EXHIBIT 10.48
RECORDED
Federal Aviation Administration
Date 10/15/96 Time 9:04
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Conveyance Number ZZ013177
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By /s/ JW
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DUPLICATE ORIGINAL
AIRCRAFT LEASE AGREEMENT
dated as of
October 9, 1996
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT
SOLELY AS OWNER TRUSTEE,
LESSOR
and
ALOHA AIRLINES, INC.,
LESSEE
AIRCRAFT LEASE AGREEMENT
THIS AIRCRAFT LEASE AGREEMENT, made as of this 9th day of October, 1996
(the "Lease"), by and between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity but solely as
owner trustee ("LESSOR"), and ALOHA AIRLINES, INC. a corporation formed under
the laws of Hawaii ("LESSEE").
WHEREAS, LESSEE desires to lease the Aircraft (as hereinafter defined)
from LESSOR and LESSOR is willing to lease the Aircraft to LESSEE, in
accordance with and subject to the terms and conditions of this Lease.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the parties hereto, LESSOR and LESSEE
agree as follows:
SECTION 1
DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Lease and shall be equally applicable to both the singular
and the plural forms of the terms herein defined. Any agreement referred to
below shall mean such agreement, as amended, supplemented and modified from
time to time:
"ACQUISITION COST" means (i) LESSOR's cost to purchase the Aircraft,
plus (ii) all sales and excise taxes paid by LESSOR on, or with respect to the
acquisition of the Aircraft, plus (iii) all costs and expenses approved and
paid by LESSOR in connection with the delivery of the Aircraft.
"ACT" shall mean Subtitle VII of Title 49 of the United States Code and
the rules and regulations promulgated thereunder, as amended from time to time.
"AFFILIATE" shall mean, with respect to any Person, any other Person
which, directly or indirectly, controls or is controlled by or is under common
control with such Person.
"AGREED VALUE" with respect to war risks and all risks insurance shall
mean Twelve Million (US$12,000,000) Dollars with respect to the hull (including
all engines installed thereon).
"AIRGROUP" shall mean Aloha Airgroup, Inc., a corporation formed under
the laws of Hawaii.
"AIR AUTHORITY" shall mean the United States Federal
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Aviation Administration, or any predecessor or successor thereto having
jurisdiction over the registration, use, operation and maintenance of the
Aircraft.
"AIR CARRIER" shall mean a citizen of the United States (as defined in
40102 of Title 49 of the United States Code) holding an air carrier operating
certificate issued by the Secretary of Transportation of the United States
pursuant to chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo.
"AIRCRAFT" shall mean the Airframe, together with the two (2) Engines
(or any Replacement Engine substituted for either of such Engines hereunder),
all as more particularly described on Exhibit "A" hereto, whether or not any of
such initial or Replacement Engines may, from time to time, be installed on
such Airframe or may be installed on any other airframe or any other aircraft.
"AIRCRAFT DOCUMENTS" shall mean the items
identified in Exhibit "B" hereto.
"AIRFRAME" means (i) the Boeing model 737-230 aircraft (excluding
Engines or engines from time to time installed thereon), bearing United States
registration no. N818AL and manufacturer's serial no. 22117, and (ii) any and
all Parts, so long as the same shall be incorporated in such Airframe, and any
and all Parts removed from such Airframe, so long as title to such Parts shall
remain vested in LESSOR in accordance with the terms of Section 8(A).
"APPROVED INSURER" shall mean any reputable and financially sound
insurance company or insurance broker, in the U.S., London, French, German or
Japanese insurance markets, that provides or confirms the existence of any
insurance required under this Lease.
"AUTHORIZED MAINTENANCE PERFORMER" shall mean LESSEE, Air New Zealand
(Xxxxxx Church), Sabre Tech (Arizona), Pemco (Alabama), Tramco (Washington),
Evergreen Air Center, Inc. (Arizona), Mobile Aerospace (Alabama), Greenwich
Air Services (Florida), TIMCO (North Carolina) or such other FAA certified
maintenance performer of comparable quality and reputation to that of any of
the above listed entities, and which is approved in advance by Lessor.
"BASE TERM" means the period commencing on the Effective Date and
expiring on the Expiration Date.
"BASIC RENT" shall mean One Hundred Twenty Thousand (US$120,000)
Dollars per month during the Base Term.
"BENEFICIARY" means Diamond Head Associates LLC, a limited liability
company formed under the laws of Delaware.
"BENEFICIARY'S ADDRESS" shall mean c/o NSJ Corporation, 0000 Xxxxx
Xxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000, Attn.: President;
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Telefax No.: (000) 000-0000.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day
on which banks are required or authorized to close in New York, New York, USA
or in Honolulu, Hawaii.
"CAPITAL LEASE" shall mean any lease of any property (whether real,
personal or mixed) which, in conformity with generally accepted accounting
principles, is or should be accounted for as a Capital Lease on a balance
sheet.
"CASH FLOW" shall mean LESSEE's net cash provided by operating
activities, as determined in accordance with Generally Accepted Accounting
Principles, consistently applied, adjusted for interest paid during such
period, calculated on a rolling twelve month basis and computed at the end of
each calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.
"CERTIFICATE OF ACCEPTANCE" shall mean the written certificate of
LESSEE, in substantially the form of Exhibit "C" hereto, pursuant to which
LESSEE accepts delivery of the Aircraft and confirms that the Aircraft is in
the condition required by this Lease.
"CODE" means the Internal Revenue Code of 1986, as amended and as may
hereafter be amended, and the rules and regulations promulgated pursuant
thereto.
"COMPENSATION" shall have the meaning set forth in Section 12(D).
"COMPONENT INVENTORY" shall have the meaning set forth in Section 3(D)
hereof.
"COVERED MAINTENANCE" shall have the meaning set forth in Section
7(D)(iii) hereof.
"CYCLE" shall mean one takeoff and landing of the Aircraft.
"DEBT SERVICE" shall mean the sum of regularly scheduled principal
payments, interest payments and payments under Capital Leases made by LESSEE,
calculated on a rolling twelve months basis and computed at the end of each
calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.
"DEFAULT" shall mean an event which, with the lapse of time, the giving
of notice, or both, would constitute an Event of Default.
"DELIVERY LOCATION" shall mean Berlin, Germany.
"DOLLARS" or "$" shall mean the legal currency of the
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Xxxxxx Xxxxxx xx Xxxxxxx.
"DOT" shall mean the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"EFFECTIVE DATE" shall mean the date on which LESSEE signs and delivers
to LESSOR Lease Supplement No. 1 to this Lease.
"ENGINE" means (i) on the Effective Date, each of the two (2) Xxxxx &
Xxxxxxx model JT8D-15 engines, bearing manufacturer's serial nos. 708305 and
708373, respectively, whether or not from time to time installed on the
Airframe or installed on any other airframe or any other aircraft, (ii) within
sixty (60) days of the Effective Date, each of the two (2) Xxxxx & Whitney
model JT8D-9A engines identified on a Lease Supplement to this Lease, whether
or not from time to time installed on the Airframe or installed on any other
airframe or any other aircraft, and (iii) any Replacement Engine, whether or
not from time to time installed on the Airframe or any other airframe or any
other aircraft, together, in each case, with any and all Parts incorporated in
such Engine and any and all Parts removed from such Engine, so long as title to
such Parts shall remain vested in LESSOR in accordance with the terms of
Section 8(A). At such time as a Replacement Engine shall be substituted
hereunder and the Engine for which the substitution is made shall be released,
such Replacement Engine shall constitute an Engine hereunder and such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means, as of
any date of determination, all Engines leased hereunder.
"ENGINE MANUFACTURER" means United Technologies Corporation, Xxxxx &
Xxxxxxx Group, Commercial Products Division, a Delaware corporation, in its
capacity as manufacturer of the Engines, and its successors and
assigns.
"EQUIPMENT CHANGE" shall have the meaning set
forth in Section 8(C) hereof.
"EVENT OF DEFAULT" shall have the meaning set
forth in Section 18 hereof.
"EVENT OF LOSS" shall mean, with respect to the Aircraft, Airframe or
any Engine, any of the following events with respect to such property: (i) loss
of such property due to destruction, damage beyond repair or rendition of such
property unfit for normal use by LESSEE by any cause whatsoever, or any damage
to such property which results in an insurance settlement with respect to such
property on the basis of a total loss or a constructive total loss or a
compromised total loss; (ii) the disappearance, loss, theft, hijacking or
condemnation, of such property for a period in excess of thirty (30)
consecutive days; (iii) the confiscation or seizure of, or requisition of use
or title of such property for a period in excess of sixty (60) consecutive
days; or (iv) any divestiture of title to an Engine treated as an Event of Loss
pursuant to Section 12(B) or any other provision hereof. An Event of Loss with
respect to the Aircraft shall be deemed to have
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occurred if an Event of Loss occurs with respect to the Airframe which
constitutes a part of the Aircraft.
"EXPIRATION DATE" shall mean October 8, 2003.
"FAA" shall mean the Federal Aviation Administration of the DOT or any
governmental person, agency or other authority succeeding to some or all of the
functions of the Federal Aviation Administration.
"FAR" shall mean the United States Federal Aviation Regulations
currently in effect or as hereafter amended or modified.
"FIXED CHARGES COVERAGE RATIO" shall mean Cash Flow divided by Debt
Service.
"FLIGHT HOUR" shall mean each hour or fraction thereof elapsed from the
moment the wheels of the Aircraft leave the ground through the moment the
wheels of the Aircraft touch down upon the ground.
"GOVERNMENTAL ENTITY" shall mean and include: (i) any national
government and any political subdivision thereof or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality, court
or agency of the foregoing, however constituted; and (iii) any association,
organization or institution of which any of the foregoing is a member, or to
whose jurisdiction any of the foregoing is subject, or in whose activities any
of the foregoing is a participant, but only to the extent that any such
association, organization or institution has jurisdiction over the Aircraft or
its operations.
"INDEMNITEE" means LESSOR, Beneficiary, Lender and their respective
successors and permitted assigns and their respective directors, officers,
shareholders, members and employees.
"JETZ VENTURES" shall mean Jetz Ventures Inc.
"LAW" shall mean and include: (i) any statute, decree, constitution,
regulation, order or other directive of any Governmental Entity; (ii) any
treaty, pact, compact or other agreement to which any Governmental Entity is a
signatory or party; (iii) any judicial or administrative interpretation or
application of any of the foregoing; and (iv) any amendment or revision of any
of the foregoing.
"LEASE," "THIS LEASE," "THIS AGREEMENT," "HEREBY," "HEREIN," "HEREOF,"
"HEREUNDER" or other like words shall mean this Aircraft Lease Agreement, as
the same may be supplemented or amended, in writing, from time to time.
"LEASE DOCUMENTS" shall mean this Lease, each Lease Supplement, the
collateral assignment of this Lease to Lender, the Certificate of Acceptance
and the Power of Attorney.
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"LEASE SUPPLEMENT" means a supplement to this Lease, substantially in
the form attached as Exhibit "D" hereto, subjecting the property described
therein to this Lease.
"LENDER" means the entity or group of entities that shall have
provided, or may hereafter provide, financing to LESSOR, which financing is
secured in whole or in part by the Aircraft, this Lease and the rights of
LESSOR hereunder.
"LESSEE'S ADDRESS" shall mean 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000;
Attn.: Senior vice President and CFO; Telefax No.: 808-833-3100.
"LESSOR'S ADDRESS" shall mean 00 Xxxxx Xxxx Xxxxxx, Xxxx Xxxx Xxxx,
Xxxx 00000; Attn.: Corporate Trust Department; Telefax 000-000-0000.
"LESSOR'S LIENS" means the Liens of any Person claiming by, through or
under LESSOR, which arises as a result of (i) claims by or against any such
Person not related to, or expressly permitted by, the Lease, (ii) any act or
omission of any such Person which is not expressly permitted by the Lease, (iii)
taxes or expenses imposed by or against any such Person (or the consolidated
group of taxpayers of which it is a member) for which LESSEE is not obligated to
indemnify pursuant to Section 11, (iv) claims by or against any such Person
arising out of any transfer by such Person of its interest in the Aircraft,
other than a transfer resulting from LESSOR's exercise of remedies while an
Event of Default has occurred and is continuing pursuant to Section 19, or (v)
the lien of any Lender with respect to the Aircraft (or any part thereof), this
Lease or the rights of LESSOR under this Lease.
"LIEN" shall mean any mortgage, pledge, lien, encumbrance, security
interest or other claim affecting the title to, or any interest in, property.
"LUFTHANSA" shall mean Deutsche Lufthansa Aktiengesellschaft.
"MAINTENANCE PROGRAM" shall mean LESSEE's FAA approved Part 121
maintenance program or the Air Authority FAR Part 121 approved maintenance
program of an approved sublessee, covering scheduled maintenance,
condition-monitored maintenance and on-condition maintenance of airframe,
engines and components of the Aircraft, including, but not limited to,
servicing, testing, preventive maintenance, repairs, structural inspections,
system checks, overhauls, approved modifications, service bulletins, engineering
orders, airworthiness directives, corrosion control inspections and treatments.
"MANUFACTURER" shall mean The Boeing Company, a Washington corporation,
in its capacity as manufacturer of the Airframe, and its successors and
assigns.
"MINIMUM LIABILITY COVERAGE" shall mean Three Hundred
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Fifty Million(US$350,000,000) Dollars per occurrence.
"OFFICER'S CERTIFICATE" shall mean a certificate signed by the
chairman, the president, any vice president, the treasurer, any assistant
treasurer, the secretary or any assistant secretary of the Person providing
such certificate.
"OVERDUE RATE" shall mean the prime or base lending rate (or such other
rate as may replace such prime or base lending rate) announced or published on
any date on which the Overdue Rate is required to be calculated, by Citibank,
N.A., New York, New York, plus six percent (6%) per annum.
"PARTS" means all appliances, parts, instruments, avionics,
appurtenances, accessories, furnishings and other equipment or components, of
whatever nature (other than complete Engines) and other than removable Parts,
along with any seats and galleys leased from third parties, which are, from
time to time, incorporated in the Airframe or any Engine, or so long as title
to such Parts shall remain vested in LESSOR, in accordance with Section 8(A)
hereof, after removal from the Airframe or any Engine.
"PERMITTED LIENS" shall mean, with respect to the Aircraft, the
Airframe or any Engine (a) the respective rights of the parties under this
Lease and each Lease Supplement; (b) LESSOR's Liens; (c) liens for taxes,
assessments or other governmental charges either not yet due or being contested
in good faith by appropriate proceedings, so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft,
the Airframe or any Engine and provided that with respect to such liens,
assessments or governmental charges, LESSEE has provided for adequate reserves,
as determined in accordance with generally accepted accounting principles, to
satisfy in full the amount of such lien plus interest and penalties thereon, or
has posted a bond, issued by a bonding or insurance company reasonably
acceptable to LESSOR, and in an amount sufficient to satisfy in full the amount
of such lien plus interest and penalties thereon; (d) materialmen's,
mechanic's, worker's, repairer's, employee's or other like liens for amounts,
the payment of which is either not yet delinquent for more than thirty (30)
days or is being contested in good faith by appropriate proceedings, so long as
such proceedings do not involve any material danger of the sale, forfeiture or
loss of the Aircraft, the Airframe or any Engine and so long as LESSEE has
provided for adequate reserves, as determined in accordance with generally
accepted accounting principles, to satisfy in full the amount of such lien plus
interest and penalties thereon, or has posted a bond, issued by a bonding or
insurance company reasonably acceptable to LESSOR, and in an amount sufficient
to satisfy in full the amount of such lien plus interest and penalties thereon;
(e) liens arising out of any judgment or award, unless the judgment secured
shall not, within thirty (30) days after entry thereof, have been discharged or
vacated or execution thereof stayed pending appeal or shall not have been
discharged, vacated or reversed within thirty (30) days after the execution of
such stay, and provided such lien presents no material danger of the sale,
forfeiture or loss of the Aircraft, the
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Airframe or any Engine or of LESSOR's interest therein and so long as LESSEE
has provided for adequate reserves, as determined in accordance with generally
accepted accounting principles, to satisfy in full the amount of such lien plus
interest and penalties thereon, or has posted a bond, issued by a bonding or
insurance company reasonably acceptable to LESSOR, and in an amount sufficient
to satisfy in full the amount of such lien plus interest and penalties thereon.
"PERSON" shall mean and include any individual, corporation, limited
liability company, partnership, limited liability partnership, firm, joint
venture, trust, unincorporated organization, association, Governmental Entity,
or any organization or association of which any of the foregoing is a member or
participant.
"POWER OF ATTORNEY" shall mean that certain power of attorney from
LESSEE to LESSOR, to be executed in the form attached hereto as Exhibit "E",
pursuant to which LESSEE designates LESSOR as attorney-in-fact to do all things
which LESSEE could do under this Lease in the event LESSEE fails to fulfill any
of its obligations hereunder, including but not limited to, terminating this
Lease and LESSEE's interest herein.
"RENT" shall mean Basic Rent and Supplemental Rent.
"RENT DATE" shall mean each date on which a payment of Basic Rent is
due. The first Rent Date shall be the Effective Date and each subsequent Rent
Date shall be the corresponding date in each consecutive month during the Base
Term. If a Rent Date shall in any month not be a Business Day, then the Rent
Date shall be the immediately following Business Day.
"REPLACEMENT ENGINE" shall have the meaning set
forth in Section 12(B) hereof.
"RETURN LOCATION" shall mean LESSEE's maintenance facilities in
Honolulu, Hawaii or such location in the western continental United States, as
LESSOR shall designate (provided that facilities exist at such location
designated by LESSOR so as to permit the performance of a boroscope inspection
and engine power assurance run), or such other location as LESSOR and LESSEE
shall agree upon. In the event LESSOR directs LESSEE to return the Aircraft in
the western continental United States, LESSOR shall pay LESSEE's ferry costs
(including the cost of fuel, which cost to LESSOR shall be the same cost as
charged to LESSEE at the point of fueling) from Honolulu to such location
(unless the Aircraft is being returned due to the occurrence of an Event of
Default).
"RETURN OCCASION" shall have the meaning set forth in Section 17(A)
hereof.
"SECURITY DEPOSIT" shall have the meaning set forth in Section 5(D)
hereof.
"SUPPLEMENTAL RENT" shall mean all amounts, liabilities
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and obligations (other than Basic Rent) which LESSEE assumes or agrees to pay
to LESSOR or any other Person hereunder, including, without limitation, all
amounts required to be paid by LESSEE under its indemnification pursuant to
Section 14 hereof.
"TAXES" shall mean any and all sales, withholding, use, excise,
personal property, ad valorem, value added, stamp, interest equalization, taxes
levied upon LESSEE's income, gross levies, customs or other duties, or other
charges of any nature, together with any penalties, fines or interest thereon,
imposed, levied or assessed by, or otherwise payable to, any Governmental
Entity. Excluded from this definition shall be any taxes imposed by any taxing
authority within the jurisdiction of the Delivery Location and any taxes based
on or measured by the gross or net income of LESSOR or any Indemnitee
(including, without limitation, any franchise tax, any capital gains tax, any
minimum or alternative minimum tax and any taxes measured on or by any items of
tax preference).
"TRUST AGREEMENT" means that certain Trust Agreement dated as of August
13, 1996, between Beneficiary, as grantor thereunder, and Trustee, as amended by
that certain Amendment No. 1 to Trust Agreement dated as of October 9, 1996 and
as supplemented by Supplement No. 1 to Trust Agreement dated the date hereof
"TRUSTEE" means First Security Bank, N.A., a national banking
association.
SECTION 2
LEASE OF AIRCRAFT
LESSOR hereby agrees to lease the Aircraft to LESSEE and LESSEE hereby
agrees to lease the Aircraft from LESSOR pursuant to the provisions of this
Lease.
SECTION 3
DELIVERY AND ACCEPTANCE; TERM
(A) DATE OF DELIVERY. LESSEE shall take delivery of the Aircraft and
Aircraft Documents and execute and deliver to LESSOR Lease Supplement No. 1 to
this Lease on the Effective Date on not less than five (5) days' prior written
notice from LESSOR to LESSEE.
(B) PLACE OF DELIVERY AND ACCEPTANCE. The Aircraft and Aircraft
Documents shall be delivered to and accepted by LESSEE at the Delivery
Location, unless LESSOR and LESSEE otherwise agree in writing upon another
location subsequent to the execution of this Lease.
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(C) CASUALTY TO AIRCRAFT PRECEDING DELIVERY. In the event that an Event
of Loss occurs with respect to the Aircraft prior to the Effective Date hereof,
this Lease shall thereupon terminate and neither LESSOR nor LESSEE shall have
any further obligation to the other hereunder except that LESSOR shall, as
promptly as is reasonably practicable, return so much of the Security Deposit
that has been paid to it to LESSEE.
(D) ACCEPTANCE OF AIRCRAFT. The Aircraft to be leased hereunder shall
be delivered to LESSEE in its "AS IS," "WHERE IS" condition, SUBJECT TO EACH AND
EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SUBSECTION
6(A)HEREOF, except that the Aircraft shall comply with the conditions set forth
on Exhibit "F". LESSEE shall indicate and confirm its acceptance of the Aircraft
by delivery to LESSOR of a (i) Lease Supplement, and (ii) Certificate of
Acceptance, dated on the Effective Date. At or preceding the time of acceptance
of the Aircraft, LESSOR shall deliver to LESSEE a written equipment inventory of
the Aircraft, prepared by LESSOR (the "Component Inventory") or Lufthansa.
(E) TERM OF LEASE. The term of this Lease, as to the Aircraft, shall be
for the Base Term.
SECTION 4
CONDITIONS PRECEDENT
(A) LESSEE'S CONDITIONS PRECEDENT. LESSOR's obligation to lease the
Aircraft hereunder to LESSEE shall be subject to the receipt by LESSOR or the
performance or occurrence, on or before the Effective Date (or such other date
as provided for herein), of the following from LESSEE, all of which shall be
satisfactory in form and substance to LESSOR and Lender:
(1) Certified copy of a resolution of LESSEE's Board of Directors,
certified by an officer of LESSEE, authorizing the entering into and
performance of this Lease together with an incumbency certificate as to the
person or persons authorized to execute and deliver this Lease and the other
Lease Documents on behalf of LESSEE;
(2) Certified copy of LESSEE's articles or certificate of incorporation
and by-laws certified by an officer of LESSEE;
(3) A favorable opinion of counsel to LESSEE, dated the Effective Date,
addressed to LESSOR and Lender, and which opinion shall opine, among other
things, that the Lease and all of the terms thereof constitutes the valid and
binding obligation of LESSEE enforceable in accordance with its terms and that
the interests of LESSOR and Lender, respectively, in the Aircraft and this
Lease are fully protected and perfected;
(4) A copy of LESSEE's air carrier operating certificate, as issued by
the Secretary of Transportation of the United States
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pursuant to Chapter 47 of Title 49 of the United States Code for aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of cargo,
duly certified as being true, correct, accurate and complete by an officer of
LESSEE;
(5) The LESSOR shall be satisfied that all necessary licenses and
permits for the exportation of the Aircraft from Germany and the importation of
the Aircraft into United States have been obtained by LESSEE and remain valid
and in full force and effect and that any applicable customs duties, stamp
duties and all other Taxes, if any, shall have been paid by LESSEE as a
consequence of the importation of the Aircraft, the entering into of this
Lease, the performance of the terms of this Lease and the leasing of the
Aircraft;
(6) An Officer's Certificate of LESSEE, dated as of the Effective Date,
stating that:
(a) The representations and warranties contained in Subsection
6(C) hereof are true and accurate on and as of such date as though
made on and at such time (except to the extent that such
representations and warranties relate solely to an earlier date); and
(b) No event has occurred and is continuing, or would result
from the leasing of the Aircraft, which constitutes a Default or an
Event of Default or would constitute a Default or an Event of
Default with the giving of notice or the passage of time or both;
(7) Not less than three (3) Business Days prior to the Effective Date,
certificates and a broker's undertaking letter, signed by an Approved
Insurer(s), as to due compliance with the insurance provisions of Section 13
hereof with respect to the Aircraft;
(8) The Security Deposit;
(9) The Power of Attorney;
(10) The collateral assignment of this Lease in favor of Lender;
(11) A written statement, on the letterhead of LESSEE, for presentation
to the export control authority of the Federal Republic of Germany (Bundesamt
fur Wirtschaft) that neither the Aircraft nor parts thereof nor any spare
parts, if any, delivered to the LESSEE shall directly or indirectly be sold,
leased, released, assigned, transferred, conveyed or in any manner disposed of
in or to any country other than the United States of America without due prior
written consent of the Bundesamt fur Wirtschaft, except to Australia, Austria,
Belgium, Luxembourg, Denmark, France, Greece, Great Britain, Ireland, Italy,
Switzerland or Turkey; and
(12)Such other documents which LESSOR or its counsel may reasonably
require.
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(B) LESSOR'S CONDITIONS PRECEDENT. LESSEE's obligation to lease the
Aircraft hereunder from LESSOR shall be subject to the receipt by LESSEE or the
performance or occurrence, on or before the Effective Date (or such other date
as provided for herein), of the following from LESSOR, all of which shall be
satisfactory in form and substance to LESSEE:
(1) The Aircraft shall be in the condition required by Exhibit "F"
hereto;
(2) The Aircraft shall be registered in the United States in the name
of LESSOR;
(3) Lufthansa shall have provided to LESSEE, on a reasonably timely
basis prior to the Effective Date, such information as LESSEE shall reasonably
require in connection with obtaining all necessary licenses, permits and
authorizations for the exportation of the Aircraft from Germany and the
importation of the Aircraft to the United States;
(4) LESSOR's Lender shall have given to LESSEE a covenant of quiet
enjoyment; and
(5) LESSOR shall have tendered the Aircraft to LESSEE for delivery not
later than December 9, 1996.
SECTION 5
RENT; SECURITY DEPOSIT AND MAINTENANCE RESERVES
(A) RENT. LESSEE covenants and agrees to pay to LESSOR, or to any of
LESSOR's assigns designated to LESSEE in writing by LESSOR, the Rent.
(1) BASIC RENT. The Basic Rent shall be paid by LESSEE to LESSOR
in respect of the Aircraft, in advance, on each Rent Date. The first
payment of Basic Rent shall be paid by LESSEE to LESSOR on the
Effective Date, and LESSEE hereby directs LESSOR, and LESSOR agrees,
that if LESSEE provides a letter of credit in the full amount of the
Security Deposit as permitted pursuant to Section 5(D) hereof, then
the Initial Deposit (as defined in Section 5(D)) shall be credited
toward LESSEE's obligation to make the first payment of Basic Rent
hereunder, and LESSEE shall on the Effective Date pay the balance of
the first payment of Basic Rent.
(2) SUPPLEMENTAL RENT. LESSEE agrees to pay to LESSOR, or to
whomsoever shall be entitled thereto, any and-all Supplemental Rent
promptly as the same shall become due and owing, and in the event of
any failure on the part of LESSEE to pay any Supplemental Rent,
LESSOR shall have all rights, powers and remedies provided for in
this Lease or by Law or equity or otherwise in the case of nonpayment
of Basic Rent. LESSEE will also pay to LESSOR,
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on demand, as Supplemental Rent, to the extent permitted by
applicable Law, interest at the Overdue Rate on any part of any
installment of Basic Rent not paid when due for the period from and
including the Rent Date to and including the date of actual payment
in full, and on any Supplemental Rent not paid when due or demanded
by LESSOR for any period for which the same shall be overdue.
(B) FORM OF PAYMENT. Payment of Rent and any other payments due under
this Lease, shall be made in Dollars by wire transfer of immediately available
funds to LESSOR or its assignee at such address and account as LESSOR may
specify in writing. Payment shall be made on the Rent Date, or the Business Day
thereafter if the Rent Date is not a Business Day, so as to reach LESSOR or its
designated depository not later than 2:00 p.m. local time, New York, New York,
on the Rent Date or the Business Day thereafter, as the case may be.
(C) RENT NOT REDUCED BY TAXES. LESSEE agrees that each payment of Rent
pursuant to this Lease shall be free of all Taxes and, in the event that any
Taxes are imposed, levied, assessed by, or otherwise payable with respect to or
arising out of the leasing or operation of the Aircraft by LESSEE, LESSEE shall
pay such amounts as are necessary to enable LESSOR and each assignee of LESSOR
to whom payments of Rent are to be made by LESSEE, to receive each payment of
Rent hereunder, under any circumstances and in any event, in the full amounts
required hereunder on an after-tax basis, without any reduction whatsoever.
(D) SECURITY DEPOSIT. LESSEE shall deliver to LESSOR a security deposit
in the amount of Two Hundred Forty Thousand(US$240,000) Dollars (the "Security
Deposit") to secure the performance of LESSEE's obligations under this Lease,
including, but not limited to, LESSEE's obligations to pay Rent. The Security
Deposit shall be paid by LESSEE to LESSOR as follows:
(i) LESSOR acknowledges receipt from LESSEE on June 5, 1996 of
Seventy Five Thousand(US$75,000) Dollars (such amount is hereinafter
referred to as the "Initial Deposit"); and
(ii) LESSEE shall pay to LESSOR, on the Effective Date, One
Hundred Sixty Five Thousand (US$165,000) Dollars.
The Security Deposit shall be paid by LESSEE to LESSOR when due to the
following account:
LGT Bank in Liechtenstein AG
Xxxxxxxxxxx 00
0000 Xxxxx, Xxxxxxxxxxxxx
Account No.: 113 451 5-10 333 01
For the account of Jetz Ventures Inc.
Reference: Diamond Head Associates/Aloha
14
The Security Deposit, if in cash, shall be held by LESSOR (or Lender)
in an interest bearing account. Upon the occurrence and continuation of an
Event of Default hereunder, LESSOR may use all or any part of the Security
Deposit, together with all interest accrued thereon, in the manner provided for
in this Lease. At the end of the Base Term of this Lease, and assuming no Event
of Default has occurred and is continuing, and the Aircraft and Aircraft
Documents have been returned by LESSEE to LESSOR in accordance with the
provisions hereof, LESSOR shall return the Security Deposit then held by
LESSOR, together with all interest accrued thereon (if the Security Deposit has
been held in the form of cash), to LESSEE, to such account as LESSEE shall
designate to LESSOR in writing.
In lieu of a cash Security Deposit, LESSEE may post an irrevocable
standby letter of credit (the "Letter of Credit") in the full amount of the
Security Deposit. Any Letter of Credit issued by LESSEE to LESSOR shall be in
form and substance satisfactory to LESSOR and Lender (the form and substance of
which shall be submitted to LESSOR for approval not less than four (4) Business
Days prior to the Effective Date), shall be issued and/or confirmed by a bank
acceptable to LESSOR and Lender, shall be renewed not less than thirty (30)
days prior to the stated expiration date thereof, shall remain in full force
and effect for not less than a one year period of time following the Expiration
Date and shall be drawable in either New York, New York or San Francisco,
California.
In the event LESSOR has drawn any part of the Security Deposit in
accordance with the terms of this Lease, LESSEE shall as promptly as
practicable supplement the Security Deposit so that at all times during the
Base Term the Security Deposit (whether in the form of cash or Letter of
Credit) shall be equal to Two Hundred Forty Thousand (US$240,000) Dollars.
(E) MAINTENANCE RESERVE. Provided Airgroup meets the Credit Standards,
then LESSEE shall not be required to pay Reserves for any period for which
Reserves would otherwise be payable, as provided below. Airgroup shall be
deemed to have satisfied the Credit Standards provided Airgroup maintains (1) a
Fixed Charges Coverage Ratio equal to not less than 1.05, calculated on a
rolling twelve month basis and (2) a minimum tangible net worth (tangible net
worth being determined in accordance with Generally Accepted Accounting
Principles, consistently applied) OF $4,000,000, calculated on a rolling twelve
month basis and computed at the end of each calendar quarter, with the first
computation being made as of the calendar quarter ending March 31, 1997.
Commencing as of the calendar quarter ending March 31, 1997, and for
each calendar quarter thereafter (each such date a "Review Date") during the
Base Term, if LESSEE failed to meet the Credit Standards as calculated on a
rolling twelve month basis, LESSEE shall pay to LESSOR Reserves on account of
the operation for the Aircraft for each subsequent month following the Review
Date on which it was determined that LESSEE failed to meet the Credit
15
Standards up through and including the next Review Date on which it is
determined that LESSEE meets the Credit Standards, in an amount equal to Two
Hundred Forty Five (US$245.00) Dollars per each Flight Hour incurred on the
Aircraft in the previous calendar month, which amount shall be allocated at
Seventy Five (US$75.00) Dollars per Flight Hour for the Airframe (the "Airframe
Reserve"), Seventy (US$70.00) Dollars per Engine for each Engine Flight Hour
(the "Engine Reserve"), Twenty ($20.00) Dollars per Flight Hour for the landing
gear (the "Landing Gear Reserve") and Ten ($10.00) Dollars per Flight Hour for
the APU (the "APU Reserve") (each a "Reserve" and collectively, the
"Reserves"). All Reserves to be paid by LESSEE to LESSOR shall be paid in
arrears, not later than ten (10) days following the last day of the month for
which the Reserves payment was calculated except the Reserve payment for the
month immediately preceding the date of the Return Occasion (as defined in
Section 17(A)) shall be paid on the date of the Return Occasion. All Reserves
paid by LESSEE to LESSOR will be held by LESSOR (or Lender) and shall be
disbursed by LESSOR (or LESSOR shall cause the same to be disbursed) only to
pay for Covered Maintenance pursuant to Section 7(D) hereof.
(F) NET LEASE, LESSEE'S OBLIGATIONS; NO SETOFF; COUNTERCLAIM, ETC. This
is a net operating lease. It is the intent of the parties hereto that this
Lease be a "true lease" and a lease for United States federal income tax
purposes. LESSEE acknowledges and agrees that it has no interest herein other
than that of a lessee. Except as otherwise provided herein, LESSEE's obligation
to pay all Rent payable hereunder shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever, including, without limitation,
(i) any Taxes (other than Taxes applicable to said Rent for which LESSEE has no
indemnification obligation under Section 11 hereof), any setoff, counterclaim,
recoupment, defense or other right which LESSEE may have against LESSOR; (ii)
any defect in the title, airworthiness, condition, design, operation or fitness
for use of, or any damage to or loss or destruction of, the Aircraft, Airframe
or any Engine, or any interruption or cessation in the use or possession
thereof by LESSEE for any reason whatsoever; (iii) any insolvency, bankruptcy,
reorganization or similar proceedings by or against LESSEE; (iv) any
restriction, prevention or curtailment of, or interference with, any use of the
Aircraft, Airframe or any Engine; (v) any invalidity or unenforceability or
disaffirmance of this Lease or any provision hereof, whether against or by
LESSEE or otherwise; or (vi) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. The foregoing
provisions shall not be construed as a waiver by LESSEE of any right to bring a
separate action against LESSOR to recover amounts allegedly due from LESSOR to
LESSEE.
SECTION 6
REPRESENTATIONS AND WARRANTIES
(A) DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN TO
THE CONTRARY, NEITHER LESSOR NOR BENEFICIARY HAS
16
MADE AND SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED THE
AIRCRAFT UNDER THIS LEASE, AND LESSOR HEREBY DISCLAIMS, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO AIRWORTHINESS, VALUE, CONDITION, COMPLIANCE
WITH SPECIFICATIONS, DURABILITY, RELIABILITY, DESIGN, OPERATION,
MERCHANTABILITY, OR FITNESS FOR USE OR PARTICULAR PURPOSE OF THE AIRCRAFT, OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
AIRCRAFT, OR ANY PART THEREOF, OR AS TO ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, OR ANY PART
THEREOF, INCLUDING, WITHOUT LIMITATION, ANY LIABILITY IN CONTRACT, TORT,
OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT LIABILITY, ANY IMPLIED
WARRANTY ARISING FROM COURSE OF PERFORMANCE OR DEALING OR USAGE OR TRADE, OR
LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER CONSEQUENTIAL
DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES, AND DISCLAIMS
EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES.
As an exception to the foregoing, LESSOR represents and warrants that,
on the Effective Date:
(1) LESSOR shall have the lawful right to lease the Aircraft to
LESSEE in accordance with the terms of this Lease;
(2) LESSOR is a national banking association and has the trust power
and authority to enter into and perform its obligations under this Lease
and all other Lease Documents to which LESSOR is a party; and
(3) This Lease and all other Lease Documents to which LESSOR is a
party have been duly entered into and delivered by LESSOR and constitutes
a valid, legal and binding obligation of LESSOR, enforceable in
accordance with its terms, except as such enforceability may be limited
by bankruptcy, moratorium, reorganization and similar Laws and by general
principles of equity, whether considered in a proceeding at Law or in
equity.
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE PRECEDING
EXCEPTION CLAUSE CONSTITUTE THE SOLE EXCEPTION TO THIS SUBSECTION 6(A)
AND IS EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES
OF LESSOR EXPRESS OR IMPLIED.
(B) MANUFACTURER'S WARRANTIES. So long as no Event of Default under
this Lease has occurred and is continuing, LESSOR agrees to assign or otherwise
make available to LESSEE such rights as LESSOR may have, if any, under any
warranty, express or implied, with respect to the Aircraft made by the
Manufacturer, Engine Manufacturer, any subcontractor or supplier thereof, to
the extent that the same may be assigned or otherwise made available to LESSEE
and, to the extent that the same may not be assigned or otherwise made
available to LESSEE, LESSOR agrees to exert its reasonable efforts, at LESSEE's
sole cost and expense, to enforce such rights
17
as LESSOR may have with respect thereto for the benefit of LESSEE; provided,
however, that upon an Event of Default all such rights shall, without further
action or notice, immediately revert to LESSOR, including all claims
thereunder, whether or not perfected.
(C) LESSEE'S REPRESENTATIONS AND WARRANTIES. LESSEE represents and
warrants, as of the Effective Date, and all such representations and warranties
being continuing, that:
(1) LESSEE is a corporation duly organized and existing in good
standing under the Laws of Hawaii and has the corporate power and
authority to carry on its business as presently conducted and to perform
its obligations under this Lease and the other Lease Documents;
(2) LESSEE is not a Governmental Entity or government owned or
controlled and neither LESSEE or its properties is immune from the
jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) nor does it have the defense of
sovereign immunity or similar defense available to it in any legal action
or proceeding;
(3) LESSEE is a citizen of the United States (as defined in 40102 of
Title 49 of the United States Code) holding an air carrier operating
certificate issued by the Secretary of Transportation of the United
States pursuant to chapter 447 of Title 49 of the United States Code for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo;
(4) At the time of delivery of the Aircraft to LESSEE, the Aircraft
will be eligible for U.S. registration (assuming LESSOR meets the
citizenship requirements for registration of an Aircraft as set forth in
the FAR's) and may be operated by LESSEE in accordance with all
applicable Federal Aviation rules and regulations notwithstanding the
fact, among other things, that the Aircraft will now be operated in the
United States (not having previously been operated in the United States),
will be added to the U.S. aircraft registry and the Aircraft will not
meet the Stage III noise regulations set forth in FAR Part 36;
(5) In the event LESSEE files a petition for relief under Chapter 11
of the United States Bankruptcy Code, as amended, or has such a petition
filed against it, LESSOR will be entitled to the rights provided to a
"lessor" under the provisions of 11 U.S.C. Section 1110(a)(1) and LESSEE
will not oppose and will consent to any motion made by LESSOR under said
section 1110 to take possession of the Aircraft pursuant to the
provisions thereof;
(6) This Lease and all other Lease Documents to which LESSEE is a
party have been duly authorized by all necessary corporate action on the
part of LESSEE, does not require any approval of the stockholders of
LESSEE (or if such approval is required, such approval has been
obtained), and neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby nor compliance by
LESSEE with any
18
of the terms and provisions hereof will contravene any Law applicable to LESSEE
or result in any breach of, or constitute any default under, or result in the
creation of, any lien, charge or encumbrance upon any property of LESSEE under
any indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement, corporate charter or bylaw, or other
agreement or instrument to which LESSEE is a party or by which LESSEE or its
properties or assets may be bound or affected;
(7) LESSEE has received or has complied with every necessary consent,
approval, order, or authorization of, or registration with, or the giving
of prior notice to, any Governmental Entity having jurisdiction with
respect to the use and operation of the Aircraft and the execution and
delivery of this Lease and all other Lease Documents to which LESSEE is a
party or the validity and enforceability hereof and thereof;
(8) This Lease and all other Lease Documents to which LESSEE is a
party have been duly entered into and delivered by LESSEE and constitutes
a valid, legal and binding obligation of LESSEE, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, reorganization, moratorium or other similar Laws and by
general principles of equity, whether considered in a proceeding at Law
or in equity;
(9) There are no suits or proceedings pending, or to the knowledge of
LESSEE, threatened against or affecting LESSEE or its properties, which
may have a material adverse effect on the financial condition or business
of LESSEE or upon LESSEE's ability to perform its obligations hereunder;
(10) LESSEE has filed or caused to be filed all material tax returns
which are required to be filed by LESSEE and has paid or caused to be
paid all Taxes shown to be due or payable on said returns or on any
assessment received by LESSEE, except those the validity of which is
contested by LESSEE in good faith by appropriate proceedings duly
instituted and diligently prosecuted;
(11) It is not necessary or advisable under any applicable Law in
order to ensure the validity, effectiveness and enforceability of this
Lease and Lender's security interest in this Lease and the Aircraft that
this Lease or any other instrument relating thereto be filed, registered
or notarized or that any other action be taken, other than the filing and
registration of this Lease and Lender's security agreement with LESSOR
with the FAA and filing of UCC-1 financing statements with the Bureau of
Conveyances of the State of Hawaii;
(12) Except for the registrations and filings described in (11)
above, no other filing or registration of any instrument or document is
necessary under any applicable Law in order to protect LESSOR'S title to
and ownership of the Aircraft and Lender's security interest in the
Aircraft and this Lease;
(13) Neither the payment of Rent nor the payment of any other amount
required under this Agreement is subject to
19
deduction or withholding under any applicable Law;
(14) No Default or Event of Default has occurred and is continuing;
(15) The obligations of LESSEE to make payments hereunder will rank
at least PARI PASSU in right of payment with all other unsecured,
unsubordinated obligations of LESSEE;
(16) LESSEE has furnished to LESSOR and Lender copies of Airgroup's
audited consolidated financial statements as of December 31, 1995, as
certified by Airgroup's independent certified public accountants, and
uncertified quarterly consolidated financial statements of Airgroup, for
the quarter ending March 31, 1996, and in each instance prepared in
accordance with generally accepted accounting principles, consistently
applied. Such financial statements present a true and accurate view of
the financial condition of LESSEE and Airgroup, respectively, as of the
date of such financial statements. Since the date of such financial
statements, no material adverse change has occurred in LESSEE's or
Airgroup's financial condition or their results of operations, and
nothing has occurred that can reasonably be expected to have a material
adverse effect on the ability of LESSEE and Airgroup to carry on their
respective businesses and operations and for LESSEE to perform its
obligations under this Lease;
(17) Neither the financial statements of Airgroup nor any other
material document furnished by or on behalf of LESSEE or Airgroup to
LESSOR or Lender in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in this Lease
not misleading. LESSEE knows of no fact that materially adversely affects
or, so far as LESSEE can now reasonably foresee, will materially
adversely affect the business, financial condition, operations or
properties of LESSEE or the ability of LESSEE to perform its obligations
under the Lease Documents; and
(18) Airgroup owns one hundred percent (100%) of the issued and
outstanding stock of LESSEE.
(D) NOTIFICATION. During the Term of this Lease, at the end of each
calendar quarter, LESSEE shall send an officer's certificate to LESSOR and
Lender notifying them of any condition that materially changes the content of
any of the representations and warranties made as of the Effective Date under
Section 6(C) hereof or certifying that there has been no such change.
SECTION 7
POSSESSION, USE, MAINTENANCE, TITLE AND REGISTRATION
(A) POSSESSION. Except as expressly provided in Subsection 8(B) and
Section 22, LESSEE shall not transfer possession of the Aircraft or any Engine
or part thereof to any
20
Person without the prior written consent of LESSOR, which consent shall not be
unreasonably withheld, provided that, so long as no Default or Event of Default
or event which would constitute an Event of Default with the giving of notice
or lapse of time, or both, shall have occurred and be continuing and so long as
LESSEE shall comply with the provisions of Section 13 hereof, LESSEE may, so
long as the action to be taken shall not deprive LESSOR of its title to and
interest in the Aircraft, the Airframe or any Engine and shall not adversely
affect the registration of the Aircraft under the Laws of the United States,
without the prior written consent of LESSOR, deliver possession of the
Aircraft, the Airframe or any Engine or other Part thereof to the Manufacturer,
the Engine Manufacturer or Authorized Maintenance Performer, as appropriate,
for testing, service, repair, maintenance or overhaul work on the Aircraft, the
Airframe, any Engine or Part, or for alterations, modifications, or additions
thereto, to the extent required or permitted by the terms of Subsection 7(D)
hereof.
(B) USE. LESSEE shall use the Aircraft solely in commercial passenger
carrying operations in accordance with all Laws applicable to it and shall not
use or permit the Aircraft to be used for any purpose for which the Aircraft is
not designed or reasonably suited. LESSEE shall not use or permit the use of
the Aircraft for the carriage of (i) whole animals, living or dead, except in
cargo compartments according to International Air Transport Association
("I.A.T.A.") regulations and except domestic pet animals carried in suitable
containers to prevent the escape of any fluids and to ensure the welfare of the
animal, (ii) acids, toxic chemicals, other corrosive materials, explosives,
nuclear fuels, nuclear wastes or any other nuclear assemblies except as
permitted for passenger aircraft under the "Restriction of Goods" schedule
issued by I.A.T.A. from time to time, or (iii) any other goods, materials or
items of cargo that would not be adequately covered by the insurance required
or obtained pursuant to this Lease.
(C) LAWFUL INSURED OPERATIONS. LESSEE shall not permit the Aircraft to
be maintained, used, or operated in violation of any Law of any Governmental
Entity having jurisdiction, or contrary to the Manufacturer's or Engine
Manufacturer's operating manuals and instructions, or in violation of any
airworthiness certificate, license, or registration relating to the Aircraft
issued by the FAA or any other Governmental Entity having jurisdiction, unless
the validity thereof is being contested in good faith and by appropriate
proceedings duly instituted and diligently prosecuted, but only so long as such
proceedings will not result in the sale, forfeiture, loss of valid insurance
coverage upon, or loss of, the Aircraft, the Airframe, any Engine or any Part.
LESSEE shall comply with the foregoing, at its sole cost and expense, and shall
maintain the Aircraft in proper condition for operation under such Laws. LESSEE
agrees not to operate the Aircraft, or to permit or suffer the Aircraft to be
operated, within or into any geographic area:
(1) unless the Aircraft is at all such times covered by insurance as
required by the provisions of Section 13
21
hereof;
(2) contrary to the terms of such insurance as required by the
provisions of Section 13 hereof; and
(3) in violation of any Law, rule, order or regulation of any
Governmental Entity.
LESSEE shall deliver to LESSOR such documents and assurances as LESSOR may
request under the provisions of Section 16 hereof to evidence compliance with
the foregoing.
(D) MAINTENANCE.
(i) LESSEE, at its own cost and expense, shall:
(a) service, repair, maintain, overhaul, test, or cause the
same to be done to the Aircraft so as to keep the Aircraft in as
good operating condition as when delivered to LESSEE hereunder,
ordinary wear and tear excepted, and such operating condition as
required by the Maintenance Program and as may be necessary to
enable the airworthiness certification of the Aircraft to be
maintained in good standing at all times under the applicable
rules and regulations of the FAA;
(b) perform all routine and non-routine services, checks
and corrosion control and inspections, including any structural
inspections requirements (SSID's) and "A", "B", "C" or "D"
checks (or the equivalent thereof) required by the Maintenance
Program, the Manufacturer or the Air Authority;
(c) maintain, in accordance with FAR Part 121, all records,
logs and other materials required by applicable Laws of any
Governmental Entity and the Air Authority to be maintained in
respect of the Aircraft, including but not limited to
serviceable component tags required by the Air Authority;
(d) throughout the Base Term of this Lease, at the end of
each calendar quarter, provide LESSOR with a written projection
of the next scheduled commencement date of each "C" or "D" check
to be performed on the Aircraft and each scheduled engine
overhaul and the location where such checks and overhauls are
scheduled to be performed;
(e) designate representatives to coordinate with LESSOR or
LESSOR's representatives on maintenance and warranty matters;
(ii) All maintenance of the Aircraft and Engines shall be
performed by the Authorized Maintenance Performer.
(iii) (A) "Covered Maintenance" means, at any time, the D check
for the Airframe, the scheduled heavy maintenance check
22
or hot section inspection for the engine, the scheduled overhaul for
the landing gear and the scheduled heavy maintenance check or hot
section inspection for the APU, respectively, pursuant to the
Maintenance Program. Excluded from Covered Maintenance shall be
overhaul or repairs caused by F.O.D, operational mishandling or by
events that can be insured against. The cost of Covered Maintenance
shall be limited to the actual cost of replacement parts plus the
cost of the associated labor at LESSEE's in-house labor rates if the
work is performed by LESSEE, or at third-party costs charged to
LESSEE if the work is performed by third parties, and shall in no
event include, late charges, interest, xxxx-ups or premium charges by
LESSEE or other similar amounts.
(B) Unless an Event of Default shall have occurred and be
continuing, to the extent that LESSEE has paid Reserves pursuant to
the terms of this Lease and such Reserves have not previously been
disbursed by LESSOR in accordance with the terms hereof, the LESSOR
shall pay to the LESSEE, within five (5) Business Days after receipt
of:
(a) an Officer's Certificate stating:
(1) that Covered Maintenance has been performed on
the Airframe, Engines, APU or landing gear,
respectively, and the cost thereof, or
(2) that advance payments are required by a
third-party Authorized Maintenance Performer under a
contract covering any such work, and the amount of such
payments; and
(b) appropriate documentation with respect to such work
or payments,
an amount equal to the actual cost of such work or such advance
payment, as the case may be, up to the amount of the then unutilized
Airframe Reserves for such Covered Maintenance on the Airframe, up to
the amount of the then unutilized Engine Reserves for such Covered
Maintenance on the Engines, up to the amount of the then unutilized
APU Reserves for such Covered maintenance on the APU and up to the
amount of the then unutilized Landing Gear Reserves for such Covered
Maintenance on the landing gear; PROVIDED, HOWEVER, that (i) at no
time shall the amount of any Reserve to be made available by LESSOR
for Covered Maintenance exceed the aggregate amount remaining in such
Reserve as of the date the Covered Maintenance was completed, and
(ii) all Reserves (including but not limited to the Reserves for each
Engine) shall be kept segregated and, except as expressly provided
below, LESSEE may only draw upon the Reserves specifically allocated
to the item on which Covered Maintenance was performed. Upon the
termination of this Lease for any reason whatsoever (including,
without limitation, the occurrence of an Event of Default), any
amounts paid to LESSOR as Reserves and not used to reimburse LESSEE
for Covered Maintenance shall be retained by LESSOR free and clear of
any claim by LESSEE. Notwithstanding the foregoing, but subject to
the condition precedent that no Event of Default has occurred and
23
is continuing, in the event that LESSEE performs Covered Maintenance
on the Airframe, either Engine, the APU or the landing gear, as the
case may be, in order to meet, on the Expiration Date, the return
conditions set forth herein, and the allocated Reserve amount for
such item is insufficient to pay in full the cost of the Covered
Maintenance for such item, then in such event, and only in such
event, LESSEE shall be entitled to draw upon and receive from the
other Reserves then held by LESSOR, that amount equal to the
difference between the cost of the Covered Maintenance and the amount
that was allocated in the Reserves for such item. Further, so long as
no Event of Default has occurred and is continuing, in the case of a
return of the Aircraft on the Expiration Date where a financial
adjustment is due to LESSOR with respect to an item where Reserves
have been paid, LESSEE may draw upon the Reserves then held by LESSOR
and use same toward satisfaction of such financial adjustment
obligation.
(f) LESSEE agrees that it will not discriminate against the
Aircraft (as compared to other aircraft of the same type owned
or operated by LESSEE) in the operation, use and performance of
maintenance, including, but not limited to, in contemplation of
the expiration or termination of this Lease with respect to the
maintenance of the Aircraft (including, but not limited to, the
substitution or replacements of Parts other than where the
failure to replace Parts would result in LESSEE failing to meet
the return conditions for the Aircraft set forth herein). The
foregoing shall not be deemed to be a prohibition on LESSEE's
withdrawing the Aircraft from revenue service in order to
prepare the Aircraft for return to LESSOR upon the expiration or
termination of this Lease nor shall the foregoing be deemed to
expand LESSEE's obligations beyond those set forth in any
specific return provision set forth herein.
(E) AIRWORTHINESS DIRECTIVES; SERVICE BULLETINS.
(i) If the FAA, the Air Authority, the Manufacturer or the
Engine Manufacturer, or the manufacturer of any Parts, publishes an
airworthiness directive, mandatory service bulletin or mandatory
modification after the commencement date of this Lease or already has
published such airworthiness directive, mandatory service bulletin or
a mandatory modification which modification is required to be
completed or terminated during the Base Term or at any time during
the ninety (90) day period following the end of the Base Term or the
termination of this Lease, LESSEE shall take all such action as is
necessary to comply with such airworthiness directive, mandatory
service bulletin or mandatory modification prior to the return of the
Aircraft by LESSEE to LESSOR and shall, except as hereinafter stated,
bear the entire expense thereof. As an exception to the foregoing,
LESSOR agrees that it will reimburse LESSEE fifty percent (50%) of
the cost (labor and material at the cost actually incurred by LESSEE
without premium, xxxx-up, surcharge or interest expense) in excess of
One Hundred Thousand Dollars (US$100,000) for each airworthiness
directive accomplished during the last twenty four (24) months of
24
the Base Term, and one hundred percent (100%) of the costs for each
airworthiness directive and service bulletin which are accomplished
by LESSEE and fall due within ninety (90)days after the Expiration
Date; provided, however, that LESSOR shall have no obligation to
reimburse LESSEE for airworthiness directives and service bulletins
accomplished by LESSEE and which fall due within ninety (90) days
after the Expiration Date unless LESSEE had prior to accomplishing
such airworthiness directive or service bulletin received written
authorization from LESSOR to accomplish same. LESSOR shall pay to
LESSEE its share, if any, of the cost of complying with airworthiness
directives performed by LESSEE, within ten (10) Business Days of
receipt from LESSEE of evidence reasonably satisfactory to LESSOR
that the airworthiness directive has been fully and satisfactorily
complied with.
(ii) LESSEE shall comply with all applicable mandatory service,
maintenance, repair and overhaul regulations, directives and
instructions of the FAA, the Air Authority, the Manufacturer, the
Engine Manufacturer and the manufacturer of all Parts and shall bear
the entire expense thereof except as provided in (i) above.
(F) TITLE, REGISTRATION, PERFECTION AND INSIGNIA. LESSEE acknowledges
and agrees that title to the Aircraft shall remain vested in LESSOR during the
Base Term in accordance with the terms of this Lease. The Aircraft shall, at
all times during the Base Term, be registered in the United States in the name
of LESSOR or such Person as LESSOR may designate, in accordance with the Laws
of United States. The interest of LESSOR's Lender in the Aircraft and this
Lease shall at all times during the Base Term be fully protected and perfected.
LESSEE agrees that it shall take no action which shall cause the Aircraft to
cease to be so registered in the name of LESSOR or cause the interest of Lender
to not be fully protected and perfected under the applicable Laws of United
States. Unless otherwise requested, within fifteen (15) days of the Effective
Date, LESSEE shall fasten or cause to be fastened in the cockpit, in a location
reasonably adjacent to and not less prominent than the airworthiness
certificate for such Aircraft and on each Engine, an insignia plate supplied by
LESSEE and in the form set forth in Exhibit "G" hereto or in any other form
subsequently designated by LESSOR to LESSEE.
LESSEE will not allow the name of any Person to be placed on the
Aircraft or any Engine as a designation that might be interpreted as a claim of
ownership; provided, however, that LESSEE may cause the Aircraft to be lettered
in an appropriate manner for convenience of identification of the interest of
LESSEE therein, including but not limited to, the customary livery of LESSEE.
(G) MAINTENANCE REPORTS AND RECORDS. During the Term, LESSEE shall:
(a) provide maintenance information and reporting requirements
to LESSOR and any other party so designated by LESSOR including but
not limited to: (i) written notification at the end of each calendar
quarter with
25
respect to the issuance during such calendar quarter of any
airworthiness directive or service bulletin, and written
notification, as promptly as possible, of any legal requirement
materially affecting the use, operation or maintenance of the
Aircraft, Airframe, Engines or Parts; (ii) quarterly written
projections of scheduled Airframe, Engine, landing gear and APU heavy
maintenance; (iii) prompt written notification of damage to the
Aircraft, Airframe, Engines or Parts where the estimated cost of
repair is in excess of $500,000 in the aggregate; (iv) promptly upon
the request of LESSOR, written notification of Engine removals,
exchanges or foreign object damage (said report to include details of
circumstances and plan of action to repair); (v) reports of Flight
Hours and Cycles on a monthly basis; (vi) promptly upon the request
of LESSOR, a report of all service bulletins completed; and (vii)
promptly upon the request of LESSOR, copies of all material reports
sent to the Air Authority or any other Governmental Entity concerning
the Aircraft.
(b) LESSEE will, during the Base Term, maintain all records,
logs and other materials required to be maintained with respect to
the Aircraft by Persons in operational control of the Aircraft under
any applicable rules, Laws or regulations and shall supply all such
records, logs and other materials to LESSOR or third parties, as
reasonably requested, as shall be necessary in order to implement the
Maintenance Program and any and all warranties and guarantees that
apply to the Aircraft. LESSEE will provide LESSOR with copies of all
records of maintenance performed during the Base Term as requested by
LESSOR. All such records shall be kept as required under the rules
and regulations of the Air Authority and shall be maintained in
English.
SECTION 8
REPLACEMENT OF PARTS: ALTERATIONS,
MODIFICATIONS AND ADDITIONS
(A) REPLACEMENT OF PARTS. Except as otherwise provided herein, LESSEE,
at its own cost and expense, shall promptly replace all Parts which may, from
time to time, be incorporated or installed in, or attached to, the Aircraft,
the Airframe or any Engine and be an accession thereto, and which may, from
time to time, become lost, stolen, seized, confiscated or unserviceable. In
addition, in the ordinary course of maintenance, service, repair, overhaul or
testing, LESSEE may remove any Parts, provided that LESSEE shall replace such
Parts as promptly as may be practicable. All replacement Parts shall be free
and clear of all Liens, except Permitted Liens, shall meet all requirements of
the Air Authority, and shall be in as good operating condition as, and have a
value and utility at least equal to, the Parts replaced, assuming such replaced
Parts were maintained in the condition
26
required pursuant to the requirements of this Lease.
All parts owned by LESSOR at any time removed from the aircraft shall
remain the property of LESSOR, no matter where located, until such time as
such Parts shall be replaced by Parts which have been incorporated or
installed in, or attached to, such Aircraft and which meet the requirements
for replacement Parts specified above. Immediately upon any replacement Parts
becoming incorporated or installed in or attached to the Aircraft as above
provided, and without further act:
(1) title to the removed Part shall vest in LESSEE, free and clear of
all rights of LESSOR and LESSOR Liens;
(2) title to the replacement Parts shall vest in LESSOR, free and
clear of all rights of third parties, including, but not limited to,
LESSEE; and
(3) such replacement Parts shall become subject to this Lease and
shall be deemed part of the Aircraft into which such Parts were
incorporated or with respect to which such Parts were required, for all
purposes hereof to the same extent as the Parts originally incorporated
or installed in, or attached or related to such Aircraft.
(b) pooling; etc.
(i) LESSEE may subject the Aircraft or any Engine to normal
interchange agreements customary among major air carriers entered
into by the LESSEE in the ordinary course of its business, and may
subject any Engine to pooling arrangements customary among major Air
Carriers and entered into by the LESSEE in the ordinary course of
its business.
(ii) LESSEE may install an Engine on an airframe owned by the
LESSEE provided such airframe is free and clear of all liens and
encumbrances, except
(a) Permitted Liens; and
(b) The rights of Air Carriers under normal interchange
arrangements which are customary among major Air Carriers and
which do not contemplate, permit or require the transfer of
title to the Airframe or Engines installed thereon.
(iii) LESSEE may install an Engine on an airframe leased to, or
purchased by the LESSEE, subject to a lease, conditional sale, trust
indenture or other security agreement, but only if
(a) such airframe is clear of all liens and encumbrances,
except Permitted Liens and the rights of the parties to the
lease, conditional sale, trust indenture or other security
agreement covering such airframe; and
27
(b) LESSOR and Lender shall have received from the lessor,
conditional seller, indenture trustee, or secured party of such
airframe, a written agreement (which may be the lease,
conditional sale, trust indenture or other security agreement
covering such airframe), whereby such lessor, conditional
seller, indenture trustee or secured party expressly agrees that
neither it nor its successors or assigns will acquire or claim
any right, title or interest in any Engine by reason of such
Engine being incorporated in such airframe at any time while
such Engine is subject to this Lease; and
(c) LESSOR and Lender, upon request, shall have received
from counsel to the LESSEE an opinion, in form and substance
satisfactory to LESSOR and Lender, to the effect that no
creditors of, or bona fide purchasers from, the lessor,
conditional seller, indenture trustee or secured party of such
airframe will acquire any right, title or interest in such
Engine by reason of such Engine being installed on such airframe
at any time while such Engine is subject to this Lease. In the
event that LESSOR and Lender require an opinion, the cost of
such opinion shall be shared equally by LESSOR and LESSEE.
(iv) No permitted interchange or pooling agreement,
transfer or other relinquishment of possession permitted
hereunder shall affect the title to, or registration of or
effect any transfer of the Aircraft, Airframe or Engines or
shall constitute consent to any action not permitted to the
LESSEE in this Lease.
(v) LESSOR agrees, for the benefit of any lessor,
indenture trustee or other secured party to LESSEE, that it
will not acquire or claim any right, title or interest in
any engine by reason of such engine being incorporated in
the Airframe at any time while such engine is subject to a
lease, conditional sale, trust indenture, or other security
agreement covering such engine.
(C) EQUIPMENT CHANGES. LESSEE, at its own expense, shall make such
alterations and modifications in and additions to the Aircraft ("Equipment
Changes") as may be required from time to time to meet the standards of the Air
Authority and of the Governmental Entity in the jurisdiction of which LESSEE
elects to fly the Aircraft and whose approval or consent is required to permit
LESSEE to fly over and/or into any geographical area with respect to which the
Governmental Entity exercises authority. In addition, the term "Equipment
Changes" shall mean modifications to or additions to the Aircraft that LESSEE,
at its own expense, may from time to time deem desirable in the proper conduct
of its business, provided that no such Equipment Change diminishes the value,
utility, condition or airworthiness of the Aircraft below the value, utility,
condition and airworthiness thereof immediately prior to such Equipment Change,
assuming the Aircraft was then in the condition required to be maintained by
the terms of this Lease, and provided further that LESSEE shall not change the
configuration (other than the seating configuration) of the Aircraft during the
Term hereof
28
unless such configuration is approved by the Manufacturer, LESSOR and the Air
Authority. Any Equipment Change with an estimated cost in excess of Two Hundred
Fifty Thousand (US$250,000) Dollars must be approved in advance by LESSOR,
which approval will not be unreasonably withheld.
In connection with the provisions of the preceding paragraph, LESSOR
and LESSEE hereby acknowledge and agree that (1) LESSEE may modify the cockpit
of the Aircraft in order to standardize same with LESSEE's fleet of Boeing
737-200 aircraft (provided such cockpit standardization is performed in
accordance and complies with, the Maintenance Program and the rules and
regulations of the FAA, in each case to the extent applicable, (2) all Parts
removed from the cockpit of the Aircraft in connection with such cockpit
standardization shall become the property of LESSEE (subject to the provisions
of clause (3) of this sentence) and all Parts installed in the cockpit of the
Aircraft in connection with such cockpit standardization shall become the
property of LESSOR and subject to the terms of this Lease, (3) in connection
with the cockpit standardization the Omega Navigation System (Xxxxxx 211) and
the Doppler Radar System (collectively, the "Removed Cockpit Parts") will not
be replaced (and are not required to be replaced) and that such Removed
Cockpit Parts shall be returned to LESSOR upon the completion of such cockpit
standardization and LESSEE shall have no claim, right, title or interest
therein and such Removed Cockpit Parts shall be the property of LESSOR and
not subject to the terms of this Lease, and (4) upon the return of the
Aircraft by LESSEE to LESSOR on a Return Occasion, LESSEE, in its sole
discretion, shall have the right to return the Aircraft with the cockpit
configured in LESSEE's standard configuration for Boeing 737-200 aircraft or
in the configuration that the cockpit was in on the Effective Date. Any and
all modifications contemplated by this paragraph shall be effected at the
sole cost and expense of LESSEE.
Title to all Parts incorporated, installed in, attached or added to the
Aircraft as the result of any such Equipment Change shall, without further act,
vest in LESSOR; provided, however, that during the Base Term LESSEE may remove
any such Part if: (1) such Part is in addition to any Part originally
incorporated or installed in or attached to such Aircraft at the time of
delivery thereof hereunder; and (2) such Part is not required by the Air
Authority or the Governmental Entity having jurisdiction to be incorporated,
installed in, attached or added to the Aircraft; and (3) such Part can be
removed from the Aircraft or can be replaced with a part of equal value to the
Part installed upon delivery without diminishing or impairing the value,
utility or airworthiness which the Aircraft would have had at such time, had
such Equipment Change not occurred. Upon the removal by LESSEE of any Part as
above provided, title thereto shall, without further act, vest in LESSEE and
such Part shall no longer be deemed part of the Aircraft from which it was
removed. Any Part not removed from the Aircraft by LESSEE as provided above
prior to a Return Occasion shall remain the property of LESSOR. Notwithstanding
the foregoing provisions of Section 8(c), LESSOR agrees that LESSEE may install
29
replacement seats and galleys on the Aircraft. If the replacement seats and
galleys are (i) owned by any third party and leased to LESSEE, (ii) sold to
LESSEE subject to a conditional sales contract or other security interest, or
(iii) lease to LESSEE pursuant to a lease which is subject to a security
interest in favor of any third party, then LESSOR will not acquire or claim, as
against such lessor, conditional vendor or secured party, any right, title or
interest in such seats and galleys as the result of such seats and galleys
being installed in the Aircraft; provided, however (a) that LESSOR's inability
to so acquire or claim is subject to the express condition that such lessor,
conditional vendor or secured party 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 seats or galleys by reason of such seats or galleys being
installed thereon, and (b) that all of LESSEE's right, title and interest in
and to any seats or galleys (but none of its obligations with respect thereto)
not removed by LESSEE within thirty (30) days after an Event of Default shall,
at such time, automatically become the property of LESSOR and subject to this
Lease.
Notwithstanding anything set forth herein to the contrary, in
connection with a return of the Aircraft by LESSEE to LESSOR on the Expiration
Date, LESSEE shall be entitled to remove and retain (with title vesting in
LESSEE) the avionics black boxes installed by LESSEE with respect to the TCAS
and windshear detection systems. All wiring installed by LESSEE in connection
with the installation of the TCAS and windshear detection systems and the mode
S transponder (which shall be installed on the Aircraft at the time of delivery
of the Aircraft by LESSOR to LESSEE on the Effective Date) shall remain in the
Aircraft and shall be deemed the property of LESSOR.
In the event the FAA requires LESSEE to comply with the Stage III noise
regulations set forth in FAR Part 36 and LESSEE cannot obtain an exemption or
deferment for complying, provided no Default or Event of Default has occurred
and is continuing, LESSOR will, upon the request of LESSEE, provide financing
to LESSEE for the acquisition of a shipset of Stage III hushkits suitable for
installation on the Aircraft or, at LESSOR's election, provide such hushkits to
LESSEE. Should LESSOR provide financing or the hushkits to LESSEE as
contemplated in the preceding sentence, the Basic Rent will be adjusted upward
so as to fully amortize the financing or the cost of the hushkits over the
remaining term of the Lease based on the amount of the financing or the cost of
the hushkits, as the case may be, and the prevailing interest rates applicable
to an entity with the credit of LESSEE at such time. In the event LESSEE is
required to install hushkits during the last twelve (12) months of the Base
Term in order to meet Stage III noise regulations, LESSEE shall have the option
of either (i) retaining the hushkits at the end of the Base Term (provided no
Default or Event of Default has occurred and is continuing, and further
provided, that LESSEE restores the Aircraft to the condition that it was in
prior to the installation of the hushkits), in which case LESSOR will transfer
title to the hushkits to LESSEE, or (ii) extending the term of the Lease on
terms and conditions mutually acceptable to LESSEE and LESSOR. In the event
LESSEE exercises the option set
30
forth in (ii), LESSEE shall send a notice to LESSOR not later than one hundred
twenty (120) days prior to the end of the Base Term and LESSOR and LESSEE shall
have agreed on the terms and conditions of such extension not later than sixty
(60) days prior to the end of the Base Term. In the event LESSEE has exercised
option (ii), above, and LESSOR and LESSEE fail to reach an agreement on the
terms and conditions for the extension of the Lease with the time period set
forth above, then, in such event, the Base Term will be deemed to be extended
for a one (1) year period of time from the Expiration Date and all other terms
and conditions of this Lease will remain unchanged, except (i) the amount of
Basic Rent which shall be equal to the greater of (x) the current fair market
rental value for the Aircraft as of the Expiration Date and (y) the amount of
Basic Rent then in effect immediately prior to the Expiration Date; and (ii)
the Security Deposit will be increased so that the amount of the Security
Deposit will at all time be equal to two month's Basic Rent.
LESSOR shall bear no liability in respect of, or cost for, any
Equipment Change, grounding of the Aircraft, suspension of certification
thereof, or loss of revenue therefrom.
(D) On the Effective Date, the Engines installed on the Aircraft shall
be Xxxxx & Whitney model JT8D-15 engines (the "-15's"). Within sixty (60) days
of the Effective Date, LESSOR shall deliver to LESSEE's maintenance base in
Honolulu, Hawaii, or such other location in the United States designated in
writing by LESSEE, two Xxxxx & Xxxxxxx model JT8D-9A engines (the "-9A's").
LESSEE shall, at its cost and expense (i) remove the -15's and ship same (along
with all components removed in installing the -9A's and all records delivered
by LESSOR to LESSEE relating to the -15's, in the same condition as delivered,
except that such records will have been updated by LESSEE to reflect LESSEE's
use of the -15's in accordance with the Maintenance Program and as required by
the FAA) to a location designated by LESSOR, (ii) perform a borescope of the
-15's having the same scope as the borescope inspection performed on the -15's
prior to delivery of same by LESSOR to LESSEE. All discrepancies outside of the
limits set under the manufacturer's maintenance manual for such -15's as
evidenced by the borescope inspection shall be corrected by LESSEE at its sole
cost and expense, and (ii) install the -9A's on the Aircraft. LESSEE agrees
that when installing the -9A's, the mixers from the -15's will either be
installed on the thrust reversers for the -9A's or returned to LESSOR.
Simultaneously with the installation of the -9A's, (i) LESSOR and LESSEE shall
execute a partial lease termination for the purpose of releasing the -15's from
the terms of this Lease, (ii) LESSOR and LESSEE shall execute a Lease
Supplement to this Lease for the purpose of subjecting the -9A's to the terms
of this Lease, (iii) LESSEE shall execute and deliver to LESSOR a Delivery
Receipt and Acceptance Certificate with respect to the -9A's, (iv) LESSEE and
LESSOR shall execute releases and/or amendments to all UCC financing statement
previously executed and filed to reflect the release of the -15's and the
inclusion of the -9A's, and (v) LESSEE shall execute and deliver such
additional documents as Lender may reasonably request in order to perfect its
security interest in the -9A's. LESSOR agrees that it shall use its
31
reasonable efforts to cause LESSEE to be named as an additional insured, for a
period of two (2) years from the date on which LESSEE re-delivers the -15's to
LESSOR or its designee, under the liability insurance coverage provided by any
party to whom LESSOR sells or leases the -15's.
SECTION 9
INSPECTION; FINANCIAL INFORMATION
(A) During the Base Term, in addition to the information and reports
required to be provided by LESSEE to LESSOR pursuant to Section 7(G) of this
Lease, LESSEE shall furnish to LESSOR and Lender such additional information
concerning the location, condition, use and operation of the Aircraft as
LESSOR and/or Lender may reasonably request.
(B) The right of LESSOR, or its designated representatives, to inspect
the Aircraft during any "C" or "D" check or equivalent (as defined in the
Maintenance Program), performed by or on behalf of LESSEE during the Base Term,
shall be absolute. LESSEE shall also provide LESSOR with maintenance schedules
relating to the Aircraft upon the delivery of the Aircraft to LESSEE, and from
time to time as such maintenance schedules are adjusted or updated. LESSEE
further agrees to provide LESSOR with quarterly written projections of the
scheduled date for "C" and "D" checks, in order to enable LESSOR to inspect the
Aircraft at the time and place such checks occur. During such checks, LESSEE
agrees to allow LESSOR, or its authorized representative, to inspect any area
of the Aircraft which LESSOR requests to inspect which would normally require
inspection during such major checks. LESSEE also shall permit any Person
designated by LESSOR in writing to:
(1) visit and inspect the Aircraft, its condition, use and
operation, and the records maintained in connection therewith;
(2) visit and inspect the properties of LESSEE;
(3) discuss the finances and accounts of LESSEE with the principal
officers of LESSEE,
all at such times and frequencies as LESSOR, or the assignee of LESSOR, may
reasonably request. Notwithstanding the foregoing or any other right to inspect
granted to LESSOR under this Lease, neither LESSOR nor the assignee of LESSOR
shall have any duty to make any such inspection and neither LESSOR nor the
assignee of LESSOR shall incur any liability or obligation by reason of not
making any such inspection;
(4) obtain such other financial information as LESSOR or Lender may
reasonably request. In this regard, during the Base Term, LESSEE shall
deliver to LESSOR and Lender annual consolidated financial statements of
Airgroup prepared in accordance with generally accepted
32
accounting principles consistently applied and audited by recognized,
independent certified public accountants reasonably satisfactory to
LESSOR as soon as practicable and in any event within 120 days after the
end of LESSEE's fiscal year, as well as quarterly unaudited financial
statements of LESSEE, certified as being true, accurate and complete by
the chief financial officer of LESSEE, within 60 days following the
close of each of LESSEE's fiscal quarters; and
(5) inspect LESSEE's Maintenance Program for the Aircraft and make
copies and take extracts thereof.
LESSOR hereby agrees that if LESSOR exercises any of the rights listed in
clauses (1) through (5) above, it shall do so in such a manner so as not to
unreasonably interfere with the business and operations of LESSEE.
(C) LESSEE shall also furnish any other information or records on the
Aircraft that LESSOR and/or Lender may reasonably request.
(D) LESSOR agrees to keep confidential any information provided to it
by LESSEE under the terms of this Lease; provided, however, that LESSOR shall
have no obligation to keep such information confidential (i) if such
information is public information at the time received by LESSOR or becomes
public at the time same is disclosed by LESSOR, (ii) from LESSOR's attorneys,
accountants, auditors and aircraft technical experts, and (iii) if compelled by
court order or the provisions of any Law to disclose same.
SECTION 10
COVENANTS OF LESSEE
LESSEE represents, warrants, covenants and agrees, in addition to all
other representations, warranties and covenants set forth in this Lease, that:
(A) MAINTENANCE OF CORPORATE EXISTENCE. LESSEE shall preserve and
maintain its existence, valid legal status, and all of its rights, privileges,
and franchises necessary to remain duly incorporated and to operate as a
passenger airline under the Laws of the United States and the State of Hawaii.
(B) PAYMENT OF TAXES. LESSEE shall:
(1) Pay or cause to be paid all Taxes imposed, levied or assessed
upon LESSEE (or for which LESSEE has assumed the obligation pursuant to
this Lease) or its income or profits, or upon any property or assets
belonging to or used by it, prior to the date on which penalties attach
thereto;
33
(2) Pay or otherwise discharge all lawful claims, which, if not
paid, might become a Lien or charge upon the property of LESSEE
(provided, however, that LESSEE shall not be required to pay any such
Taxes or claims, the payment of which is being contested in good faith
and by appropriate proceedings and for which adequate reserves have been
provided, except that LESSEE will pay or cause to be paid all such Taxes
or claims forthwith in the event LESSEE is unable to stay or suspend
enforcement or execution of a warrant of restraint or foreclosure of any
Liens which attach as security therefor).
(C) SALE OF ASSETS, MERGER, ETC. Without the prior written consent of
LESSOR, which consent shall not be unreasonably or arbitrarily withheld, LESSEE
will not sell, lease, assign, transfer or otherwise dispose of substantially
all of its assets, whether now owned or hereafter acquired, except in the
ordinary course of its business as presently conducted and for a full and
adequate consideration, and will not merge or consolidate with or into, or
acquire substantially all of the assets and assume substantially all of the
liabilities of, any corporation or other entity unless the surviving entity is
the LESSEE or the surviving entity assumes this Lease and the financial
condition of LESSEE or the surviving entity after such sale of assets, merger,
consolidation or acquisition is equal to or better than that of LESSEE
immediately prior thereto as LESSOR in its reasonable judgment shall determine.
(D) AIR CARRIER. Throughout the Base Term, LESSEE shall, at all times,
be an Air Carrier in good standing.
(E) U.S. CITIZEN. Throughout the Base Term, LESSEE shall, at all times,
be a citizen of the United States as defined in 40102 of Title 49 of the
United States Code.
(F) AIRWORTHINESS CERTIFICATE. Prior to operating the Aircraft in
revenue service, LESSEE shall provide to LESSOR a copy of the Certificate of
Airworthiness for the Aircraft issued by the Air Authority or other
Governmental Entity having jurisdiction, duly certified as being true, accurate
and complete by an officer of LESSEE.
(G) COMMUNICATIONS. LESSEE shall deliver to LESSOR promptly any
communications received by LESSEE from the Air Authority or any Governmental
Entity which materially affects the Aircraft.
SECTION 11
TAXES
(A) GENERAL TAX INDEMNITY. LESSEE agrees to pay and to indemnify and
hold harmless the Indemnitees from all Taxes against or upon any of the
Indemnitees, LESSEE, the Aircraft, or any part thereof during the Base Term and
arising out of this Lease, or upon
34
the leasing, selling, possession, use, operation, repair, maintenance,
overhaul, settlement of any insurance claim, or return thereof, or upon any
Rent, receipts or earnings arising from the operation thereof, or upon or with
respect to this Lease unless, and to the extent only that, any such Tax is
being contested by LESSEE in good faith and by appropriate proceedings duly
instituted and diligently prosecuted with adequate reserves having been
provided on account thereof and only so long as such proceedings do not involve
any danger of the sale, forfeiture or loss of the Aircraft. In case any report
or return is required to be made with respect to any obligation of LESSEE under
or arising out of this Section 11, LESSEE shall either make such report or
return in such manner as will show the ownership of the Aircraft in LESSOR and
send a copy of such report or return to LESSOR, or shall notify LESSOR of such
requirement and make such report or return in such manner as shall be
satisfactory to LESSOR. If claim is made against any Indemnitee for any Taxes
arising during the term of this Lease, such Indemnitee shall promptly notify
LESSEE. Any such Indemnitee shall, at LESSEE's expense, take such action as
LESSEE may reasonably request in writing with respect to such asserted
liability, and if reasonably requested by LESSEE and upon the prior payment to
such Indemnitee by LESSEE of an amount equal to such Tax, any payment by an
Indemnitee of such Tax shall be made under protest. If payment is made, the
Indemnitee shall, at LESSEE's expense, take such action as LESSEE may
reasonably request to recover such payment and shall, if requested, permit
LESSEE in the Indemnitee's name to file a claim or prosecute an action to
recover such payment. All of the obligations of LESSEE in this Section 11 with
respect to Taxes imposed or accrued before the expiration or other termination
of this Lease shall continue in full force and effect notwithstanding such
expiration or other termination, and are expressly made for the benefit of, and
shall be enforceable by, each Indemnitee. LESSEE further agrees that, with
respect to any payment or indemnity hereunder, such payment or indemnity shall
include any amount necessary to hold the recipient of the payment or indemnity
harmless on an after-tax basis from all Taxes required to be paid by such
recipient with respect to such payment or indemnity under the Laws of any
Governmental Entity. Excluded from the tax indemnification set forth above are
any income taxes assessed or due on an Indemnitee's net income or any state
franchise or similar corporate taxes payable by an Indemnitee.
In the event that during the Base Term a federal value added tax or
consumption tax is enacted and becomes effective which replaces the federal
income tax, LESSOR and LESSEE shall negotiate in good faith a restructuring of
the provisions of this Section 11(A), consistent with the principles for tax
indemnification reflected in this Section 11(A), so as to achieve substantially
the same degree of tax indemnification obligations of LESSEE as existed prior
to the enactment of such federal value added tax or consumption tax.
(B) SPECIAL TAX INDEMNITY. (i) TAX ASSUMPTIONS. In entering into the
Lease and the transactions contemplated hereby, LESSOR has made the following
tax assumptions for the Aircraft (the "Tax Assumptions"):
35
(1) LESSOR or Beneficiary is entitled to the benefit of
depreciation for Federal income tax purposes under the Accelerated Cost
Recovery System provided for in Section 168 of the Code and depreciation
deductions for state income tax purposes for the state where LESSOR's or
Beneficiary's principal place of business is located ("LESSOR's Home State")
based upon one hundred percent (100%)of the Acquisition Cost of the Aircraft,
and on the basis that the Aircraft shall have seven year recovery period and
property classification, and that LESSOR or Beneficiary shall be entitled to
use the method of depreciation and depreciation convention equal to 200%
declining balance method of depreciation, switching to the straight line method
at the point in time that maximizes the depreciation allowance for LESSOR or
Beneficiary (the "Recovery Deduction");
(2) with respect to the Aircraft, Lessor or Beneficiary will be
entitled to the benefit of deductions for Federal and LESSOR's Home State
income tax purposes for interest payable with respect to any indebtedness
incurred by LESSOR or Beneficiary in connection with any financing by LESSOR or
Beneficiary of any portion of the Acquisition Cost of the Aircraft (the
"Interest Deduction"); and
(3) for each year of the Base Term of the Lease, including any year
in which a Tax Loss (hereinafter defined) occurs, LESSOR or Beneficiary will be
subject to tax as follows:
(x) for such year up to and including the year in which such
Tax Loss occurs, at a composite Federal and state income tax rate that is equal
to the highest marginal rate (provided that, in computing such highest marginal
rate, there shall be excluded any surcharges to normal Federal and state income
tax rates which are applicable to brackets of income which are limited as to
their upper level, such as but not limited to those described in the last two
sentences of Section 11(a)(1) of the Code, and, it is understood that
surcharges which are applicable to brackets of income which are not limited as
to their upper level shall be included in computing such highest marginal rate)
provided for under the Code and the laws of the LESSOR's Home State (the
"Highest Composite Marginal Tax Rate") and that is actually in effect for each
such year and assuming that any state tax used in the calculation of such
marginal rate shall be taken as a deduction for purposes of computing Federal
tax so that the Composite Rate is a lower rate than that obtained by merely
adding the state rate to the Federal rate (assuming LESSOR has received a tax
benefit from such deduction), and
(y) for such year following the year in which such Tax Loss
occurs, at a composite Federal and state income tax rate that is equal to the
Highest Composite Marginal Tax Rate actually in effect in the year in which
such Tax Loss occurs and which, under the provisions of the Code and the laws
of LESSOR's Home State then in effect, is to be applicable to each such
following year.
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(ii) LESSEE'S TAX REPRESENTATIONS AND WARRANTIES. LESSEE represents and
warrants to LESSOR and Beneficiary that:
(1) at all times during the Base Term, with respect to the
Aircraft, such Aircraft will not, due to any act or failure to act on the part
of LESSEE, constitute property "used predominantly outside the United States"
or "tax-exempt use property" within the meaning of Sections 168(g)(1)(A),
168(g)(4)(a) and 168(h)(1)(A), respectively, of the Code and Proposed Code
Regulation Section 1.168-2(g)(5)(iii)(A).
(iii) INDEMNITY. If by reason of the breach or inaccuracy of any of
LESSEE's representations and warranties set forth in this Section, LESSOR or
Beneficiary shall lose the benefit of, or shall not have or shall lose the
right to claim, or shall suffer a disallowance or recapture of, or delay in
claiming, all or any portion of the Recovery Deduction or, if LESSOR or
Beneficiary finances any portion of its Acquisition Cost, the Interest
Deduction, with respect to the Aircraft (any such loss, failure to have or loss
of the right to claim, disallowance, recapture, delay in claiming, treatment,
or inclusion referred to in any of the foregoing clauses of this section being
hereinafter called a "Tax Loss"), then a Tax Loss shall be deemed to have
occurred and LESSEE shall on the Rent Date next following written notice by
LESSOR or Beneficiary to LESSEE that a Tax Loss has occurred pay to LESSOR or
Beneficiary an amount sufficient to indemnify LESSOR or Beneficiary for such
Tax Loss and penalties, if any thereon, on an after-tax basis.
(iv) IDENTIFICATION OF LESSOR. For purposes of this Section, the term
"LESSOR" shall include the Beneficiary, each member of the Beneficiary and
their respective successors, assigns, heirs and personal representatives.
(v) CONTESTS. If an Indemnitee should receive notice of any claim by a
taxing authority that may result in liability on the part of LESSEE under
Section 11 (B) (iii), such Indemnitee shall promptly notify LESSEE of such
claim and LESSEE and such Indemnitee shall have the same rights and privileges
with respect to such contest of such claim as are described above in Section
11(A).
(C) EXCLUSIONS. Notwithstanding the foregoing provisions of this
Section 11, the LESSEE shall not be required to indemnify for any liability
which occurs directly and primarily as a result of any of the following events:
(1) a failure by an Indemnitee to timely or properly claim a
deduction or other tax benefit, the gross negligence of an Indemnitee or the
failure of an Indemnitee to timely notify LESSEE of a claim against such
Indemnitee by a taxing authority, provided such failure to timely notify LESSEE
has a material adverse affect on LESSEE's rights under this Section 11;
(2) the treatment of the Aircraft in 1996 or the year in which the
Base Term (or any extension thereof) expires as used predominantly outside the
United States for purposes of Code
37
Section 168(g)(1)(A), if such treatment would not have occurred but for such
use of the Aircraft outside of the United States prior to or subsequent to the
term of the Lease;
(3) an event which occurs after the end of the Base Term with
respect to the Aircraft and the return thereof in accordance with the Lease; or
(4)(a) a material change in the Code, the Income Tax Regulations
promulgated by the United States Treasury Department or a change in the
administrative or judicial interpretations thereof (collectively, a "Change in
Law"), which is enacted, adopted or promulgated and becomes effective after the
Effective Date and during the Base Term; provided, however, that with respect
to such Change in Law, (i) there is no pending contest, appeal or review
process with respect thereto, and (ii) the Internal Revenue Service has
recognized and is enforcing such Change in Law.
(b) should a Change in Law occur and become effective during the
Base Term, LESSEE shall have the right to send a notice to LESSOR (a "LESSEE's
Change Notice") advising LESSOR of the Change in Law and LESSEE's intention not
to indemnify LESSOR for those matters which are the subject of the Change in
Law. LESSOR shall have ninety (90) days from the date of the giving of LESSEE's
Change Notice to send LESSEE a notice (the "LESSOR's Response") advising LESSEE
that it either (i) acknowledges and agrees that it will not be indemnified by
LESSEE for those matters which are the subject of the Change in Law, or (ii)
that it has elected to terminate the Lease ninety (90) days from the date of
the giving of the LESSOR's Response. In the event that LESSOR in the LESSOR's
Response has elected option (ii), LESSEE shall have thirty (30) days from the
date of the giving of LESSOR's Response to send a written notice to LESSOR
modifying LESSEE's Change Notice (a "LESSEE Modification Notice") and agreeing
to indemnify LESSOR for those matters which are the subject of the Change in
Law. In the event LESSEE does not give a LESSEE Modification Notice within said
thirty (30) day period, LESSOR shall have ten (10) days from the end of such
thirty (30) day period to send to LESSEE a notice modifying the LESSOR's
Response (a "LESSOR Modification Notice") and agreeing to option (i) above. In
the event that LESSEE has declined to indemnify LESSOR for those matters which
are the subject of the Change in Law, LESSEE would have no obligation to
indemnify for those matters for the period of time following the giving of
LESSEE's Change Notice.
(D) TAX SAVINGS OR REFUND. (i) If an Indemnitee shall receive a refund
on account of any Tax for which such Indemnitee was indemnified or which was
advanced by LESSEE, then such Indemnitee shall, and LESSOR shall use its
reasonable efforts to cause such Indemnitee to, promptly pay the amount of such
refund to LESSEE (together with the amount of any interest and attorneys fees
received by such Indemnitee in relation to such refund).
(ii) If an Indemnitee, as a result of a loss or expense for which an
indemnity payment has been made pursuant to this Section 11 or as a result of
deferred depreciation deductions or
38
increased basis (i.e., depreciation deductions or basis in any tax year which
are greater than they would have been had the circumstances giving rise to
LESSEE's liability for indemnity not occurred), shall realize an aggregate net
reduction in United States federal income tax or state or local incomes taxes
which such Indemnitee would not have realized but for such loss, expense,
deferred depreciation deductions or increased basis, the Indemnitee shall pay,
and the LESSOR shall cause the Indemnitee to pay, the LESSEE an amount equal to
such aggregate net reduction in United States federal income tax plus any other
tax savings realized by such Indemnitee on account of the same. Any payment due
to the LESSEE from an Indemnitee pursuant to this Section 11 shall be paid
promptly after the Indemnitee actually realizes any such aggregate net
reduction in United States federal income tax or state or local income taxes.
Notwithstanding anything set forth herein to the contrary, in no event shall
any Indemnitee be required to make any payment to LESSEE pursuant to the terms
of this subsection (ii) in excess of the amount of indemnification payments
made by LESSEE to such party pursuant to this Section 11.
SECTION 12
EVENT OF LOSS
(A) EVENT OF LOSS REGARDING THE AIRCRAFT. In the event that an Event of
Loss occurs with respect to the Aircraft, LESSEE shall forthwith (and, in any
event, not later than three (3) days after the occurrence of the Event of Loss)
give LESSOR written notice of such Event of Loss and, not later than the
earlier of: (a) the sixtieth day following the occurrence of such Event of
Loss; or (b) the day of receipt of insurance proceeds in respect of such Event
of Loss; pay to LESSOR or its assignees, in funds of the type specified in
Subsection 5(B) hereof, the sum of all unpaid Rent and all other amounts due
hereunder with respect to such Aircraft and which have accrued through and
including the date of payment of the Agreed Value, plus an amount equal to the
Agreed Value. In the event of payment in full of such Agreed Value, together
with all such amounts due or accrued hereunder on or prior to the date of such
payment, the obligation of LESSEE to pay Rent hereunder shall terminate. On the
date of payment of the Agreed Value, LESSOR shall credit or refund to LESSEE
all pre-paid Basic Rent, if any, the Security Deposit and all accrued Reserves.
Upon payment of all Rent due and the Agreed Value, LESSOR shall
transfer to LESSEE (subject to the rights of the insurers) all of LESSOR's
right, title, and interest in and to: (i) the Aircraft which sustained such
Event of Loss, as well as all of LESSOR's right, title, and interest in and to
any Engines constituting part of such Aircraft; and (ii) all claims for damages
to such Aircraft and/or Engines, if any, against third Persons arising from
such Event of Loss (unless any insurance carrier requires that such claims be
assigned to it), without any representation, warranty, or recourse of any kind
whatsoever, express or implied, except a warranty that such Aircraft is free
and clear of any Liens, mortgages and encumbrances, other than
39
Liens which LESSEE is required to discharge hereunder or defects in title
resulting from acts by or claims against LESSEE.
In the event of an Event of Loss involving the Aircraft wherein one
or more of the Engines are not attached to the Airframe, the Aircraft, for
purposes of this Section 12(A), shall be deemed to include all Engines on lease
hereunder and LESSOR shall cooperate in transferring title to such non-attached
Engines, free and clear of all LESSOR Liens, to the owner of the engine
attached to the Airframe at the time of the Event of Loss.
In the event of an Event of Loss to an airframe involving an Engine
attached to an airframe owned by LESSEE or another party, such airframe shall
be deemed to include the Engine attached thereto and LESSEE shall promptly
transfer title to, or cause the party on whose airframe the Engine was attached
to promptly transfer title to, a Replacement Engine (as defined below) in
accordance with the terms and conditions set forth in Section 12(B).
(B) EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon any Event of Loss
with respect to an Engine not then installed on the Aircraft, or an Event of
Loss with respect to Only an Engine installed on the Aircraft not involving an
Event of Loss to the Aircraft, LESSEE shall give LESSOR prompt written notice
thereof and LESSEE shall replace such Engine as soon as reasonably possible
after such Event of Loss by duly conveying to LESSOR, as a replacement for such
Engine, title to another engine owned by LESSEE (a "Replacement Engine"), which
Replacement Engine shall be free and clear of all Liens and shall have a value
and utility at least equal to, and be in as good operating condition as, the
Engine which sustained such Event of Loss (assuming the Engine which sustained
such Event of Loss was maintained in the condition in which LESSEE was required
to maintain such Engine pursuant to this Lease). Such Replacement Engine, after
approval and acceptance by LESSOR, shall be deemed an "Engine" as defined
herein. LESSEE agrees to take such action as LESSOR may reasonably request in
order that any such Replacement Engine shall be duly and properly leased
hereunder to the same extent as the Engine subject to the Event of Loss and
shall be titled in LESSOR and the interest of LESSOR's Lender therein shall be
fully protected and perfected. Upon request by LESSOR, LESSEE shall cause to be
delivered to LESSOR and Lender an opinion of FAA counsel (to be provided at
LESSEE's expense) as to the lien free status of such engine along with an
opinion of FAA counsel that such replacement engine has been made subject to
this Lease and that the security interest of Lender therein has been fully
perfected. LESSEE's obligation to pay Rent hereunder shall continue in full
force and effect regardless of the occurrence of an Event of Loss with respect
to an Engine, but LESSEE shall be entitled to be reimbursed by LESSOR the
amount of insurance or condemnation proceeds, if any, received by LESSOR with
respect to such Engine. Upon receipt of title by LESSOR to the Replacement
Engine as hereinabove provided, LESSOR shall convey to LESSEE, free and clear
of all Liens (except, subject to the rights of the insurers), title to the
Engine which sustained such Event of Loss.
40
(C) DAMAGE OR REQUISITION NOT CONSTITUTING AN EVENT OF LOSS. In the
event of material damage or requisition of the Aircraft or any Engine not
constituting an Event of Loss, LESSEE shall promptly notify LESSOR in writing
of such damage or requisition and shall remain obligated to make all payments
of Rent in respect of such Aircraft or Engine which may become due hereunder in
the same manner as if such damage or requisition had not occurred and to
perform all other obligations of LESSEE hereunder. All payments at any time
received by LESSEE, or by LESSOR from any Person other than LESSEE in excess of
$500,000 with respect to any such damage or requisition shall be paid over to,
or retained by, LESSOR, and shall be paid to LESSEE upon repair of the Aircraft
or Engine. To the extent that LESSEE has paid Rent and LESSOR receives a
requisition payment for the period of time for which LESSEE had paid Rent,
LESSOR agrees that it shall, as promptly as is reasonably practicable, pay to
LESSEE that amount of the requisition payment received by it equal to the Rent
for such period previously paid to LESSOR by LESSEE.
(D) RECEIPT AND APPLICATION OF COMPENSATION. Following an Event of Loss
or an occurrence not constituting an Event of Loss with respect to which
payments, including insurance proceeds, are made by or are due from any Person
(any such payments or proceeds being hereinafter referred to as
"Compensation"), LESSOR shall be entitled to receive, and shall receive, and
LESSEE hereby assigns to LESSOR any right or interest which LESSEE may have or
may hereafter acquire, in such Compensation, to be applied as follows:
(1) If such Compensation is received with respect to the Aircraft,
so much thereof as shall not exceed the Agreed Value and other amounts
due under Subsection 12(A) shall be retained by LESSOR, in reduction of
LESSEE's obligation to pay such Agreed Value and other amounts due as
was not theretofore paid by LESSEE, or, if such Agreed Value and other
amounts have already been paid to LESSOR, such Compensation shall be
applied to reimburse LESSEE for its payment of such Agreed Value, and
may be paid to LESSEE.
(2) If such Compensation is received with respect to an Engine
under the circumstances described in Subsection 12(B), such Compensation
shall be held in an account established for LESSOR with a bank or trust
company as depository, as designated by LESSOR, such sums to be held,
invested and distributed as provided below. All of LESSEE's interest in
all moneys and investments standing to the credit of such account are
hereby pledged to LESSOR (or, at the election of LESSOR, to Lender), and
LESSOR (or Lender) is hereby granted a general lien upon and security
interest in all of LESSEE's interest, if any, in all such moneys and
investments as security for the performance in full of all of LESSEE's
covenants contained in this Lease. The bank or trust company holding
such Compensation shall be deemed to be LESSOR's (or Lender's) agent for
the purpose of perfecting LESSOR's (or Lender's) security
41
interest in such sums and shall be notified of, and accept such
appointment as agent. If LESSEE shall replace such Engine in accordance
with the provisions of Subsection 12(B), LESSOR shall, so long as no
Default or Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute a Default or an Event of
Default shall have occurred and be continuing, return, or cause to be
returned, all moneys and investments then held in such account to
LESSEE.
(E) PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT. Any payment
referred to in Subsection 12(A),(B),(C) or (D) hereof which is payable to
LESSEE hereunder shall not be paid to LESSEE, or, if previously paid directly
to LESSEE, shall not be retained by LESSEE, if at the time of such payment a
Default or an Event of Default or an event which with the giving of notice or
the passage of time, or both, would constitute a Default or an Event of Default
hereunder shall have occurred and be continuing, but shall be paid to and
retained by LESSOR as security for the obligations of LESSEE under this Lease
until such time as such Default or Event of Default or event which with the
giving of notice or the passage of time, or both, would constitute a Default or
Event of Default shall have been remedied, whereupon such payment shall be made
to LESSEE.
SECTION 13
INSURANCE
(A) PUBLIC LIABILITY AND PROPERTY DAMAGE LIABILITY INSURANCE.
LESSEE will carry and maintain in effect, at its own expense, with Approved
Insurers, public liability insurance (including, but not limited to,
contractual liability, and passenger legal liability), and property damage
liability insurance with respect to the Aircraft, in amounts per occurrence
of not less than the Minimum Liability Coverage, or such greater amounts as
LESSEE may carry from time to time on other similar aircraft in its fleet.
LESSEE shall not discriminate against the Aircraft in providing such
insurance coverage. Each and any policy of insurance carried in accordance
with this Subsection (A), and each and any policy obtained in substitution or
replacement for any of such policies, (i) shall designate LESSOR,
Beneficiary, Lender, Lufthansa, Jetz Ventures and the party who conveys title
to the - 9A's to Jetz Ventures, Beneficiary or directly to LESSOR (the "-9A
Vendor"), and their respective officers, directors, shareholders, members,
employees, agents and assigns (collectively, the "Additional Insureds"), as
additional insureds as their interests may appear (but without imposing upon
the Additional Insureds any obligation imposed upon the insured, including,
without limitation, the liability to pay any premiums for any such policies,
but LESSOR, Beneficiary, Lender, Jetz Ventures, the -9A Vendor and/or
Lufthansa shall have the right to pay such premiums if it shall so elect),
and (ii) shall expressly provide that, in respect of the interests of the
Additional Insureds in such policies, the insurance will not be invalidated
by any action or inaction of the LESSEE, and shall insure the Additional
Insureds, regardless of any
42
breach or violation by LESSEE of any warranty, declaration or condition
contained in such policies, (iii) shall provide that if such insurance is
canceled by insurers for any reason whatsoever, or is adversely changed in any
way by insurers with respect to the interests of the Additional Insureds, or if
such insurance is allowed to lapse for nonpayment of premiums, such
cancellation, change or lapse shall not be effective as to the Additional
Insureds for 30 days (seven (7) days or such shorter period as may be customary
in the case of any war risks and allied perils coverage), in each instance,
after the issuance to LESSOR, Beneficiary, Lender, Jetz Ventures, the -9A
Vendor and Lufthansa of written notice by such insurer or insurers and/or
brokers to LESSOR, Beneficiary, Lender and Lufthansa of such prospective
cancellation, change or lapse, (iv) shall provide coverage on a worldwide
basis, subject to such territorial exclusions as may be usual and customary in
the worldwide airline insurance industry for airlines similarly situated with
LESSEE, (v) shall provide that, as against the Additional Insureds, the insurer
shall waive any rights of set-off, counterclaim or any other deduction, whether
by attachment or otherwise, and waives any right of subrogation it may have
against the Additional Insureds but only to the same extent that LESSEE has
waived its right of recovery against the Additional Insureds under the Lease
Documents. Each liability policy shall be primary without right of contribution
from any other insurance which may be carried by LESSOR, Beneficiary, Lender,
Jetz Ventures, the -9A Vendor, Lufthansa or their assigns, and shall expressly
provide that all of the provisions thereof shall operate in the same manner as
if there were a separate policy covering each insured, provided that such
provisions shall not operate to increase the insurer's limit of liability. No
liability policy shall permit any deductible or self-insurance provision except
for baggage and cargo as is customary in the London or U.S. aviation insurance
industry and such other deductibles only with the consent of the LESSOR, which
consent shall not be unreasonably withheld or delayed, which from time to time
LESSEE can demonstrate are standard in comprehensive liability insurance and,
in particular, public liability risks (including, INTER ALIA, contractual
liability and passenger liability coverage) for major international passenger
air carriers in the then current London or U.S. aviation insurance market.
(B) HULL WAR RISKS INSURANCE. LESSEE will carry and maintain in effect
with Approved Insurers, at its own expense, hull war risks and allied perils
insurance on the Aircraft (which shall include, but not be limited to, a
disappearance clause and coverage for hijacking, declared or undeclared war and
insurrections, strikes, riots, commotion's or labor disturbances, malicious
acts or acts of sabotage and unlawful seizure or wrongful exercise of control
of the Aircraft in flight by a person on board such Aircraft acting without the
consent of LESSEE) in an amount not less than the Agreed Value or such greater
amounts as LESSOR may request from time to time (and for which LESSOR shall
reimburse LESSEE for its cost of increased premium, if any, for such greater
amounts of insurance) and covering those perils which, from time to time, are
customarily covered by similar insurance maintained by major international
passenger air carriers insuring in the London
43
or U.S. Aviation insurance market.
(C) ALL RISKS HULL INSURANCE. LESSEE, at its own expense, will maintain
in effect with Approved Insurers all risks ground and flight aircraft hull
insurance covering such Aircraft, and fire, transit, spares and extended all
risks coverage insurance with respect to Engines and Parts while not installed
on such Aircraft or an aircraft, which in each case is of the type maintained
by major international passenger air carriers similarly situated to LESSEE and
operating similar aircraft and engines which comprise LESSEE's fleet. At all
times while the Aircraft is subject to this Lease, such insurance shall be for
an amount not less than the Agreed Value or such greater amounts as LESSOR may
request from time to time (and for which LESSOR shall reimburse LESSEE, at its
own cost of increased premium, if any, for such greater amounts of insurance).
Notwithstanding anything above, each and every policy of insurance
obtained and maintained pursuant to Subsection (B) and this Subsection (C), and
each and every policy obtained in substitution or replacement for any such
policies, (i) shall designate LESSOR as owner of the Aircraft covered thereby,
and shall designate Lender (or LESSOR, if there is no Lender), or its assigns,
as loss payee, as their respective interests may appear (but without imposing
upon LESSOR, Lender, or their assigns, any obligation imposed upon the insured,
including, without limitation, the liability to pay any premiums for any such
policies, but LESSOR and/or Lender and/or their assigns shall have the right to
pay such premiums if they shall so elect), (ii) shall expressly provide that,
in respect of the interests of LESSOR, Lender or their assigns in such
policies, the insurance shall not be invalidated by any action or inaction of
LESSEE and shall insure LESSOR, Lender or their assigns, regardless of any
breach or violation of any warranty, declaration or condition contained in such
policies by LESSEE, (iii) shall provide that if such insurance is canceled for
any reason whatsoever, or is adversely changed in any way with respect to the
interest of the LESSOR, Lender or their assigns, or if such insurance is
allowed to lapse for nonpayment of premium, such cancellation change or lapse
shall not be effective as to LESSOR, Lender or their assigns, for thirty (30)
days (seven (7) days or such shorter period as may be customary in the case of
any war risks or allied perils coverage) after issuance to LESSOR and Lender of
written notice by such insurer or insurers to LESSOR and Lender, as the case
may be, of such prospective cancellation, change or lapse, (iv) shall provide
coverage on a worldwide basis, subject to such territorial exclusions as may be
usual and customary in the worldwide airline insurance industry for airlines
similarly situated with LESSEE, (v) shall provide that, as against the LESSOR,
Lender or their assigns, the insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waives any right of subrogation it may have against LESSOR, Lender or their
assigns but only to the same extent that LESSEE has waived its right of
recovery against LESSOR, Lender or their assigns under the Lease Documents,
(vi) shall provide that in the event of any damage or loss which is an Event of
Loss hereunder and which results in a payment, such payment
44
shall be payable solely and directly to LESSOR or, if LESSOR shall at such time
have a lender that has provided financing secured in whole or in part by the
Aircraft and/or this Lease, then to the Lender, for the account of all
interests, (vii) shall provide that in the event of any damage or loss which is
not an Event of Loss hereunder and which results in a payment for any one
occurrence in excess of $500,000.00, such payment shall be payable directly to
LESSOR, (viii) shall provide that payments for any one occurrence not in excess
of $500,000.00 shall be payable directly to LESSEE provided there exists no
Default or Event of Default by LESSEE, and (ix) shall provide for a 50/50
claims funding arrangement between the all risks hull and war risks
underwriters.
LESSEE shall have the right to carry insurance in excess of the
amounts required hereunder and the proceeds of such excess insurance shall be
payable to LESSEE. Similarly, LESSOR shall have the right to carry additional
and separate insurance for its own benefit at its own expense, without,
however, thereby limiting LESSEE's obligations under this Section 13.
LESSEE shall at all times maintain a deductible amount in its all
risks hull and war risks insurance policies which is no more than Five Hundred
Thousand (US$500,000.00) Dollars.
(D) APPLICATION OF INSURANCE PROCEEDS NOT IN EXCESS OF $500,000.00.
LESSEE shall be entitled to receive any insurance proceeds not in excess of
Five Hundred THOUSAND ($500,000.00) Dollars as soon as such funds are paid by
the insurance company and shall promptly receive such additional insurance
proceeds, if any, upon presentation to LESSOR of a vendor's or LESSEE's
invoice, provided that repair work is in progress, replacement parts are
ordered, or such work is complete. All insurance proceeds received by LESSEE
pursuant to this Subsection 13(D) shall be used by the LESSEE exclusively for
the repair of any damage to the Aircraft or Engines on account of which the
insurance proceeds were paid. Any amount referred to in this Subsection 13(D)
which is payable to LESSEE shall not be paid to LESSEE if, at the time of such
payment, any Default or Event of Default shall have occurred and be continuing
or if the amount of the insurance proceeds payable is less than the estimated
total cost of the repairs and LESSEE does not deliver evidence to LESSOR that
such additional amount needed to pay the estimated total cost of repairs has
been paid, but shall be held by LESSOR as security for the obligations of
LESSEE under this Lease and such amount shall be paid to LESSEE at such time as
there shall not be continuing any such Default or Event of Default.
(E) APPLICATION IN DEFAULT. Any insurance proceeds referred to in this
Lease which are otherwise payable to LESSEE, or if it has been previously paid
to LESSEE and not yet applied by LESSEE as permitted or required hereunder,
shall be delivered from LESSEE to LESSOR if, at the time of such payment, a
Default or an Event of Default shall have occurred and be continuing. In such
case, all such amounts shall be paid to and held by LESSOR as security for the
obligations of LESSEE hereunder.
(F) CERTIFICATES. Not less than three (3) Business Days
45
prior to the Effective Date, and thereafter on each renewal by the LESSEE of
the insurance required hereby, LESSEE will furnish to LESSOR a certificate
executed and delivered by an Approved Insurer, appointed by LESSEE, describing
in reasonable detail, and in accordance with customary practice, insurance
carried on the Aircraft and certifying that the insurance then maintained on
the Aircraft complies with the terms of this Lease. LESSEE will cause such
Approved Insurer, identified to and reasonably acceptable to LESSOR, to agree
to hold all insurance contracts and slips for the benefit of LESSOR and to
advise LESSOR in writing at least thirty (30) days (seven (7) days in the case
of any war risk and allied perils coverage) prior to the non-renewal,
termination, or cancellation for any reason (including, without limitation,
failure to pay premiums therefor) of any such insurance.
In the event LESSEE shall fail to maintain insurance as herein
provided, LESSOR may at its option provide such insurance and, in such event,
LESSEE shall, upon demand, reimburse LESSOR, as Supplemental Rent for the cost
thereof.
(G) CHANGES IN INDUSTRY PRACTICE. If there shall be a fundamental
change in the generally accepted industry-wide practice with respect to the
insurance of aircraft (whether relating to all or any of the types of insurance
required to be effected pursuant to the terms of this Section 13) and, as a
consequence thereof, LESSOR shall be of the reasonable opinion that the
insurance required pursuant to the provisions of this Section 13 shall be
insufficient to protect the interests of LESSOR, the insurance requirements set
forth in this Section 13 shall be varied as may be mutually agreed so as to
include such additional or varied requirements to be effected pursuant to the
terms of this Section 13, and as so varied, shall provide the same protection
to LESSOR as it would have done had such change in generally accepted
industry-wide practice not occurred. If any such change in generally accepted
industry-wide practice would enable LESSEE, but for the requirements in this
Section 13, to reduce its expenditures in relation to all or any of the types
of insurance required to be effected pursuant to the terms of this Section 13
without, in the reasonable opinion of LESSOR and Lender, prejudicing the
interest of LESSOR and/or Lender, the insurance requirements in this Section 13
shall be amended to take account of such change in generally accepted
industry-wide practice to the extent required to enable LESSEE to reduce such
expenditures, provided, however, that in no event shall such public liability
insurance coverage set forth in Section 14 be less than Three Hundred Fifty
Million(US$350,000,000) Dollars.
SECTION 14
INDEMNIFICATION
(A) LESSEE agrees to indemnify, reimburse, and hold harmless the
Indemnitees from and against any and all claims, damages, losses, liabilities,
demands, suits, judgments, causes of action, legal proceedings, whether civil
or criminal, penalties,
46
fines, other sanctions, and any costs and expenses in connection herewith,
including attorney's fees and expenses (any and all of which are hereafter
referred to as "Claims") which in any way may result from, pertain to, or arise
in any manner out of, or are in any manner related to the Aircraft or this
Lease, arising out of events occurring on or subsequent to the Effective Date
through and including the date this Lease terminates and all obligations of
LESSEE have been fully and satisfactorily performed, or the breach of any
representation, warranty or covenant made by LESSEE hereunder, including, but
not limited to, (i) the condition, ownership, manufacture, delivery,
non-delivery, lease, acceptance, rejection, possession, return, disposition,
use, or operation of the Aircraft either in the air or on the ground; or (ii)
any defect in the Aircraft arising from the material or any articles used
therein or from the design, testing, or use thereof or from any maintenance,
service, repair, overhaul, or testing of such Aircraft, regardless of when such
defect shall be discovered (including, but not limited to, infringement of
patent or other right or latent and other defects whether or not discoverable
by LESSEE or LESSOR), whether or not such Aircraft is at the time in the
possession of LESSEE, and regardless of where such Aircraft may then be
located; or (iii) this Lease or any other transaction, approval, or document
contemplated hereby or given or entered into in connection herewith; provided,
however, that LESSEE shall be subrogated to all rights and remedies which
LESSOR may have against the Manufacturer or Engine Manufacturer.
LESSEE hereby waives and releases any claim now or hereafter
existing against any Indemnitee, on account of any Claims for or on account of
or arising or in any way connected with injury to or death of personnel of
LESSEE or loss or damage to property of LESSEE or the loss of use of any
property which may result from or arise in any manner out of or in relation to
the leasing, condition, use, or operation of the Aircraft, either in the air or
on the ground during the Base Term hereof, or which may be caused during such
Base Term by any defect in such Aircraft from any material or any article used
therein or from the design or testing thereof, or use thereof or from any
maintenance, service, repair, overhaul, or testing of such Aircraft regardless
of when such defect may be discovered, whether or not such Aircraft is at the
time in the possession of LESSEE, and regardless of the location of such
Aircraft at any such time.
Without limitation upon LESSEE's liability under this Section 14,
LESSEE hereby agrees to indemnify, reimburse, and hold each Indemnitee harmless
from any Claims in any manner imposed upon or accruing against each Indemnitee
because of the manufacture of the Aircraft, any originally manufactured design
or design incorporated prior to the operation of the Aircraft by LESSEE, any
change or alteration of design by LESSEE, or material therein or relating
thereto, because of infringement of patent or any other right. With respect to
any claim for infringement of patent or any other right which is alleged to
have occurred prior to LESSEE leasing the Aircraft, LESSEE's indemnification
obligation with respect to such claims shall be limited to claims that are
asserted during the Base Term of this Lease or any extension thereof. The
foregoing limitation shall not apply to claims for infringement of
47
patent or any other right which is alleged to have occurred at any time during
the Base Term or any extension thereof regardless of when such claims are
asserted.
LESSEE hereby agrees, and shall have the right, to assume and conduct,
promptly and diligently, at its sole cost and expense, the entire defense of
any Indemnitee against any such Claims, and any claim, suit, or action for
which any Indemnitee is required to assume liability.
LESSOR agrees to give LESSEE prompt notice of any Claim hereunder
following LESSOR's actual knowledge of such Claim. The failure of LESSOR to
give the notice required by this Section 14 of any Claim shall not constitute a
release by LESSOR or the Indemnitees of any obligations of LESSEE to any
Indemnitees in respect of any such Claim, unless LESSEE is materially adversely
affected solely by such failure of LESSOR to give such notice. No settlement of
any Claim by an Indemnitee may be made without the consent of LESSEE, which
consent or withholding of consent shall be promptly noticed to LESSOR and the
Indemnitee seeking indemnification. LESSEE may only withhold consent to a
proposed settlement of a Claim if LESSEE posts a bond issued by a reputable
bonding or insurance company reasonably satisfactory to LESSOR, in an amount
not less than the full amount of the Claim together with interest and
penalties, if any, thereon.
The indemnifications contained in this Section 14 shall continue in
full force and effect notwithstanding any expiration or other termination of
this Lease and are expressly made for the benefit of and shall be enforceable
by each Indemnitee and their respective successors and assigns.
(B) EXCEPTIONS. In no event shall the indemnity provided for in Section
14(A) extend to any Claim or disbursement of any Indemnitee resulting from,
pertaining to or arising in any manner out of, or in any manner relating to,
the gross negligence or willful misconduct of any Indemnitee.
SECTION 15
LIENS
LESSEE shall not directly or indirectly create, incur, assume, or
suffer to exist any Lien on or with respect to the Aircraft, title thereto, any
interest therein, this Lease or any interest therein, except Permitted Liens.
LESSEE shall promptly, at its own expense, take such action as may be necessary
to duly discharge any Lien (except for Permitted Liens) directly or indirectly
created, incurred, assumed or suffered to exist by LESSEE if the same shall
arise at any time with respect to the Aircraft, title thereto, any interest
therein, this Lease or any interest therein.
SECTION 16
48
PERFECTION OF TITLE AND FURTHER ASSURANCES
(A) Except through the action or inaction of LESSOR or Lender after due
notice and request having been made upon them, if, at any time, any filing or
recording is reasonably necessary to protect the interest of LESSOR or Lender,
LESSEE shall, at its own cost and expense, cause this Lease, any assignment of
this Lease, any security agreement with respect to the Aircraft, financing
statements with respect thereto, and any and all additional instruments which
shall be executed pursuant to the terms hereof, so far as permitted by
applicable Law, to be kept, filed and recorded and to be re-executed, re-filed
and re-recorded at all times in the appropriate office pursuant or in relation
to any Laws of any Governmental Entity, as LESSOR and/or Lender may request, to
perfect, protect, and/or preserve the rights and interests of LESSOR and
Lender, respectively, hereunder and in the Aircraft, and LESSEE shall furnish
to LESSOR and Lender evidence satisfactory to LESSOR and Lender of each such
filing, re-filing, recordation and re-recordation.
(B) Without limiting the foregoing, LESSEE shall do or cause to be
done, at LESSEE's cost and expense, any and all acts and things which may be
required under the terms of the Convention on the International Recognition of
Rights in Aircraft ("Mortgage Convention") to perfect and preserve the title of
LESSOR to the Aircraft and the security interest of Lender in the Aircraft
(assuming, that with respect to the U.S. registration of the Aircraft, LESSOR
meets the citizenship requirements for such registration) within the
jurisdiction of any signatory which has ratified the Mortgage Convention, as
LESSOR and/or Lender may reasonably request. LESSEE shall also do or cause to
be done, at its own expense, any and all acts and things which may be required
under the terms of any other law involving any jurisdictions in which LESSEE
will operate, or any and all acts and things which LESSOR and/or Lender may
reasonably request to perfect and preserve LESSOR's ownership rights and
Lender's security interest regarding the Aircraft within any such jurisdiction.
(C) LESSEE will not suffer any matter or thing whatsoever whereby the
LESSOR's title and the Lender's security interest in and to, the Aircraft may
be impaired.
SECTION 17
RETURN OF AIRCRAFT AND RECORDS
(A) RETURN. On the Expiration Date, or pursuant to Section 19 hereof
(such date or event being hereinafter referred to as a "Return Occasion"),
LESSEE, at its own expense, on or prior to the Return Occasion, shall return
such Aircraft to LESSOR at the Return Location or such other location as may be
mutually agreed upon by LESSOR and LESSEE, fully equipped as delivered or
modified as provided hereunder with all required Engines installed thereon.
49
(B) RECORDS. Upon a Return Occasion applicable to the Aircraft, LESSEE,
at its own expense, shall deliver to LESSOR all Aircraft Documents listed in
Exhibit "B", as updated, amended or supplemented along with such other records
and documents in such form as are necessary to qualify the Aircraft for the
issuance, at LESSOR's election, of an Export Certificate of Airworthiness
issued by the Air Authority or the issuance by the FAA of an FAA Standard
Airworthiness Certificate so as to permit operation of the Aircraft under the
Act and FAR Part 121. Such records and manuals shall be current and shall
constitute an accurate representation of the condition of the Aircraft.
(C) CONDITION OF AIRCRAFT. Upon a Return Occasion applicable to the
Aircraft, LESSEE shall return the Aircraft to LESSOR in such condition so that
the Aircraft shall: (1) comply with each and every return condition requirement
set forth in Exhibit "H" hereto; (2) have accomplished all work necessary to
obtain a valid Certificate of Airworthiness for Export or Standard
Airworthiness Certificate (other than (i) having TCAS and windshear detection
systems installed, and (ii) complying with Stage III noise requirements,
subject to the provisions of Section 8(C) of this Lease), as LESSOR shall
elect, in each case issued by the FAA; and (3) shall be free and clear of all
Liens, except LESSOR's Liens and Liens which may have existed prior to the
Effective Date and were not created by or consented to by LESSEE.
(D) FINAL INSPECTION. Upon or next preceding a Return Occasion with
respect to the Aircraft hereunder, LESSEE shall make such Aircraft available to
LESSOR not less than ten (10) days prior to the date of the Return Occasion for
detailed inspection in order to verify that the condition of such Aircraft
complies with the requirements set forth above (such inspection being
hereinafter referred to as the "Final Inspection"). Such Final Inspection may
be scheduled at an appropriate maintenance facility of the Authorized
Maintenance Performer then performing maintenance of such Aircraft, pursuant to
Subsection 7(D) hereof, and LESSEE shall give LESSOR not less than ten (10)
days' prior written notice of the location and commencement date of such Final
Inspection. The period allowed for the Final Inspection shall, if necessary, be
extended so as to have such duration as to permit the performance of all of the
following, each of which must occur during such period:
(1) a B check performed in accordance with LESSEE's Maintenance
Program;
(2) the opening, in order to verify any aspect of the condition of
any area of the Aircraft which would normally be accessible during the
maintenance check being performed, or at LESSOR's request, the opening
of any areas of the Aircraft if LESSOR reasonably believes, based
on prior inspections or other evidence, that opening of such areas
would reveal that the Aircraft does not completely comply with the
requirements of this Section 17 and Exhibit "H"; and
50
(3) No less than three (3) of LESSOR's representatives shall be
permitted to attend each phase of activity required to be
conducted during the Final Inspection. A Final Inspection shall
commence on or before the date of a Return Occasion with respect
to the Aircraft and shall continue on consecutive days until all
activity required pursuant to the terms of Exhibit "H" and the
above provisions have been concluded. To the extent that any
portion of the Final Inspection extends beyond the date of a
Return Occasion, the Base Term with respect to the Aircraft
undergoing the Final Inspection shall be deemed to be
automatically extended (but LESSEE shall have no right to operate
the Aircraft during such time except in connection with any
required re-delivery test flights), and the LESSEE shall be
obligated to continue to insure the Aircraft, in accordance with
the provisions of this Lease, and to pay Rent hereunder on a daily
basis, calculated at a daily rate equal to 1/15 of the Basic Rent,
until the Final Inspection shall have been concluded (provided,
however, that LESSEE's shall have no obligation to pay Basic Rent
beyond the originally scheduled Expiration Date if the Final
Inspection is not completed on or before the Expiration Date due
to LESSOR's failure to timely appear for such inspection unless
such failure is caused by LESSEE denying access to the Aircraft
and/or Aircraft Documents at a time when same were to be made
available to LESSOR or if LESSEE unreasonably interferes with such
Final Inspection by LESSOR). All storage expenses attributable to
any extension of the Base Term pursuant to the preceding sentence
shall be payable by LESSEE.
(E) AIRCRAFT DOCUMENTATION. In order to enable LESSOR to prepare for
its Final Inspection of the Aircraft pursuant to Subsection 17(D) above, LESSEE
agrees to make available at LESSEE's maintenance base to LESSOR, not later than
ten (10) days prior to the commencement of such Final Inspection, the Aircraft
Documents listed in Exhibit "B" hereto, together with such other documentation
regarding the condition, use, maintenance, operation and history of the
Aircraft as LESSOR may reasonably request.
(F) LESSEE'S CORRECTION AND SUBSEQUENT CORRECTIONS. To the extent that
the Aircraft, any Engine or any of the Aircraft Documents fails upon a Return
Occasion to conform to any requirement imposed by Section 17 hereof and Exhibit
"H", LESSOR may, at its option:
(1) continue the Lease in effect in the manner provided for in
Subsection 17(D)(3) above with regard to automatic extension with
respect to such Aircraft until such time as the nonconforming
items are corrected; or
(2) request LESSEE to pay, and LESSEE shall pay to LESSOR, an
amount equal to the amount required (labor and materials) by the
then current Authorized Maintenance
51
Performer or any other Person designated by LESSOR, as the case
may be, to correct such nonconforming items. Any such amount
payable by LESSEE to LESSOR for such correction shall become
Supplemental Rent, payable by LESSEE within five (5) days
following the submission of a written statement by LESSOR to
LESSEE identifying the items corrected or to be corrected and
setting forth the expense of such correction. LESSEE's obligation
to pay such Supplemental Rent shall survive the passage of the
early termination of the Base Term or other termination of this
Lease. In addition to the foregoing, but subject to Sections A(ix)
and (xi) of Exhibit "H", and under the same payment terms, LESSEE,
with regard to any time-limited component installed on such
Aircraft which does not satisfy the return condition requirements
of this Section 17 and Exhibit "H" upon a Return Occasion, shall
pay LESSOR, at the time of a Return Occasion, an amount equal to
the amount which would be required to be paid to the Person
selected by LESSOR for putting such item in such condition.
(G) DISPUTE AS TO COMPLIANCE WITH RETURN CONDITIONS. Should there be
any dispute as to whether the Aircraft meets the return conditions, the matter
shall be resolved by an independent knowledgeable aviation maintenance expert
reasonably acceptable to LESSOR and LESSEE.
SECTION 18
EVENTS OF DEFAULT
Each of the following events shall constitute a Default and after the
applicable grace, notice or cure period, if any, an Event of Default:
(A) LESSEE shall fail to make any payment of Rent when due under this
Lease and such payment shall remain unpaid for a period of three (3) days from
the due date;
(B) LESSEE shall fail to carry and maintain insurance on or with
respect to the Aircraft in accordance with the provisions of Section 13 hereof
or shall operate the Aircraft or permit the Aircraft to be operated in
violation of any insurance policy required to be provided pursuant to Section
13 hereof;
(C) Except as otherwise expressly provided in this Section 18 and
Subsection 18(B) above, for which no notice is required, LESSEE shall fail to
perform or observe any covenant, condition or agreement to be performed or
observed by LESSEE under the Lease and such failure shall continue for a period
of thirty (30) days after written notice thereof from LESSOR to LESSEE;
(D) Any representation or warranty made by LESSEE herein, or in any
notice, certificate or other document furnished by or on behalf of LESSEE
herein to LESSOR or its assigns, shall prove to
52
have been incorrect in any material respect when made;
(E) LESSEE or Airgroup shall consent to the appointment of a receiver,
trustee or liquidator for itself or for a substantial part of its property, or
LESSEE or Airgroup shall admit in writing its inability to pay its debts
generally as they become due, or shall make a general assignment for the
benefit of creditors, or LESSEE or Airgroup, shall file a voluntary petition in
bankruptcy or a voluntary petition or answer seeking reorganization in a
proceeding under any Laws dealing with bankruptcy, insolvency, moratorium or
creditors' rights generally (any or all of which are hereinafter referred to as
"Bankruptcy Laws"), or an answer admitting the material allegations of a
petition filed against LESSEE or Airgroup, in any such proceeding, or LESSEE or
Airgroup shall by voluntary petition, answer or consent to or seek relief under
the provisions of any Bankruptcy Laws;
(F) An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of LESSEE or Airgroup,
as the case may be, a receiver, trustee or liquidator for LESSEE or Airgroup,
or any substantial part of its property, or any substantial part of the
property of LESSEE or Airgroup shall be sequestered, and any such order,
judgment, decree or appointment, or sequestration, shall remain in force
undismissed, unstayed or unvacated for a period of sixty (60) days after the
date of entry thereof;
(G) A petition against LESSEE or Airgroup in a proceeding under the
Bankruptcy Laws of any Governmental Entity shall be filed and shall not be
withdrawn or dismissed within sixty (60) days thereafter, or if, under the
provisions of any Bankruptcy Laws which may apply to LESSEE or Airgroup, any
court of competent jurisdiction shall assume jurisdiction, custody or control
of LESSEE or Airgroup, or of any substantial part of its property, and such
jurisdiction, custody or control shall remain in force unrelinquished, unstayed
or unterminated for a period of ninety (90) days;
(H) LESSEE or Airgroup, shall be dissolved or liquidated, terminate its
existence or suspend its operations, shall lose any right, privilege or
franchise necessary to maintain its corporate existence, or shall dispose of
all or substantially all of its properties to any Person;
(I) LESSEE shall make or permit any assignment or transfer of this
Lease or of possession of the Aircraft other than as permitted hereunder;
(J) Any license, permit, certificate, authorization, consent, approval,
notification, registration or filing now or hereafter necessary to enable
LESSEE to perform or comply with its obligations under the Lease shall fail to
be timely issued, granted or made, or shall expire or lapse and shall not be
forthwith renewed or extended or shall be revoked, withdrawn, withheld or
adversely modified, or shall cease to be in full force and effect;
(K) All or a substantial part of the properties of LESSEE
53
or Airgroup shall be condemned, seized or otherwise appropriated for custody or
control, or such property shall be assumed by any Governmental Entity or any
court or other Person purporting to act under the authority of any Governmental
Entity, or LESSEE or Airgroup shall be prevented from exercising normal control
over all or a substantial part of its properties and the events as set forth in
this Subsection 18(K) are not remedied within sixty (60) days after they occur;
(L) LESSEE shall fail to pay when due any obligation for the payment of
money in excess of Four Hundred Thousand (US$400,000) Dollars under any
agreement to which LESSEE is a party where such failure would constitute an
event of default thereunder or permit the party to whom such payment was owed
(hereinafter referred to as a "Creditor") to exercise remedies under such
agreement as a result of such non-payment; provided, however, that the
foregoing shall only constitute a Default and not an Event of Default hereunder
for the period of time that the Creditor states in a letter, addressed to and
delivered to LESSOR, that it irrevocably agrees for such period of time to
forebear from the exercise of remedies or the taking of other action against
LESSEE (the "Forbearance Period") as a result of such non-payment of money.
Upon the expiration of the Forbearance Period, unless such period has been
extended by the Creditor (but in no event may the Forbearance Period, in the
aggregate, be greater than sixty (60) days from the original due date for such
payment), unless LESSEE has delivered to LESSOR written confirmation from the
Creditor that it has been paid in full or has otherwise waived its claim
against LESSEE or has otherwise settled with LESSEE, the Default set forth in
this subsection (L) shall automatically and without any further action on the
part of LESSOR be deemed to constitute an Event of Default hereunder;
(M) LESSEE shall voluntarily suspend all or substantially all of its
commercial revenue passenger operations, or the franchises, concessions,
permits, licenses, rights or privileges required for the conduct of the
commercial revenue passenger operations of LESSEE shall be revoked, canceled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented, and as a result the principal business activity of
LESSEE shall cease to be that of commercial revenue passenger airline;
(N) If for any reason or at any time Airgroup owns less than seventy
percent (70%) of the outstanding voting stock of LESSEE; or
(0) An "Event of Default" shall occur and be continuing under any other
lease agreement entered into between LESSOR or Beneficiary (or any affiliated
or related entity to LESSOR or Beneficiary) and LESSEE.
SECTION 19
REMEDIES
54
Upon the occurrence of any Event of Default, and at any time thereafter
so long as the same shall be continuing, LESSOR may, at its option, declare
this Lease to be in default, and at any time thereafter, so long as LESSEE
shall not have remedied any outstanding Event of Default, LESSOR may exercise
one or more of the following remedies with respect to the Aircraft as LESSOR,
in its sole discretion, shall elect, to the extent available and permitted by,
and subject to compliance with, any mandatory requirements of applicable Law
then in effect; PROVIDED, HOWEVER, that upon the occurrence of any Event of
Default specified in paragraphs (E),(F),(G) or (H) of Section 18, LESSOR shall
be entitled automatically, as of the day prior to such occurrence, to exercise
any of the following remedies without declaring this Lease to be in default or
making demand or giving notice or the taking of any other action:
(A) Demand that LESSEE, and LESSEE shall, upon the written demand of
LESSOR, at LESSEE's expense, return the Aircraft and Aircraft Documents
promptly to LESSOR in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Section 17 and Exhibit "H" hereof; or
LESSOR, at its option and to the extent permitted by applicable Law, may enter
upon the premises where all or any part of the Aircraft and Aircraft Documents
are located and take immediate possession of and remove the same, by summary
proceedings or otherwise, all without liability accruing to LESSOR for or by
reason of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise;
(B) Sell the Aircraft at public or private sale, as LESSOR may
determine, or otherwise dispose of, hold, use, operate, lease to others, or
keep idle the Aircraft, as LESSOR, in its sole discretion, may determine, all
free and clear of any rights of LESSEE and without any duty to account to
LESSEE with respect to such action or inaction, or for any proceeds with
respect thereto;
(C) Demand (whether or not LESSOR, pursuant to Subsection 19(B) hereof,
may have sold the Aircraft) that LESSEE pay LESSOR, and LESSEE shall upon such
demand pay to LESSOR, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Rent for such Aircraft due after such payment occurs),
any accrued and unpaid Rent for such Aircraft due up to the time LESSOR demands
such payment, plus the amount by which the fair market value of such Aircraft
(assuming the condition of the Aircraft and the Aircraft Documents fully and
satisfactorily meets all of the return conditions set forth herein and on
Exhibit "H") exceeds the net cash proceeds of any sale of such Aircraft,
together with interest at the Overdue Rate on such fair market value or portion
thereof and such unpaid Rent from the date of LESSOR's demand to the date such
payment is made;
(D) Proceed by appropriate court action or actions, either at Law or in
equity, to enforce performance by LESSEE of the applicable obligations and
covenants of LESSEE under this Lease and to recover damages for the breach
thereof, or to rescind this Lease
55
as to the Aircraft;
(E) Terminate this Lease or any of LESSEE's rights hereunder by written
notice, and repossess the Aircraft and Aircraft Documents, provided such
termination shall not release LESSEE from its financial obligations hereunder
or any other obligations hereunder which can be satisfied by the payment of
money (including the payment of money for the performance of services);
(F) Apply all or any part of the Security Deposit then held by LESSOR
hereunder toward satisfaction of any obligations of LESSEE hereunder; or
(G) Exercise any and all other rights and remedies provided for under
applicable law whether or not such rights and remedies are specifically
enumerated herein.
Further, should the LESSEE fail to return the Aircraft and Aircraft
Documents upon termination of the Lease for any reason whatsoever except due to
an Event of Loss and as set forth in Subsection 17(F), without prejudice to
LESSOR's rights hereunder to demand return of the Aircraft in the condition
required by this Section, LESSEE shall continue to pay Rent to LESSOR for each
day the Aircraft remains in LESSEE's possession at the rate of 1/15 of the
monthly Basic Rent then in effect.
In addition, LESSEE shall be liable for any and all unpaid Rent due
hereunder before or during the exercise of any of the foregoing remedies, and
for all attorneys' fees, legal expenses and other costs and expenses incurred
by LESSOR, Lender or their respective representatives or agents by reason of
the occurrence of any Event of Default or the exercise of LESSOR's remedies
with respect thereto, including all costs and expenses incurred in connection
with the return of the Aircraft, in accordance with the terms of Section 17 and
Exhibit "H" hereof, or with placing such Aircraft in such condition.
Except as otherwise expressly provided above, no remedy referred to
in this Section 19 is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to above or otherwise available to
LESSOR under any applicable Law, and the exercise or commencement of exercising
by LESSOR of any one or more of such remedies shall not preclude the
simultaneous or later exercise by LESSOR of any or all such other remedies. No
express or implied waiver by LESSOR of any Default or Event of Default shall in
any way be, or be construed to be, a waiver of any future or subsequent Default
or Event of Default. LESSEE hereby agrees that, except as provided in this
Section 19, any financing profit or savings accruing to LESSOR by virtue of
LESSEE's default and LESSOR's subsequent sale, re-letting, or award shall in no
way reduce, offset or mitigate the damages for which LESSEE is liable
hereunder.
To facilitate LESSOR in the termination of this Lease and the
exercise of its remedies upon the occurrence and continuation of an Event of
Default, LESSEE hereby appoints LESSOR
56
as LESSEE's irrevocable agent and attorney-in-fact, pursuant to the Power of
Attorney attached hereto as Exhibit "E", to execute all documents deemed
necessary to release, terminate and void LESSEE's interest in the Aircraft
leased hereunder and to otherwise enable and/or assist LESSOR in the exercise
of its remedies hereunder, and to file said documents for recordation with the
FAA and any other appropriate Governmental Entity following the occurrence of
an Event of Default, where LESSOR, at its sole discretion, may deem use of such
Power of Attorney necessary to effect any remedy which LESSOR chooses to
exercise.
SECTION 20
ALIENATION
(A) There shall be no restriction upon LESSOR's right to assign, sell,
transfer, pledge, hypothecate or encumber any interest of LESSOR (hereinafter
referred to generally as "Alienation") to any other Person in the Aircraft,
this Lease and/or the proceeds thereof and hereof, subject to rights of the
LESSEE under the provisions of this Lease and provided that any such
assignment, sale, transfer, pledge, hypothecation or encumbrance does not have
a material adverse affect on LESSEE's obligations hereunder or adversely affect
the registration of the Aircraft or the quiet enjoyment of the LESSEE therein
pursuant to this Lease. To effect or facilitate any such assignment, sale,
transfer, pledge, hypothecation or encumbrance, LESSEE agrees to provide LESSOR
or LESSOR's designee or assignee with such agreements, consents, conveyances or
documents as may be reasonably requested by LESSOR. The agreements,
representations, warranties, covenants, obligations and liabilities contained
herein, including, but not limited to, all obligations to pay Rent and
indemnify LESSOR, are made for the benefit of LESSOR, any security assignee of
LESSOR and their respective successors and assigns, notwithstanding the
possibility that any such Person was not originally a party to this Lease or
may, at the time such enforcement is sought, not be a party to this Lease.
(B) In the case of any Alienation or assignment by LESSOR pursuant to
the provisions of Section 20, LESSEE shall execute and deliver to LESSOR
promptly upon request of LESSOR, any consents or agreements required for the
perfection of such assignment provided that such consent or other documents
does not affect LESSEE's rights under Subsection 21(G) below.
SECTION 21
MISCELLANEOUS
(A) SEVERABILITY, AMENDMENT AND CONSTRUCTION. Any provision of this
Lease which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or
57
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged, or terminated orally, but only
by an instrument in writing expressed to be a supplement to this Lease, signed
by an officer of the party against which the enforcement of the change, waiver,
discharge or termination is sought. This Lease shall constitute an agreement of
lease for the Base Term of the Lease, and nothing herein shall be construed as
conveying to LESSEE any right, title or interest in the Aircraft, the Airframe,
any Engine or Part except as a LESSEE only, for such Base Term. The headings in
this Lease are for convenience of reference only and shall not define or limit
any of the terms or provisions hereof. Unless the context otherwise requires,
all references in this Lease to designated Sections or other subdivisions
hereof are to such designated Sections or subdivisions; and the words "herein",
"hereof", "hereto", "hereunder", and other words of similar import refer to
this instrument as a whole and not to any particular Section or subdivision. In
construing any provision of this Lease, no account shall be taken as to the
party who drafted same and no presumption shall arise or result therefrom.
(B) GOVERNING LAW. This Lease shall in all respects be governed by, and
construed in accordance with, the Laws of the State of New York with respect to
contracts made and to be entirely performed in such State by residents thereof.
(C) WAIVER OF JURY TRIAL. LESSEE AND LESSOR HEREBY WAIVE, TO THE
FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT BY EITHER PARTY HERETO WITH RESPECT TO
THE CONSTRUCTION OR ENFORCEMENT OF THIS LEASE OF ANY PROVISION HEREOF.
(D) NOTICE. Except as otherwise specified herein, all notices, requests,
demands, consents or other communications to, upon or by the respective parties
hereto shall be in the English language and in writing, sent by international
recognized express courier or telefax, and shall be deemed to have been duly
given or made when received by the party if sent by telefax or when received by
the party, if sent by express courier, addressed to the party to which such
notice, request, demand or other communication is required or permitted to be
given or made hereunder, at the LESSEE'S Address or LESSOR'S Address (with a
copy to Beneficiary at Beneficiary's Address), as the case may be, or at such
other address of which such Person shall have notified in writing the party
giving such notice.
(E) LESSOR'S RIGHT TO PERFORM FOR LESSEE. If LESSEE fails to make any
payment of Supplemental Rent or fails to perform or comply with any covenant,
agreement or obligation contained herein, LESSOR shall have the right, but not
the obligation, to make such payment or perform or comply with such agreement,
covenant or obligation, and the amount of such payment and the amount of the
reasonable expenses of LESSOR incurred in connection with such payment or the
performance thereof or compliance therewith, together with interest thereon at
the Overdue Rate,
58
shall be deemed Supplemental Rent, payable by LESSEE upon demand. The taking of
any such action by LESSOR pursuant to this Subsection 21(E) shall not
constitute a waiver or release of any obligation of LESSEE under the Lease, nor
a waiver of any Default or Event of Default which may arise out of LESSEE's
nonperformance of such obligation, nor an election or waiver by LESSOR of any
remedy or right available to LESSOR under or in relation to this Lease.
(F) COUNTERPARTS. This Lease may be executed simultaneously in one or
more counterparts, all of which together shall constitute one and the same
Lease. To the extent that this Lease constitutes chattel paper in any
jurisdiction, no security interest herein may be created through the transfer
of possession of any counterpart other than the counterpart marked "Original."
Other than the counterpart of this Lease marked "Original," all other original
executed counterparts of this Lease shall be marked "Duplicate Original."
(G) QUIET ENJOYMENT. LESSOR covenants that if, and as long as, no Event
of Default hereunder has occurred and is continuing, LESSEE shall quietly enjoy
the Aircraft without interference by LESSOR or by any Person claiming by,
through or under LESSOR, or by any assignee of LESSOR, and neither LESSOR nor
any Person claiming by, through or under LESSOR, or any assignee of LESSOR
will, as long as no Event of Default hereunder has occurred and is continuing,
take any action which adversely affects the registration of the Aircraft.
(H) BROKERS. LESSOR and LESSEE each agree that there has been no third
party as broker or finder involved in the introduction of LESSOR and LESSEE
with respect to this Lease or the subject matter or negotiation hereof and each
party hereby indemnifies and agrees to hold harmless the other party from
liability for fees, commissions or other claims made upon such other party due
to such claims arising through it.
(I) JURISDICTION, SERVICE OF PROCESS. The parties hereto hereby
expressly submit to the non-exclusive jurisdiction of the United States
District Court for the Southern District of New York sitting in New York
County, New York, with respect to any action arising out of or relating to this
Lease. In connection with the foregoing, LESSEE hereby appoints CT Corporation
System whose address is currently at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
as its lawful agent and attorney ("LESSEE's Process Agent") upon whom all
service of summonses and other legal processes may be made with respect to any
action. The LESSEE's Process Agent is hereby authorized and directed to accept
by and on behalf of LESSEE summonses and other legal processes against LESSEE.
This appointment of LESSEE's Process Agent is irrevocable by LESSEE and coupled
with an interest, and if LESSEE's Process Agent revokes such relationship
LESSEE shall, prior to the effective date of such revocation, appoint a
successor, which successor shall be approved by LESSOR and Lender. LESSEE
shall, prior to any change of the address of LESSEE's Process Agent, notify
LESSOR and Lender in writing of such new address.
59
LESSOR hereby appoints Feltman, Karesh, Major & Xxxxxxx, whose address
is currently at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its lawful
agent and attorney ("LESSOR's Process Agent") upon whom all service of
summonses and other legal processes may be made with respect to any action. The
LESSOR's Process Agent is hereby authorized and directed to accept by and on
behalf of LESSOR summonses and other legal processes against LESSOR. This
appointment of LESSOR's Process Agent is irrevocable by LESSOR and coupled with
an interest, and if LESSOR's Process Agent revokes such relationship LESSOR
shall, prior to the effective date of such revocation, appoint a successor,
which successor shall be approved by LESSEE. LESSOR shall, prior to any change
of the address of LESSOR's Process Agent, notify LESSEE in writing of such new
address.
The parties hereto, to the fullest extent available under applicable
Law, waive any claim that venue or jurisdiction is improper in such court or
that such court constitutes an inconvenient forum. Service of summons,
complaint and other legal process on LESSOR or LESSEE with respect to any
action arising out of or relating to this Lease may be made by mailing
(registered mail, return receipt requested) a copy of any summons or other
legal process to said Party at the LESSEE's Address or LESSOR's Address, as the
case may be, or by any other procedure permitted under the Laws of the United
States of America.
The mailing, as herein provided, of such summons or other legal process
shall be deemed personal service and accepted by LESSEE or LESSOR as such, and
shall be legal, effective and binding upon LESSEE or LESSOR for all the
purposes of the suit.
Nothing in this Subsection 21(1) shall in any way be deemed to
limit the ability of LESSOR or LESSEE to serve any such summons or legal
process in any other manner permitted by applicable Law or to obtain
jurisdiction over the other party in such other jurisdictions, and in such
manner, as may be permitted by applicable Law.
(J) STORAGE OF AIRCRAFT. Upon the expiration or termination of this
Lease, provided that the final maintenance check prior to return is
accomplished at LESSEE's Honolulu maintenance base or the return location is
Honolulu, LESSEE shall provide storage facilities for the Aircraft at a
location where LESSEE has storage facilities for a period not to exceed sixty
(60) days (the "Storage Period"). During the Storage Period, LESSOR shall bear
the risk of loss of the Aircraft and shall pay maintenance, insurance and other
costs (except for the cost of the storage facilities provided by LESSEE) with
respect to the Aircraft. Upon the expiration of the Storage Period, LESSEE
shall cooperate with LESSOR by flying the Aircraft to the Return Location.
(K) EXPENSES. Unless otherwise specifically provided for to the
contrary, LESSOR and LESSEE shall each bear their own expenses in connection
with this transaction, including, but not limited to the fees and expenses of
counsel. Notwithstanding the
60
foregoing, LESSOR and LESSEE shall each be responsible for one-half of the fees
and expenses of FAA counsel.
SECTION 22
SUBLEASE; ASSIGNMENT
(A) LESSEE may sublease the Aircraft to any Air Carrier provided that
(i) such Air Carrier at the time of such subleasing is solvent and is not in
receivership or subject to the jurisdiction of any bankruptcy court, (ii) that
LESSOR and Lender have consented to such subleasing, such consent not to be
unreasonably withheld, and (iii) that LESSOR's title in and to the Aircraft and
the security interest of Lender in and to the Aircraft and this Lease remain
fully perfected and protected and LESSOR and its Lender receive satisfactory
legal opinions with respect thereto. LESSEE shall be responsible for all
reasonable costs and expenses incurred by LESSOR and Lender in connection with
any subleasing of the Aircraft, including, but not limited to, the reasonable
fees and expenses of counsel to LESSOR.
(B) Any sublease consented to by LESS0R shall contain, among other
things, the following terms and conditions:
(1) That such sublease is subject to and
subordinate to this Lease;
(2) The sublease shall not relieve the LESSEE of its obligations
under this Lease and the LESSEE shall continue to be primarily liable
hereunder;
(3) The terms of such sublease shall be no less favorable to the
lessor thereunder than the terms of this Lease; and
(4) The rights of the lessor in any Sublease (including, but not
limited to security deposits and maintenance reserves payable thereunder) shall
be assigned to LESSOR and/or its Lender.
(C) All of LESSEE's obligations hereunder may be performed by any
approved sublessee, provided however that the LESSEE shall not be released from
its obligations hereunder.
(D) Nothing set forth in this Section 22 shall constitute, or be deemed
to constitute, a consent by LESSOR to the assignment by LESSEE, in whole or in
part, of this Lease or the rights and obligations of LESSEE thereunder. Any
assignment or purported assignment, in whole or in part of this Lease or the
rights and obligations of LESSEE hereunder shall be null and void and of no
force and effect unless the prior written consent of LESSOR and Lender to such
assignment had been obtained.
SECTION 23
61
EXCUSABLE DELAY
LESSOR or LESSEE shall not be responsible for, nor be deemed to be in
default under this Lease on account of any delay in delivery of the Aircraft or
commencement of this Lease due to any of the following causes:
(a) acts of God; war, war-like operations, insurrections or riots;
fires, floods, explosions, earthquakes or serious accidents; epidemics or
quarantine restrictions; any act of government, governmental priorities,
allocation regulations or orders affecting materials, facilities or completed
aircraft; strikes or labor troubles causing cessation, slowdown or interruption
of work; or inability after due and timely diligence to procure materials,
accessories or equipment prior to delivery (including, without limitation, the
Aircraft);
(b) damage to the Aircraft which can reasonably be repaired,
provided Lufthansa or its agent will promptly perform such repair work;
(c) Lufthansa's delay in delivery of the Aircraft to LESSOR for
whatever reason, including, but not limited to, delay caused by an aircraft
manufacturer's failure to deliver a replacement aircraft on time; or
(d) correction of discrepancies evidenced during the Delivery
Check, ground inspection or demonstration flight of the Aircraft, provided
Lufthansa is promptly and diligently correcting same.
Should an excusable delay continue beyond December , 1996, LESSOR
and LESSEE shall each have the right to terminate this Lease, without
liability or further obligation to the other (other than the return of the
Security Deposit by LESSOR to LESSEE); provided, however, that any time after
the sixtieth day if a rescheduled Delivery Date has been established and the
Lease has not theretofore been terminated, neither LESSOR nor LESSEE shall
have any right to terminate the Lease during the fifteen (15) day period
preceding the rescheduled Delivery Date.
SECTION 24
ENTIRE AGREEMENT
This Lease (including all Exhibits hereto) embodies the entire
agreement and understanding between LESSOR and LESSEE relating to the subject
matter hereof and supersedes all prior agreements and understandings relating
hereto and neither of the parties hereto shall be bound by or charged with
any oral or written agreements, representations, warranties, statements,
promises or understandings not specifically set forth herein. This
62
Lease may not be changed and no right granted or obligation imposed hereunder
may be waived orally, but only by an instrument in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
63
IN WITNESS WHEREOF, LESSOR and LESSEE, each pursuant to due corporate
authority, have caused this Lease to be executed by their duly authorized
officers as of the day and year first above written.
LESSOR: LESSEE:
FIRST SECURITY BANK, N.A., ALOHA AIRLINES, INC.
A NATIONAL BANKING ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
By: [SIGNATURE] By:
________________________________ ________________________________
Title: VICE PRESIDENT Title:
____________________________ _____________________________
By: _________________________________
Title: ______________________________
63
IN WITNESS WHEREOF, LESSOR and LESSEE, each pursuant to due corporate
authority, have caused this Lease to be executed by their duly authorized
officers as of the day and year first above WRITTEN.
LESSOR: LESSEE:
FIRST SECURITY BANK, N.A., ALOHA AIRLINES, INC.
A NATIONAL BANKING ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
By: __________________________________ By: [SIGNATURE]
_________________________________
Title: _______________________________ Title: SR. VICE PRESIDENT FINANCE &
PLANNING AND CFO
______________________________
By: [SIGNATURE]
_________________________________
Title: STAFF VICE PRESIDENT - FINANCE
& CONTROLLER
______________________________
64
EXHIBIT "A" (Page 1 of 2)
AIRCRAFT SPECIFICATIONS
Model: Boeing 737-230 Max. Taxi Wt. 120,000 lbs.
Serial No. 22117 Max. Gross T.O. Wt. 119,500 lbs.
Line No. 790 Max. Landing Wt. 103,000 lbs.
Reg. No. N818AL Max. Zero Fuel Wt. 95,000 lbs.
Date of Mfgr. September, 1980
Optrs. Empty Wt. 68,000 lbs.
Payload 27,000 lbs.
AIRFRAME STATUS
Time as of Maintenance Program
Total Hours
Total Cycles
Time Since Overhaul
Time Since Last C Ck "D" Check -
Time to Next Overhaul "C" Check -
ENGINE STATUS
Model # Serial # REMAINING Limiter
------- -------- --------- -------
1. Xxxxx & Xxxxxxx 708305 ________ hrs/ ________ cyc
JT8D-15
2. Xxxxx & Whitney 708373 ________ hrs/ cyc
JT8D-15
APU
LANDING GEAR - TIME REMAINING
R/H MLG hrs Nose Gear hrs
L/H MLG hrs L/G TBO hrs
GENERAL DATA AND COMMENTS
Fuel Capacity/lbs 34,469 lbs FAR Part 00 Xxxxxx Xxx 0
Interior Configuration 103YC
4 Galleys
3 Lavs
1 Closet
65
EXHIBIT "A" (Page 2 of 2)
AVIONICS INVENTORY
66
EXHIBIT "B" (Page 1 of 2)
AIRCRAFT DOCUMENTATION
On the Effective Date, LESSOR shall deliver to LESSEE the Aircraft
Documentation listed below. All reports and computer documentation produced by
Lufthansa shall be certified by Lufthansa or Lufthansa Technik.
A. The following manuals shall be delivered with the Aircraft. Each manual
shall be current and include all temporary revisions. Each manual shall be in
the English language.
1. FAA-Approved Airplane Flight Manual.
2. Weight and Balance Control and Cargo Loading Manual and Supplements
(load and trim sheet). Include last weigh paperwork and delivery equipment list
with previous operator running W & B computation sheets.
3. Operations Manual and Quick Reference Handbook. Including Cabin
Safety/F/A Manual (PAX A/C).
4. Structural Repair Manual.
5. Aircraft/Engine/APU Maintenance Manual.
6. Boeing Component Overhaul Manuals, including Galley Manuals
(CMM,IPC,OHM).
7. Aircraft/Engine/APU Illustrated Parts Catalog (I.P.C.) (Operator
Customized)
8. Wiring Diagram Manual including the following:
a. Equipment List.
b. Standard Practices (Chapter 20).
c. Charts and Graphs (Chapter 91).
d. Hook Up Charts.
e. Splice List.
f. Ground List.
g. Terminal List.
9. Engine and APU Overhaul Manuals.
10. Current and revised Lufthansa Maintenance Schedule and (COSL)
component, operating and storage limits manual.
67
B. Airworthiness Directives Documentation: The following data will be
provided on the Effective Date. LESSOR shall provide to LESSEE all records
associated with A.D. compliance.
1. A single, complete and current A.D. status list of the airframe,
appliances, Engine and APU Airworthiness Directive applicable to the Aircraft,
appliances, Engine and APU. This list shall be consistent with the preliminary
AD status reports received during the initial inspection. The list shall be
typed, certified and signed by authorized quality assurance representative of
Lufthansa.
2. LESSOR will provide legible copies of the completion documentation
that accomplish each AD. If the AD is a repetitive inspection documentation,
the last accomplishment is sufficient. If the original completion documents are
not available, LESSOR shall provide at a minimum a copy of the job card or
engineering order that accomplished the AD plus a certification letter signed
by Lufthansa's airworthiness department stating that the AD in question was
accomplished at a certain time and cycles, date and reference all pertinent
support documentation (ie. engineering order, alternate means of compliance,
etc.).
However, any AD that was complied with by an alternate means of
compliance must have all original documentation and necessary air authority
approvals.
3. Exemptions or deviations granted by the FAA (or equivalent) to
Lufthansa on A.D. compliance, including copy of exemption request.
C. Engineering Documentation
1. LESSOR shall provide a single, current list, in the English
language (except for the ADA list referenced in b. below) of engineering
documentation covering the aircraft as listed below:
a. Service Bulletin status based on the Boeing provided
summary of all Boeing service bulletins to the aircraft and consistent with the
"reference only" status report provided during the initial inspection.
b. List of all Lufthansa initiated on aircraft modifications
consistent with the ADA list covering all Spec 100 ATA chapters. A current copy
of all engineering orders listed on the ADA list shall be provided with
appropriate certification stamp on the ADA list.
c. Major repairs list.
d. Supplemental Type Certificate list.
2. Data package covering all non-manufacturer/non-FAA-approved repairs
or alterations, including the submittal to the LBA for an approval, if
applicable.
68
D. Additional Documentation
1. Master Minimum Equipment List and Configuration Deviation List.
2. Set of cockpit drawings (full scale preferably).
3. Quarterly Reliability Reports for one (1) year.
4. Location map of emergency equipment, with description.
5. Interior configuration drawings.
6. LBA Export Certificate of Airworthiness.
7. Evidence of de-registration.
8. Passenger/Cargo Equipment List (seats, galleys, lavs,
entertainment, etc.).
9. Complete paperwork for last "D" check overhaul and last "A", "B",
and/or "C" check inspections.
10. Compass card and F.D.R. calibration documentation.
11. Copies of Aircraft registration and Certificate of Airworthiness.
12. All Life records (Lufthansa - Lebenslaufkarte) for the assemblies
and rotable parts installed during the last overhaul for each nose, left hand
and right hand main landing gears.
E. Individual Aircraft and Engine Records:
1. Letter of Declaration for each major aircraft/engine accident or
major incident which shall include complete documentation reports, if any.
2. Major structural damage reports, if any.
3. Engine trend monitoring data (1 year minimum provided the engine
was operated with Lufthansa) for each engine installed on the aircraft.
4. Copies of logbook entries for the last twelve (12) months of
operation (at delivery).
5. List of open items, watch items, deferred items.
6. Serviceable/Overhaul tags for all life limited parts, hard time
components listed in the rotable components list. The LESSOR and LESSEE agree
that all serviceable overhaul tags for OC (on condition)/CM (condition
monitored) parts listed in the rotable components list for the last 12 months
as at delivery shall
69
be provided to LESSEE by LESSOR on a case by case basis (up to a maximum of one
(1) year after aircraft delivery).
7. Listing of Aircraft, Engine and APU components status by P/N - S/N
- Description Position TBO - TSI - TSO - TSN, Total Time, next Due Time,
including interpretation keys. (Rotable Component List).
8. Engine and APU Logbooks or equivalent reports or documentation.
9. Aircraft and Engine time status at delivery with Serial No. - total
time/total cycles - and times of the last letter check inspection.
10. Engine time report and engine on log which shall include ASB 6038
status for each engine.
11. All Engine and APU records, for the last heavy maintenance shop
visit including back to birth history for each engine life limited part.
Exceptions will be acceptable for parts introduced to Lufthansa before 1993
when back to birth history records was not mandatory; however, LESSOR shall use
its reasonable efforts to assist LESSEE in obtaining full traceability on these
parts, if any.
12. Manufacturer's delivery documents for Engines.
13. Boeing Electrical Load Analysis documents and data.
14. Last power plant test cell run documents for Engines and APU.
15. Documents for boroscope inspection prior to delivery for current
installation for engines (as stated in the Agreement).
16. Letter certifying that at the time of delivery of the aircraft the
aircraft is a non-SSID candidate aircraft.
17. Operator's Corrosion Control Program. (see Maintenance Schedule)
18. Aircraft Readiness Log (manufacturer's).
19. Copies of all applicable Master Changes (M.C.) performed on each
aircraft.
20. LBA approvals, Lufthansa certification reports for major
modifications, alterations and repairs which are not covered by manufacturers
service bulletins. For minor modifications not covered by manufacturers service
bulletins, Lufthansa shall provide the requested substantiation work. (i.e.
certification reports to the extent required by the LBA).
21. Fire blocking status for all seats, interior fabrics/materials,
including burn test documentation and
70
xxxxxxxxxxxxx.Xx accordance with the LBA for all items introduced by
Lufthansa.
22. Current Aging Aircraft and CPCP Status Report.
23. Current list outlining all waiver items/components not approvable
by the FAA.
24. Any historical records applicable to the aircraft, engines or APU
that may be available at reasonable effort and within reasonable time.
25. List detailing Lufthansa component shop history for all components
on the rotable components list on a case by case basis (up to a maximum of one
(1) year after aircraft delivery).
LESSOR agrees that it will reimburse LESSEE for the cost of translating into
English all engineering orders (including without limitation those described in
Section C of this Exhibit "B") and Airworthiness Directive compliance documents
(including without limitation those described in Section B of this Exhibit "B")
which are delivered to LESSEE in German pursuant to the Lease.
71
EXHIBIT "C" (Page 1 of 2)
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered on and as of the date set
forth below by Aloha Airlines, Inc. (hereinafter referred to as "LESSEE") to
FIRST SECURITY BANK, N.A., a national banking association, not in its
individual capacity but solely as owner trustee, (hereinafter referred to as
"LESSOR") pursuant to that Aircraft Lease Agreement dated as of October __,
1996 between LESSOR and LESSEE (hereinafter referred to as the "Agreement"):
A. DETAILS OF ACCEPTANCE
LESSEE hereby indicates and confirms to LESSOR, its successors and
assigns, that the LESSEE has at o'clock _.M., on this day of _____,
1996, at , accepted the following in accordance with the provisions of
the Agreement:
1. (a) Boeing Model: 737-230
(b) Manufacturer's Serial No.: 22117
(c) U.S. Registration Number: N818AL
Manufacturer and Manufacturer's Hours Cycles
Engine No. Model Number Serial Number Remaining Remaining
--------- ---------------- ------------- --------- ---------
(1) Xxxxx & Xxxxxxx
JT8D-15
(2) Xxxxx & Whitney
JT8D-15
Each of the above-described Engines having 750 or more rated take-off
horsepower or the equivalent thereof.
AIRFRAME
Total Time: hrs.
Total Cycles: Cycles
Time Remaining to "C" Check: hrs.
Time Remaining to "D" Check: hrs.
72
EXHIBIT "C" (Page 2 of 2)
B. CONFIRMATION OF UNDERTAKINGS
LESSEE confirms that the above described Aircraft and Engines have
been examined by its duly appointed and authorized representative(s), that such
Aircraft and Engines conform to the information set forth above, that there
have been fixed to the Aircraft the markings required by the Agreement (or that
such markings shall be affixed to the Aircraft within fifteen (15) days of the
date hereof). LESSEE confirms and acknowledges that the date set forth above
constitutes the Effective Date, as such term is defined in the Agreement, and
that LESSEE's execution and delivery of this Certificate represents LESSEE's
acceptance of the above described Aircraft and Engines for all purposes of the
Agreement.
IN WITNESS WHEREOF, LESSEE has caused this Certificate of Acceptance to
be executed in its name, by its duly authorized officer(s) or
representative(s), pursuant to due corporate authority, all as of the date
written in Section A above.
LESSEE: ALOHA AIRLINES, INC.
By: ___________________________
Title: ________________________
Date: _________________________
73
EXHIBIT "D"
LEASE SUPPLEMENT NO.
LEASE SUPPLEMENT NO. __ , dated ____________. 1996, between ALOHA
AIRLINES, INC., a Hawaiian corporation ("LESSEE") and FIRST SECURITY BANK,
N.A., a national banking association, not in its individual capacity but
solely as owner trustee ("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain Aircraft
Lease Agreement dated as of October __, 1996 (herein called the "Lease
Agreement" and the defined terms therein being hereinafter used with the same
meaning). The Lease Agreement provides for the execution and delivery from time
to time of Lease Supplements, each substantially in the form hereof, for the
purpose of leasing the Aircraft under the Lease Agreement as and when delivered
to the LESSEE in accordance with the terms thereof.
*The Lease Agreement relates to the aircraft and engines described
below, and a counterpart of the Lease Agreement is attached hereto and made a
part hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the FAA as one document.
**The Lease Agreement relates to the aircraft and engines described
below, and a counterpart of the Lease Agreement, attached to and made a part
of Lease Supplement No. 1 dated _____________ to the Lease Agreement, has
been recorded by the FAA on _____________, 199__ as one document and assigned
Conveyance No. ________.
NOW THEREFORE, in consideration of the premises and other good,
valuable and sufficient consideration, LESSOR and LESSEE hereby agree as
follows:
---------------
*This language for Lease Supplement No. 1
**This language for other Lease Supplements.
74
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230ADV aircraft (the "Delivered
Aircraft"), which Delivered Aircraft as of the date hereof consists of the
following:
(i) One Boeing Model 737-230 Airframe, bearing U.S. registration
number N_____ ; Manufacturer's serial no._____; and
(ii) Two Xxxxx & Xxxxxxx Model JT8D-9A engines, bearing
manufacturer's serial nos._____ and _____, respectively, (each of which
engines has 750 or more rated takeoff horsepower or the equivalent thereof).
2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
3. The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on _______________, 2003.
4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.
5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each
Engine installed thereon have been accepted by LESSEE for allpurposes hereof
and of the Lease Agreement, as being in the condition that such Delivered
Aircraft and Engines are required to be in pursuant to the terms of the Lease
Agreement.
6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
75
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, N.A., A
NATIONAL BANKING ASSOCIATION, NOT IN
ITS INDIVIDUAL CAPACITY BUT SOLELY
AS OWNER TRUSTEE
By: _________________________________
Title: ______________________________
LESSEE
ALOHA AIRLINES, INC.
By: _________________________________
Title: ______________________________
By: _________________________________
Title: ______________________________
76
EXHIBIT "E"
APPOINTMENT AS ATTORNEY-IN-FACT
Pursuant to the terms of Subsection 19 of the Lease (as hereinafter defined),
ALOHA AIRLINES, INC. ("LESSEE") hereby irrevocably appoints FIRST SECURITY
BANK, N.A., A NATIONAL BANKING ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE ("LESSOR") as its true and lawful
attorney-in-fact, to act in all respects, do such acts and take such actions
as LESSEE could do or authorize itself under the Lease with respect to the
use, operation, maintenance, possession, registration, de-registration and
lease termination of the Boeing 737-230 Aircraft, Serial Number _____, U.S.
Registration No. N_____ (the "Aircraft"), which LESSOR has leased to LESSEE
by Aircraft Lease Agreement dated as of October __, 1996 (the "Lease"). The
appointment is made as part of and in consideration of the leasing of the
Aircraft to LESSEE by LESSOR and shall remain in full force and effect until
the earlier to occur of (i) the date on which all obligations of LESSEE under
the Lease shall be fully discharged or satisfied, or (ii) __________, 2006.
Executed this _____ day of October, 1996.
ALOHA AIRLINES, INC.
By: _________________________________
Title: ______________________________
By: _________________________________
Title: ______________________________
Attested by:
_____________________________________
(PLACE CORPORATE Secretary
SEAL HERE)
77
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of _______________, 199_, before me personally came
____________________, to me known, who, being by me duly sworn, did depose
and say that he resides at ____________________; that he is the
____________________ of ____________________, the corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
_____________________________________
Notary Public
[Seal]
78
EXHIBIT "F"
On the Effective Date for the Aircraft, LESSOR shall deliver and LESSEE shall
accept the Aircraft in an "as is, where is and with all faults" condition
other than the following conditions to which the Aircraft shall conform:
(i) be clean to the standards of Lufthansa;
(ii) be in a condition permitting commercial revenue service under
the applicable operating regulations of the German Airworthiness Authority
("LBA");
(iii) comply with all airworthiness directives issued by the LBA
and FAA prior to the Effective Date of the Aircraft which requires compliance
on or before the Effective Date;
(iv) have a valid airworthiness certificate for export, certifying
compliance with the airworthiness requirements of the Federal Republic of
Germany, issued by the LBA prior to the delivery of the Aircraft;
(v) be in a normal operating condition with all the Aircraft
equipment, components and systems functioning in accordance with their intended
use;
(vi) be in a configuration as normally flown by Lufthansa in
scheduled airline revenue service with regard to the fixed installed equipment;
(vii) except for minor items such as emergency equipment, loose
equipment, electrical and electronic equipment, LESSOR. will use its reasonable
efforts to deliver the Aircraft equipment without Lufthansa's special markings;
(viii) have accomplished all maintenance items except items
permitted to be deferred in accordance with Lufthansa's procedure for deferred
items until the next IL2 or D2 check;
(ix) neutral livery with all of Lufthansa's special exterior
markings removed or painted over;
(x) have installed two Xxxxx & Whitney JT8D-15 engines. LESSOR
shall use its reasonable efforts to deliver each engine with not less than
1,500 engine cycles of remaining life until the next scheduled engine removal,
but in no event shall any engine be delivered with less than 1,500 cycles
remaining. Each Engine to be delivered hereunder shall be subject to LESSEE's
reasonable approval;
(xi) have undergone a borescope inspection on the engines (at
LESSEE's sole cost and expense). In the event the borescope inspection
indicates a discrepancy that is outside the
79
limits set under the manufacturer's maintenance manual for the engine, same
shall be corrected at LESSOR's cost and expense or LESSOR may provide a
substitute engine which shall meet the delivery conditions for an engine set
forth herein;
(xii) have undergone a power assurance run with LESSEE's
representatives present to ensure performance of the engines based on the Xxxxx
& Xxxxxxx maintenance manual;
(xiii) have performed a demonstration flight of the airframe in
accordance with Lufthansa's procedures with up to two representatives of LESSEE
on board the Aircraft during such flight. Any discrepancies in the airframe
found during such demonstration flight which are outside the limits set forth
in Lufthansa's maintenance program found during such demonstration flight shall
be corrected accordingly;
(xiv) be certified for a maximum taxi gross weight of
120,000lbs.;
(xv) have reconfigured the cockpit switches into the Boeing
standard;
(xvi) have installed an APU in serviceable condition;
(xvii) have all gauges converted from the metric system to
the imperial system; and
(xviii) except with respect to the engines, landing gear and APU,
have installed hard time components with an average of fifty percent (50%)
minimum time of remaining life as defined under Lufthansa's LBA approved
maintenance program with no single component having less than three months of
remaining life as defined under such program.
80
EXHIBIT "G"
LEASE IDENTIFICATION
OWNER: FIRST SECURITY BANK, N.A., A NATIONAL BANKING
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT
SOLELY AS OWNER TRUSTEE
LESSEE: ALOHA AIRLINES, INC.
MORTGAGEE: FINOVA CAPITAL CORPORATION
81
EXHIBIT "H"
RETURN CONDITIONS
A. The Aircraft will be redelivered in accordance with Section 17 of the
Lease and shall be in the following condition:
(i) be clean to the standards of major international
airlines;
(ii) be in a condition permitting commercial revenue service under
the applicable operating regulations of the Federal Aviation Administration
("FAA");
(iii) comply with all airworthiness directives issued by the FAA
prior to the Return Occasion of the Aircraft which requires compliance on or
before the originally scheduled Return Occasion;
(iv) have a valid U.S. Standard Airworthiness Certificate or a
valid Airworthiness Certificate for Export, as LESSOR shall elect, certifying
compliance with the airworthiness requirements of the United States, issued by
the FAA prior to the return of the Aircraft;
(v) be in a normal operating condition with all the Aircraft
equipment, components and systems functioning in accordance with their intended
use;
(vi) be in the same configuration as at delivery with
regard to the fixed installed equipment;
(vii) except for minor items such as emergency equipment, loose
equipment, electrical and electronic equipment, LESSEE will use its reasonable
efforts to deliver the Aircraft equipment without LESSEE's special markings;
(viii) have accomplished all maintenance items (including, but not
limited to having fully accomplished all required corrossion prevention
controls, treatments, repairs and inspections in accordance with LESSEE's FAA
approved CPCP program) except items permitted to be deferred in accordance with
LESSEE's procedure for deferred items until the next D check;
(ix) The Airframe shall be returned fresh from a B check performed
in accordance with LESSEE's Maintenance Program. Further, the Airframe shall
have an equal or greater amount of time remaining as when delivered to the next
scheduled D check, but with respect to the D check shall in all events have not
less than 3,000 flight hours remaining (as determined under LESSEE's
maintenance program) to the next scheduled D check. In the event that the
Aircraft has more or less time remaining to the next D check than it had
remaining on the Effective Date, D Check Compensation shall be paid in
accordance with the following formula and paid by the
82
relevant party in relation to any difference. If the D Check Compensation, as
calculated below, is a positive number, then, so long as no Default or Event of
Default has occurred and is continuing, LESSOR will pay to LESSEE such D Check
Compensation. If the D Check Compensation, as calculated below is a negative
number, then LESSEE will pay to LESSOR such D Check Compensation.
(a) D CHECK COMPENSATION. The "D Check Compensation" shall
be calculated as follows:
[Al-A2/B] x C
"Al" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) remaining on the
Aircraft until the next scheduled D check in accordance with LESSEE's FAA
approved maintenance program as of the Return Occasion.
"A2" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) remaining on the
Aircraft until the next scheduled D check in accordance with LESSEE's FAA
approved maintenance program as of the Effective Date.
"B" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) between scheduled D
checks in accordance with LESSEE's FAA approved maintenance program.
"C" is the cost for the next D check of the
Aircraft in accordance with LESSEE's FAA approved maintenance program as
mutually agreed to by LESSOR and LESSEE (in the event that after a reasonable
period of time LESSOR and LESSEE cannot reach a mutual agreement on the cost
for the next D check, such cost will be established by taking the average of
the price quotes submitted by two (2) reputable FAA approved Airframe
overhaul facilities, one selected by LESSEE and the other selected by LESSOR).
Notwithstanding the foregoing, for the purposes of the calculation of D Check
compensation, "Al" shall not exceed 15,000 Flight Hours.
(x) neutral livery with all of LESSEE's special exterior markings
removed or painted over;
(xi) have installed two Xxxxx & Xxxxxxx JT8D-9A engines. LESSEE
shall use its reasonable efforts to deliver each engine with not less than
7,689 engine cycles of remaining life until the next scheduled engine
removal, but in no event shall any engine be delivered with less than 3,000
cycles remaining. In the event that any Engine has more or less time
remaining to the next scheduled overhaul or hot section inspection (as
determined in accordance with LESSEE's FAA approved maintenance program) than
it had remaining on the Effective Date, Engine Adjustment Compensation for
each such Engine shall be paid in accordance with the following formula and
paid by the relevant party in relation to any
83
difference. If any Engine is returned with a greater number of Cycles to the
next scheduled overhaul or hot section inspection than it had remaining on the
Effective Date, then LESSOR shall pay Engine Adjustment Compensation to LESSEE
on account of such Engine. If any Engine is returned with fewer Cycles to the
next scheduled overhaul or hot section inspection than it had remaining on the
Effective Date, then LESSEE shall pay Engine Adjustment Compensation to LESSOR
on account of such Engine.
[A/B] x C
"A" is the average cost for an engine overhaul or
hot section inspection, as mutually agreed to by LESSOR and LESSEE (in the
event that after a reasonable period of time LESSOR and LESSEE cannot reach a
mutual agreement on the cost for the engine overhaul or hot section
inspection, such cost will be established by taking the average of the price
quotes submitted by two (2) reputable FAA approved engine overhaul
facilities, one selected by LESSEE and the other selected by LESSOR).
"B" is 7,000
"C" is the difference between the number of Cycles
remaining to the next overhaul or hot section inspection (whichever is the
most limiting factor) on the Engine as of the Effective Date as determined
under the Engine Manufacturer's maintenance manual and the number of Cycles
remaining to the next overhaul or hot section inspection (whichever is most
limiting factor) on the Engine as of the Return Occasion as determined under
LESSEE's FAA approved maintenance program.
Notwithstanding the foregoing, LESSOR shall have no obligation to compensate
LESSEE for any time to the next scheduled engine overhaul or hot section
inspection in excess of 7,000 Cycles.
(xii) have undergone a borescope inspection on the engines (at
LESSOR's sole cost and expense). In the event the borescope inspection
indicates a discrepancy that is outside the limits set under the manufacturer's
maintenance manual for the engine, same shall be corrected at LESSEE's cost and
expense or LESSEE may provide a substitute engine which shall meet the return
conditions for an engine set forth herein;
(xiii) have undergone a power assurance run with LESSOR's
representatives present to ensure, performance of the engines based on the
Xxxxx & Xxxxxxx maintenance manual;
(xiv) have performed a demonstration flight of the Aircraft in
accordance with LESSEE's procedures with up to two representatives of LESSOR on
board the Aircraft during such flight. Any discrepancies in the Aircraft found
during such demonstration flight which are outside the limits set forth in
LESSEE's maintenance program found during such demonstration flight shall be
corrected accordingly;
(xv) be certified for a maximum taxi gross
weight of 120,000lbs.;
84
(xvi) have installed an APU in serviceable condition;
(xvii) have all gauges converted from the imperial system
to the metric system upon LESSOR's request;
(xviii) except with respect to the engines, landing gear and
APU, have installed hard time components with an average of fifty percent
(50%) minimum time of remaining life as defined under LESSEE's FAA approved
maintenance program with no single component having less than three months of
remaining life as defined under such program; and
(xix) in the event that during the Base Term the Aircraft was
hushkitted to meet Stage III noise regulations, LESSEE shall return the
Aircraft with such hushkits so installed so as to be compliance with such
regulations (except in the case where the hushkitting of the Aircraft was
accomplished in the last twelve months of the Base Term and LESSEE has
elected not to extend the term of the Lease but has instead elected to retain
title to the hushkits).
DUPLICATE ORIGINAL
LEASE SUPPLEMENT NO. 1
LEASE SUPPLEMENT NO. 1, dated October 9, 1996, between ALOHA AIRLINES,
INC., a Hawaii corporation ("LESSEE") and FIRST SECURITY BANK, N.A., a national
banking association, not in its individual capacity but solely as owner trustee
("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain Aircraft
Lease Agreement dated as of October 9, 1996 (herein called the "Lease
Agreement" and the defined terms therein being hereinafter used with the same
meaning). The Lease Agreement provides for the execution and delivery from time
to time of Lease Supplements, each substantially in the form hereof, for the
purpose of leasing the Aircraft under the Lease Agreement as and when
delivered to the LESSEE in accordance with the terms thereof.
The Lease Agreement relates to the aircraft and engines described
below, and a counterpart of the Lease Agreement is attached hereto and made a
part hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the FAA as one document.
NOW THEREFORE, in consideration of the premises and other good,
valuable and sufficient consideration, LESSOR and LESSEE hereby agree as
follows:
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230 aircraft (the "Delivered Aircraft"),
which Delivered Aircraft as of the date hereof consists of the following:
(i) One Boeing Model 737-230 Airframe, bearing U.S. registration
number N818AL; Manufacturer's serial no.22117; and
(ii) Two Xxxxx & Xxxxxxx Model JT8D-15 engines, bearing manufacturer's
serial nos.708305 and 708373, respectively, (each of which engines has 750 or
more rated takeoff horsepower or the equivalent thereof).
2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
3. The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on October 8, 2003.
4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.
5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each Engine
installed thereon have been accepted by LESSEE for all purposes hereof and of
the Lease Agreement, as being in the condition that such Delivered Aircraft and
Engines are required to be in pursuant to the terms of the Lease Agreement.
6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
(balance of page intentionally left blank)
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, N.A., A
NATIONAL BANKING ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
By: [SIGNATURE]
__________________________
Title: VICE PRESIDENT
_______________________
LESSEE
ALOHA AIRLINES, INC.
By: __________________________
Title: _______________________
By: __________________________
Title: _______________________
3
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
TO BE DULY EXECUTED AS of the day and year first above written.
LESSOR
FIRST SECURITY BANK, N.A., A
NATIONAL BANKING ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
By: _________________________________
Title: ______________________________
LESSEE
ALOHA AIRLINES, INC.
By: [SIGNATURE]
_________________________________
Title: SR. VICE PRESIDENT FINANCE &
PLANNING & CFO
______________________________
By: [SIGNATURE]
_________________________________
Title: STAFF VICE PRESIDENT - FINANCE
& CONTROLLER
3
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered on and as of the date set forth
below by Aloha Airlines, Inc. (hereinafter referred to as "LESSEE") to FIRST
SECURITY BANK, N.A., a national banking association, not in its individual
capacity but solely as owner trustee, (hereinafter referred to as "LESSOR")
pursuant to that Aircraft Lease Agreement dated as of 10-9, 1996 between
LESSOR and LESSEE (hereinafter referred to as the "Agreement"):
A. DETAILS OF ACCEPTANCE
LESSEE hereby indicates and confirms to LESSOR, its successors and
assigns, that the LESSEE has at 9.50 clock A.m., COT on this 9th day,
October, 1996 at Berlin, Germany, accepted the following in
accordance with the provisions of the Agreement:
1. (a) Boeing Model 737-230 Aircraft
(b) Manufacturer's Serial No. 22117
(c) U.S. Registration No. N818AL
2. Engines:
Eng. Manufacturer Hours Cycles
No. and Model No. MSN Remaining Remaining
--- --------------- --- --------- ---------
(1) Xxxxx & Whitney
JT8D-15 708305 29288 28216
(2) Xxxxx & Xxxxxxx
JT8D-15 708373 29007 26819
Each of the above-described Engines having 750 or more
rated take-off horsepower or the equivalent thereof.
3. Airframe:
(a) Total Time: 36589.58 hrs.
(b) Total Cycles: 36078 Cycles
(c) Time Remaining to "C" Check: 12-23-97
(d) Time Remaining to "D" Check: Nov. 2000
or 47993 hours
or 51420 hours, or
which ever comes first
B. CONFIRMATION OF UNDERTAKINGS
LESSEE confirms that the above described Aircraft and Engines have been
examined by its duly appointed and authorized representative(s), that
such Aircraft and Engines conform to the information set forth above,
that there have been fixed to the Aircraft the markings required by the
Agreement (or that such markings shall be affixed to the Aircraft within
fifteen (15) days of the date hereof). LESSEE confirms and acknowledges
that the date set forth above constitutes the Effective Date, as such
term is defined in the Agreement, and that LESSEE's execution and
delivery of this Certificate represents LESSEE's acceptance of the above
described Aircraft and Engines for all purposes of the Agreement.
IN WITNESS WHEREOF, LESSEE has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s), or representative(s),
pursuant to due corporate authority, all as of the date written in Section A
above.
LESSEE: ALOHA AIRLINES, INC.
By /s/ /ILLEGIBLE/
--------------------------------
Its SR. VICE PRESIDENT FINANCE &
PLANNING AND CFO
By /s/ /ILLEGIBLE/
-----------------------------------
Its STAFF VICE PRESIDENT - FINANCE
& CONTROLLER
2
FIRST PRIORITY PURCHASE MONEY AIRCRAFT CHATTEL
MORTGAGE AND SECURITY AGREEMENT
(N818AL)
THIS FIRST PRIORITY PURCHASE MONEY AIRCRAFT CHATTEL MORTGAGE AND SECURITY
AGREEMENT ("Agreement"), dated as of October 9, 1996, by and between FIIRST
SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but
solely as Owner Trustee ("Borrower"), as mortgagor, and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("Lender"), as mortgagee,
W I T N E S S E T H:
WHEREAS, Borrower and Diamond Head Associates LLC, a Delaware limited
liability company ("Diamond Head") have entered into a Secured Loan Agreement
dated as of August 13, 1996 (hereinafter the "Loan Agreement") with Lender,
which provides for the making of the "Loan" (as defined in the Loan
Agreement) by Lender on behalf of Borrower and Diamond Head; and
WHEREAS, it is a condition to the effectiveness of the Loan Agreement
that Borrower execute and deliver this Agreement for the purposes, among
other things, of securing payment and performance of the "Obligations" (as
defined in the Loan Agreement), and for the purpose of subjecting the
properties and assets hereinafter described to the lien of this Agreement;
NOW, THEREFORE, in consideration of Lender's execution and delivery of
the Loan Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, Borrower and Lender hereby agree as follows:
I. DEFINITIONS.
1.1 GENERAL DEFINITIONS. Capitalized terms defined in the text of this
Agreement shall have the meanings so ascribed to them, and the following
terms shall have the following meanings, unless the context otherwise
requires:
"AGREEMENT" shall mean this agreement as from time to time amended and
supplemented in accordance with the terms hereof, including, without
limitation, all Supplemental Agreements executed by Borrower in
accordance with the terms hereof.
"AIRCRAFT" shall mean, collectively, the Airframe and
Engines.
"ASSIGNMENT OF LEASE" shall MEAN the Assignment of Lease of even date
herewith by and between Borrower and Lender.
This counterpart is attached to the FAA.
"AIRFRAME" shall have the meaning ascribed to such term in Section
2.1 hereof.
"BANKING DAY" shall mean a day on which national banks in Phoenix,
Arizona are open for the transaction of business.
"CLOSING DATE" shall mean October 9, 1996.
"DEFAULT" shall mean an event which, with The passage of time, or
giving of notice, or both, would constitute an Event of Default.
"ENGINES" shall have the meaning ascribed to such term in Section
2.1 hereof
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in
Section 4.1 hereof.
"EVENT OF LOSS" shall mean, with respect To any item of the
Mortgaged Property or any part thereof: (a) the actual, constructive,
compromised, arranged or agreed total loss thereof; (b) the destruction or
damage beyond repair of such Mortgaged Property or part thereof, or such
Mortgaged Property or part thereof being rendered or becoming permanently
unfit for normal use for any reason whatever; (c) the requisition for title,
confiscation, restraint, detention, forfeiture or any compulsory acquisition
or seizure or requisition for hire of such Mortgaged Property or part thereof
(other than a requisition for hire for a temporary period not exceeding one
hundred and eighty (180) days) by or under the order of any Government
(whether civil, military or DE FACTO) or public or local authority; or (d)
the high-jacking, theft or disappearance, resulting in loss of possession by
Borrower for a period of thirty (30) consecutive days or longer, of such
Mortgaged Property or part thereof. Notwithstanding the foregoing, so long as
the Lease shall be in effect, an "Event of Loss" under this Agreement shall
be deemed to have occurred with respect to the Mortgaged Property, or any
portion thereof, if an "Event of Loss" as defined in the Lease (as in effect
on the Closing Date or as amended, provided such amendment is consented to by
Lender) has occurred with respect to such Mortgaged Property or portion
thereof.
"EXCLUDED AMOUNTS" shall mean (a) proceeds, of public liability
insurance in respect of the Mortgaged Property payable as a result of
insurance claims made, or losses suffered, by Borrower, any affiliate of
Borrower or any director, officer, employee, representative or agent of
Borrower or any such affiliate to the extent That such insurance claims made,
or losses suffered, do not apply to Lender, as assignee of Borrower, or to
the Mortgaged Property, (b) proceeds of insurance
-2-
which is maintained with respect to the Mortgaged Property by Borrower or any
such affiliate and which insurance is not required under the Loan Documents,
(c) any interest paid or payable on any amounts described in clauses (a) or
(b) of this definition, (d) the proceeds from the enforcement of the payment
of any amount described in clauses (a) through (c) of this definition, and
(e) any amount payable by Lessee to Borrower pursuant to the indemnity
provisions of the Lease (except to the extent that such payment relates to
claims or damages suffered by or asserted against Lender or the Mortgaged
Property).
"FEDERAL AVIATION ACT" shall mean the Federal Aviation Act of 1958,
as amended and recodified, and the rules and regulations promulgated
thereunder, as codified in Title 49, United States Code, as in effect on the
date of this Agreement, and as modified or amended hereafter or any successor
or substituted legislation at the time in effect and applicable.
"FAA" shall mean the Federal Aviation Administration provided for
in the Department of Transportation Act of 1966, as in effect on the date of
this Agreement and as modified or amended hereafter, or any successor or
substituted governmental authority at the time having jurisdiction over the
Mortgaged Property.
"GOVERNMENT" shall mean any governmental body, or a political
subdivision thereof
"LEASE" shall mean the
Aircraft Lease Agreement of even date herewith
by and between Borrower, as lessor, and Aloha Airlines, Inc., a Hawaii
corporation, as lessee, with respect to the Aircraft.
"LENDER" shall mean, collectively, Lender and each subsequent holder
of any interest in the Notes, or either of them, and each of their respective
successors and assigns.
"LIEN" shall mean any mortgage, pledge, lien, charge, encumbrance,
option, security interest or lease (including any conditional sale agreement,
equipment trust agreement, or other title retention agreement) or right or
claim of any person, whether voluntary or involuntary in nature.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Loan
Agreement, the Note, the Other Note, and all other documents executed in
connection with any of the foregoing agreements or contemplated thereby or the
transactions related hereto or thereto.
"MORTGAGED PROPERTY" shall have the meaning ascribed to such
term in Section 2.1 hereof.
-3-
"NOTE" shall mean the Promissory Note dated as of even date
herewith, executed and delivered by Borrower, as maker, in favor of Lender,
as holder, in accordance with the terms of the Loan Agreement, in the
original principal amount of $6,800,000.00, which Note is referred to as the
"NXXX Note" under the Loan Agreement and which Note evidenced the "NXXX
Advance" (as defined in the Loan Agreement).
"OBLIGATIONS" shall mean all of the obligations of Borrower and
Diamond Head of payment and PERFORMANCE under this Agreement, the Loan
Agreement, the Note, the Other Note and the other Loan Documents, and the
payment of any sum advanced or subsequently advanced or obligation incurred
pursuant to any provision of this Agreement, the Loan Agreement, the Note,
the Other Note, if any, and the other Loan Documents, which term shall
include, without limitation, all of the "Obligations" as defined in the Loan
Agreement.
"OTHER NOTE" shall mean the Promissory Note, dated August 13, 1996,
executed and delivered by Borrower, as maker, to the order of Lender, as
holder, in accordance with the terms of the Loan Agreement, which Note is
referred to as the "N820 Note" under the Loan Agreement and which Note, if
and when so executed and delivered, will evidence the "N820 Advance" (as
defined in the Loan Agreement).
"OFFICER'S CERTIFICATE" shall mean a certificate signed by an
authorized officer of Borrower and delivered to Lender.
"PERMITTED LIENS" shall mean:
(a) The Lien of the Lease which is applicable to such Aircraft, and
the interest of Lessee in such Aircraft arising pursuant to such Lease;
(b) Liens for Taxes either not yet due or being contested in good
faith by appropriate proceedings, so long as adequate reserves are
maintained with respect to such Liens from and after the date the Taxes,
as to which such Liens relate, became due and so long as the Aircraft is
not in material danger of being lost, sold, confiscated, forfeited or
seized as a result of such Liens;
(c) materialmen's, mechanics', workmen's, repairmen's, employees' or
other like Liens arising in the ordinary course of business of Borrower
and not delinquent for more than sixty (60) days or being contested in
good faith so long as adequate reserves are maintained with respect to
such Liens from and after the date the amounts as to which such Liens
relate became due and so long as the Aircraft is not in material danger of
being lost, sold, confiscated, forfeited or seized as a result of such
Lien;
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(d) Liens arising out of any judgment or award unless the judgment
secured shall not, within sixty (60) days of the entry thereof, have been
discharged or vacated or execution thereof stayed pending appeal or bonded
in a manner satisfactory to Lender, so long as adequate reserves are
maintained with respect to such Liens from and after the date such
judgment or award is entered or made, and so long as the Aircraft is not
in material danger of being lost, sold, confiscated, forfeited or seized
as a result of such Lien; and
(e) the Lien Of the Security Documents and of each other Loan
Document granting a Lien in favor of Lender as security for the payment
and performance of the Obligations.
"SELLER" shall mean Jetz Ventures Inc.
"SUPPLEMENTAL AGREEMENT" shall mean a Supplemental Agreement, in
substantially the form, attached hereto as EXHIBIT A, executed by Borrower
and delivered to Lender and referring to the Supplemental Collateral
described therein.
"SUPPLEMENTAL COLLATERAL" shall have the meaning ascribed to such
term in Section 2.1 hereof.
"TAXES" shall mean all present and future taxes whatever, and
value-added levies, imposts, duties or charges of any nature wherever
imposed, including, without limitation, value added taxes or similar taxes
and any franchise, transfer, sales, use, business, occupation, excise,
personal property, real property, stamp or ocher tax imposed by any national
or local taxing or fiscal authority or agency, together with any penalties,
additions to tax, fines or interest thereon (excluding, however, taxes
imposed upon the income of Lender and taxes in the nature of franchise taxes
which are payable by Lender).
1.2 TERMS DEFINED IN UNIFORM COMMERCIAL CODE. All terms used herein which
are defined in the
Arizona Uniform Commercial Code (the "Code") shall have
the meanings ascribed to such terms in the Code unless the context in which
such terms are used herein indicates otherwise.
1.3 TERMS DEFINED IN ASSIGNMENT OF LEASE. All capitalized terms used in
this Agreement which are defined in the Assignment of Lease shall, unless
otherwise defined herein, have the respective meanings ascribed to such terms
in the Assignment of Lease, the applicable provisions of which Assignment of
Lease are incorporated herein.
1.4 TERMS DEFINED IN FEDERAL AVIATION ACT. The terms "AIRCRAFT ENGINES,"
"APPLIANCES" and "SPARE PARTS" shall have the respective meanings
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ascribed to such terms in the Federal Aviation Act as in effect on the date
of this Agreement.
2. GRANT OF SECURITY INTEREST.
2.1 GRANT OF SECURITY INTEREST. To secure the prompt payment to Lender
of, and discharge and performance of, the obligations, Borrower hereby grants
to Lender a continuing first priority security interest in all of the
following items and types of property and interests in property (except to
the extent that such property or interests in property constitute Excluded
Amounts), whether now owned or existing, hereafter acquired or arising, or in
which Borrower now or hereafter has any rights, and wheresoever located
(collectively, the "Mortgaged Property"):
(a) One (1) airframe, identified as follows:
MANUFACTURER: The Boeing company
MANUFACTURER'S
MODEL NUMBER: 737-230
FAA REGISTRATION
NUMBER: N81SAL
MANUFACTURER'S
SERIAL NUMBER: 22117
together with all appliances, parts, equipment and accessories thereto
belonging, by whomsoever manufactured, now owned by Borrower or hereafter
acquired by Borrower and installed in or appurtenant to said airframe
(collectively, the "Airframe");
(b) Two (2) Xxxxx & Xxxxxxx model number JTD8-15 jet aircraft engines
bearing manufacturer's serial numbers 708305 and 708373, each of the two
engines having 750 or more rated take-off horsepower or the equivalent
thereof, together with all appliances, parts, equipment and accessories
thereto belonging, by whomsoever manufactured, now owned by Borrower or
hereafter acquired by Borrower and installed in or appurtenant to said
engines (any one of the foregoing, an "Engine" and, all of the foregoing,
collectively, the "Engines");
(c) One shipset of Nordam heavyweight Stage III hushkits suitable for
installation in the Engines, as more specifically described in EXHIBIT B
to this Agreement.
(d) any interest of Borrower in any property (collectively, the
"Supplemental Collateral") consisting of: (i) any airframe, appliance,
equip-
-6-
ment, instrument or accessory (including, without limitation, radio and
radar) which is installed in or appurtenant to the Airframe, or (ii) any
engine, having 750 or more rated take-off horsepower or the equivalent
thereof, installed in or appurtenant to the Airframe, or any appliance,
equipment or accessory installed in or appurtenant to any Engine or
installed in or appurtenant to the Airframe, and (iii) any replacement or
substitution for any of the foregoing;
(e) all warranties, service contracts and product agreements of any
manufacturer of, or of any maintenance or overhaul agency with respect
to, the Mortgaged Property, or any subcontractor or supplier or vendor
thereof, and any and all rights of Borrower to compel performance of the
terms of such warranties, service contracts and product agreements in
respect of any of the Mortgaged Properly;
(f) all right, title and interest of Borrower in, to and under the
Warranty Xxxx of Sale of even date herewith between Seller and Borrower
(the "Warranty Xxxx of Sale"), wherein, among other things, Seller has
granted, bargained, sold, conveyed, transferred, and set over and unto
Borrower (and made certain warranties in connection therewith) all of the
Seller's right, title and interest in and to, among other things:
(i) the Aircraft; and
(ii) all rights of Seller with respect to (and only with respect
to) the Aircraft (and specifically excluding, among other things, any
and all rights of Seller in and to any other aircraft or other
equipment), arising under that certain Sales Agreement for B737-200
Advanced Aircraft, dated October 31, 1995 (the "Sales Agreement"),
between Deutsche Lufthansa Aktiengesellschaft ("Lufthansa") and Jetz,
Inc. ("Jetz"), as assigned by Jetz to Seller pursuant to that certain
Assignment, Assumption and Consent Agreement dated as of November 6,
1996 among Jetz, Seller and Lufthansa, as amended by that certain
Amendment No. 1 dated as of August 1, 1996 between Lufthansa and
Seller;
(g) all of Borrower's right, title and interest in, to and under any
lease with respect to all or any portion of the Mortgaged Property, as
may be amended, supplemented or restated (including, without
limitation, the Lease), such right, title and interest including,
without limitation, (i) the right of Borrower to collect all rental
payments, income, proceeds (including, but not limited to, insurance
proceeds), awards, revenues and other sums payable to Borrower
pursuant to any such lease, (ii) all of Borrower's rights under
-7-
Section 1110 of the Bankruptcy Code of the United States or any
subsequently enacted statutes of similar import with respect to or in
connection with such lease, (iii) all right, title and interest of
Borrower to collect, hold and apply all security deposits, maintenance
reserves and similar amounts, as provided pursuant to the terms of any
such lease, and (iv) all rights of Borrower to enforce Borrower's
rights and remedies under any such lease;
(h) all substitutions, replacements, products, proceeds (including,
but not limited to, insurance proceeds) and renewals of, and all
accessions to, the foregoing, and all property which shall hereafter
become physically attached to or incorporated in any of the foregoing,
in each case whether the same are now owned by Borrower or shall
hereafter be acquired by it;
(i) all monies deposited from time to time with Lender pursuant to
this Agreement or any of the other Loan Documents, including, without
limitation, pursuant to Section 2.3 hereof, and
(j) all records, logs, manuals and documents or other materials of
any kind relating to the condition, use, location, maintenance of or
repairs or overhauls to all or any part of the Mortgaged Property.
2.2 SUPPLEMENTAL COLLATERAL; SUPPLEMENTAL SECURITY AGREEMENT. In the
event that Borrower acquires any interest in any Supplemental Collateral,
Borrower shall execute and deliver to Lender a Supplemental Agreement with
respect to such Supplemental Collateral, which Supplemental Collateral shall
be therein designated as an Airframe or an Engine, as appropriate. Upon the
execution and delivery by Borrower of such Supplemental Agreement, (a) the
Airframe and Engines referred to therein shall be subject to the Lien of this
Agreement, and the terms "Airframe" and "Engines" under this Agreement will
be deemed to refer to the Airframe and Engines referred to in each such
Supplemental Agreement, together with the Airframe and the Engines referred
to herein and (b) references herein to "this Agreement" shall be deemed
references to this Agreement as supplemented by all such Supplemental
Agreements then in effect. Without diminishing the obligation of Borrower to
deliver a Supplemental Agreement with respect to Supplemental Collateral,
Borrower and Lender agree that, as between Lender and Borrower (and, to the
extent permitted by applicable law, as between Lender any other party
claiming an interest in Supplemental Collateral), the Lien of Lender shall
extend to and continue in, shall remain perfected with respect to, all
Supplemental Collateral whether or not any Supplemental Agreement is executed
by Borrower with respect to such Supplemental Collateral.
2.3 CASH COLLATERAL. All proceeds of insurance payable with respect to
any part of the Mortgaged Property shall be paid directly to Lender, except
(a) to the
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extent that Lessee is entitled to receive such proceeds pursuant to the
express terms of the Lease or (b) for proceeds of insurance which proceeds
constitute Excluded Amounts, All such proceeds of insurance payable to
Lender, and all money elsewhere herein provided to be held and applied under
this Section, and all money, if any, required to be paid to Lender hereunder,
the disposition of which money is not elsewhere herein otherwise specifically
provided for (all such money being hereinafter referred to as "Cash
Collateral"), shall be held by Lender and applied by Lender from time to time
as provided herein and in the Loan Agreement.
2.4 PROCEEDS OF INSURANCE USED FOR REPAIR. To the extent that any Cash
Collateral is the proceeds of insurance relating to the Mortgaged Property
which is payable to Lender pursuant to Section 2.3, which proceeds of insurance
are payable for reasons other than an Event of Loss, then upon Borrower's
written request to Lender, such proceeds shall be disbursed by Lender for the
following purposes: (a) to reimburse Borrower for, and up to an amount not
exceeding, costs incurred by Borrower for repair and/or restoration, as
required hereunder, of the property damaged, but only following receipt by
Lender of an Officer's Certificate, dated not more than five days prior to
Borrower's request for such disbursement, stating that such costs have been
incurred by Borrower in a specified amount for one or more of the purposes
aforesaid, which shall be briefly described, and also stating that no part of
such costs have been or are then being used in any other previous or then
pending application, as the basis for the withdrawal of any Cash Collateral
from Lender hereunder, or (b) directly to the vendor or contractor who has
provided parts and/or labor to repair or restore the Mortgaged Property as to
which the proceeds of insurance comprising the Cash Collateral were payable;
PROVIDED, however, that, subject to the terms of the Lease, including, but not
limited to, Lessee's right to the use, possession and enjoyment of the
Mortgaged Property, Lender shall have no obligation to make such disbursement
of Cash Collateral if, at the time such disbursement is to be made, a Default
or Event of Default hereunder and under the Lease has occurred and is
continuing (except that, in the case of Defaults (but not Events of Default),
Lender shall make such disbursement if such Default would be cured by the
making of such payment); and further PROVIDED, that disbursements from Cash
Collateral pursuant to this Section shall be subject to reasonable verification
by Lender of the costs for which such disbursement represents payment or
reimbursement.
2.5 CASH COLLATERAL FOLLOWING DEFAULT OR EVENT OF DEFAULT. Following the
occurrence of an Event of Default hereunder and under the Lease, and during
the continuance thereof, Lender may, in its sole discretion (subject to the
terms of the Lease, including, but not limited to, Lessee's right to the use,
possession and enjoyment of the Mortgaged Property): (a) disburse Cash
Collateral in payment for repairs or restoration of mortgaged property,
following Borrower's request for such disbursement; or (b) apply Cash
Collateral to repayment of the Loan.
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2.6 SECURITY FOR OBLIGATIONS. Without limiting the generality of any
other provision of this Agreement, Borrower acknowledges and agrees that the
security interest in the Mortgaged Property pursuant to this Agreement shall
secure payment and performance of the Note and the Other Note, if any,
whether such note is held by Lender or any successor or assign thereof.
3. PARTICULAR COVENANTS OF BORROWER.
Borrower covenants and agrees with Lender, and represents and warrants to
Lender, as follows:
3.1 WARRANTY AND COVENANT OF TITLE. At the time of the execution and
delivery of this instrument, Borrower owns the Mortgaged Property subject to
no lien, charge, encumbrance, option, title retention agreement or security
interest, except Permitted Liens, and has full power and authority to grant,
bargain, sell, transfer, convey and mortgage, and give a security interest
in, the Mortgaged Property in the manner and form as set forth in this
Agreement. Borrower is and shall remain the legal owner, free and clear of
all mortgages, security interests, liens, charges, encumbrances, title
retention agreements, and options (except for Permitted Liens) of the
Mortgaged Property.
3.2 ADVERSE Claims. Borrower hereby does and will forever warrant and
defend the title to and possession of the Mortgaged Property against the
claims and demands of all persons whomsoever (except claims and demands under
the Permitted Liens) and at all times keep the Lien and security interest
granted herein with respect to the Mortgaged Property, at Borrower's expense,
a duly perfected first priority security interest in and Lien upon the
Mortgaged Property as constituted from time to time, superior to the rights
of all Third parties (except for Permitted Liens) to the fullest extent
permitted by applicable law, and shall take all actions (including obtaining
any authorization, approval, license, or consent of any competent
governmental or judicial authority) and make all filings (including, without
limitation, filings with the Aircraft Registry maintained by the FAA), which
Lender may deem necessary or appropriate in order to obtain the full benefits
of this Agreement and all rights and powers granted or to be granted herein,
or in order to preserve, protect and perfect the Lien of Lender in the
Mortgaged Property.
3.3 RECORDING. Borrower will bear the expense of and be responsible for
recording and re-recording, registering and re-registering and filing and
re-filing this Agreement and each and every Supplemental Agreement, and such
other financing statements or other instruments from time to time as may be
requested by Lender in all such jurisdictions and offices as Lender shall
from time to time require in order that (a) the Lien hereof remains at all
times a first priority lien on the Mortgaged Property, subject only to
Permitted Liens, as security for the Obligations,
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and (b) the rights and remedies of Lender with respect to the Mortgaged
Property and the Loan Documents may be established, confirmed, maintained and
protected. Borrower will furnish to Lender evidence satisfactory to Lender of
every such recording, registering and filing which is not filed, recorded or
registered by Lender. Borrower hereby appoints Lender as its irrevocable
attorney-in-fact (said agency being coupled with an interest and therefore
irrevocable) to take all such action and execute all such documents in
Lender's own name or in the name of Borrower that is necessary to carry out
the purposes of this Section. Borrower agrees that it shall confirm to
Lender, in writing, not less frequently than every ninety days, the location
of the Mortgaged Property.
3.4 MAINTENANCE OF AUTHORIZATIONS: PAYMENT OF TAXES. The Lien of Lender
upon the Mortgaged Property will at all times remain a first priority
purchase money security interest upon the Mortgaged Property as from time to
time constituted and Borrower will obtain and maintain, or cause to be
obtained or maintained, in full force and effect, any authorization,
approval, license, or consent of any governmental or judicial authority,
which may be or become necessary in order to permit the operation and use of
the Mortgaged Property or in order to obtain the full benefits of this
Agreement and all rights and remedies granted or to be granted herein, and
will not create or suffer to exist any Lien upon the Mortgaged Property or
any part thereof or upon the income therefrom other than Permitted Liens.
Borrower will from time to time pay or cause to be paid as they become due
and payable all taxes, assessments and governmental charges lawfully levied
or assessed or imposed upon the Lien of Lender on the Mortgaged Property so
that the Lien of this Agreement shall at all times be wholly preserved at the
cost of Borrower and without expense to Lender; and Borrower will not suffer
any other matter or thing whatsoever whereby the Lien of or security interest
created by this Agreement might be impaired (except for Permitted Liens).
3.5 INDEMNIFICATION. Borrower shall assume liability for and indemnify,
protect, save, and keep harmless Lender, its officers, directors, agents, and
employees for, from and against any and all liabilities, losses, damages,
taxes, claims, actions, suits, reasonable costs and expenses of whatsoever
kind, including, without limitation, reasonable legal fees and disbursements
and reasonable expert witness fees, imposed on, incurred by, or asserted
against Lender, its officers, directors, agents and employees in any way
relating to or arising out of the purchase, ownership, delivery, possession,
use, operation, condition, performance, quality, suitability, airworthiness,
maintenance, registration, loss, confiscation, seizure, requisition, lease,
sale, or other disposition of the Mortgaged Property or any part thereof, or
this Agreement or any other Loan Document or any of the instruments or
agreements to be entered into by the parties pursuant hereto or thereto,
PROVIDED, that the indemnity obligation of Borrower hereunder shall not apply
to (a) taxes
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which are assessed against Lender based on the gross income of Lender or (b)
taxes which are payable by Lender in the nature of franchise taxes.
3.6 MAINTENANCE OF MORTGAGE PROPERTY. Borrower shall at all times
maintain, preserve and keep, or cause to be maintained, preserved and kept,
at no cost or expense to Lender, all of the Mortgaged Property as from time
to time constituted and every part thereof in good order and repair (ordinary
wear and tear excepted), in accordance with FAR Part 121 airline standards in
conformity with FAA regulations, and shall comply with all mandatory
manufacturer's service bulletins, notices and directives with respect to the
Mortgaged Property or will cause such Mortgaged Property to be so maintained,
preserved and kept, without cost or expense under this Agreement to Lender.
Borrower will from time to time make, or cause to be made, all needed and
proper repairs to the Mortgaged Property in order to comply with such
standards at a Maintenance Repair Station approved by the FAA, and obtain and
maintain in full force and effect and in good order all licenses, permits,
certificates, registrations or other documents required by any insurance
policy or any governmental authority having jurisdiction regarding the
Mortgaged Property. Borrower will replace or will cause to be replaced,
without expense to Lender, all or any part of the Mortgaged Property
(including, without limitation, any Engine, but excluding the entire Aircraft
under circumstances constituting an Event of Loss with respect to the
Aircraft) that may be retired (whether by sale, expropriation, wearing out,
loss or destruction or other cause), or may be in any way rendered unfit for
use, with replacement property of comparable grade, quality and utility,
which replacement property shall be in the same or better serviceable
condition by standards of the FAA as the unit so retired or rendered unfit
for use assuming such replaced property was maintained in accordance with the
provisions hereof and will, with respect to replacement engines, execute and
deliver to Lender a Supplemental Agreement and such other documents as may be
necessary to accord Lender a first priority Lien under this Agreement with
respect thereto (subject to Permitted Liens) and to subject such replacement
property to the Lien of this Agreement as Mortgaged Property. Borrower shall,
at any time and from time to time, at Lender's request, promptly furnish to
Lender information as to the maintenance status of the Aircraft in such
derail as Lender shall reasonably require. Notwithstanding the foregoing,
Lender agrees that compliance by the Lessee with the maintenance provisions
of the Lease as in effect on the Closing Date (or as amended, provided such
amendment is consented to by Lender) shall constitute compliance by Borrower
with the provisions of this Section 3.6 and any other provision of this
Agreement with respect to the maintenance of the Mortgaged Property.
3.7 COMPLIANCE WITH LAWS AND THE LIKE. Borrower will at all times comply
or cause compliance with all lawful laws, orders, rules and regulations of
governmental authorities having jurisdiction with respect to any part of the
Mortgaged Property the noncompliance with which would have a materially
adverse
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effect on the condition of any Mortgaged Property, the business of Borrower
or the perfection or priority of this Agreement, the Lien of Lender on the
Mortgaged Property or any of Lender's rights or remedies under any Loan
Document. Borrower will forthwith advise Lender of the receipt by Borrower of
any notice from the FAA as to any violation of or failure to comply with or
any order, rule or regulation thereof.
3.8 MAINTENANCE OF INSURANCE. Borrower shall at all times procure and
maintain, or cause to be procured and maintained, on the Mortgaged Property,
without liability and at no cost to Lender, policies of insurance in such
form, of such type and with insurers satisfactory to Lender. All proceeds of
insurance paid to Lender shall be held and paid over or applied by Lender as
provided herein. Notwithstanding the foregoing, Lender agrees that compliance
by the Lessee with the insurance provisions of the Lease as in effect on the
Closing Date (or as amended, provided such amendment is consented to by
Lender) shall constitute compliance by Borrower with the provisions of this
Section 3.6 and any other provision of this Agreement with respect to the
insurance of the Mortgaged Property.
3.9 INSPECTION BY LENDER; INFORMATION. Borrower will at all times
maintain or cause to be maintained records adequate to identify the Mortgaged
Property and to disclose its use, maintenance, condition and the income
generated to Borrower through the use thereof. Borrower shall, at any time
and from time to time, provide Lender with all information available to
Borrower regarding the location of the Mortgaged Property. Borrower shall
permit Lender or any representative designated by Lender: (a) to inspect the
books of account, records, reports and other papers of Borrower related to
the Mortgaged Property and to take copies and extracts therefrom, and
Borrower will afford and procure the opportunity to make any such inspection
and will furnish Lender with any and all such other information and copies of
documents and print-outs of data related to the Mortgaged Property stored on
any electronic or data processing medium under the control of Borrower as
Lender may request, with respect to any Mortgaged Property and the financial
records of Borrower related to the Mortgaged Property, and Borrower will
permit Lender to discuss any of the foregoing with any officer or accountant
of Borrower, or either of them, all at such times and as often as may be
requested by Lender; and (b) to inspect the Mortgaged Property, upon Lender's
request, once every 12 months during the period during which the Loan remains
outstanding and unpaid, and to inspect and appraise the Mortgaged Property,
upon Lender's request, at any time and from time to time, after the
occurrence of an Event of Default, or whenever there has been, in Lender's
reasonable judgment, a material, adverse change in the condition of the
Mortgaged Property or in the financial condition of Borrower. All such
inspections and appraisals as are permitted in clauses (a) and (b) of the
previous sentence shall be at the reasonable cost and expense of Lender and
shall be conducted by an employee or other appointed representative or
-13-
agent of Lender; PROVIDED, that from and during the continuation of an Event
of Default, such inspections and appraisals shall be at the reasonable cost
and expense of Borrower. Lender may in its discretion require, and Borrower
shall permit, the Mortgaged Property to be inspected and appraised by an
appraiser selected by Lender at any time, at Lender's sole cost and expense.
Notwithstanding the foregoing, Lender agrees that compliance by the Lessee
with the records-keeping provisions of the Lease as in effect on the Closing
Date (or as amended, provided such amendment is consented to by Lender) shall
constitute compliance by Borrower with the provisions of this Section 3.9 and
any other provisions of this Agreement with respect to the maintaining of
records concerning the Mortgaged Property.
3.10 CITIZENSHIP. Borrower is as of the date hereof and will at all times
until the Loan is repaid remain a "citizen of the United States" as defined
in 49 U.S.C. section 40102(a)(15).
3.11 INSIGNIA. Forthwith following the request of Lender therefor,
Borrower will plainly, distinctly and conspicuously place and maintain in the
cockpit of the Aircraft and on each Engine, a place, insignia or ocher
identification bearing the following words in letters of a size reasonable
under the circumstances and acceptable to Lender as follows:
THIS AIRCRAFT IS OWNED BY FIRST SECURITY BANK,
NATIONAL ASSOCIATION, AS OWNER TRUSTEE FOR THE BENEFIT OF
DIAMOND HEAD ASSOCIATES LLC, A DELAWARE LIMITED LIABILITY COMPANY,
AND IS SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF
FINOVA CAPITAL CORPORATION, A DELAWARE CORPORATION
3.12 OPERATION LOCATION OF MORTGAGED PROPERTY. Borrower shall not operate
the Aircraft or suffer the Aircraft to be operated in violation of any
provision of any insurance policy in effect with respect to the Aircraft or
in any jurisdiction where all of the insurance required hereunder shall nor
remain in full force and effect or in violation of any law, treaty, statute,
rule, airworthiness directive, regulation or order of any government or
governmental authority (domestic or foreign) having or asserting jurisdiction
over Lender or the Mortgaged Property or in violation of any applicable
airworthiness certificate, license or registration relating to the Mortgaged
Property issued by any such government or governmental authority.
Notwithstanding the foregoing, Lender agrees that compliance by the lessee
with the provisions of the Lease as in effect on the Closing Date (or as
amended, provided such amendment is consented to by Lender) concerning the
use and operation of the Mortgaged Property shall constitute compliance by
Borrower with the provisions of this Section 3.12 and any other provision of
this Agreement concerning the use and operation of the Mortgaged Property.
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3.13 NO SALE; ALTERATION OR MODIFICATION. (a) Borrower shall not make or
cause to be made or cause or permit another to make any change or alteration
in any registration, filing, or recordation of any of the Mortgaged Property
from the registration, filing, or recordation required by this Agreement, or
consent to the Mortgaged Property being operated by pilots other than those
currently certified by the appropriate governmental authorities,
(b) Except to the extent expressly provided in this Section 3.13, Borrower
shall not sell, lease, convey, transfer or encumber (other than Permitted
Liens) or otherwise dispose of all or any part of the Mortgaged Property or
cause or permit another to do any of the foregoing with respect to any of the
Mortgaged Property, and shall not (except to the extent required pursuant to
Section 3.6 hereof) modify or cause or permit any modification to any of the
Mortgaged Property.
(c) Notwithstanding anything to the contrary in this Agreement, so long
as no Event of Default shall have occurred and be continuing, Borrower may:
(i) deliver possession of any of the Mortgaged Property to the
manufacturer thereof or another maintenance facility for testing,
service, repair, maintenance or overhaul work thereon or on any part
thereof, or for alterations and modifications in or additions thereto to
the extent required or permitted by this Agreement;
(ii) enter into and carry our any charter, wet-lease or other
agreement with respect to the Mortgaged Property on terms whereby the
Mortgaged Property will at all times be operated by an air crew employed
by and subject to the operational control of Borrower; PROVIDED, that any
such charter, wet-lease or other agreement shall be subordinate in all
respects to this Agreement; and
(iii) subject any Engine To normal interchange or pooling agreements or
arrangements customary in the airline industry applicable to similar
engines operated by Borrower and entered into by Borrower in the ordinary
course of its business; provided, that no such agreement or arrangement
contemplates or requires the transfer of title to such Engine and if
Lender's interest in any such Engine shall be divested, under any such
agreement or arrangement, such divestiture shall be deemed to be an Event
of Loss with respect to such Engine and Borrower shall replace such
Engine as soon as reasonably possible by duly executing a Supplemental
Agreement with respect to a replacement engine thereby causing same to
become subject to this Agreement as a replacement for such Engine, which
replacement engine shall be free and clear of all Liens other than
Permitted Liens, and shall be the same model as the Engines and shall
have a value and utility at least equal to, and
-15-
be in at least as good operating condition as the Engine which is being
replaced, assuming the Engine being replaced was in the condition and repair
required by the terms hereof. Such replacement Engine shall be deemed an
"Engine" hereunder upon the filing with the FAA of the Supplemental Agreement
with respect thereto, whereupon Lender shall release its security interest
pursuant to this Agreement in the replaced engine.
4. EVENTS OF DEFAULT; REMEDIES.
4.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
Constitute an Event of Default hereunder:
(a) Failure of Borrower to pay when due and payable any principal of
or interest on or other sum with respect to the Loan, the Note, the Other
Note, if any, or other sums which may become due hereunder or under any Loan
Document, whether by reason of stated maturity or due date, notice of
prepayment, cancellation, acceleration or otherwise, and such sum is not
fully paid within five (5) Banking Days after the due date thereof;
(b) (i) Any failure by Borrower to perform or cause to be performed
its obligations as set forth in this Agreement concerning (X) the preparation
or recordation of any document or instrument required by Lender for the
maintenance or perfection of any lien on the Mortgaged Property, or (Y)
maintenance of any part of the Mortgaged Property, within live (5) Banking
Days after notice thereof from Lender, (ii) any lapse of, or failure to
maintain, insurance coverage on the Mortgaged Property required to be
maintained under this Agreement, or (iii) any failure by Borrower to fulfill
any other covenant or to perform any other obligation on its part to be
performed under any Loan Document to which it is a party and such failure is
not cured within thirty (30) days after the earlier of actual knowledge
thereof on the part of Borrower or receipt of notice thereof by Borrower;
PROVIDED, however, that if such failure is capable of being cured and cannot
with diligence be cured within thirty (30) days, then such failure shall not
constitute an Event of Default so long as Borrower is in good faith taking
all steps necessary, in the reasonable opinion of Lender, to diligently cure
such failure and such failure is cured within sixty (60) days of such failure;
(c) If any representation or warranty made by Borrower in this
Agreement, or any other Loan Document or any financial statement shall prove
to have been untrue, inaccurate or incomplete in any material respect at the
time when made or when effective and Borrower fails to do that which shall be
necessary in order that said representation or warranty shall be true,
accurate or complete within thirty (30) days after the earlier of actual
knowledge thereof on the part of borrower or of receipt of notice thereof by
Borrower; or
-16-
(d) Any Event of Default under, and as defined in, any one or more of
the Loan Documents shall occur.
4.2 REMEDIES. Upon the occurrence and continuance of any Event of
Default, Lender may, in its sole discretion, do one, several, or all of the
following:
(a) exercise all the rights and remedies granted to secured parties
by the provisions of the
Arizona Uniform Commercial Code (whether or not
the Uniform Commercial Code is in effect in the same form in the jurisdiction
where Lender's rights and remedies are asserted) or under the provisions of
any applicable law;
(b) accelerate the entire principal balance then due and owing under
the Loan Agreement, the Note and the Other Note (or either of them), this
Agreement and the other Loan Documents, whereupon all such amounts, accrued
interest thereon, and all other amounts comprising the Obligations shall
become immediately due and payable;
(c) enforce the rights of Borrower with respect to the Mortgaged
Property, and institute legal proceedings to foreclose upon and against the
security interest granted in and by this Agreement and to recover judgment
for all amounts then due and comprising the Obligations;
(d) institute legal proceedings for the specific performance of any
covenant or agreement herein contained or in the Loan Agreement or in aid of
the execution of any power herein granted and Lender shall be entitled as of
right to the appointment of a receiver of all or any part of the Mortgaged
Property;
(e) institute legal proceedings for the sale or otherwise for the
enforcement of any right, under the judgment of any court of competent
jurisdiction, of or concerning any of the Mortgaged Property;
(f) personally, or by agents or attorneys, take possession of all or
any part of the Mortgaged Property and demand, xxx for, collect or receive
any money or property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement deemed desirable with
respect to, any of the Mortgaged Property or any sum payable in connection
therewith; and
(g) to the extent permitted by law, enter any place where the
Mortgaged Property may be found or where Lender reasonably believes some or
all thereof may be kept and personally, or by agents or attorneys, take
possession of any part or all of the Mortgaged Property without being
responsible for loss or damage caused thereby, and sell or dispose of all or
any part of the same, free from any and
-17-
all claims of Borrower or of any other party claiming by, through, or under
Borrower, at law or in equity, at one or more public or private sales on such
terms as Lender may fix, with or without any previous demand upon Borrower
or advertisement of any such sale or other disposal.
Except as otherwise expressly herein provided to the contrary, any notice or
demand and right of equity of redemption otherwise required by or available
to Borrower under applicable law is hereby waived by Borrower to the fullest
extent permitted by applicable law,
4.3 WAIVER OF BONDS. If Lender seeks to take possession of any or all of
the Mortgaged Property or avail itself of any provisional remedy by court
process, Borrower hereby irrevocably waives any bonds and any surety or
security required by any statute, court rule or otherwise as an incident to
such possession or remedy, and waives any demand for possession of Mortgaged
Property prior to the commencement of any suit or action to recover same.
4.4 MULTIPLE SALES. The power of sale hereunder shall not be exhausted by
one or more sales, and Lender may from time to time adjourn any sale to be
made pursuant hereto. The Mortgaged Property need not be present at the time
and place of sale.
4.5 DELIVERY OF MORTGAGED PROPERTY. If Lender shall demand possession of
the Mortgaged Property or any part thereof pursuant to this Agreement, or any
records, including print-outs of data stored on any electronic or data
processing medium, relating to the Mortgaged Property, Borrower shall, at its
own expense, forthwith cause such Mortgaged Property or any part thereof or
any such records designated by Lender to be assembled and made available
and/or delivered to Lender at any place reasonably designated by Lender;
PROVIDED, that such assembly or delivery by Borrower is not in breach of its
obligations under the Lease, including, but not limited to, its obligation to
grant Lessee quiet enjoyment of the Mortgaged Property to the extent
expressly provided in the Lease as in effect on the Closing Date (or as
amended, provided such amendment is consented to by Lender).
4.6 NOTICES. In addition to any other notices required by law, Lender
shall give to Borrower at least twenty (20) days prior written notice of each
public sale or any date after which a private sale or other intended
disposition of any Mortgaged Property hereunder shall occur, and Borrower
hereby covenants and agrees that a notice, which shall be sent in accordance
with the provisions of Section 6.1 hereof, at least twenty (20) days before
the date of any such act shall be deemed to be commercially reasonable notice
for such act within the meaning of Section 9-504 of the Uniform Commercial
Code and, specifically, reasonable notification of the time and place of any
public sale hereunder and reasonable notification of the time after
-18-
which any private sale or other intended disposition to be made hereunder
is to be made.
4.7 LENDER'S RIGHT TO REPAIR AND MANAGE MORTGAGED PROPERTY. In the event
that Lender shall take or come into possession of any of the Mortgaged
Property, Lender may, but shall have no obligation to, from time to time, at
the expense of Borrower, make all such repairs, replacements, alterations,
additions and improvements to and of the Mortgaged Property as Lender may
reasonably deem proper to protect its interests hereunder. In each such
case, Lender shall have the right to manage and control the Mortgaged
Property and to carry on the business and to exercise all rights and powers
of Borrower in respect thereof as Lender shall deem appropriate, including
the right to enter into any and all such agreements with respect to the
leasing and/or operation of the Mortgaged Property or any part thereof as
Lender may see fit; and Lender shall be entitled to collect and receive all
rents, issues, profits, revenues and other income of the same and every part
thereof. Such rents, issues, profits, revenues and other income shall be
applied to pay the expenses of holding and operating the Mortgaged Property
and of conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all
payments which Lender may be required or may elect to make, if any, for
taxes, assessments, insurance and other proper charges upon the Mortgaged
Property or any part thereof, and all other payments which Lender may be
required or authorized to make under any provision of this Agreement. The
remainder of such rents, issues, profits, revenues and other income shall be
applied only in accordance with Section 4.9 hereof.
4.8 DELIVERY TO PURCHASER. Upon the completion of any sale of any of the
Mortgaged Property under this Article, Borrower shall deliver all of the
property so sold to the purchaser or purchasers at such sale on the date of
sale, or within a reasonable time thereafter if it shall be impractical to
make immediate delivery, but in any event full title and right of possession
to such property shall pass to such purchaser or purchasers forthwith upon
the completion of such sale. Nevertheless, if so requested by Lender or by
any purchaser, Borrower shall confirm any such sale or transfer by executing
and delivering to such purchaser all proper instruments of conveyance and
transfer and releases as may be designated in any such request. Subject to
the rights of Lessee, to the extent that they exist, every such sale of
Mortgaged Property shall operate to divest all right, title, interest, claim
and demand whatsoever of Borrower and any person claiming such interest by,
through or under Borrower, in and to the property so sold, and shall be a
perpetual bar, both at law and in equity, against Borrower and all such
persons and their respective successors or assigns.
4.9 APPLICATION OF PROCEEDS. The proceeds of any sale, rental or other use
of the Mortgaged Property, or any part thereof, under this Article, together
with any
-19-
other sums then held by Lender, as Part Of the Mortgaged Property, shall be
applied as follows:
(a) First, to the payment of the costs and expenses of such sale,
including reasonable brokers' fees or sales commissions, a reasonable
compensation to Lender's agents, attorneys and counsel and all other
reasonable charges, expenses, liabilities and advances incurred or made by
Lender in connection therewith, and to the payment of all taxes, assessments
or Liens for which Borrower is liable to indemnify Lender, if any, prior to
the Lien of this Agreement, except any taxes, assessments or Liens subject to
which such sale shall have been made;
(b) Second, to the payment of amounts due under the Loan Agreement
and the balance of the Obligations; and
(c) Third, the surplus, if any, shall be paid to Borrower or such
other person as may be legally entitled thereto.
4.10 LENDER MAY PURCHASE. At any public sale under this Article, Lender
or its nominee may, to the extent permitted by applicable law, bid for and
purchase the Mortgaged Property offered for sale, and, upon compliance with
the terms of sale, may hold, retain and dispose of such Mortgaged Property
without further accountability therefor. Lender need not be present at such
sale in order to make such bid. For the purpose of making payment for the
Mortgaged Property or any part thereof so purchased, claim for payment of the
Obligations, or any part thereof, may be used by Lender as a credit against
the purchase price therefor.
4.11 RIGHT TO POSSESSION. Borrower hereby waives, to the fullest extent
permitted by applicable law, the benefit of any law or procedure under the
federal Bankruptcy Code (or any comparable or succeeding law) which might
limit or impair the right of Lender to take possession of and sell or operate
and manage the Mortgaged Property in compliance with the provisions of this
Agreement.
4.12 REMEDIES CUMULATIVE. Each right, power, and remedy specifically
given to Lender herein, or otherwise existing shall be cumulative and shall
be in addition to every other right, power, and remedy specifically given
herein, or in the Loan Agreement or any of the other Loan Documents or now or
hereafter existing at law, in equity, or otherwise; and each right, power and
remedy, whether specifically given under the Loan Agreement or otherwise
existing, may be exercised from time to time and as often and in such order
as may be deemed expedient by Lender; and the exercise of any right, power or
remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy. No delay of
omission by Lender in the exercise of any right or power, or in the pursuance
of any remedy, shall impair any such right, power, or remedy or be
-20-
construed to be a waiver of any Default or Event of Default or to be an
acquiescence therein. No waiver by Lender of any breach or Default or Event
of Default by Borrower under this Agreement shall be deemed a waiver of any
other previous breach or default or any thereafter occurring. The invalidity
of any remedy in any jurisdiction shall not invalidate such remedy in any
other jurisdiction. The invalidity or unenforceability of any of the remedies
herein provided in any jurisdiction shall not in any way affect the right to
the enforcement in such jurisdiction or elsewhere of any of the other
remedies herein provided.
4.13 CERTAIN WAIVERS. Borrower agrees, to the full extent that it may
lawfully so agree, that neither it nor anyone claiming through or under it
will set up, claim or seek to take advantage of any appraisement, valuation,
stay, extension or redemption law now or hereafter in force in any locality
where any Mortgaged Property may be situated in order to prevent, hinder or
delay the enforcement or foreclosure of this Agreement, or the absolute sale
of the Mortgaged Property or any part thereof; or the final and absolute
putting into possession thereof, immediately after such sale, of the
purchasers thereof, and Borrower, for itself and all who may at any time
claim through or under it, hereby waives, to the full extent that it may be
lawful so to do, the benefit of all such laws, and any and all right to have
any of the properties or assets comprising the Mortgaged Property marshaled
upon any such sale, and agrees that Lender or any court having jurisdiction
to foreclose the Lien hereof may sell the Mortgaged Property as an entirety
or in such parcels as Lender may determine.
4.14 LENDER'S RIGHT TO PERFORM; EXPENSES. At any time and from time to
time after an Event of Default has occurred, if Borrower fails to perform or
fulfill any of its undertakings or obligations contained herein, including,
without limitation, the obligation to maintain insurance with respect to the
Mortgaged Property as herein provided, Lender shall have the right, but shall
not be obligated: (a) to effect such performance or compliance and (b) to
incur such expenses relative thereto or to the enforcement of Lender's rights
as against, or the preservation, protection, reconditioning, storage or sale
of, the Mortgaged Property including, but without limitation, such sums as
are referred to in Sections 4.7 and 4.9(a) hereof. The amount of any such
expenses and other reasonable costs of Lender incurred as hereinabove
provided shall become payable by Borrower to Lender as of the date on which
Lender shall pay the same, together with interest thereon from said date of
payment at the Default Rate, until the same shall be repaid.
4.15 ADVANCES ARE SECURED. All costs and expenses referred to in Section
4.14 shalt become part of the Obligations and shall become part of the
indebtedness secured under this Agreement. Subject to the rights of Lessee,
if any, to the use, possession and enjoyment of the Aircraft, Lender shall
have the right (but shall not be obligated) to use and apply any Cash
Collateral at any time held by it for the
-21-
repayment of all such advances, costs or expenses. However, no such use of
any Cash Collateral, nor the making by Lender of any advance in payment of
any such expense, shall relieve Borrower from any Default or Event of Default
hereunder.
4.16 AGENCY. Borrower hereby appoints Lender, such appointment being
immediately and without further notice or action effective upon the
occurrence of an Event of Default, as Borrower's irrevocable attorney-in-fact
and agent (such appointment being coupled with an interest) either in
Lender's own name or in the name of Borrower, to (a) incur and to pay the
costs and expenses aforesaid; (4) make claim for, collect, compromise and
bring suit in respect Of all claims relating to the Mortgaged Property; (c)
execute and endorse all documents, checks or drafts received in payment of
any and all such expenses or any losses or damages under any insurance
policies maintained with respect to any Mortgaged Property; (d) execute
financing statements in Borrower's name as debtor; and (e) take any action
which Borrower could take as owner of the Mortgaged Property in order to
facilitate the realization by Lender of any of its rights and remedies herein
provided.
5. RELEASE UPON SATISFACTION OF OBLIGATIONS.
Following payment in full and satisfaction of the Obligations, this
Agreement and the Lien, rights and interests hereby granted shall cease,
terminate and become null and void, and, upon Borrower's written request
therefor, Lender shall execute and deliver to Borrower such instruments of
satisfaction and discharge of this Agreement, and the Lien hereof, as may be
reasonably requested by Borrower, and pay and deliver all monies and other
personal property then held as collateral security (but excluding any monies
received by Lender in payment of the Obligations) by Lender hereunder. All
such instruments and documents of release or discharge shall be prepared and
filed at the sole cost and expense of Borrower and shall be reasonably
satisfactory in form and substance to Lender.
6. MISCELLANEOUS.
6.1 NOTICES. Except as otherwise specifically provided to the contrary
herein:
(a) Every notice or demand under this Agreement shall be in writing and may
be given or made by registered mail, return receipt requested or by
internationally recognized overnight courier service.
(b) Every notice or demand shall be sent, in the case of overnight
courier or registered mail, to Lender or to Borrower, at the following
addresses, or to such other address as Borrower or Lender may designate for
itself by notice to the other conforming to the requirements for notice set
forth, in this Section;
-22-
If to Borrower: First Security Bank, National Association
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Corporate Trust Department
and
Diamond Head Associates LLC
c/o NSJ Corporation
0000 Xxxxx Xxxxx Xxxx, Xxxx 0
Xxxxxxx, Xxxxxxx 00000
Attention: Manager
with a copy to:
Xxxxxxx X. Xxxxx, Esq.
00 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
If to Lender: FINOVA Capital Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Vice President-Law
and
FINOVA Capital Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Vice President-Operations
Management/Transportation
Finance
(c) Every notice or demand shall, except so far as otherwise expressly
provided by this Agreement, be deemed to have been received in the case of an
internationally recognized overnight courier service or registered mail, upon
acknowledgment of receipt or as of the date on which receipt of such notice
delivered by overnight courier or registered mail is refused or such courier
or the U.S. Postal Service advises that such letter is not deliverable at the
address set out in paragraph (b) of this Section 6.
(d) A copy of all notices sent to Lender shall be sent to Xxxxxxx, Xxxx &
Xxxxxx, 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000,
Attention: Xxxx X. Xxxxxxx, Esq.
6.2 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each of such counterparts shall for all purposes be deemed
to be
-23-
an original, and all such counterparts shall together constitute but one
and the same Agreement.
6.3 APPLICABLE LAW. THE OBLIGATIONS OF BORROWER HEREUNDER ARE TO BE PERFORMED
IN; AND THIS AGREEMENT IS EXECUTED, DELIVERED AND ACCEPTED IN, AND THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS
AND DECISIONS OF THE STATE OF
ARIZONA, AND BY EXECUTION HEREOF BORROWER AND
LENDER EACH AGREES THAT SUCH LAWS AND DECISIONS OF THE STATE OF
ARIZONA SHALL
GOVERN THIS AGREEMENT NOTWITHSTANDING THE FACT THAT THERE MAY BE OTHER
JURISDICTIONS WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
6.4 JURISDICTION AND VENUE. BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS
INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR
COURT OF
ARIZONA, MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF
ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN
ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE
SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. BORROWER HEREBY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION
OR PROCEEDING COMMENCED BY LENDER IN ANY OF SUCH COURTS, AND HEREBY AGREES
THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER, AT THE ADDRESS TO
WHICH NOTICES ARE TO BE SENT PURSUANT HERETO. BORROWER WAIVES ANY CLAIM THAT
PHOENIX,
ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD BORROWER, AFTER BEING SO
SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS
SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING
THEREOF, THEN BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR
JUDGMENT MAY BE ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED FOR
IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM
FOR BORROWER SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION.
6.5 CONSTRUCTION; CAPTIONS AND PARAGRAPH HEADINGS. If any provision of
this Agreement or of any other agreement between the parties hereto shall be
held invalid or inapplicable to any circumstance or in any jurisdiction, such
invalidity or
-24-
inapplicability shall not affect any other provision hereof or of any other
agreement between the parties hereto which can be given effect without regard
to the invalid provision, nor to the same provision to the extent valid or
enforceable in any other applicable jurisdiction, nor shall any such
inapplicability to any circumstance affect the applicability of such terms to
any other or different or subsequent circumstance, all of of such terms,
conditions or provisions are deemed severable. Captions and paragraph
headings used herein are for convenience only and are not part of this
Agreement and shall not be used in construing it.
6.6 WAIVER OF RIGHT TO JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY WOULD BE BASED UPON DIFFICULT
AND COMPLEX ISSUES AND, THEREFORE, BORROWER AND LENDER AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
6.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of Borrower and shall inure to the benefit of the
successors, assigns and participants of Lender.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-25-
IN WITNESS WHEREOF, Borrower and Lender have caused this instrument to be
duly executed as of the day and year above written.
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
BY: /s/ ILLEGIBLE
-------------------------
ITS: VICE PRESIDENT
BORROWER:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
in its individual capacity but solely as owner
Trustee for the benefit of DIAMOND HEAD
ASSOCIATES LLC, a Delaware Limited Liability
Company
BY:
-------------------------
ITS:
IN WITNESS WHEREOF, Borrower and Lender have caused this instrument to be
duly executed as of the day and year first above written.
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware
Corporation
BY:
-------------------------
ITS:
BORROWER:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
in its individual capacity but solely as Owner
Trustee for the benefit of DIAMOND HEAD
ASSOCIATES LLC, a Delaware limited liability
company
BY: /s/ ILLEGIBLE
-------------------------
ITS: VICE PRESIDENT
EXHIBIT A
to
FIRST PRIORITY PURCHASE MONEY AIRCRAFT CHATTEL
MORTGAGE AND SECURITY AGREEMENT
_______________________________________________________________________________
FORM OF SUPPLEMENTAL AGREEMENT
_______________________________________________________________________________
THIS SUPPLEMENTAL AGREEMENT ("Agreement"), dated as
of______________,19__ by and between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity but solely as Owner Trustee
("Borrower"), as mortgagor, and FINOVA CAPITAL CORPORATION, a Delaware
corporation ("Lender"), as mortgagee,
WITNESSETH:
WHEREAS, Borrower has heretofore executed and delivered to Lender a
First Priority Purchase Money Aircraft Chattel Mortgage and Security
Agreement dated as of October 8, 1996 (hereinafter, as at any time
supplemented or amended, called the "Original Mortgage", terms defined
therein, unless otherwise defined herein, being used herein as therein
defined), covering certain Mortgaged Property of Borrower, to secure the
Obligations, as defined in the Original Mortgage; and
WHEREAS, the Original Mortgage was recorded by the Federal Aviation
Administration on______________, 1996 and assigned Conveyance Number___________
_; and
WHEREAS, Borrower is the legal and beneficial owner, free and
clear of all mortgages, security interests, Liens, charges and encumbrances,
other than the Lien of the Original Mortgage and Liens permitted by the
Original Mortgage, of the flight equipment hereinbelow described, and desires
to execute and deliver this Supplemental Agreement,
NOW, THEREFORE, to secure the payment of all of the "Obligations"
(as such term is defined in the Original Mortgage, as at any time amended or
supplemented), and under any other Loan Document, and the performance of the
covenants in the Original Mortgage contained and for the purpose of
specifically subjecting such
A-1
property to, and of confirming, the Lien of the Original Mortgage, Borrower
does hereby grant, bargain, sell, transfer, convey and mortgage unto Lender,
its successors and assigns, and grants to Lender a security interest in, the
following described property, to wit:
(a) [number of airframes] airframe[s], identified as follows:
MANUFACTURER: ___________________
FAA REGISTRATION
NUMBER: ___________________
MANUFACTURER'S
MODEL NUMBER: ___________________
MANUFACTURER'S
SERIAL NUMBER: ___________________
together with all appliances, equipment and accessories thereto
belonging, by whomsoever manufactured, now owned by Borrower or
hereafter acquired by Borrower and installed in or appurtenant to said
airframe (the "Airframe");
(b) [number of engines] [manufacturer] [model number] engines, each
such engine having 750 or more rated take-off horsepower or the
equivalent thereof, identified by the following manufacturer's serial
numbers:
________________________
________________________
together with all appliances, equipment and accessories thereto
belonging, by whomsoever manufactured, now owned by Borrower or
hereafter acquired by Borrower and installed in or appurtenant to said
engines (any one of the foregoing, an "Engine" and, all of the
foregoing, collectively, the "Engines");
(c) all warranties, service contracts and product agreements of
any manufacturer of, or of any maintenance or overhaul agency with
respect to, the Mortgaged Property, or any subcontractor or supplier or
vendor thereof, and any and all rights of Borrower to compel performance
of the terms of such warranties, service contracts and product
agreements in respect of any of the Mortgaged Property;
(d) all substitutions, replacements, products, proceeds
(including, but not limited to, insurance proceeds) and renewals of, and
all accessions to, all property subjected or required to be subjected to
the Lien hereof and all property which shall hereafter become physically
attached to or incorporated in all property subjected or required to be
subjected to the Lien hereof, in
A-2
each case whether the same are now owned by Borrower or shall hereafter
be acquired by it;
(e) all records, logs, manuals and documents or other materials of
any kind relating to the condition, use, location, maintenance of or
repairs or overhauls to all or any part of the Mortgaged Property; and
(f) all right, title and interest of Borrower in, to and under any
purchase agreement whereby Borrower acquired any of the foregoing,
including, without limitation, Borrower's right, title and interest in
and to all warranties thereunder, all monies due and to become due
Borrower thereunder (however, Lender assumes none of Borrower's
obligations thereunder) and Borrower's right to compel performance of
the seller's obligations thereunder.
TO HAVE AND TO HOLD all and singular the property aforesaid unto Lender,
its successors and assigns, as security as aforesaid and for the uses and
purposes and subject to the covenants, agreements, provisions and conditions
set forth in the Original Mortgage.
This Agreement shall be construed as supplemental to the Original
Mortgage and shall form a part thereof, and the Original Mortgage and each
Supplemental Agreement heretofore executed and delivered, which are hereby,
by reference, incorporated herein, are hereby ratified, approved and
confirmed.
This Agreement may be simultaneously executed in several counterparts,
each of which shall be deemed to be an original, and all such counterparts
shall together constitute but one and the same Supplemental Agreement,
This Agreement is intended to be and shall be deemed to be delivered by
Borrower to Lender and accepted by Lender in Phoenix, Arizona, and shall be
subject to and construed in accordance with the laws of the State of Arizona.
This Agreement shall be effective on the date hereof.
A-3
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
duly executed as of the date first above written.
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware corporation
BY: ______________________________________________
ITS:______________________________________________
BORROWER:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in
its individual capacity but solely as Owner Trustee
for the benefit of DIAMOND HEAD ASSOCIATES LLC, a
Delaware limited liability company
BY: _______________________________________________
ITS:______________________________________________
A-4
ASSIGNMENT OF LEASE
(N818AL)
THIS ASSIGNMENT OF LEASE (hereinafter referred to as the "Agreement"),
dated as of October 9th, 1996 by and between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner-Trustee ("Lessor"), and FINOVA CAPITAL CORPORATION, a Delaware
corporation ("Lender"),
WITNESSETH:
WHEREAS, pursuant to that certain Aircraft Lease Agreement dated as of
even date herewith (the "Lease"), between Lessor, as lessor, and Aloha
Airlines, Inc., a Hawaii corporation, as lessee ("Lessee"), Lessor has agreed
to lease to Lessee, among other things, one Boeing model 737-230 aircraft,
together with two Xxxxx & Xxxxxxx model JT8D-15 jet aircraft engines installed
thereon, more particularly described in EXHIBIT A attached hereto (the "Flight
Equipment"); and
WHEREAS, Lessor has obtained or will obtain financing from Lender in
order to finance the acquisition of the Flight Equipment; and
WHEREAS, in order to secure the performance by Lessor and Diamond Head
Associates LLC, a Delaware limited liability company ("Diamond Head") of their
joint and several obligations under that certain Secured Loan Agreement dated
as of August 13, 1996 by and among Lessor and Diamond Head (collectively
"Borrowers"), as borrowers, and Lender, as lender (the "Loan Agreement") as the
same may hereafter be amended, restated or otherwise modified, and the other
Loan Documents (as defined in the Loan Agreement), Lessor has agreed to, among
other things, assign to Lender all of Lessor's right, title and interest (but
none of its obligations) in and to the Lease, including, but not limited to,
all amounts payable by Lessee to Lessor under the Lease (subject, however, to
the express provisions of the Loan Agreement setting forth Lender's obligation,
under certain circumstances, to remit to Diamond Head a portion of certain
rental payments under the Lease following receipt of such payments by Lender),
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lender hereby agree as
follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. In this agreement, terms and expressions defined in the
foregoing recitals shall have effect as therein defined, and the following
terms and expressions shall have the meanings ascribed to such terms below,
"AGREEMENT" shall mean this agreement as from time to time amended
and supplemented in accordance with the terms hereof.
"AIRCRAFT" shall mean, collectively, the Airframe and the Engines.
"AIRFRAME" shall mean the airframe described in EXHIBIT A hereto,
any and all equipment furnished by Lessee and incorporated therein in
accordance with the terms of the Lease, and any and all parts (except Engines)
relating thereto.
"ASSIGNED PROPERTY" shall mean, collectively, the Lease and the
Earnings.
"BANKING DAY" shall mean a day on which federally chartered banking
institutions in Phoenix, Arizona are open for the transaction of business.
"CHATTEL MORTGAGE" shall mean the First Priority Purchase Money
Aircraft Chattel Mortgage and Security Agreement of even date herewith by and
between Lessor and Lender.
"CLOSING DATE" shall mean the date on which the Advance is made to
Lessor pursuant to the Loan Agreement.
"DEFAULT" shall mean in event which, with the passage of
time, or giving of notice, or both, would constitute an Event of
Default.
"EARNINGS" shall mean all moneys whatsoever from time to time due
or payable to Lessor arising out of the use or operation of the Aircraft
including (but without limiting the generality of the foregoing) all rental
payments, insurance proceeds, maintenance reserves and other monies due to
Lessor under the Lease or any other document relating thereto, including
compensation payable to Lessor in the event the Aircraft is requisitioned for
hire, damages for breach of any contract for the employment of the Aircraft
or any documents relating thereto, any amounts payable in consideration of
the termination or variation of any lease or charter or other such contract
and any other earnings whatsoever due or to become due to Lessor and any
proceeds of the foregoing but excluding in all cases Excluded Amounts.
"ENGINES" shall mean, collectively, each of the engines (having 750
or more rated take off horsepower or the equivalent thereof) described in
EXHIBIT A attached hereto and originally installed on the Airframe, whether
or not from time to time hereafter installed on the Airframe or installed on
other aircraft, (ii) any Replacement Engine, and (iii) any and all parts,
accessories and accessions to any of the foregoing.
"EVENT OF DEFAULT" shall mean the occurrence of any of the
following:
- 2 -
(a) Failure of Lessor to pay when due and payable any principal of or
interest on or other sum with respect to the Loan, the Note, the Other Note, if
any, or other sums which may become due hereunder or under any Loan Document,
whether by reason of stated maturity or due date, notice of prepayment,
cancellation, acceleration or otherwise, and such sum is not fully paid within
five (5) Banking Days after the due date thereof;
(b) (i) Any failure by Lessor to perform or cause to be performed
its obligations as set forth in this Agreement concerning (x) the preparation
or recordation of any document or instrument required by Lender for the
maintenance or perfection of any lien on the Mortgaged Property, or (y)
maintenance of any part of the Mortgaged Property, within five (5) Banking
Days after notice thereof from Lender, (ii) any lapse of, or failure to
maintain, insurance coverage on the Mortgaged Property required to be
maintained under the Loan Documents, or (iii) any failure by Lessor to
fulfill any other covenant or to perform any other obligation on its part to
be performed under any Loan Document to which it is a party and such failure
is not cured within thirty (30) days after the earlier of actual knowledge
thereof on the part of Lessor or receipt of notice thereof by Lessor;
PROVIDED, however, that if such failure is capable of being cured and cannot
with diligence be cured within thirty (30) days, then such failure shall not
constitute an Event of Default so long as Lessor is in good faith taking all
steps necessary, in the reasonable opinion of Lender, to diligently cure such
failure and such failure is cured within sixty (60) days of such failure;
(c) If any representation or warranty made by Lessor in this
Agreement, or any other Loan Document or any financial statement shall prove
to have been untrue, inaccurate or incomplete in any material respect at the
time when made or when effective and Lessor fails to do that which shall be
necessary in order that said representation of warranty shall be true,
accurate or complete within thirty (30) days after the earlier of actual
knowledge thereof on the part of Lessor or of receipt of notice thereof by
Lessor; or
(d) Any event of default under, and as defined in, any one or more of
the Loan Documents shall occur.
"EVENT OF LOSS" shall mean with respect to any item of the Flight
Equipment or any part thereof: (a) the actual, constructive, compromised,
arranged or agreed total loss thereof; (b) the destruction or damage beyond
repair of such Flight Equipment or part thereof, or such Flight Equipment or
part thereof being rendered or becoming permanently unfit for normal use for
any reason whatever; (c) the requisition for title, confiscation, restraint,
detention, forfeiture or any compulsory acquisition or seizure or requisition
for hire of such Flight Equipment of part thereof (other than a requisition
for hire for a temporary period not exceeding one hundred and eighty (180)
days) by or under the order of any Government (whether civil, military or DE
FACTO or public or local authority; or (d) the high-jacking, theft or
disappearance, resulting in loss of possession by Lessor or
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Lessee for a period of thirty (30) consecutive days or longer, of such Flight
Equipment or part thereof. Notwithstanding the foregoing, so long as the Lease
shall be in effect, an "Event of Loss" under this Agreement shall be deemed
to have occurred with regard to the Mortgaged Property, or any portion
thereof, if an "Event of Loss" as defined in the Lease (as in effect on the
Closing Date or as amended, provided such amendment is consented to by
Lender) has occurred with respect to such Mortgaged Property or portion
thereof.
"EXCLUDED AMOUNTS" shall mean (a) proceeds of public liability
insurance in respect of the Flight Equipment payable as a result of insurance
claims made, or losses suffered, by Lessor, any affiliate of Lessor or any
director, officer, employee, representative or agent of Lessor or any such
affiliate to the extent that such insurance claims made, or losses suffered,
do not apply to Lender, as assignee of Lessor, or to the Flight Equipment,
(b) proceeds of insurance which is maintained with respect to the Flight
Equipment by Lessor or any such affiliate and which insurance is not required
under the Loan Documents, (c) any interest paid or payable on any amounts
described in clauses (a) or (b) of this definition, (d) the proceeds from the
enforcement of the payment of any amount described in clauses (a) through (c)
of this definition, and (e) any amount payable by Lessee to Borrower pursuant
to the indemnity provisions of the Lease (except to the extent that such
payment relates to claims or damages suffered by or asserted against Lender
or the Mortgaged Property).
"FEDERAL AVIATION ACT" shall mean the Federal Aviation Act of 1958,
as amended and recodified, and the rules and regulations promulgated
thereunder, as in effect on the date of this Agreement, and as modified or
amended hereafter or any successor or substituted legislation at the time in
effect and applicable.
"FAA" shall mean the Federal Aviation Administration provided for in
the Department Of Transportation Act of 1966, as in effect on the date of this
Agreement and as modified or amended hereafter, or any successor or substituted
governmental authority at the time having jurisdiction over the Flight
Equipment.
"GOVERNMENT" shall mean any governmental body, or a political
subdivision thereof.
"LESSEE" shall mean Aloha Airlines, Inc., a Hawaii corporation.
"LIEN" shall mean any mortgage, pledge, lien, charge, encumbrance,
option, security interest or lease (including any conditional sale agreement,
equipment trust agreement, or other title retention agreement) or right or claim
of any person, whether voluntary or involuntary in nature.
"LOAN" shall mean the loan to be made to Lessor by Lender pursuant to
the Loan Agreement and the other Loan Documents.
-4-
"LOAN DOCUMENTS" shall mean, collectively this Agreement, the Loan
Agreement, the Notes and all other documents executed in connection with any
of the foregoing or contemplated thereby or the transactions related hereto
or thereto.
"NOTES" shall mean, collectively, (a) the Promissory Note in the
original principal amount of $6,800,000 of Lessor, as maker to the order of
Lender, as holder, dated as of the date hereof, and referred to in the Loan
Agreement as the "NXXX Note" and (b) the Promissory Note, in the original
principal amount of $6,800,000 of Lessor, as maker, to the order of Lender,
as holder, dated August 13, 1996, mid referred to in the Loan Agreement as
the N820 Note."
"SECURED OBLIGATIONS" shall mean all of the obligations of Lessor
and Diamond Head of payment and performance under this Agreement, the Loan
Agreement, the Notes and each of the other Loan documents
1.2 TERMS DEFINED IN UNIFORM COMMERCIAL CODE. All terms used herein which
are defined in the Arizona Uniform Commercial Code (the "Code" shall have the
meanings ascribed to such terms in the Code unless the context in which such
terms are used herein indicates otherwise
1.3 TERMS DEFINED IN CHATTEL MORTGAGE. All capitalized terms used in
this Agreement which are defined in the Chattel Mortgage shall, unless
otherwise defined herein, have the respective meanings ascribed to such terms
in the Chattel Mortgage, the applicable provisions of which Chattel Mortgage
are incorporated herein.
2. ASSIGNMENT.
To secure the payment and performance by Lessor and Diamond Head of the
Secured Obligations, Lessor hereby assigns, transfers, conveys and sets over
to Lender, and grants to Lender a security interest in (a) all of Lessor's
right, title and interest in, to and under the Lease (but none of its
obligations thereunder), including, without limitation, the right to collect
all rental payments, income, proceeds (including, but not limited to,
insurance proceeds), awards, revenues and other sums payable by Lessee to
Lessor pursuant to the Lease and which are not Excluded Amounts, (b) all of
Lessor's rights, if any, under Section 1110 of the Bankruptcy Code of the
United States or any subsequently enacted statutes of similar import (or any
laws of similar import applicable to the Lease of any other jurisdiction),
with respect to the Flight Equipment, (c) all right, title and interest of
Lessor to collect, hold and apply all security deposits, maintenance reserves
and similar amounts, as provided pursuant to the terms of the Lease
(including the right to receive, hold and draw upon the irrevocable standby
letter of credit issued to Lessor and delivered by Lessee in lieu of a cash
security deposit, pursuant to Section 5(D) of the Lease),and (d) all rights
of Lessor to enforce Lessor's rights and remedies under the Lease (other than
Lessor's rights to indemnification payments, but only if such payments are
Excluded Amounts). Lender agrees that it shall not exercise any rights
-5-
of Lender to enforce Lessor's rights and remedies under the Lease unless and
until an Event of Default (as hereinafter defined) has occurred and is
continuing.
3. NOTICE OF ASSIGNMENT.
On or prior to the Closing Date, Lessor shall have delivered to Lessee a
Notice of Assignment of Lease in the form attached hereto as EXHIBIT B, and
Lessor and Lessee shall each have executed such Notice of Assignment of Lease
and returned same to Lender. In the event that the Aircraft is subject to any
sublease by Lessee, Lessor shall, prior to such sublease becoming effective,
have delivered to the sublessee under such sublease a Notice of Assignment of
Lease in substantially the form attached hereto as EXHIBIT B and Lessor and
such sublessee shall each have executed such Notice of Assignment of Lease
and returned same to Lender.
4. APPLICATION OF EARNINGS.
The Earnings shall be applied and credited in favor of Lessor in accordance
with the repayment provisions of the Loan Agreement.
5. UNDERTAKINGS.
Lessor hereby covenants and agrees with Lender as follows:
5.1 DURATION. The undertakings and obligations of Lessor under this
Agreement shall continue in full force and effect from and after the date
hereof and until the payment and performance in full of the Secured
Obligations.
5.2 PERFORMANCE OF OBLIGATIONS. Lessor shall:
(a) perform its obligations under the Lease and each other agreement
made between Lessor and Lessee in respect of the Aircraft and will not
without the prior written consent of Lender rescind, cancel or otherwise
terminate the Lease or any of such other agreements other than as permitted
by the Loan Agreement;
(b) promptly notify Lender (i) of any default of which it has knowledge
by Lessor or Lessee under the Lease or any other agreement made in respect
of the Aircraft, and (ii) of the Lease or such other Agreement being
frustrated or the performance thereof becoming impossible or substantially
different from that contemplated originally by the parties thereto;
(c) institute and maintain all, such proceedings as may be necessary to
preserve or protect this Agreement as a valid grant of a security interest in
Lessor's rights in the Assigned Property and each other agreement made in
respect of the Aircraft;
-6-
(d) not, without the prior written consent of Lender, take or omit to
take any action the taking or omission of which might result in any material
adverse alteration of any of the Lease or any other agreement made in respect
of the Aircraft;
(e) not, without the prior written consent of Lender, agree to any
variation, modification or amendment in the terms of any of the Lease or any
other agreement made in respect of the Aircraft, or release any party thereto
from any of its obligations thereunder, or waive any breach of the
obligations of such party, or consent to any such act or omission of any such
party as would otherwise constitute such breach;
(f) not permit any sublease by Lessee of its interest in the Aircraft,
except as expressly permitted under the terms of the Lease as in effect on
the Closing Date;
(g) provide written notice to Lender of any sublease or purported sublease
of the Aircraft by Lessee, designating the name and address of such sublessee
and such other information as Lender may reasonably request; and
(h) cause the counterpart of the Lease marked "ORIGINAL" to be delivered to
Lender on the Closing Date.
6. EXERCISE OF REMEDIES.
6.1 REMEDIES. Following the occurrence and continuation of an Event of
Default under the Loan Agreement and at all times thereafter, Lender shall be
entitled:
(a) to exercise any and all rights of Lessor under or in connection with
the Lease or otherwise in respect of the Assigned Property, including without
limitation, any and all rights of Lessor to demand or otherwise require
payment of any amount under, or performance of, any provision of the Lease
(other than indemnification payments owing by Lessee to Lessor but only to
the extent that such payments are Excluded Amounts);
(b) on 20 days' prior written notice to Lessor of any public sale or the
date after which any private sale may occur, to sell to any person all or any
part of Lessor's right, title and interest in and to the Assigned Property
upon such terms as Leader shall determine;
(c) collect, receive or compromise and give a good discharge for any and
all monies and claims for monies due and to become due in respect of or under
the Lease; and
(d) otherwise put into force and effect all rights, powers and remedies
available to it, at law or otherwise, as assignee of, and holder of a
security interest in, the Assigned Property.
-7-
6.2 NO LIABILITY FOR EXERCISE. To the extent permitted by applicable law
Lender may exercise its power of sale hereunder in such a way as it in its
absolute discretion may determine and, to the extent permitted by applicable
law, Lessor hereby agrees that Lender shall not in any circumstances be
answerable for any loss occasioned by any such sale or resulting from any
postponement thereof.
6.3 NO LIABILITY AS ASSIGNEE. To the extent permitted by applicable law
Lender shall not be liable as assignee in respect of the Assigned Property to
account or be liable for any loss upon the realization thereof or for any
neglect or default of any nature whatsoever in connection therewith for which
an assignee of the Assigned Property may otherwise be liable as such.
6.4 LENDER'S AUTHORITY. Upon any sale by Lender of Lessor's right, title
and interest in and to the Assigned Property, or any part thereof, the
purchaser shall not be bound to see or inquire whether the power of sale of
Lender has arisen, the sale shall be deemed for all purposes hereof to be
within the power of Lender and the receipt of Lender for the purchase money
shall effectively discharge the purchaser who shall nor be concerned with
the manner of application of the proceeds of sale or be in any way answerable
therefore.
7. POWER OF ATTORNEY.
Lessor hereby irrevocably appoints and constitutes Lender as its true
and lawful attorney-in-fact with full power (in the name of and on behalf of
Lessor or otherwise) following the occurrence and continuation of an Event of
Default, to demand, compound and give acquittance for any monies or claims
for monies due or to become due, to endorse any check or other instrument or
order in connection therewith and to file any claims or take any action or
institute any proceedings which may seem to Lender to be necessary or
advisable and otherwise to do any and all things which Lessor itself could do
in relation to the Assigned Property. The exercise of such power by Lender
shall not put any person dealing with Lender on inquiry as to whether any
such event has happened nor shall any person be in any way affected by notice
that no such event has happened and the exercise by Lender of such power
shall be conclusive evidence of its right to exercise it.
8. LIABILITY UNAFFECTED BY ASSIGNMENT.
Lessor agrees, to the extent permitted by law, that, notwithstanding the
assignment to Lender of, and the grant to Lender of a security interest in,
the Assigned Property, (a) Lender shall not be obliged to make any inquiries
as to the nature or sufficiency of any payment received by Lender under the
Assigned Property or to make any claim or take any other action to collect
any moneys or to enforce any rights and benefits assigned to Lender or to
which Lender may at any time he entitled thereunder, and (b) Lessor shall
remain liable to perform all the obligations of Lessor under the Lease and
Lender shall be under no obligation of
-8-
any kind whatsoever (except obligations with respect to disbursement of
maintenance reserves and insurance proceeds (to the extent such amounts come
into the possession of Lender) in accordance with the terms of the Lease as
in effect on the Closing Date or as amended, provided such amendment is
consented to by Lender) in respect thereof, and Lender shall have no
liability whatsoever in the event of any failure by Lessor to perform its
obligations thereunder.
9. CONTINUING SECURITY.
This Agreement and the assignment and security interest granted herein
shall continue in full force and effect until performance in full of the
Secured Obligations.
10. FURTHER ASSURANCES.
Lessor undertakes that it will, from time to time on being required to
do so by Lender, at the cost and expense of Lessor, do, and cause to be done,
all such further acts and/or execute or procure the execution of all such
further documents in a form satisfactory to Lender as Lender may reasonably
consider necessary for giving full effect to this Agreement or securing to
Lender the full benefit of the rights, powers and remedies conferred upon
Lender in this Agreement.
11. FEE AND EXPENSES.
Lessor shall upon Lender's demand, pay to or reimburse Lender for all
reasonable expenses of Lender incurred in connection enforcement of this
Agreement and the transactions contemplated hereby (including, without
limitation, all reasonable expert witness fees and reasonable legal fees and
disbursements of Lender's counsel, including special FAA counsel), and in
connection with any actual or proposed amendments hereof and in connection
with the preservation and/or enforcement of any Lender's rights and interest
in the Assigned Property and in any rights granted to Lender hereunder.
12. NOTICES.
Every notice or demand under this Agreement shall be (a) in writing and
may be given or made by registered mail, return receipt requested or by
internationally recognized overnight courier service, (b) deemed to have been
received in the case of an internationally recognized overnight courier
service or registered mail, upon acknowledgment of receipt or as of the date
on which receipt of such notice delivered by overnight courier or registered
mail is refused or such courier or the U.S. Postal Service advises that such
letter is not deliverable at the address designated in this Section, and (c)
sent, in the case of overnight courier or registered mail, to Lender or to
Lessor, as applicable, at the following addresses, or to such other address
as Lessor or Lender may designate for itself by notice to the other
conforming to the requirements for notice set forth in this Section:
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If to Lessor: First Security Bank, National Association
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Corporate Trust
Department
with copies to:
Diamond Head Associates LLC
0000 Xxxxx Xxxxx Xxxx
Xxxx #0
Xxxxxxx Xxxxxxx 00000
Attention: Manager
and: Xxxxxxx X. Xxxxx, Esq.
00 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
If to Lender: FINOVA Capital Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Vice President-Law-Transportation
Finance
and
FINOVA Capital Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Vice President-Operations
Management-Transportation Finance
A copy of all notices sent to Lender shall be sent to Xxxxxxx, Xxxx & Xxxxxx,
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, Attention:
Xxxx X. Xxxxxxx, Esq.
13. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement (including all Exhibits hereto) embodies the entire
agreement and understanding between Lessor and Lender relating to the subject
matter hereof and supersedes all prior agreements and understandings relating
hereto and none of the parties hereto shall he bound by or charged with any
oral or written agreements, representations, warranties, statements, promises
or understandings not specifically set forth herein or therein. This
Agreement may not
-10-
be changed and no right granted or obligation imposed hereunder may be
waived, except pursuant to an instrument in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
14. GOVERNING LAW: JURISDICTION AND VENUE.
(A) THE OBLIGATIONS OF LESSOR HEREUNDER ARE TO BE PERFORMED IN, AND THIS
AGREEMENT IS EXECUTED, DELIVERED AND ACCEPTED IN, AND THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE OF ARIZONA, AND BY EXECUTION HEREOF LESSOR, AND BY ACCEPTANCE HEREOF
LENDER, EACH AGREES THAT SUCH LAWS AND DECISIONS OF THE STATE OF ARIZONA
SHALL GOVERN THIS AGREEMENT NOTWITHSTANDING THE FACT THAT THERE MAY BE OTHER
JURISDICTIONS WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
(B) LESSOR AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY LESSOR
AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA
COUNTY, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR,
IF LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY
COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT
HAS JURISDICTION. LESSOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN ANY OF
SUCH COURTS, AND HEREBY AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED
TO LESSOR AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO THE
FURTHER PROVISIONS OF THIS AGREEMENT. LESSOR WAIVES ANY CLAIM THAT PHOENIX,
ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED ON LACK OF VENUE. SHOULD LESSOR, AFTER BEING SO SERVED, FAIL TO
APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, THEN
LESSOR SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED
BY LENDER AGAINST LESSOR AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR LESSOR SET
FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY
LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY LENDER,
OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND
LESSOR HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR
ACTION.
-11-
15. WAIVER OF JURY.
LESSOR AND LENDER IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT.
16. ASSIGNMENT, SUCCESSORS AND ASSIGNS.
Lender may assign or obtain participations with other Lenders in regard
to its rights hereunder and under the Note and any other Loan Document and in
respect of the Loan, PROVIDED only that no such assignment or participation
shall impose any greater obligation on Lessor than set forth herein or
therein. Lessor shall not assign any rights under this Agreement nor shall
any of Lessor's duties hereunder be assigned or delegable without the prior
written Consent of Lender. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person or entity, other than the
parties hereto and their permitted successors in interest and permitted
assigns, any rights or remedies under or by reason of this Agreement unless
expressly herein stated to the contrary. All covenants, representations,
warranties and agreements of the parties contained herein shall, subject to
the provisions of the preceding sentence, be binding upon and inure to the
benefit of their respective successors and permitted assigns.
17. CAPTIONS AND SECTION HEADINGS: CONSTRUCTION.
Captions and paragraph headings used herein are for convenience only and
are not a part of this Agreement and shall not he used in construing it. This
Agreement and all documents executed in connection herewith shall be construed
without regard to the identity of the party which prepared the same, and no
presumption shall arise as a result thereof.
18. SEVERABILITY.
In the event that any one of more of the provisions of this Agreement
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
19. TIME OF THE ESSENCE.
Time is of the essence with respect to all of the payment and
performance obligations of Lessor hereunder. Time is of the essence with
respect to all of the performance obligations of Lender hereunder.
-12-
20. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall constitute an original and, when taken together, all of which shall
constitute one and the same Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-13-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers as of the day and year first
above written.
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
BY: /s/ [Illegible]
__________________________________
ITS: VICE PRESIDENT
__________________________________
LESSOR:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
in its individual capacity but solely as Owner
Trustee for the benefit of DIAMOND HEAD
ASSOCIATES LLC, a Delaware limited liability
company
BY: ____________________________________
ITS:____________________________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers as of the day and year first
above written.
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware
corporation
BY:
____________________________________
ITS:
___________________________________
LESSOR:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
in its individual capacity but solely as Owner
Trustee for the benefit of DIAMOND HEAD
ASSOCIATES LLC, a Delaware limited liability
company
BY: /s/ [Illegible]
____________________________________
ITS VICE PRESIDENT
____________________________________
EXHIBIT A
to
ASSIGNMENT OF LEASE
______________________________________________________________________________
DESCRIPTION OF AIRFRAME AND ENGINES
______________________________________________________________________________
The "Flight Equipment" as described in the foregoing
Assignment of Lease shall consist of the following:
(a) One (1) airframe, identified as follows:
MANUFACTURER: The Boeing company
MANUFACTURER'S
MODEL NUMBER: 737-230
FAA REGISTRATION
NUMBER: N818AL
MANUFACTURER'S
SERIAL NUMBER: 22117
together with all appliances, parts, equipment and accessories thereto
belonging, by whomsoever manufactured, now owned by Borrower or
hereafter acquired by Borrower and installed in or appurtenant to said
airframe (collectively, the "Airframe"); and
(b) Two (2) Xxxxx & Xxxxxxx model number JT8D-15 jet aircraft engines
bearing manufacturer's serial numbers 708305 and 708373, each of the two
engines having 750 or more rated take-off horsepower or the equivalent
thereof, together with all appliances, parts, equipment and accessories
thereto belonging, by whomsoever manufactured, now owned by Borrower or
hereafter acquired by Borrower and installed in or appurtenant to said
engines (any one of the foregoing, an "Engine" and, all of the foregoing,
collectively, the "Engines").
EXHIBIT B
to
ASSIGNMENT OF LEASE
______________________________________________________________________________
FORM OF NOTICE OF ASSIGNMENT OF LEASE
______________________________________________________________________________
DUPLICATE ORIGINAL
LEASE SUPPLEMENT NO. 1
LEASE SUPPLEMENT NO. 1, dated October 9, 1996, between ALOHA AIRLINES,
INC., a Hawaii corporation ("LESSEE") and FIRST SECURITY BANK, N.A., a national
banking association, not in its individual capacity but solely as owner trustee
("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain Aircraft Lease
Agreement dated as of October 9, 1996 (herein called the "Lease Agreement" and
the defined terms therein being hereinafter used with the same meaning). The
Lease Agreement provides for the execution and delivery from time to time of
Lease Supplements, each substantially in the form hereof, for the purpose of
leasing the Aircraft under the Lease Agreement as and when delivered to the
LESSEE in accordance with the terms thereof.
The Lease Agreement relates to the aircraft and engines described below,
and a counterpart of the Lease Agreement is attached hereto and made a part
hereof and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document.
NOW THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement,
and LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230 aircraft (the "Delivered Aircraft"),
which Delivered Aircraft as of the date hereof consists of the following:
(i) One Boeing Model 737-230 Airframe, bearing U.S. registration number
N818AL; Manufacturer's serial no.22117; and
(ii) Two Xxxxx & Whitney Model JT8D-15 engines, bearing manufacturer's
serial nos.708305 and 708373, respectively, (each of which engines has 750 or
more rated takeoff horsepower or the equivalent thereof).
2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
3. The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on Oct 8, 2003.
4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and. any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.
5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each
Engine installed thereon have been accepted by LESSEE for all purposes hereof
and of the Lease Agreement, as being in the condition that such Delivered
Aircraft and Engines are required to be in pursuant to the terms of the Lease
Agreement.
6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
(balance of page intentionally left blank)
2
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement to
be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, N.A., A
NATIONAL BANKING ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS 0WNER TRUSTEE
By: /s/ [ILLEGIBLE]
------------------------------------
Title: VICE PRESIDENT
----------------------------------
LESSEE
ALOHA AIRLINES, INC.
By: ____________________________________
Title: _________________________________
By: ____________________________________
Title: _________________________________
3
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement to
be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, N.A., A
NATIONAL BANKING ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS 0WNER TRUSTEE
By: ____________________________________
Title: _________________________________
LESSEE
ALOHA AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------------
Title: SR. VICE PRESIDENT FINANCE &
---------------------------------
PLANNING AND CFO
By: /s/ [ILLEGIBLE]
------------------------------------
Title: STAFF VICE PRESIDENT - FINANCE
---------------------------------
& CONTROLLER
3
RECORDED
Federal Aviation Administration
Date 1-27-97 Time 8:48 am
--------- ---------
Conveyance Number Q59492
-----------
By /s/ [Illegible]
--------------------
Conveyances Examiner
LEASE TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement described
in the attached Appendix has terminated with respect to the Xxxxx & Whitney
model JT8D-15 aircraft engines with manufacturer's serial number 708305 and
708373 and further certify that said aircraft engines are no longer subject to
the terms thereof.
Dated this 3rd day of January, 1997.
LESSOR: LESSEE:
First Security Bank, National Association, Aloha Airlines, Inc.
as Owner Trustee
By: /s/ [ILLEGIBLE] By: _______________________________
-------------------------------
Title: Vice President Title: ____________________________
----------------------------
By: _______________________________
Title: ____________________________
LEASE TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement described
in the attached Appendix has terminated with respect to the Xxxxx & Xxxxxxx
model JT8D-15 aircraft engines with manufacturer's serial number 708305 and
708373 and further certify that said aircraft engines are no longer subject to
the terms thereof.
Dated this 3rd day of January, 1997.
LESSOR: LESSEE:
First Security Bank, National Association, Aloha Airlines, Inc.
as Owner Trustee
By: _______________________________ By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Title: ____________________________ Title: SR. VICE PRESIDENT FINANCE &
----------------------------
PLANNING AND CFO
By: /s/ [ILLEGIBLE]
--------------------------------
Title: STAFF VICE PRESIDENT -
----------------------------
FINANCE & CONTROLLER
APPENDIX
Aircraft Lease Agreement dated as of October 9, 1996, by and between
First Security Bank, National Association, as Owner Trustee, lessor, and Aloha
Airlines, Inc. as lessee, as supplemented by Lease Supplement No. 1 dated
October 9, 1996, recorded by the Federal Aviation Administration on
Oct. 15, 1996, as Conveyance No. ZZ013177.
DUPLICATE ORIGINAL
LEASE SUPPLEMENT NO. 2
dated as of
January 3, 1997
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT
SOLELY AS OWNER TRUSTEE,
LESSOR
and
ALOHA AIRLINES, INC.,
LESSEE
RECORDED
Federal Aviation Administration
Date 1-27-97 Time 8:48 am
--------- ---------
Conveyance Number Q59494
-----------
By /s/ [Illegible]
--------------------
Conveyances Examiner
LEASE SUPPLEMENT NO. 2
LEASE SUPPLEMENT NO. 2, dated January 3, 1997, between ALOHA AIRLINES,
INC., a Hawaii corporation ("LESSEE") and FIRST SECURITY BANK, N.A., a national
banking association, not in its individual capacity but solely as owner trustee
("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain Aircraft Lease
Agreement dated as of October 9, 1996 (herein called the "Lease Agreement" and
the defined terms therein being hereinafter used with the same meaning). The
Lease Agreement provides for the execution and delivery from time to time of
Lease Supplements.
The Lease Agreement relates to the aircraft and engines described therein,
and a counterpart of the Lease Agreement, attached to and made a part of Lease
Supplement No. 1 dated October 9, 1996 to the Lease Agreement, has been recorded
by the FAA on Oct 15, 1996 as one document and assigned Conveyance No. ZZ013177.
NOW THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, as of
the date hereof, the following described engines (the "Replacement Engines"),
which consist of the following:
Two Xxxxx & Xxxxxxx Model JT8D-9A engines, bearing manufacturer's serial
nos. 666798 and 666847, respectively, (each of which engines has 750 or more
rated takeoff horsepower or the equivalent thereof).
2. LESSEE hereby confirms to LESSOR that the Replacement Engines have been
accepted by LESSEE for all purposes hereof and of the Lease Agreement, as being
in the condition that such Replacement Engines are required to be in pursuant to
the terms of the Lease Agreement. Each of the Replacement Engines shall for all
purposes hereof and of the Lease Agreement be deemed to be an "Engine" as
defined in the Lease Agreement.
3. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
1
4. This Lease Supplement No. 2 shall be effective as of the date hereof.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement No.
2 to be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, N.A.
NATIONAL BANKING
ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
By: /s/ [ILLEGIBLE]
------------------------------------
Title: VICE PRESIDENT
---------------------------------
LESSEE
ALOHA AIRLINES, INC.
By: ____________________________________
Title: _________________________________
By: ____________________________________
Title: _________________________________
2
4. This Lease Supplement No. 2 shall be effective as of the date hereof.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement No.
2 to be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, N.A.
NATIONAL BANKING
ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
By: ____________________________________
Title: _________________________________
LESSEE
ALOHA AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------------
Title: SR. VICE PRESIDENT FINANCE &
---------------------------------
PLANNING AND CFO
By: /s/ [ILLEGIBLE]
------------------------------------
Title: STAFF VICE PRESIDENT - FINANCE
---------------------------------
& CONTROLLER
2
RECORDED
Federal Aviation Administration
Date 7-25-97 Time 11:20
--------- ------
Conveyance Number EE014053
------------
By /s/ [Illegible]
--------------------
Conveyances Examiner
LEASE SUPPLEMENT NO. 3
LEASE SUPPLEMENT NO. 3, dated July 9, 1997 between ALOHA AIRLINES, INC., a
Delaware corporation ("LESSEE") and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity but solely as owner
trustee ("Lessor")
LESSOR AND LESSEE have heretofore entered into that certain Aircraft Lease
Agreement dated as of October 9, 1996 (herein called the "Lease Agreement") and
the defined terms therein being hereinafter used with the same meaning). The
Lease Agreement provides for the execution and delivery from time to time of
Lease Supplements.
The Lease Agreement relates to the aircraft and engines described therein,
and a counterpart of the Lease Agreement, attached to and made a part of
Lease Supplement No. 1 dated October 9, 1996 to the Lease Agreement, has been
recorded by the Federal Aviation Administration (the "FAA") on October 15, 1996
as one document and assigned Conveyance No. ZZ013177, as further supplemented
by Lease Supplement No. 2 dated January 3, 1997 recorded by the FAA on
January 27, 1997 as Conveyance No. Q59494, and as amended by First Amendment to
Assignment of Lease (N818) dated as of April 30, 1997 recorded by the FAA on
May 2, 1997 as Conveyance No. P10680.
NOW, THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement,
and LESSEE hereby accepts and leases from LESSOR under the Lease Agreement,
as of the date hereof, the following described engine (the "Replacement
Engine"), which consist of the following:
One Xxxxx & Xxxxxxx Model JT8D-9A engine, bearing manufacturer's
SERIAL NO. 666682 (which engine has 750 or more rated takeoff
horsepower or the equivalent thereof).
2. LESSEE hereby confirms to LESSOR that the Replacement Engine has been
accepted by LESSEE for all purposes hereof and of the Lease Agreement, as
being in the condition that such Replacement Engine is required to be in
pursuant to the terms of the Lease Agreement. The Replacement Engine shall
for all purposes hereof and of the Lease Agreement be deemed to be an
"Engine" as defined in the Lease Agreement.
3. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
4. This Lease Supplement No. 3 shall be effective as of the date hereof.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK)
2
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
No. 3 to be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its
individual capacity but solely
as Owner Trustee
By /s/ [ILLEGIBLE]
---------------------------------------
Its Vice President
LESSEE
ALOHA AIRLINES, INC.
By _______________________________________
Its
By _______________________________________
Its
3
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
No. 3 to be duly executed as of the day and year first above written.
LESSOR
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its
individual capacity but solely
as Owner Trustee
By _______________________________________
Its
LESSEE
ALOHA AIRLINES, INC.
By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------
XXXXXX X. XXXXXXXXX
Its SR. Vice President
Finance & Planning and CFO
By /s/ Xxxxx X. Xxxx
---------------------------------------
XXXXX X. XXXX
Its Vice President Planning
& Development
3
[ALOHA AIRLINES LETTERHEAD]
________________________________________________________________________________
November 28, 2001.
Mr. Xxxxx Xxxxxxx
Unicapital Air Group
VIA FACSIMILE
(000) 000-0000
Re: Aircraft N818AL, man 22117 and N820AL, man 22138
Dear Xx. Xxxxxxx:
This letter agreement sets forth our agreement to amend that certain Aircraft
Lease Agreement dated as of Auqust 13, 1996 between Xxxxx Fargo Bank Northwest,
N. A., the First Security Bank, National Association, not in its individual
capacity but solely as owner trustee, as lessor ("Lessor"), and Aloha Airlines
Inc. as lessee ("Lessee"), with respect to one (1) Boeing Model 737-730ADV
Aircraft bearing manufacturer's serial no. 22138 and U.S. registration no.
N820AL, as amended (the "N820AL Lease") and that certain Aircraft Lease
Agreement dated as of October 9, 1996 between Lessor and Lessee, with respect to
one (1) Boeing model 737-730 Aircraft bearing manufacturer's serial no, 22117
and U.S. registration no. N818AL, as amended (the N818AL Lease") (collectively
the "Lease Agreements"), and the agreement of Unicapital Air Group to cause the
Lessor to so amend the Lease Agreements as soon as practicable.
1) With respect to the N820AL Lease:
[This provision has been omitted as confidential information and
separately filed with the Commission]
All capitalized terms not defined in this paragraph no. 1 shall be as set
forth in the N820AL Lease.
Mr. Xxxxx Xxxxxxx
November 28, 2001
Page 2
2) With respect to the N818AL Lease:
[This provision has been omitted as confidential information and
separately filed with the Commission]
All capitalized terms not defined in this paragraph no. 2 shall be as
set forth in the N818AL Lease.
AGREED AND ACCEPTED:
ALOHA AIRLINES INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------------
Its: Exec. Vice President & CFO
-------------------------------
By: /s/ Xxxxx X. Xxxx
------------------------------------
Its: Sr. Vice President
-------------------------------
Planning & Business Development
UNICAPITAL AIR GROUP
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Its: Vice President
-------------------------------
ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT
THIS ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT ("Assignment"), dated as
of ________________, 1996 is between FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely as Owner Trustee ("Lessor"), ALOHA
AIRLINES, INC., a Hawaii Corporation ("Assignor"), ALOHA AIRLINES, INC., a
Delaware corporation ("Assignee") and FINOVA Capital Corporation ("Lender").
RECITALS
WHEREAS, Lessor and Assignor entered into that certain Aircraft Lease
Agreement dated as of October 9, 1996, as it may be supplemented or amended from
time to time (the "Lease"), pursuant to which Assignor leased from Lessor one
(1) Boeing model 737-230ADV aircraft bearing manufacturer's serial number 22117
and registration xxxx N818AL (the "Aircraft");
WHEREAS, Lessor and Lender entered into that certain Assignment of Lease
dated as of October 9, 1996, as it may be supplemented or amended from time to
time ("Lessor's Assignment") pursuant to which Lessor transferred and assigned
to Lender, and granted Lender a first security interest in, all of Lessor's
present and future right, title, and interest in, to, and under the Lease.
WHEREAS, Lessor, Assignor and Lender entered into that certain Notice of
Assignment of Agreement dated as of October 9, 1996 ("Notice of Assignment")
pursuant to which Assignor consented to Lessor's Assignment.
WHEREAS, effective ________________, 1996, Assignor merged with Assignee,
and Assignee emerged as the surviving entity and the successor in interest to
Lessee.
AGREEMENT
NOW, THEREFORE, in consideration of these presents and for other valuable
consideration, the parties agree as follows.
1. CERTAIN DEFINED TERMS. Unless otherwise defined herein or the context
otherwise requires, all capitalized terms used in this Assignment shall have the
respective meanings assigned to them in the Lease.
2. ASSIGNMENT. As of ________________, 1996 (the "Effective Date"), the
Assignor hereby sells, assigns, transfers and conveys to Assignee all of the
Assignor's right, title and interest in and to the Lease, as if Assignee were
the original party to the Lease.
3. ASSUMPTION BY ASSIGNEE. Assignee hereby accepts the foregoing sale,
assignment, transfer and conveyance of all of the Assignor's right, title,
interest, obligations and liabilities in, to and under the Lease to the Assignee
and, as of the Effective Date, agrees to assume and to be bound by all the terms
of, and to undertake all of the obligations of the Assignor contained in, the
Lease, including without limitation, all such obligations existing at or prior
to, or attributable to acts or events occurring prior to the Effective Date.
4. LESSOR AND LENDER CONSENT.
(a) Pursuant to Section 22(D) of the Lease and Section 1 of the
Notice of Assignment, Lessor and Lender acknowledge and consent to the foregoing
sale, assignment, transfer and conveyance of all of the Assignor's right, title,
interest, obligations and liabilities in, to and under the Lease to the Assignee
under this Assignment, and acknowledge the rights and obligations of the
Assignee described in this Assignment.
(b) Lessor and Lender further acknowledge and agree that from and
after the Effective Date Assignee shall be deemed the "Lessee" for all purposes
of the Lease and each reference in the Lease to the Assignor as "Lessee" shall
be deemed after the Effective Date for all purposes to refer to the Assignee and
that, from and after the Effective Date Lessor will perform its obligations
under the Lease, in all respects as if Assignee were the original party to the
Lease as "Lessee" thereunder.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNEE. Assignee
represents and warrants as follows:
(a) Assignee is a corporation duly organized in existing in
good standing under the laws of the state of Delaware and has the corporate
power and authority to carry on its business as presently conducted and to
perform its obligations under this Assignment.
(b) Assignee is not a Governmental Entity or government owned or
controlled and neither Assignee or its properties is immune from the
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) nor does it have the defense of sovereign immunity or similar
defense available to it in any legal action or proceeding.
(c) Assignee is a citizen of the United States (as defined in 40102
of Title 49 of the United States Code) holding an air carrier operating
certificate issued by the Secretary of
Transportation of the United States pursuant to chapter 447 of Title 49 of the
United States Code for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo.
(d) This Assignment has been duly authorized by all necessary
corporate action on the part of Assignee, does not require any approval of the
stockholders of Assignee (or if such approval is required, such approval has
been obtained), and neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby nor compliance by Assignee
with any of the terms and provisions hereof will contravene any Law applicable
to Assignee or result in any breach of, or constitute any default under, or
result in the creation of, any lien, charge or encumbrance upon any property of
Assignee under any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, corporate charter or
by-law, or other agreement or instrument to which Assignee is a party or by
which Assignee or its properties or assets may be bound or affected.
(e) Assignee has received or has complied with every necessary
consent, approval, order, or authorization of, or registration with, or the
giving of prior notice to, any Governmental Entity having jurisdiction with
respect to the use and operation of the Aircraft and the execution and delivery
of this Assignment of the validity and enforceability hereof.
(f) This Assignment has been duly entered into and delivered by
Assignee and constitutes a valid, legal and binding obligation of Assignee,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, reorganization, moratorium or other similar Laws and by
general principles of equity, whether considered in a proceeding at Law or in
equity.
6. GOVERNING LAW. This Assignment shall governed by the Laws of the
State of New York.
IN WITNESS WHEREOF, the undersigned parties have caused this Assignment,
Assumption, Amendment and Consent to be duly executed and delivered by their
duly authorized officers as of the date first written above.
ASSIGNOR: ALOHA AIRLINES, INC., a Hawaii
Corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Name: XXXXXX X. XXXXXXXXX
--------------------------------------
Title: SR. VICE PRESIDENT FINANCE &
--------------------------------------
PLANNING AND CFO
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name: XXXXX X. XXXX
--------------------------------------
Title: VICE PRESIDENT PLANNING & DEVELOPMENT
--------------------------------------
ASSIGNEE: ALOHA AIRLINES, INC., a
Delaware Corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Name: XXXXXX X. XXXXXXXXX
--------------------------------------
Title: SR. VICE PRESIDENT FINANCE &
--------------------------------------
PLANNING AND CFO
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name: XXXXX X. XXXX
--------------------------------------
Title: VICE PRESIDENT PLANNING & DEVELOPMENT
--------------------------------------
LESSOR: FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its
individual capacity, but
solely as Owner Trustee
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
LENDER: FINOVA CAPITAL CORPORATION
BY: /s/ Xxxxxx X. XxXxxxxxx
----------------------------------------
Name: XXXXXX X. XXXXXXXXX
--------------------------------------
Title: VICE PRESIDENT
-------------------------------------
0 0 0 0 0 0 0 1 1 1 9
RECORDED
Federal Aviation Administration
Date 7-25-97 Time 11
--------- -----------
Conveyance Number EE014050
-------------
By
-----------------------------
PARTIAL TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement described in
the attached Appendix has terminated with respect to the Xxxxx & Xxxxxxx model
JT8D-9A aircraft engine with manufacturer's serial number 666798 and further
certify that said aircraft engine is no longer subject to the terms thereof.
Dated this 9th day of July, 1997.
LESSOR: LESSEE:
FIRST SECURITY BANK, ALOHA AIRLINES, INC.
NATIONAL ASSOCIATION, not
in its individual capacity
but solely as Owner Trustee By
------------------------------
Its
BY [ILLEGIBLE] By
------------------------ ------------------------------
Its Vice President Its
PARTIAL TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement described in
the attached Appendix has terminated with respect to the Xxxxx & Whitney model
JT8D-9A aircraft engine with manufacturer's serial number 666798 and further
certify that said aircraft engine is no longer subject to the terms thereof.
Dated this 9th day of July, 1997.
LESSOR: LESSEE:
FIRST SECURITY BANK, ALOHA AIRLINES, INC.
NATIONAL ASSOCIATION, not
in its individual capacity
but solely as Owner Trustee By /s/ Xxxxxx X.Xxxxxxxxx
-----------------------------
XXXXXX X. XXXXXXXXX
Its SR. Vice President
Finance & Planning and CFO
By By /s/ Xxxxx X. Xxxx
---------------------------- -----------------------------
Its XXXXX X. XXXX
Its Vice President Planning
& Development
0 0 0 0 0 0 0 1 1 5 1
APPENDIX
Aircraft Lease Agreement dated as of October 9, 1996, by and between First
Security Bank, National Association, not in its individual capacity but solely
as owner Trustee, as lessor, and Aloha Airlines, Inc., as lessee, as
supplemented by Lease Supplement No. 1 dated as of October 9, 1996, filed
together and recorded by the Federal Aviation Administration (the "FAA") on
October 15, 1996 as Conveyance No. ZZ013177; and further supplemented by Lease
Supplement No. 2 dated as of January 3, 1997, as recorded by the FAA on January
27, 1997, as Conveyance No. Q59494; as amended by First Amendment to Assignment
of Lease (N818) dated as of April 30, 1997, as recorded by the FAA on May 2,
1997, as Conveyance No. 91068.
