.
(a) Prior to the Expiration Date and upon Lessor's request,
Lessee will provide Lessor or its agent reasonable access to the Agreed
Maintenance Program and the Aircraft Documents in order to facilitate the
Aircraft's integration into any subsequent operator's fleet;
(b) Lessee will, if requested by Lessor to do so, upon return
of the Aircraft, deliver to Lessor a certified true current and complete copy of
the Agreed Maintenance Program, together with a letter authorizing Lessor to use
such copy for "bridging" purposes for the next lessee of the Aircraft. Lessor
agrees that it will not disclose the contents of the Agreed Maintenance Program
to any person or entity except to the extent necessary to bridge the Maintenance
Program for the Aircraft from the Agreed Maintenance Program to another program
after the Expiration Date; provided, however, that this will not give Lessor or
any third party any rights to use the Agreed Maintenance Program.
12.7 NOT USED.
12.8 AIRCRAFT STORAGE. During the period of thirty (30) days after the
Expiration Date, Lessor shall have the right to (a) require Lessee to maintain,
store and insure the Aircraft at Lessee's principal maintenance facility or such
other location as may be mutually agreed by Lessor and Lessee, at Lessor's sole
cost and expense as provided below; and (b) require Lessee to ferry the Aircraft
to Lessor's principal place of business or its principal maintenance facility
within the continental United States, at Lessee's sole cost and expense. Any
maintenance or insurance cost actually incurred or paid by Lessee to any third
party vendor in connection with the foregoing shall be payable by Lessor at
Lessee's direct cost without "xxxx-up". No later than thirty (30) days prior to
the Expiration Date, Lessor shall advise Lessee as to whether Lessor requires
Lessee to provide the services contemplated by this Section 12.8.
13. DEFAULT
13.1 EVENTS OF DEFAULT. Each of the following events or conditions will
constitute an Event of Default (whether any such event or condition is voluntary
or involuntary or occurs by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any Government Entity):
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(a) NON-PAYMENT. Lessee fails to make (i) any payment of Rent,
Maintenance Reserves or the Agreed Value or fails to pay the Deposit on the due
date and such failure continues for two (2) Business Da.Js or (ii) any other
payment due under this Agreement on the due date and such failure continues for
five (5) Business Days after written demand therefor from Lessor to Lessee given
on or after such due date; or
(b) INSURANCE. Lessee fails to comply with any provision of
Section 9 or any insurance required to be maintained under this Agreement is
canceled or terminated or notice of cancellation is given in respect of any such
insurance and such insurance is not renewed or replaced before cancellation or
termination; or
(c) BREACH. Lessee fails to comply with any other provision of
this Agreement and, if such failure is in the reasonable opinion of Lessor
capable of remedy, the failure continues for ten (10) calendar days after
written notice from Lessor to Lessee; or
(d) REPRESENTATION. Any material representation or warranty
made (or deemed to be repeated) by Lessee in or pursuant to this Agreement or in
any document or certificate or statement is or proves to have been incorrect in
any material respect when made or deemed to be repeated; or
(e) CROSS DEFAULT. An Event of Default shall occur and be
continuing under any Other Agreement or any other payment of Lessee owing to
Lessor under any Other Agreement is not paid when due.
(f) APPROVALS: Any consent, authorization, license, certificate
or approval of or registration with or declaration to any Government Entity in
connection with this Agreement (including, without limitation):
(i) required by Lessee to authorize, or in connection
with, the execution, delivery, validity, enforceability or admissibility
in evidence of this Agreement or the performance by Lessee of its
obligations under this Agreement; or
(ii) the registration of the Aircraft (to the extent that
the same is within the control of Lessee); or
(iii) Lessee's authority to operate the Aircraft under
Part 121 of the Federal Public Aviation Regulations and Lessee's
interstate Certificate of Public Convenience and Necessity issued under
Section 401 of the Federal Aviation Act;
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is modified in a manner unacceptable to Lessor or is withheld, or is revoked,
suspended, canceled, withdrawn, terminated or not renewed, or otherwise ceases
to be in full force provided the foregoing is not the result of any act,
omission or breach of Lessor; or
(g) BANKRUPTCY, ETC.
(i) Lessee consents to the appointment of a custodian,
receiver, trustee or liquidator of itself or all or any material part of
Lessee's property or Lessee's consolidated property, or Lessee admits in
writing its inability to, or is unable to, or does not, pay its debts
generally as they come due, or makes a general assignment for the benefit
of creditors, or Lessee files a voluntary petition in bankruptcy or a
voluntary petition seeking reorganization in a proceeding under any
bankruptcy or insolvency laws (as now or hereafter in effect), or an
answer admitting the material allegations of a petition filed against
Lessee in any such proceeding, or Lessee by voluntary petition, answer or
consent seeks relate under the provisions of any other bankruptcy,
insolvency or other similar law providing for the reorganization or
winding-up of corporations, or provides for an agreement, composition,
extension or adjustment with its creditors, or any corporate action
(including, without limitation, any board of directors or shareholder
action) is taken by Lessee in furtherance of any of the foregoing,
whether or not the same is fully effected or accomplished; or
(ii) an order, judgment or decree is entered by any court
appointing, without the consent of Lessee, a custodian, receiver, trustee
or liquidator of Lessee, or of all or any material part of Lessee's
property or Lessee's consolidated property is sequestered, and any such
order, judgment or decree of appointment or sequestration remains in
effect, undismissed, unstayed or unvacated for a period of sixty (60)
days after the date of entry thereof or at any time an order for relief
is granted; or
(iii) an involuntary petition against Lessee in a
proceeding under the United States Federal Bankruptcy laws or other
insolvency laws (as now or hereafter in effect) is filed and is not
withdrawn or dismissed within thirty (30) days thereafter or at any time
an order for relief is granted in such proceeding, or if, under the
provisions of any law providing for reorganization or winding-up of
corporations which may apply to Lessee, any court of competent
jurisdiction assumes jurisdiction over, or custody or control of, Lessee
or of all or any material part of Lessee's property, or Lessee's
consolidated property and such jurisdiction, custody or control remains
in effect,
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unrelinquished, unstayed or unterminated for a period of sixty (60) days
or at any time an order for relief is granted in such proceeding; or
(h) UNLAWFUL. It becomes unlawful for Lessee to perform any of
its obligations under this Agreement or this Agreement becomes wholly or partly
invalid or unenforceable;
(i) SUSPENSION OF BUSINESS. Lessee suspends or ceases or
threatens to suspend or cease to carry on all or a substantial part of its
business as a Certificated Air Carrier for a period of more than seven (7) days
other than for any of the events enumerated in the definition of "Excusable
Delay"; or
(j) DISPOSAL. Except for a reorganization the terms of which
have received the previous consent in writing of Lessor, Lessee disposes,
conveys or transfers or threatens to dispose, convey or transfer of all or a
material part of its assets, liquidates or dissolves or consolidates or merges
with any other Person (other than a consolidation or merger permitted by the
terms of Section 8.8(b) above), whether by one or a series of transactions,
related or not.
(k) RIGHTS. The existence, validity, enforceability or priority
of the rights of Lessor as owner and lessor in respect of the Aircraft are
challenged by Lessee or any other person claiming by or through Lessee, except
if such challenge is in connection with a breach by Lessor of Section 7.1; or
(l) DELIVERY. Lessee fails to accept the Aircraft when validly
tendered for acceptance or delivery by Lessor in the condition required by and
pursuant to this Agreement.
13.2 RIGHTS. If an Event of Default occurs, Lessor may at its option
(and without prejudice to any of its other rights under this Agreement), at any
time thereafter (without notice to Lessee except as required under applicable
law):
(a) By written notice to Lessee and with immediate effect,
terminate this lease of the Aircraft (but without prejudice to the continuing
obligations of Lessee under this Agreement), whereupon all rights of Lessee
under this Agreement shall cease; and/or
(b) Proceed by appropriate court action or actions to enforce
performance of this Agreement or to recover damages for the breach of this
Agreement; and/or
(c) Either:
(i) Take possession of the Aircraft, for which purpose
Lessor may enter any premises belonging to or
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in the occupation of or under the control of Lessee where the Aircraft
may be located, or cause the Aircraft to be redelivered to Lessor at
Dubuque, Iowa (or such other location in the continental U.S. as Lessor
may require) Lessor is hereby irrevocably by way of security for Lessee's
obligations under this Agreement appointed attorney for Lessee in causing
the redelivery [or in directing the pilots of Lessee or other pilots to
fly] the Aircraft to that airport and will have all the powers and
authorizations necessary for taking that action; or
(ii) By serving written notice require Lessee to
redeliver the Aircraft to Lessor at Dubuque, Iowa (or such other location
in the continental U.S. as Lessor may require).
13.3 DEREGISTRATION. If an Event of Default occurs, Lessor may sell or
otherwise deal with the Aircraft free and clear of any leasehold or other
interest of Lessee as if this Agreement had never been made and Lessee will, at
the request and expense of Lessor, execute and deliver to Lessor such
acknowledgment of termination of this Lease or other consent to deregistration
of the Aircraft and its export from the United States to enable the Aircraft to
be delivered, at Lessor's option, outside the United States; Lessee hereby
irrevocably and by way of security for its obligations under this Agreement
appoints (which appointment is coupled with an interest) Lessor as its attorney
to execute and deliver any such documentation required in connection with the
foregoing.
13.4 DEFAULT PAYMENTS. If:
(a) An Event of Default occurs; or
(b) The Aircraft is not delivered on the proposed Delivery Date
by reason of failure of Lessee to satisfy any conditions to that delivery and
such failure is not the result of Lessor's breach hereunder;
Lessee will indemnify Lessor on demand against any loss, damage, expense, cost
or liability which Lessor may sustain or incur directly or indirectly as a
result including but not limited to:
(i) Any amount of principal, interest, fees or other
sums whatsoever paid or payable on account of funds borrowed in order to carry
any unpaid amount provided that the element of Lessor's damages described in
this clause (i) shall not exceed the aggregate amount of Rent remaining to be
paid under this Agreement discounted at the Prime Rate to the date of Lessee's
payment; or
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(ii) Any loss, cost, expense or liability sustained or
incurred by Lessor owing to Lessee's failure to redeliver the Aircraft on the
date, at the place and in the condition required by this Agreement.
14. ASSIGNMENT
14.1 LESSEE WILL NOT ASSIGN, TRANSFER (VOLUNTARILY OR INVOLUNTARILY BY
OPERATION OF LAW OR OTHERWISE) OR CREATE OR PERMIT TO EXIST ANY LIEN IN, TO OR
UNDER, ANY OF ITS RIGHTS UNDER THIS AGREEMENT.
14.2 Lessor may assign or transfer all of its rights under this
Agreement and in the Aircraft, and in the case of an assignment other than by
way of security, Lessor will have no further obligation under this Agreement
following the assignment of all its rights under this Agreement but
notwithstanding that assignment will remain entitled to the benefit of each
indemnity and the liability insurances effected under this Agreement; provided
that such assignment, novation or transfer does not violate any provision of the
Federal Aviation Act or any rule or regulation thereunder, or prevent the
continued U.S. registration of the Aircraft. Lessee will comply with all
reasonable requests of Lessor, its successors and assigns in respect of any such
assignment, and Lessor will promptly notify Lessee of any such assignment.
14.3 If Lessor desires to effect any assignment or transfer of its
rights and obligations under this Agreement, Lessee agrees to cooperate and take
all such steps as Lessor may reasonably request to give the transferee the
benefit of this Agreement. Any reasonable expenses incurred by Lessee directly
as a result of any assignment contemplated by Section 14.2 shall be advanced by
Lessor.
14.4 Any assignment, novation or transfer by Lessor will be at Lessor's
cost and expense.
14.5 Any provisions of this Section 14 to the contrary notwithstanding,
Lessor's assignee shall:
(i) be a "citizen" of the United States within the
meaning of 49 U.S.C. Section 40102(a) (15);
(ii) have the full power and authority to enter into and
carry out the transactions contemplated hereby;
(iii) enter into an agreement satisfactory in form and
substance to Lessee whereby the assignee confirms that it shall be deemed
a party to this Agreement and provides all of the representations,
warranties and
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agreements of Lessor under Sections 2.4 and 7 hereof and is bound by all
the terms of, and undertakes all the obligations of Lessor contained in
this Agreement and the documents ancillary thereto to which Lessor is a
party and confirms that such Agreement and agreements are legal, binding
and enforceable in accordance with their terms.
15. ILLEGALITY
If it is or becomes unlawful in any jurisdiction for Lessor to give
effect to any of its obligations as contemplated by this Agreement or to
continue this Agreement, Lessor may by notice in writing to Lessee terminate the
leasing of the Aircraft under this Agreement and Lessee will forthwith redeliver
the Aircraft to Lessor in accordance with Section 12. Without prejudice to the
foregoing Lessor will consult in good faith with Lessee as to any steps which
may be taken to restructure the transaction to avoid that unlawfulness but will
be under no obligation to take any such steps.
16. MISCELLANEOUS
16.1 WAIVERS, REMEDIES CUMULATIVE. The rights of each party under this
Agreement:
(a) May be exercised as often as necessary;
(b) Are cumulative and not exclusive of its rights under any
law; and
(c) May be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right will not constitute a
waiver of that right.
16.2 DELEGATION. Lessor may delegate to any person or persons all or
any of the trusts, powers or discretions vested in it by these presents and any
such delegation may be made upon such terms and conditions and subject to such
regulations (including power to sub-delegate) as Lessor in its absolute
discretion thinks fit provided, however, that such delegation shall not relieve
Lessor of its obligations hereunder, including without limitation, Lessee's
right of quiet enjoyment under Section 7.1 hereof.
16.3 APPROPRIATION. If any sum paid or recovered in respect of the
liabilities of Lessee under this Agreement is less than the amount then due,
Lessor may apply that sum to amounts due under this Agreement in such
proportions and order and generally in such manner as Lessor may determine at
its sole discretion.
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16.4 NOT USED.
16.5 NOT USED.
16.6 SET-OFF. Lessor may set off any matured obligation owed by Lessee
under this Agreement or the Other Agreements !to the extent beneficially owned
by Lessor) against any obligation (whether or not matured) owed by Lessor to
Lessee, regardless of the place of payment or currency. If an obligation is
unascertained or unliquidated, Lessor may in good faith estimate that obligation
and set off in respect of the estimate, subject to the relevant party accounting
to the other when the obligation is ascertained or liquidated. Lessor will not
be obliged to pay any amounts to Lessee under this Agreement so long as any sums
which are then due from Lessee under this Agreement or the Other Agreements
remain unpaid and any such amounts which would otherwise be due will fall due
only if and when Lessee has paid all such sums except to the extent Lessor
otherwise agrees or sets off such amounts against such payment pursuant to the
foregoing.
16.7 SEVERABILITY. If a provision of this Agreement is or becomes
illegal, invalid or unenforceable in any jurisdiction, that will not affect:
(a) The legality, validity or enforceability in that
jurisdiction of any other provision of this Agreement; or
(b) The legality, validity or enforceability in any other
jurisdiction of that or any other provision of this Agreement.
16.8 REMEDY. If Lessee fails to comply with any provision of this
Agreement, Lessor may, without being in any way obliged to do so or responsible
for so doing and without prejudice to the ability of Lessor to treat the
non-compliance as a Default or an Event of Default, effect compliance on behalf
of Lessee, where upon Lessee shall become liable to pay immediately any sums
expended by Lessor together with all costs and expenses (including legal costs)
in connection therewith.
In the event that Lessee obtains a judgment against Lessor, Lessee
will be entitled to receive all costs and expenses (including legal costs) in
connection therewith.
16.9 EXPENSES. Unless this Agreement is terminated by reason of
Lessor's failure to deliver the Aircraft to Lessee through no breach or default
of Lessee of the terms of this Agreement, Lessee will pay to Lessor on demand,
upon the occurrence of a Default, all reasonable expenses (including legal,
survey and other costs) payable or incurred by Lessor in contemplation of, or
otherwise in connection with, the
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enforcement of or preservation of any of Lessor's rights under this Agreement,
or in respect of the repossession of the Aircraft.
All expenses payable pursuant to this Section 16.9 will be paid as they are
incurred by Lessor.
16.10 TIME OF ESSENCE. The time stipulated in this Agreement for all
payments payable by Lessee to Lessor and for the performance of Lessee's other
obligations under this Agreement will be of the essence of this Agreement.
16.11 NOTICES. All notices under, or in connection with, this Agreement
will, unless otherwise stated, be given in Any such notice is deemed effectively
to be given, if by letter, by registered mail, return receipt requested, or by
an overnight courier which provides a receipt upon deposit with such courier,
when delivered.
The address of Lessee and Lessor are as follows:
Lessee: Air South Airlines, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Vice President - Airline
Services
Lessor: Mimi Leasing Corp.
000 Xxxxxx Xxxxx
Xxxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
16.12 LAW AND JURISDICTION:
(a) THIS AGREEMENT IN ALL RESPECTS IS GOVERNED BY AND TO BE
INTERPRETED IN ACCORDANCE WITH LAWS OF THE STATE OF THE GOVERNING LAW, WITHOUT
REGARD TO ITS CONFLICTS OF LAW PRINCIPLES, AND THIS AGREEMENT SHALL BE DEEMED TO
BE EXECUTED AND DELIVERED IN SUCH STATE.
(b) For the benefit of Lessor, Lessee agrees that the federal
courts of the Eastern District of Iowa, are to have nonexclusive jurisdiction to
settle any disputes in connection with this Agreement and submits itself and its
property to the jurisdiction of the courts of the State of Iowa in connection
with this Agreement;
(c) Without prejudice to any other mode of service, Lessee
consents to the service of process relating to any such proceedings by prepaid
mailing of a copy of the process to Lessee's agent at the address identified in
paragraph [i);
(d) Lessee:
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(i) waives objection to the federal courts in the State
of Iowa on grounds of inconvenient forum or otherwise as regards
proceedings in connection with this Agreement; and
(ii) agrees that a judgment or order of a federal court
in the State of Iowa in connection with this Agreement is conclusive and
binding on it and may be enforced against it in the courts of any other
jurisdiction;
(e) Nothing in this Section limits the right of Lessor to bring
proceedings against Lessee in connection with this Agreement in any other court
of competent jurisdiction.
(f) Lessee and Lessor irrevocably and unconditionally:
(i) agrees that if the other party brings legal
proceedings against it or its assets in relation to this Agreement no
immunity from such legal proceedings (which will be deemed to include
without limitation, suit, attachment prior to judgment, other attachment,
the obtaining of judgment, execution or other enforcement) will be
claimed by or on behalf of itself or with respect to its assets;
(ii) waives any such right of immunity which it or its
assets now has or may in the future acquire;
(iii) consents generally in respect of any such
proceedings to the giving of any relief or the issue of any process in
connection with such proceedings including, without limitation, the
making, enforcement or execution against any property whatsoever
(irrespective of its use or intended use) of any order or judgment which
may be made or given in such proceedings.
16.13 ENTIRE AGREEMENT. Except for the Original Lease which will remain
in full force and effect until the Aircraft is accepted by Lessee pursuant to
Section 4.2 of this Agreement, after which time the Original Lease shall be
released, terminated and appropriate filings with respect thereto made at the
FAA Registry, Oklahoma City, Oklahoma, this Agreement, Letter Agreement No. 1
and Letter Agreement No. 2 are the sole and entire agreements between Lessor and
Lessee in relation to the leasing of the Aircraft, and shall supersede all
previous agreements in relation to that leasing.
16.14 INDEMNITIES. All rights expressed to be granted to each Indemnitee
under this Agreement (other than Lessor) are given to Lessor on behalf of that
Indemnitee.
16.15 COUNTERPARTS. This Agreement may be executed in counterparts each
of which will constitute one and the same document.
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17. DISCLAIMERS AND WAIVERS
17.1 EXCLUSION. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE
AIRCRAFT IS DELIVERED "AS IS, WHERE IS" AND LESSEE AGREES AND ACKNOWLEDGES THAT
UPON ACCEPTANCE OF DELIVERY OF THE AIRCRAFT BY LESSEE, SAVE AS EXPRESSLY STATED
IN THIS AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS
NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN, ANY WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO, THE AIRCRAFT, INCLUDING
BUT NOT LIMITED TO:
(a) THE AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR ANY
PARTICULAR USE OR PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE AIRCRAFT OR ANY
PART; OR
(b) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
WHETHER OR NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED; OR
(c) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS
OF OR DAMAGE TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD PARTY, OR
FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
17.2 WAIVER. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, LESSEE
HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL ITS RIGHTS IN RESPECT OF
ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, ON THE PART OF LESSOR AND
ALL CLAIMS AGAINST LESSOR HOWSOEVER AND WHENEVER ARISING AT ANY TIME IN RESPECT
OF OR OUT OF THE OPERATION OR PERFORMANCE OF THE AIRCRAFT OR THIS AGREEMENT
EXCEPT TO THE EXTENT ARISING UNDER SECTION 2.4.
17.3 CONFIRMATION. LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE
PROVISIONS OF THIS SECTION 17 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE
BEEN CALCULATED BASED ON ITS PROVISIONS.
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18. TRUE LEASE
(i) It is the intent of Lessor and Lessee that for all
purposes (including without limitation U.S. federal income tax purposes)
this Agreement will be a true lease, and that this Agreement conveys to
the Lessee no right, title or interest in the Aircraft except as a
lessee.
(ii) Notwithstanding any provision herein or elsewhere
contained to the contrary, it is understood and agreed between the Lessor
and the Lessee that the transactions contemplated by this Agreement are
expressly intended to be, shall be and should be construed so as to be,
entitled to the full benefits of 11 U.S.C. Section 1110 from time to time
with respect to the right to repossess the Airframe, the Engines and any
Parts as provided herein, and in any circumstances where more than one
construction of the terms and conditions of this Agreement is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful.
(iii) Lessee acknowledges that Lessor would not have
entered into this Agreement unless it had available to it the benefits of
a lessor under Section 1110 of Title 11 of the United States Code. Lessee
covenants and agrees with Lessor that to better ensure the availability
of such benefits, Lessee shall support any motion, petition or
application filed by Lessor with any bankruptcy court having jurisdiction
over Lessee, whereby Lessor seeks recovery of possession of the Aircraft
under said Section 1110 and shall not in any way oppose such action by
Lessor unless Lessee shall have complied with the requirements of said
Section 1110 to be fulfilled in order to entitle Lessee to continued use
and possession of the Aircraft hereunder, In the event said Section 1110
is amended, or if it is repealed and another statute is enacted in lieu
thereof, Lessor and Lessee agree to amend this Agreement and take such
other action not inconsistent with this Agreement as Lessor reasonably
deems necessary so as to afford to Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of
aircraft similarly situated to Lessor.
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IN WITNESS whereof the parties hereto have executed this Agreement on the
date shown at the beginning of this Agreement.
WITNESS: Lessor:
MIMI LEASING CORP.
By:
-------------------------- ---------------------
Name:
-------------------
Title:
------------------
WITNESS: Lessee:
AIR SOUTH AIRLINES, INC.
/s/ By: /s/ Xxxxxx X. Xxxxxx
------------------------- ---------------------
Name: Xxxxxx X. Xxxxxx
-------------------
Title: Vice President
------------------
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SCHEDULE 1
PART 1
FORM OF LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT is dated as of February 1, 1997, and is
executed by Air South Airlines, Inc. ("Lessee") and Mimi Leasing Corp.
("Lessor"), pursuant to Section 3.1(d) of the Aircraft Lease Agreement between
Lessor and Lessee dated as or February 1, 1997 (the "Lease"). All capitalized
terms used herein which are not otherwise defined herein shall have the meaning
given to such terms in the Lease.
Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Aircraft described below (the "Aircraft") upon and subject to all of
the terms, conditions and provisions of the Lease, and Lessor and Lessee further
agree and state as follows:
1. Description of the Aircraft:
(a) Airframe: Boeing 737-247
FAA Registration No.: N4510W
Manufacturer's Serial No.: 19607
(b) Engines: Two (2) Xxxxx & Xxxxxxx engines, Model
JT8D-9A, Serial Numbers 674165B and 674214B, each of
said engines having 750 or more rated take-off
horsepower or the equivalent thereof;
(c) All Parts (other than Engines) installed on or
associated with the Airframe and Engines; and
(d) The Aircraft Documents relating to the Airframe and
Engines.
2. The main base of the Aircraft is Columbia, South Carolina.
3. The Term for the Lease commences on February 1, 1997 (the
"Delivery Date") and ends on the day preceding the numerically corresponding day
36 months after the Delivery Date, both dates inclusive, unless sooner
terminated in accordance with the provisions of the Lease.
4. The Rent for the Aircraft shall be payable in advance for
each calendar month of the Term commencing on the Delivery Date and shall be the
amount set forth in Schedule 1 to Letter Agreement No. 1 to the Lease.
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IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be executed by their respective corporate officers as of the date
first above written.
AIR SOUTH AIRLINES, INC. (LESSEE)
By:
------------------------------
Title:
---------------------------
MIMI LEASING CORP. (LESSOR)
By:
------------------------------
Title:
---------------------------
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SCHEDULE 1
PART 2
AIRCRAFT DOCUMENTS
A. CERTIFICATES
- FAA Certificate of Airworthiness
B. AIRCRAFT STATUS RECORDS
- Log Books
- Airframe Maintenance Status Report
- Supplemental Structural Inspection Document Status (if applicable)
- Manufacturer's Service Bulletin Status Report
- Airworthiness Directive Service Bulletin Compliance Records and
Report (terminated and repetitive), including documentation
adequate to determine the method of compliance, but not limited to
current status
- Modification Status Report List documents will be provided upon
request)
- Last Weighing Report
- List of Life Limited Components with remaining hours/cycles, with
FAA-approved serviceable tags or other documentation or releases
approved by the FAA under Part 121
C. AIRCRAFT MAINTENANCE RECORDS (last heavy maintenance visits)
- Test Flight Reports
- X-ray pictures
- Last "C" check and heaviest maintenance check Work Cards
D. AIRCRAFT HISTORY RECORDS
- Aircraft Maintenance History Cards (may include computer generated
summaries and records in lieu of cards)
- Service Difficulty Report
- Accident, Incident or Major Structural Repair Report
E. ENGINE RECORDS (for each engine)
- Engine time and cycle records
- Last overhaul and repair summaries (including FAA Forms 337)
- Airworthiness Directive Compliance Records and Report (terminated
and repetitive), including documentation adequate to determine the
method of compliance, but not limited to current status
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- Manufacturer's Service Bulletin Status Report for those service
bulletins which Lessee has complied with, including documentation
adequate to determine the method of compliance, but not limited to
current status
- List of Time Controlled Components with remaining hours and cycles
with FAA-approved serviceable tags or other documentation or
releases approved by the FAA under Part 121
- Modification Status Report
- Engine Disc Sheets
- Engine Build Specifications for last major engine shop visit.
F. APU RECORDS
- Last Overhaul and Repair Documents (including modification status)
- Airworthiness Directive Compliance Records and Report (terminated
and repetitive), including documentation adequate to determine the
method of compliance, but not limited to current status
- Manufacturer's Service Bulletin Records and Status Report
- List of Time Controlled Components with remaining hours/cycles
- Modification Status Report, with FAA approved serviceable tags or
other documentation or releases approved by the FAA under Part 121
G. COMPONENT RECORDS
- Time Controlled Component Historical Records with Installation
Records and FAA Serviceability Tags or other documentation or
releases in a form acceptable to the FAA for a Part 121 Air
Carrier
H. MANUALS
- Airplane Flight Manual (Manufacturer Approved, FAA Approved)
- Flight Crew Operating Manual
- Weight and Balance Manual
- Wiring Diagram Manual (microfilm and hard copy if available)
- Illustrated Parts Catalog (microfilm)
- Aircraft Maintenance Manual (microfilm)
- Manufacturer's Engine Maintenance Manual and any approved
engineering changes, as applicable
I. MISCELLANEOUS TECHNICAL DOCUMENTS
- Maintenance Program
- Interior Configuration Drawings
- Original Delivery Documents
- Loose Equipment Inventory
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SCHEDULE 2
CERTIFICATE OF ACCEPTANCE AND DELIVERY
This Certificate of Acceptance and Delivery is delivered, on the date set
forth below by Air South Airlines, Inc. ("Lessee"), to Mimi Leasing Corp.
("Lessor"), pursuant to the Aircraft Lease Agreement dated as of February l,
1997 between Lessor and Lessee (the "Agreement"). Capitalized terms used in this
Certificate shall have the meaning given to such terms in the Agreement.
1. DETAILS OF ACCEPTANCE
Lessee hereby confirms to Lessor that Lessee has at _____________ o'clock
on this ____ day of __________, 199_, at Oklahoma City, Oklahoma, accepted the
following, in accordance with the provisions of the Agreement:
(a) Boeing 737-247 airframe, Manufacturer's Serial No. 19607, FAA
Registration Number N4510W;
(b) 2 Xxxxx & Xxxxxxx JT8D-9A Engines:
Manufacturer's Serial No.
674214B
674165B
(Each of which shall have more than 750 rated takeoff horsepower or the
equivalent of such horsepower).
(c) Loose Equipment Check List: as per list signed by Lessor and
Lessee and attached hereto.
2. HOURS AND CYCLES DATA (AS OF ACCEPTANCE DATE)
(a) Airframe:
Number of Hours since last "C-7" Plus SI Check (Heaviest Check):
______ hours
"C" Check (or Equivalent):
Interval: ________________________
Time Since: ______________________
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(b) Landing Gear Overhaul:
Number of Hours Since Last Overhaul:
Left Gear ________________________________ Hours
Right Gear _______________________________ Hours
Nose Gear ________________________________ Hours
Interval: Left Gear ________________________________
Right Gear _______________________________
Nose Gear ________________________________
(c) Engines:
Total Number of Hours and Cycles:
S/N ______: ______ hours; ______________________ cycles
S/N ______: ______ hours; ______________________ cycles
Number of Hours Since Last Hot Section Refurbishment:
S/N ______: ______ hours
S/N ______: ______ hours
Number of Hours Since Last Cold Section Refurbishment:
S/N ______: ______ hours
S/N ______: ______ hours
Hot Section Refurbishment:
Interval __________________________________________
Time Since (S/N ________): ________________________
Time Since (S/N ________):_________________________
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Time Remaining to First Restriction:
Engine S/N: ____________________
Hours: ____________ Restriction: __________________
Cycles: ___________ Restriction: __________________
Engine S/N: ____________________
Hours: ____________ Restriction: __________________
Cycles: ___________ Restriction: __________________
Average Cycles in Life Limited Parts (see attached Schedule):
______________
(d) Auxiliary Power Unit:
Number of APU Hours Since Last Heavy Shop Visit:
__________ hours ______________ Date accomplished
Hot Section Refurbishment:
Interval: ________________________________
Time Since: ______________________________
(e) Time Controlled Components: [see attached report]
(f) Interior Equipment:
Number of Passenger Seats
and Configuration: _______ _______
Number of Galleys and Location: _______ _______
Number of Lavatories and Location: _______ _______
LOPA - Attached: _______ _______
List of Loose Equipment on Board:
_________________________________ _______ _______
_________________________________ _______ _______
_________________________________ _______ _______
_________________________________ _______ _______
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________________________________ _______ _______
________________________________ _______ _______
(g) Avionics:
Part
Description Model No.
_______________________________ _______ _______
_______________________________ _______ _______
_______________________________ _______ _______
_______________________________ _______ _______
_______________________________ _______ _______
_______________________________ _______ _______
IN WITNESS WHEREOF, Lessee has, by its duly authorized representative,
executed this Certificate on the date in paragraph 1 above.
LESSEE:
AIR SOUTH AIRLINES, INC.
By: _________________________________
Title: ______________________________
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SCHEDULE 3
OPERATING CONDITION AT REDELIVERY
On the Expiration Date, the Aircraft shall:
(1) GENERAL CONDITION
(a) Possess a valid Certificate of Airworthiness with respect to the
Aircraft issued by the Air Authority. The Aircraft will also meet all
requirements for U.S. domestic operations under FAR Part 121 without waiver or
restriction. There will be no deferred, open or carryover items on the Aircraft
or any Engine on the Expiration Date;
(b) Be clean by U.S. airline standards;
(c) Have installed the full complement of engines and other equipment,
parts and accessories and loose equipment as is normally installed in the
Aircraft, and be in the same economy configuration of 122 seats, in accordance
with an approved STC, as at Delivery;
(d) Have undergone, immediately prior to redelivery, a full C check
(with all supplemental inspections associated with that Check complied with) in
accordance with the Agreed Maintenance Program, so that all airframe inspections
falling due within the next following C check interval, in accordance with the
Agreed Maintenance Program, and in addition at least 3,100 Flight Hours or
Cycles (whichever is lower) remain to the next C-7 plus SI Major Check per the
Agreed Maintenance Program.
Notwithstanding Paragraph l(d) above, if Lessee wishes to redeliver the
Airframe to Lessor with less life so remaining, Lessee shall give written notice
to Lessor no later than sixty (60) days prior to the Expiration Date, and
Lessee, shall deliver the Arframe in such condition with an additional payment
(in addition to the Airframe Maintenance Reserves otherwise payable) equal to
the number of Flight Hours or Cycles less than the minimum required by this
Schedule 3 multiplied by the amount of Airframe Maintenance Reserve per Flight
Hour or Cycle then in effect under the Lease, unless Lessor and Lessee shall
mutually agree that Lessee perform a premature C 7 plus SI Major Check and
utilize the Airframe Maintenance Reserves (if such work qualifies for
contribution by Lessor pursuant to Section 7.2) held by Lessor under the Lease;
(e) Be in compliance with all airworthiness directives issued by the
FAA ("ADs") for compliance during the Term and within 180 days after the
Expiration Date (except that repetitive inspections having intervals of less
than 180 days will be performed only once at or immediately prior to the
Expiration
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Date), including being current with all initial tasks of the Corrosion
Prevention and Control Program (CPCP) under the Boeing D6-38528 document, with
no exceptions or deviations and with proper supporting documentation;
(f) Be stripped and freshly painted with an "all white" fuselage and
xxxx wings;
(g) Have all required signs and decals clean, secure and legible.
(2) COMPONENTS
(a) All time-controlled components (other than the Engines and Landing
Gears which are referred to elsewhere in this Schedule 3) shall have at least
3,000 Flight Hours or Cycles (whichever is the most limiting) or at least one
(1) year remaining to the next scheduled overhaul per the Agreed Maintenance
Program;
(b) Each "on-condition" and "condition monitored" component shall be
serviceable; and
(c) The APU will be in the same operational condition as at the
Delivery Date with temperatures and air outputs within the APU manufacturer's
limits at all operational settings; and
(3) ENGINES
Each Engine will be installed on the Aircraft and if not the engines
installed on the Delivery Date will be accompanied by all documentation Lessor
may require to evidence that title thereto is properly vested in Lessor and:
(a) Each Engine and each life limited part within each Engine will
have no less than 3,500 Cycles or 6,000 Flight Hours until the next scheduled
life limited part replacement;
(b) Each Engine will, at Lessor's option and expense, have had a
complete hot (including combustion chamber) and cold section video borescope
inspection, and a power assurance run in accordance with the Engine
manufacturer's maintenance manual and all items beyond such manufacturer's
limits will be repaired at Lessee's expense. No Engine will be "on watch" for
any reason requiring any special or out of sequence inspection.
Notwithstanding Paragraph 3(a) above, if Lessee wishes to redeliver an
Engine to Lessor with less life so remaining, Lessee shall give written notice
to Lessor no later than sixty (60) days prior to the Expiration Date, and Lessee
shall redeliver such Engine in such condition with an additional payment (in
addition to Maintenance Reserves otherwise payable per Engine) equal to
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81
the number of Flight Hours or Cycles less than the minimum required by this
Schedule 3, multiplied by the amount of Engine Maintenance Reserves per Flight
Hour or cycle then in effect, unless Lessor and Lessee shall mutually agree that
Lessee perform a premature Hot Section Refurbishment Inspection and shop visit
and utilize the Engine Maintenance Reserves (if such work qualifies for
contribution by Lessor pursuant to Section 7.2) held by Lessor under the Lease.
(4) FUSELAGE, WINDOWS AND DOORS
(a) The fuselage will be free of major dents outside allowable Boeing
Maintenance or Structural Repair Manual Limits and abrasions and loose or pulled
or missing rivets;
(b) Doors will be free moving, correctly rigged and be fitted with
serviceable seals, free from damage as defined by the Boeing Maintenance or
Structural Repair Manual Limits.
(5) WINGS AND EMPENNAGE
(a) Leading edges will be free from damage, outside allowance Boeing
Maintenance or Structural Repair Manual Limits;
(b) Wings will be free of fuel leaks.
(6) INTERIOR
(a) Ceilings, sidewalls and bulkhead panels will be clean and
reasonably free of noticeable cracks and stains by U.S. airline standards.
(b) Carpets and seat covers will be in good condition, clean and
reasonably free of noticeable stains by U.S. airline standards and meet FAR burn
certification regulations;
(c) Seats will be serviceable and in good condition;
(d) Emergency equipment having a calendar life will have a minimum of
1 year or 100% of its total approved life, whichever is less, remaining;
(e) Galleys will contain all equipment installed and functional
including service carts (trolleys), containers and coffee pots, which will be
reasonably clean by airline standards and shall have all FAA required markings
installed;
(f) Overhead stowage compartments will be clean by airline standards
and serviceable with proper markings installed; and
(g) Lavatories will be clean by airline standards and serviceable with
correct FAA markings installed.
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82
(7) COCKPIT
(a) Trim panels shall be reasonably free of noticeable stains and
cracks, will be clean secure and repainted as necessary;
(b) Seat covers will be in good condition, clean and free of stains
and will conform to FAR burn certification regulations; and
(8) CARGO COMPARTMENTS
(a) Panels will be in good condition; and
(b) Nets will be in good condition.
(9) LANDING GEAR
Time on each Landing Gear will not be less than 5,000 Flight Hours or
Cycles (whichever is less) remaining until the next scheduled overhaul. Each
life limited part within the landing gear will have at least the same time
remaining as at the Delivery Date. The Landing Gear and wheel xxxxx will be
clean, free of leaks and repaired as necessary.
Notwithstanding paragraph 9 above, if Lessee wishes to redeliver a
Landing Gear to Lessor with less life so remaining, Lessee shall give written
notice to Lessor no later than sixty (60) days prior to the Expiration Date, and
Lessor shall redeliver such Landing Gear in such condition with an additional
payment (in addition to the Landing Gear Maintenance Reserves otherwise payable)
equal to the number of Flight Hours or Cycles less than the minimum required by
this Schedule 3 multiplied by the amount of Landing Gear Maintenance Reserve per
Flight Hour or Cycle then in effect under the Lease, unless Lessor and Lessee
shall mutually agree that Lessee perform a premature overhaul of such Landing
Gear and use the Landing Gear Maintenance Reserve (if such work qualifies for
contribution by Lessor pursuant to Section 7.2) held by Lessor under the Lease.
(10) CORROSION
(a) The Aircraft will have been inspected and treated with respect to
corrosion as defined in the Agreed Maintenance Program and/or Boeing Document
No.D6-38528 relative to compliance with the Corrosion Prevention and Control
Program (CPCP). The entire fuselage will be free from corrosion which, if
discovered during any Check, would require treatment or repair in accordance
with the Boeing Structural Repair Manual; and
(b) Fuel tanks will be free from contamination and corrosion and a
tank treatment Program will be in operation.
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83
Notwithstanding anything contained in this Schedule 3, Lessor shall not
be required to make any payments to Lessee in the event that the Airframe, the
Engines, the Landing Gear, any time, cycle or calendar controlled component is
returned to Lessor in a condition better than that specified in Section 12 and
this Schedule 3.
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84
SCHEDULE 4
INSURANCE REQUIREMENTS
The Insurance required to be maintained are as follows:
(a) HULL ALL RISKS of Loss or Damage (while flying and on the ground)
with respect to the Aircraft on an "agreed value basis" for the Agreed Value and
with a deductible not exceeding $100,000 (including, without limitation, foreign
object damage coverage with a deductible not exceeding $100,000 per engine per
occurrence), or such other amount agreed by Lessor from time to time. Without
prejudice to the foregoing, with the prior written consent of Lessor, Lessee may
increase the aforesaid deductible amount to $500,000 if, prior to doing so,
Lessee shall have paid to Lessor the sum of $250,000 by way of an insurance
security deposit (the "Insurance Security Deposit") (which Insurance Deposit
shall also be available to be applied to deductible losses between $100,000 and
$500,000) Insurance Security Deposit (which shall be held by Lessor as security
for the performance by Lessee of its obligations under this Agreement and the
Other Agreements), shall be returned to Lessee on the Expiration Date if all
amounts payable by Lessee under this Agreement and any Other Agreement shall
have been paid in full and no Default shall have occurred and be continuing.
With Lessor's prior consent, the Insurance Deposit may be provided by Lessee by
way of letter of credit issued by a bank acceptable to Lessor and in form and in
substance satisfactory to Lessor.
In the event that the Insurance Security Deposit is applied to a loss
claim thereby reducing the balance thereof, Lessee will either (a) replace any
deficiency in such balance; or (b) lower the all risk hull insurance deductible
to $100,000 within 15 days after the aforementioned application.
(b) HULL WAR AND ALLIED PERILS, being such risks excluded from the
Hull All Risks Policy to the fullest extent available from the leading
international insurance markets including confiscation and requisition by the
State of Registration for the Agreed Value;
(c) ALL RISKS (INCLUDING WAR AND ALLIED RISK except when on the ground
or in transit other than by air) property insurance on all Engines and Parts
when not installed on the Aircraft on an "agreed value" basis and including
engine test and running risks;
(d) AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER, BAGGAGE, CARGO
AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING PRODUCTS) LEGAL LIABILITY
for a Combined Single Limit (Bodily Injury/Property Damage) of an amount not
less than the Minimum Liability Coverage for any one occurrence (but in respect
of products and personal injury liability this limit may be an
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85
aggregate limit for any and all losses occurring during the currency of the
policy) War and Allied Risks are also to be covered under the Policy to the
fullest extent available from the leading international insurance markets;
(e) All required hull and spares insurance (as specified above), so
far as it relates to the Aircraft will:
(i) name Lessor and its respective successors and assigns as
additional assureds for their respective rights and interests;
(ii) provide that any loss will be settled jointly with Lessor
and Lessee, subject to final prior approval of Lessor and will be payable
in Dollars to Lessor, for the account of all interests except where the
loss does not exceed the Damage Notification Threshold, and Lessor has
not notified the insurers to the contrary, in which case the loss will be
settled with and paid to Lessee;
(iii) include a notice and/or acknowledgment of assignment in a
form acceptable to Lessor;
(iv) if separate Hull "all risks" and "war risks" insurances are
arranged, include a 50/50 provision in accordance with market practice
(AVS. 103 is the current market language);
(v) confirm that the insurers are not entitled to replace the
Aircraft in the event of an insured Event of Loss;
(vi) confirm that the insurers will not obtain a valid discharge
of the obligations under the Insurance by payment to the broker,
notwithstanding market practice to the contrary;
(f) All required liability insurances (specified above) will:
(i) include Lessor and Mercantile Bank of Dubuque, Iowa and
their respective successors and assigns, and their respective
shareholders, subsidiaries, directors, officers, agents, employees and
indemnitees as additional insureds for their respective rights and
interests, warranted, each as to itself only, no operational interest;
(ii) include a Severability of Interest Clause which provides
that the insurance, except for the limit of liability, will operate to
give each assured the same protection as if there was a separate policy
issued to each assured;
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86
(iii) contain a provision confirming that the policy is primary
without right of contribution and the liability of the insurers will not
be affected by any other insurance of which Lessor or Lessee have the
benefit so as to reduce the amount payable to the additional insureds
under such policies;
(g) All Insurance will:
(i) be in accordance with normal industry practice of persons
operating similar aircraft in similar circumstances;
(ii) provide cover denominated in Dollars and any other
currencies which Lessor may reasonably require in relation to liability
insurance;
(iii) operate on a worldwide basis subject to such reasonable
limitations and exclusions as Lessor may agree;
(iv) acknowledge the insurer is aware (and has seen a copy) of
this Agreement and that the Aircraft is owned by Lessor;
(v) provide that, in relation to the interests of each of the
additional assureds the Insurance will not be invalidated by any act or
omission by Lessee, or any other person other than the respective
additional assured seeking protection and shall insure the interests of
each of the additional assureds regardless of any breach or violation by
Lessee, or any other person other than the respective additional assured
seeking protection of any warranty, declaration or condition, contained
in such Insurances;
(vi) provide that the insurers will hold harmless and waive any
rights of recourse and/or subrogation against the additional assureds or
to be subrogated to any rights of the Banks against Lessor or Lessee;
(vii) provide that the additional assureds will have no
obligation or responsibility for the payment of any premiums due (but
reserve the right to pay the same should any of them elect so to do) and
that the insurers will not exercise any right of set-off or counter-claim
in respect of any premium due against the respective interests of the
additional assureds other than outstanding premiums relating to the
Aircraft, any Engine or Part the subject of the relevant claim;
(viii) provide that the Insurance will continue unaltered for the
benefit of the additional assureds for at least thirty (30) days after
written notice by registered
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87
mail or telex of any cancellation, change, event of non-payment of
premium or installment thereof has been sent to Lessor, except in the
case of war risks for which seven (7) days (or such lesser period as is
or may be customarily available in respect of war risks or allied perils)
will be given, or in the case of war between the five [5) great powers or
nuclear peril for which termination is automatic;
(ix) contain a provision entitling Lessor or any insured party
to initiate a claim under any policy in the event of the refusal or
failure of Lessee to do so; and
(x) accept and insure the indemnity provisions of this
Agreement to the extent of the risks covered by the policies.
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88
LETTER AGREEMENT NO. 1
From: MIMI Leasing Corp.
To: Air South Airlines, Inc.
Date: February 1, 1997
Re: Aircraft Lease Agreement (the "Lease Agreement") of even date
herewith between Mimi Leasing Corp. ("Lessor") and Air South
Airlines, Inc. (the "Lessee") in respect of Boeing 737-247
Aircraft, Serial Number 19607
Dear Sirs,
This is Letter Agreement No. 1, referred to in the Lease Agreement, and
upon your acceptance of its terms, will record our further agreement with
respect to the Lease Agreement. Capitalized terms used, but not defined, in this
Letter Agreement shall have the respective meanings assigned to them in the
Lease Agreement.
For valuable consideration (the receipt and sufficiency of which is
acknowledged), Lessor and Lessee agree as follows:
In order to preserve the confidentiality of certain other business terms
of the Lease Agreement, Lessor and Lessee have agreed that certain provisions
referred to in the Lease Agreement shall be set forth in this Letter Agreement
No. 1 rather than in the body of the Lease Agreement, as follows:
Paragraph 1
AIRCRAFT DEPOSIT. The amount of the Aircraft Deposit contemplated by
Section 5.1 of the Lease Agreement shall be that sum specified on Schedule 1
hereto, payable in full on or before May 1, 1997.
Paragraph 2
RENT. The amount of Rent payable by Lessee in respect of each Rental
Period pursuant to Section 5.3 of the Lease Agreement shall be as follows:
Rental Periods 1-36 The sum specified on
Schedule 1 hereto
89
Paragraph 3
MAINTENANCE RESERVES. The amount of Maintenance Reserves payable pursuant
to Section 5.4 of the Lease Agreement shall be as specified on Schedule 1
hereto.
On or about February 1, 1998 and on February 1, 1999, the rate of Maintenance
Reserves may be adjusted upwards by Lessor at a percentage rate per annum not to
exceed the percentage increase in the Consumer Price Index for the Columbia,
South Carolina Metropolitan Area since the Delivery Date or the date of the last
price adjustment under this provision, if later. In addition, but not limiting
the foregoing, Lessee acknowledges that the rates of Maintenance Reserves
currently provided for in this Agreement are based upon the assumption the
Agreed Maintenance Program for the Aircraft during the Term will be the same as
that in effect on the Delivery Date. In the event that such assumption proves to
be incorrect at any time during the Term, Lessor and Lessee agree that Lessor
shall have the right, upon written notice to Lessee, to adjust the rate of
Maintenance Reserves so as to reasonably account for the incorrectness of such
assumption. In the event that the Agreed Maintenance Program changes during the
Term (any such change to be in accordance with the relevant terms and conditions
of this Agreement), Lessor shall make the aforementioned adjustment in the
manner which Lessor determines, in its reasonable discretion, is necessary to
maintain the rates of Maintenance Reserves at levels which accurately reflect
the costs associated with obtaining the maintenance services referred to in
Section 7.2 at prevailing industry rates. Each such notice shall specify the
revised rate of Maintenance Reserves and the effective date of such revision.
Lessee agrees to advise Lessor, in writing, of any circumstances or events which
would result in the foregoing assumption becoming incorrect at any time during
the Term.
Paragraph 4
INSURANCE
(a) The Agreed Value shall be that sum specified on Schedule 1 hereto,
or, if higher, the appraised value of the Aircraft most recently determined by
an appraiser selected by Lessor and experienced in valuing Boeing 737 aircraft.
(b) The Damage Notification Threshold shall be that sum specified on
Schedule 1 hereto.
(c) The Minimum Liability Coverage shall mean that sum specified on
Schedule 1 hereto, on each occurrence.
(d) Nothing in the Lease Agreement shall prohibit Lessor or Lessee
from insuring the Aircraft (or, in the case of Lessor only, its interest in the
Lease Agreement), at their own expense and to the extent their respective
interests may appear, in an
90
amount in excess of that required to me maintained by Lessee under Section 9 and
Schedule 4 of the Lease Agreement and this Letter Agreement No. 1; provided that
in no event shall such additional insurance obtained be the Lessor interfere
with Lessee's ability to insure its interests in the Aircraft in accordance with
its standard policies and practices in effect from time to time during the Term;
and provided further that Lessee shall not maintain insurance covering the
aircraft hull risks described in Clauses (a) and (b) of Schedule 4 to the Lease
Agreement in an amount greater than $1,000,000 in excess of the Agreed Value, or
such higher limit as Lessee may maintain with a prior written approval of
Lessor, which approval will not be unreasonably withheld.
Except as amended hereby, the Lease Agreement remains in full force and
effect as the legal, valid and binding obligations of Lessor and Lessee.
This letter shall be governed by, and construed in accordance with, the
Governing Law. Please indicate your acceptance of the foregoing by signing this
letter at the place indicated and return it to us.
Yours truly,
MIMI LEASING CORP.
By______________________________________
Its_____________________________________
Agreed and accepted
AIR SOUTH AIRLINES, INC.
By______________________________
Its_____________________________
91
SCHEDULE 1
TO LETTER AGREEMENT NO. 1
DATED FEBRUARY 1, 1997
Paragraph 1
The Aircraft Deposit is $210,000.
Paragraph 2
The Rent per Rental Period is $105,000.
Paragraph 3
The amount of Maintenance Reserves is:
(i) Airframe Maintenance Reserves $90 per Flight Hour or Cycle,
whichever is higher;
(ii) Engine Maintenance Reserves - $85 per Flight Hour or Cycle,
whichever is higher, in respect of each Engine;
(iii) APU Maintenance Reserves - $10 per Flight Hour or Cycle,
whichever is higher, in respect of the APU.
(iv) Landing Gear Maintenance Reserves - $10 per Flight Hour or
Cycle, whichever is higher.
Paragraph 4
(a) The Agreed Value is $4,800,000.
(b) The Damage Notification Threshold is $100,000.
(c) The Minimum Liability Coverage is $400,000.000.
92
LETTER AGREEMENT NO. 1
From: MIMI Leasing Corp.
To: Air South Airlines, Inc.
Date: February 1, 1997
Re: Aircraft Lease Agreement (the "Lease Agreement") of even date herewith
between Mimi Leasing Corp. ("Lessor") and Air South Airlines, Inc. (the
"Lessee") in respect of Boeing 737-247 Aircraft, Serial Number 19607
Dear Sirs,
This is Letter Agreement No. 1, referred to in the Lease Agreement, and
upon your acceptance of its terms, will record our further agreement with
respect to the Lease Agreement. Capitalized terms used, but not defined, in
this Letter Agreement shall have the respective meanings assigned to them in
the Lease Agreement.
For valuable consideration (the receipt and sufficiency of which is
acknowledged), Lessor and Lessee agree as follows:
In order to preserve the confidentiality of certain other business
terms of the Lease Agreement, Lessor and Lessee have agreed that certain
provisions referred to in the Lease Agreement shall be set forth in this Letter
Agreement No. 1 rather than in the body of the Lease Agreement, as follows:
Paragraph 1
AIRCRAFT DEPOSIT. The amount of the Aircraft Deposit contemplated by
Section 5.1 of the Lease Agreement shall be that sum specified on Schedule 1
hereto, payable in full on or before May 1, 1997.
Paragraph 2
RENT. The amount of Rent payable by Lessee in respect of each Rental
Period pursuant to Section 5.3 of the Lease Agreement shall be as follows:
Rental Periods 1-36 The sum specified on
Schedule 1 hereto
93
Paragraph 3
Maintenance Reserves. The amount of Maintenance Reserves payable
pursuant to Section 5.4 of the Lease Agreement shall be as specified on
Schedule 1 hereto.
On or about February 1, 1998 and on February 1, 1999, the rate of Maintenance
Reserves may be adjusted upwards by Lessor at a percentage rate per annum not
to exceed the percentage increase in the Consumer Price Index for the Columbia,
South Carolina Metropolitan Area since the Delivery Date or the date of the
last price adjustment under this provision, if later. In addition, but not
limiting the foregoing, Lessee acknowledges that the rates of Maintenance
Reserves currently provided for in this Agreement are based upon the assumption
the Agreed Maintenance Program for the Aircraft during the Term will be the same
as that in effect on the Delivery Date. In the event that such assumption
proves to be incorrect at any time during the Term, Lessor and Lessee agree
that Lessor shall have the right, upon written notice to Lessee, to adjust the
rate of Maintenance Reserves so as to reasonably account for the incorrectness
of such assumption. In the event that the Agreed Maintenance Program changes
during the Term (any such change to be in accordance with the relevant terms
and conditions of this Agreement), Lessor shall make the aforementioned
adjustment in the manner which Lessor determines, in its reasonable discretion,
is necessary to maintain the rates of Maintenance Reserves at levels which
accurately reflect the costs associated with obtaining the maintenance services
referred to in Section 7.2 at prevailing industry rates. Each such notice
shall specify the revised rate of Maintenance Reserves and the effective date
of such revision. Lessee agrees to advise Lessor, in writing, of any
circumstances or events which would result in the foregoing assumption becoming
incorrect at any time during the Term.
Paragraph 4
INSURANCE
(a) The Agreed Value shall be that sum specified on Schedule 1
hereto, or, if higher, the appraised value of the Aircraft most recently
determined by an appraiser selected by Lessor and experienced in valuing Boeing
737 aircraft.
(b) The Damage Notification Threshold shall be that sum specified
on Schedule 1 hereto.
(c) The Minimum Liability Coverage shall mean that sum specified on
Schedule 1 hereto, on each occurrence.
(d) Nothing in the Lease Agreement shall prohibit Lessor or Lessee
from insuring the Aircraft (or, in the case of Lessor only, its interest in the
Lease Agreement), at their own expense and to the extent their respective
interests may appear, in an
94
amount in excess of that required to be maintained by Lessee under Section 9
and Schedule 4 of the Lease Agreement and this Letter Agreement No. 1; provided
that in no event shall such additional insurance obtained by the Lessor
interfere with Lessee's ability to insure its interest in the Aircraft in
accordance with its standard policies and practices in effect from time to time
during the Term; and provided further that Lessee shall not maintain insurance
covering the aircraft hull risks described in Clauses (a) and (b) of Schedule 4
to the Lease Agreement in an amount greater than $1,000,000 in excess of the
Agreed Value, or such higher limit as Lessee may maintain with a prior written
approval of Lessor, which approval will not be unreasonably withheld.
Except as amended hereby, the Lease Agreement remains in full force and
effect as the legal, valid and binding obligations of Lessor and Lessee.
This letter shall be governed by, and construed in accordance with, the
Governing Law. Please indicate your acceptance of the foregoing by signing
this letter at the place indicated and return it to us.
Yours truly,
MIMI LEASING CORP.
By
-------------------------------
Its
------------------------------
Agreed and accepted
AIR SOUTH AIRLINES, INC.
BY /s/
--------------------------
Its Vice President
-------------------------
95
Mimi Leasing Corp.
000 Xxxxxx Xxxxx
Xxxxxxx, Xxxx 00000
February 1, 1997
Air South Airlines, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn.: Vice President - Airline Services
Re: Letter Agreement No. 2 to Aircraft Lease Agreement, dated as
of even date herewith (the "Lease Agreement"), between Mimi
Leasing Corp. ("Lessor") and Air South Airlines, Inc.
("Lessee") in respect of One Boeing 737-247 Aircraft,
manufacturer's serial number 19607, United States
registration N4510W
Dear Sirs:
This Letter Agreement No. 2, upon your acceptance of its terms, will
record our further agreements with respect to the referenced Lease Agreement,
and the provisions hereof shall be incorporated into, and for all purposes
deemed part of the Lease Agreement.
Capitalized terms used, but not defined, in this Letter Agreement No. 2
shall have the respective meanings assigned to them in the Lease Agreement.
For valuable consideration, the receipt and sufficiency of which is
acknowledged, Lessor and Lessee agree as follows:
1. Any provisions of Sections 8.5 and 8.7 of the Lease Agreement
to the contrary notwithstanding, Lessee may (a) enter into contracts (sometimes
referred to as "leases" or "wet leases") covering a part or all of the capacity
of the Aircraft in the ordinary course of Lessee's business, under which Lessee
retains operational control of the Aircraft (which for the purposes hereof
means, among other things, that Lessee will at all times supply and be
responsible for furnishing flight and cabin crews, maintenance and insurance
for, and covering, such operations of the Aircraft), and such leases or wet
leases shall not be deemed to be prohibited transfers of possession under the
Lease Agreement, provided that in all events Lessee's obligations under the
Lease Agreement shall continue in full force and
96
Air South Airlines, Inc.
February 1, 1997
Page 2
effect notwithstanding such leases or wet leases, and (b) transfer possession
of the Airframe or any Engine to the United States of America or any
instrumentality thereof pursuant to the Civil Reserve Air Fleet Program
authorized by 10 U.S.C. Section 9511 et seq., or any substantially similar
program of the United States Government, provided that any such transfer of
possession does not extend beyond the Expiration Date of the Lease Agreement.
2. Any provisions of Sections 8.12, 8.13 and 8.14(c) of the Lease
Agreement to the contrary notwithstanding, with respect to any Engine, and at
any time and from time to time during the Term, Lessee may:
(a) install such Engine on an airframe owned by Lessee free and
clear of all Liens, except (i) Permitted Liens, (ii) those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the aircraft or airframe as an
entirety), and (iii) those created by the rights of others under normal
interchange or pooling agreements or arrangements customary in the airline
industry which do not contemplate, permit or require the transfer of title to,
or give rise to a Lien upon, such airframe as an entirety or the engines
installed thereon; and
(b) install an Engine on an airframe leased to Lessee, or purchased
by Lessee subject to a conditional sale or otherwise subject to a security
agreement, provided that (i) such airframe is free and clear of all Liens
except (y) the rights of the parties to the lease, conditional sale or other
security agreement and (z) Liens of the type permitted by the immediately
preceding Clause 2(a), and (ii) such lease, conditional sale or other security
agreement expressly provides that such Engine shall not become subject to the
lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe; and
(c) install an engine on the Aircraft, provided that (i) such
engine shall meet the standards for a replacement engine set forth herebelow,
(ii) such engine shall be airworthy and in condition required by the Agreed
Maintenance Program for regular use on the Aircraft and (iii) if such
replacement engine is being installed on the Aircraft because an Engine has
become time, cycle or calendar expired, unserviceable or otherwise damaged,
Lessee shall promptly comply with all maintenance requirements of the Lease
Agreement and the Agreed Maintenance Program and/or otherwise repair or return
such Engine to an airworthy and
97
Air South Airlines, Inc.
February 1, 1997
Page 3
serviceable condition. For the purposes of this Clause 3(c), the term
"replacement engine" means a Xxxxx and Xxxxxxx Model JT8D-9A engine, or an
engine of the same or another manufacturer of a comparable or improved model,
that is suitable and certificated by the FAA for installation and use on the
Aircraft and that is in as good an operating condition as the Engine it is
temporarily replacing assuming such Agreement at the time it is replaced.
(d) In the Event Lessor shall have received from the lessor or
secured party of any airframe leased to Lessee or purchased by Lessee subject
to a conditional sale or other security agreement, a written agreement
(contemplated by the immediately preceding Clause 2(b)(ii) and Clause 2(e)
below), which provides that the lessor or secured party under such agreement
shall not acquire or claim any right, title or interest in any Engine or
Lessor, and the lease or conditional sale or other security agreement covering
such airframe also covers an engine or engines owned by the lessor under such
lease or subject to a security interest in favor of the secured party under
such conditional sale or other security agreement, Lessor hereby agrees for the
benefit of such lessor or secured party that Lessor will not acquire or claim,
as against such lessor or secured party, any right, title or interest in any
such engine as the result of such engine being installed on the Aircraft at any
time while such engine is owned by such lessor or is subject to such
conditional sale or other security agreement or security interest in favor of
such secured party. Without limiting the requirements of Clause 2(e), below,
Lessor agrees that the existence of a clause reciprocal to the foregoing in
such lease, conditional sale or other security agreement shall suffice the
purposes of this paragraph as the required written agreement.
(e) For the avoidance of doubt, Lessee's rights under Clauses 2(b)
and 2(c), above, shall become effective (i) upon Lessee's having first
obtained from the lessor of, or the secured party having a security interest
in, a specific airframe or engine, a written agreement expressly providing that
such Person will not claim or acquire any interest in Lessor's Aircraft or any
Engine as a result of the temporary engine exchanges authorized by this Clause
2, and (ii) upon Lessor's approval of such written agreement which approval
will not be unreasonable withheld.
(f) Lessee shall furnish Lessor with a written report of any engine
exchanges authorized by this Clause 2 which shall identify (i) the location and
maintenance status of each affected Engine and (ii) any engine not owned by
98
Air South Airlines, Inc.
February 1, 1997
Page 4
Lessor that is installed on the Airframe. Lessee shall also furnish Lessor
with a written report identifying any interchange or pooling agreement or parts
leasing agreement entered into by Lessee, identifying by name and address, the
other party to any such agreement, and Lessor may, upon request, review such
agreements. Such written reports shall be submitted monthly along with
Lessee's payment of maintenance reserves pursuant to Section 5.4 of the Lease
Agreement.
3. (a) The provisions of Sections 8.12 through 8.18, inclusive,
of the Lease Agreement to the contrary notwithstanding, with respect to any
Part, and at any time and from time to time during the Term, Lessee shall, at
its own cost and expense, as promptly as practicable replace all Parts that may
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason whatsoever. In
addition, in the ordinary course of maintenance, service, repair, overhaul or
testing. Lessee may remove any damaged beyond repair or permanently rendered
unfit for use, provided that Lessee shall, except as otherwise provided in
Clause 3(d) below, replace such Parts as provided in Clause 3(c), below,
provided, however, that Lessee shall notify Lessor in writing and obtain
Lessor's approval prior to replacing any Landing Gear or the APU. All
replacement Parts shall be free and clear of all Liens except Permitted Liens
and shall be in as good operating condition as, and shall have a value and
utility at least equal to, the Parts replaced, assuming such replace Parts were
in the condition and repair required to be maintained by the terms hereof.
(b) Except as otherwise provided in Clause 3(d), below, all Parts at
any time removed from the Airframe or any Engine shall remain the property of
Lessor and subject to the Lease Agreement, no matter where located, until such
time as such Parts shall be replaced by Parts that have been incorporated or
installed in or attached to such Airframe or Engine and that meet the
requirements for such replacement Parts specified in Clause 3(a) hereof.
Immediately upon any replacement Part becoming incorporated or installed in or
attached to an Airframe or Engine as provided in Clause 3(a) hereof, without
further act, (i) title to the replaced Part shall thereupon vest in Lessee,
free and clear of all rights of Lessor and shall no longer be deemed a Part
hereunder; (ii) title to such replacement Part shall thereupon vest in Lessor;
and (iii) such replacement Part shall become subject to this Lease and be
deemed part of such Airframe or Engine, as the case may be, for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to such Airframe or Engine.
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Air South Airlines, Inc.
February 1, 1997
Page 5
(c) Any Part (other than a Landing Gear or the APU) removed from the
Airframe or from any Engine as provided in Clause 3(A) hereof may be subjected
by Lessee to a normal pooling or leasing agreement or arrangement customary in
the airline industry entered into in the ordinary course of Lessee's business
with any Certificated Air Carrier or a recognized lessor of aircraft parts,
provided the part replacing such removed Part shall be incorporated or
installed in or attached to such Airframe or Engine in accordance with Clauses
3(a) and 3(b) hereof as promptly as practicable after the removal of such
removed Part. In addition, any temporary replacement part when incorporated or
installed in or attached to the Airframe or any Engine in accordance with
Clause 3(A) hereof may be owned by another airline or vendor as customary in
the airline industry, subject to such a normal pooling or leasing arrangement,
provided (i) such arrangement does not contemplate, permit or require the
transfer of title to , or give rise to any Lien upon, the Airframe or any
Engine, and (ii) Lessee, at its expense, as promptly thereafter as practicable,
either (A) causes title to such temporary replacement part to vest in Lessor in
accordance with Clause 3(b) hereof by Lessee acquiring title thereto for the
benefit of Lessor free and clear of all Liens except Permitted Liens, at which
time such temporary replacement part shall become a Part and become subject to
the Lease Agreement, or (B) replaces such temporary replacement part by
incorporating or installing in or attaching to such Airframe or Engine a
further replacement Part owned by Lessee free and clear of all Liens except
Permitted Liens, and by causing title to such further replacement Part to vest
in Lessor in accordance with Clause 3(b) hereof.
(d) Lessee, at its own expense, shall make alterations and
modifications in and additions to the Airframe and any Engine as may be
required to be made from time to time during the Term by applicable law
regardless upon whom such requirements are, by their terms, nominally imposed.
In addition, Lessee, at its own expense and with the prior written approval of
Lessor, which approval will not be unreasonably withheld, may from time to time
make such alterations and modifications in and additions to the Airframe and
any Engine as Lessee deems desirable in the proper conduct of its business
(including, without limitation, removal of Parts other than a landing gear or
the APU), provided that no such alteration, modification or addition diminishes
the value, utility, condition or airworthiness of such Airframe or Engine below
the value, utility, condition or airworthiness thereof immediately prior to
such alteration, modification or addition, assuming such Airframe or Engine
was then in the condition required to be maintained by the terms of this Lease.
Title to all Parts incorporated or installed in or attached or added to the
Airframe or any Engine as the result of any alteration,
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Air South Airlines, Inc.
February 1, 1997
Page 6
modification or addition effected by Lessee shall, without further act, vest in
the Lessor and become subject to this Lease, provided, however, to the extent
agreed to in advance, in writing by Lessor and Lessee, Lessee may remove any
such Part from the Airframe or an Engine if (i) such Part is in addition to, and
not in replacement of or in substitution for, any Part originally incorporated
or installed in or attached to such Airframe or Engine at the time of delivery
thereof hereunder or any Part in replacement of, or in substitution for, any
such original Part, (ii) such Part is not required to be incorporated or
installed in or attached or added to such Airframe or Engine pursuant to the
terms of Section 8.11 of the Lease Agreement or the first sentence of this
Clause 3(d), and (iii) such Part is readily removable without causing material
damage to such Airframe or Engine and such Part can be removed from such
Airframe or Engine without diminishing or impairing the value, condition,
utility or airworthiness which such Airframe or Engine would have had at the
time of removal had such alteration, modification or addition not been effected
by Lessee. Upon the removal by Lessee or any Part agreed to in advance, in
writing by Lessor and Lessee as provided by the immediately preceding Clauses
3(d)(i) through 3(d)(iii) title thereto shall, without further act, vest in
Lessee free and clear of all rights of Lessor and Lessor's Liens and such Part
shall no longer be deemed a Part hereunder and Lessee shall, as soon as
practicable, repair any damage to the Aircraft or Engine resulting from the
removal of such Part. Any Part not removed by Lessee as above provided prior to
the return of the Airframe or respective Engine to Lessor under the Lease
Agreement shall remain the property of Lessor all subject to this Lease. If any
removable part, incorporated or installed in or attached or added to the
Airframe or any Engine as the result of any alteration modification or addition
agreed to in advance, in writing by Lessor and Lessee is (y) owned by any third
party and leased to Lessee or installed on the Aircraft under license granted to
or by Lessee, or (z) sold to Lessee subject to a conditional sales contract or
other security subject to a security interest in favor of any third party, then
Lessor will not acquire or claim, as against such lessor, licensor, conditional
vendor or secured party, any right, title or interest in any such removal part
as the result of such removable part being installed in the Aircraft, provided,
however, that (A) the inability of Lessor to so acquire or claim is subject to
the express condition that such lessor, licensor, conditional vendor or secured
party (aa) shall not acquire or claim, as against Lessor, any right, title or
interest in the Aircraft, or any Part other than its interest in such removable
part by reason of such removable part being installed thereon, and (bb) shall
expressly disclaim in writing any right to assert a claim, as against Lessor, to
any right, title or interest in the Aircraft or any Part thereof, and (B) any
removable part not removed by Lessee within 60 days after the occurrence of an
Event of Default which is continuing uncured, shall, at
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Air South Airlines, Inc.
February 1, 1997
Page 7
such time, become the property of Lessor and be subject to this Lease. In no
event shall Lessor bear any liability or cost for any alteration, modification
or addition to, or for any grounding or suspension of certification of, the
Aircraft, or for any loss of revenue arising therefrom.
(e) For the avoidance of doubt, under this Clause 3, a whole Engine
shall is not be construed to be a Part.
4. (a) Except as expressly set forth herein, the Lease Agreement,
including Letter Agreement No. 1 with respect thereto, shall remain in full
force and effect as the legal, valid and binding obligations of Lessor and
Lessee.
(b) This Letter Agreement No. 2 shall be governed by, and
construed in accordance with the Governing Law.
(c) This Letter Agreement No. 2 may be executed by the parties
hereto in separate counterparts each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
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Page 8
Please indicate your acceptance of the foregoing by signing this letter
at the place indicated and returning it to us.
Yours truly,
MIMI LEASING CORP.
By:
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Its:
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Agreed and Accepted
AIR SOUTH AIRLINES, INC.
By: /s/
---------------------------------
Its: Vice President
--------------------------------
Date: 3/5/97
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