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ENGINE LEASE NOVATION AGREEMENT
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This ENGINE LEASE NOVATION AGREEMENT (this "Novation")
dated July __, 1997, is by and among (i) FIRST SECURITY
BANK, NATIONAL ASSOCIATION, not in its individual capacity (except as otherwise
specified), but solely as Owner Trustee (the "New Lessor") under a Trust
Agreement dated as of June 15, 1997 between itself and KG Aircraft Leasing Co.,
Ltd., (ii) TACA INTERNATIONAL AIRLINES, S.A., a corporation organized and
existing under the laws of El Salvador ("Original Lessor") and (iii) WESTERN
PACIFIC AIRLINES, INC., a corporation organized and existing under the laws of
Delaware ("Lessee").
RECITALS
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WHEREAS, Original Lessor and Lessee are parties to that certain Engine
Lease Agreement dated as of May 21, 1996 (as supplemented and amended, the
"Engine Lease"), which was recorded by the FAA on July 31, 1996 and assigned
Conveyance No. BB24108; and
WHEREAS, pursuant to the Engine Lease, Original Lessor has leased to
Lessee, as lessee, one (1) CFM International, Inc. engine, Model CFM56-3B2,
bearing manufacturer's serial number 721150 (the "Engine") together with that
certain PF Industries, Inc. model PF71-169 engine stand bearing serial number
0001B; and
WHEREAS, on the date that the Engine is sold (the "Closing Date") by the
Original Lessor to the New Lessor, Original Lessor desires to novate certain of
its rights and obligations under the Engine Lease to the New Lessor, and the New
Lessor desires to assume such rights and obligations and in connection with such
novation and simultaneously therewith, the New Lessor and the Lessee intend to
enter into an Amended and Restated Engine Lease Agreement (the "Amended and
Restated Engine Lease"); and
Section 1. DEFINITIONS. Capitalized terms used herein and not defined
otherwise herein shall have the meanings specified in the Engine Lease or by
reference therein.
Section 2. NOVATION OF ENGINE LEASE. Subject to the terms and conditions of
this Novation, the parties hereto agree that from and after the Closing Date:
(a) The Original Lessor assigns to New Lessor all of Original Lessor's
right, title and interest, and all of the covenants, undertakings, duties,
liabilities and obligations of the Original Lessor in and under the Engine Lease
arising on or after the Closing Date.
(b) The Original Lessor releases and discharges the Lessee from the
performance of any and all of its covenants, undertakings, obligations, duties
and liabilities to the Original Lessor under the Engine Lease to the extent the
same arise or accrue on or after the Closing Date.
(c) The Lessee releases and discharges the Original Lessor from the
Original Lessor's covenants, undertakings, obligations, duties and liabilities
to Lessee under the Engine Lease to the extent the same arise or accrue on or
after the Closing Date.
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(d) The New Lessor agrees with the Lessee and the Original Lessor to assume
all of the right, title and interest, and all of the covenants, undertakings,
duties, liabilities and obligations of the Original Lessor in and under the
Engine Lease, other than the obligation to Cauff, Xxxxxxx & Xxxxx Aviation, Inc.
as provided in Section 3(c) thereof, arising on or after the Closing Date and
hereby undertakes to observe and perform in favor of the Lessee at all times on
or after the Closing Date, all of the covenants, undertakings, duties,
obligations and liabilities originally made, given or assumed by the Original
Lessor under or pursuant to the Engine Lease, including, without limitation, any
and all obligations in respect of the Security Deposit and the Engine Reserves.
(e) The Lessee agrees with the New Lessor to observe and perform in favor
of and for the benefit of the New Lessor all of the covenants, undertakings,
duties, obligations and liabilities originally made, given or assumed by the
Lessee in favor of the Original Lessor under or pursuant to the Engine Lease
arising on or after the Closing Date.
(f) The Lessee hereby expressly consents to and accepts the assumption by
the New Lessor of the Original Lessor's right, title, interest, covenants,
undertakings, obligations, duties and liabilities under the Engine Lease arising
or accruing on or after the Closing Date.
(g) The Lessee agrees that it will not assert against the Original Lessor
any claim or defense that it may have against the New Lessor under the Amended
and Restated Engine Lease to the extent the same is attributable to any act or
event occurring on or after the Closing Date.
(h) The Lessee agrees that it will not assert against the New Lessor any
claim or defense that it may have against the Original Lessor under the Engine
Lease to the extent the same is attributable to any act or event occurring prior
to the Closing Date.
(i) The Lessee, the New Lessor and the Original Lessor accordingly agree
that
(i) from and after the Closing Date, the Amended and
Restated Engine Lease constitutes an agreement
between the New Lessor (as lessor) and the Lessee
(as lessee) on the terms and conditions set forth
therein;
(ii) from and after the Closing Date, the Original
Lessor's obligation to lease the Engine to the
Lessee is terminated and the Lessee accepts the
New Lessor's obligation to lease the Engine to
the Lessee and the Lessee will take the Engine on
lease from the New Lessor, and the New Lessor
agrees to lease the Engine to the Lessee, on the
terms and conditions set forth in the Amended and
Restated Engine Lease; and
(iii) from and after the Closing Date, the Lessee shall
make all payments of Rent and all other amounts
due and payable under the Amended and Restated
Engine Lease to the New Lessor, or as the New
Lessor may direct in accordance with the terms of
the Amended and Restated Engine Lease, and shall
look solely to the New Lessor for reimbursement
of the Security Deposit and the Engine Reserves
in accordance with the terms thereof.
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Section 3. CLAIMS ARISING PRIOR TO THE CLOSING DATE. (a) Without prejudice
to the rights of the New Lessor under the Amended and Restated Engine Lease, the
Original Lessor and the Lessee agree that each of them, and each Indemnitee (as
defined in the Engine Lease) shall have, pursuant to this Section 3, the same
rights and remedies as they would have had under the Engine Lease (including,
without limitation, Lessee's indemnities under Section 12 of the Engine Lease),
without regard to any amendment thereto effected by the Amended and Restated
Engine Lease, in respect of any losses, liabilities indemnities or claims
suffered or incurred or brought against, or payment due to, the other to the
extent attributable to any period ending prior to the Closing Date to the same
extent as provided for under the Engine Lease as in effect prior to the
execution and delivery of the Amended and Restated Engine Lease.
(b) The Lessee hereby acknowledges and agrees that all of the covenants,
undertakings, obligations and liabilities of the Original Lessor under Section
6(b) of the Engine Lease have been fully performed and that it has no claims
against any Engine Reserves or the Original Lessor in respect thereof.
Section 4. ENGINE RESERVES; SECURITY DEPOSIT. (a) On the Closing Date, the
New Lessor has agreed to pay the purchase price to the Original Lessor, and such
purchase price reflects a reduction in respect of the amount of Engine Reserves
and Security Deposit held on the Closing Date by or on behalf of the Original
Lessor. From and after the Closing Date, the Lessee shall look only to the New
Lessor for the reimbursement of the Security Deposit and any Engine Reserves in
accordance with the provisions of the Amended and Restated Engine Lease. For the
avoidance of doubt, the Lessee confirms, for the benefit of the Original Lessor
and the New Lessor, that the amounts being held by the Original Lessor for
Engine Reserves are as set forth below:
Engine MSN 721150
Shop Visit Portion $[ ]*
LLP Portion $[ ]*
The amount of the Security Deposit being held in respect of the Engine is
$[ ]*.
(b) From and after the Closing Date, all payments to be made by the Lessee
in respect of Engine Reserves shall be paid to the New Lessor and not to the
Original Lessor, and the Original Lessor shall not make any claim thereon or
have any right therein. From and after the Closing Date, the New Lessor shall
have the right to receive all Engine Reserve payments that have accrued since
the immediately preceding date on which Engine Reserves were due pursuant to
Section 6(b) of the Engine Lease and the Lessee shall pay all such amounts to
the New Lessor on the due date therefor in accordance with the terms of the
Amended and Restated Engine Lease.
Section 5. CONDITIONS PRECEDENT. On or prior to the Closing Date, the
Lessee shall deliver to the New Lessor and Original Lessor(i) an opinion of
counsel in form and substance reasonably satisfactory to the New Lessor to the
effect, among other things, that this Novation and the Amended and Restated
Engine Lease have been duly authorized by the Lessee and constitute enforceable
obligations of the Lessee and (ii) a certificate of insurance evidencing
compliance by the Lessee with the provisions of Section 9 of the Amended and
Restated Engine Lease and Section 6 of this Novation.
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Section 6. INSURANCE. (a) REQUIRED INSURANCE From and after the Closing
Date and until the earlier of April 30, 1999 or the date of the next "D" check
(or its equivalent) on the Boeing 737-3S3 aircraft bearing manufacturer's serial
number 23787 and United States registration no. N375TA (to be changed to N954WP)
(the "Aircraft"), Lessee shall maintain public liability (including, without
limitation, aircraft third-party, baggage, cargo, contractual and passenger
legal liability including war risks), property damage liability insurance with
respect to any aircraft on which the Engine is installed and general airline
third party legal liability insurance (including products liability insurance)
with insurers of recognized responsibility and good repute specializing in
aviation insurance in the leading international markets, in amounts at least
equal to [ ]* Dollars (U.S. $[ ]*) per occurrence subject to no deductible
except deductibles as to baggage and cargo that are standard in the airline
industry in respect of carriers operating in the countries in which the operator
of the aircraft on which the Engine is installed operates.
(b) TERMS OF INSURANCE.Any policies carried in accordance with Section 6(a)
hereof and any policies taken out in substitution or replacement for any such
policies shall (i) insure the interests of and name as additional insureds,
Original Lessor and its respective officers, directors, employees and agents
(the "Additional Insureds") and provide that the Additional Insureds bear no
liability for the payment of premiums; (ii) provide that the coverages afforded
by such policies to the Additional Insureds shall not be invalidated by any act
or omission of any named insured or other person which results in a violation of
the terms, conditions or warranties of the policies, provided that the named
insured or the person so protected has not caused, contributed to or knowingly
condoned the said act or omission; (iii) provide that if there is any
cancellation of the insurance, such cancellation shall not be effective as to
any Additional Insured for thirty (30) days (with respect to war risk insurance,
seven (7) days or such lesser period as may be customarily available) after the
underwriters of such insurance issue written notice of such cancellation or
alteration; (iv) contain a waiver by the insurers of (A) all rights of
subrogation against any and all of the Additional Insureds and (B) and rights of
set-off, counterclaim or any other deductions whether by attachment or
otherwise, which they may have against any Additional Insured; and (v) be
primary and without right of contribution from any other insurance carried by
any of the Additional Insureds, and shall expressly provide that all of the
provisions thereof (except limits of liability) shall operate in the same manner
as if there were a separate policy covering each Additional Insured; with
substantially the same endorsements (insofar as the same apply to liability
coverage) as are currently in effect with respect to the Engine.
(c) INSURANCE CERTIFICATES. On or before the Closing Date, and promptly
after each renewal or replacement of the policies of insurance covering the
Aircraft, Lessee shall cause to be furnished to Original Lessor an insurance
certificate of independent aircraft insurance brokers evidencing that the
insurance then carried and maintained on any aircraft on which the Engine is
installed complies with the terms hereof. Lessee shall cause such firm to advise
the Additional Insureds in writing promptly of any default in the payment of any
premium, of any other act or omission on the part of Lessee of which such firm
has knowledge that might invalidate or render unenforceable, in whole or in
part, any insurance provided pursuant to Section 6(a).
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Section 7. REPRESENTATIONS. (a) REPRESENTATIONS OF EACH PARTY. Each party
hereto represents and warrants (each as to itself only) to each of the other
parties as of the Closing Date as follows:
(i) Such party has the power, authority and legal
right to execute and deliver this Novation and
to perform its obligations hereunder, such
execution, delivery and performance have been
authorized by all necessary corporate and other
action of such party and this Novation
constitutes the legal, valid and binding
agreement of such party, enforceable in
accordance with its terms except as limited by
bankruptcy, insolvency, moratorium,
reorganization, receivership, fraudulent
conveyance or other similar laws or equitable
principles of general application to or
affecting the enforcement of creditors' rights
and remedies generally from time to time in
effect, regardless of whether such
enforceability is considered in a proceeding at
equity or at law.
(ii) All governmental and other licenses, approvals
and consents that may be necessary for such party
to enter into this Novation have been obtained
and are in full force and effect.
(iii) The execution, delivery and performance of this
Novation by such party will not contravene or
violate any provision of any law, rule,
regulation or order binding on such party or any
of its organizational documents and will not
contravene the provisions of, or constitute a
default under, any contract or other instrument
binding upon such party.
(b) REPRESENTATIONS OF ORIGINAL LESSOR. Original Lessor represents and
warrants to the Lessee and to the New Lessor as of the Closing Date as follows:
(i) all payments of Rent due as at the Closing Date
have been duly made to the Original Lessor and
received by it, and
(ii) as of the Closing Date, Original Lessor is not
aware of any claims that it has against the
Lessee arising under or pursuant to the Engine
Lease.
(c) REPRESENTATIONS OF LESSEE. The Lessee represents and warrants to the
Original Lessor and to the New Lessor as of the Closing Date as follows:
(i) each of the representations and warranties of the
Lessee set forth in the Amended and Restated
Engine Lease are true on and as of the Closing
Date, and
(ii) as of the Closing Date, the Lessee is not aware
of any claims that it has against the Original
Lessor, including, without limitation, any claims
for reimbursement of Engine Reserves pursuant to
Section 6(b) of the Engine Lease.
(d) REPRESENTATIONS OF NEW LESSOR. The New Lessor represents and warrants
to the Lessee as of the Closing Date that each of the representations and
warranties of the New Lessor set forth in the Amended and Restated Engine Lease
are true on and as of the Closing Date.
Section 8. MISCELLANEOUS.
(a) COUNTERPARTS. This Novation may be executed by the parties hereto in
separate counterparts each of which, when so executed and delivered, shall be an
original for all purposes, but all such counterparts shall together constitute
but one and the same instrument.
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(b) SEVERABILITY. If any term or provision hereof or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or such provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable any remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable. To the extent permitted
by applicable law, the parties hereto hereby waive any provision of law that
renders any term or provision hereof invalid or unenforceable in any respect.
(c) FURTHER ASSURANCES. Each party will promptly and duly execute and
deliver all such documents and assurances and take such further action as the
other party may from time to time reasonably request in order to carry out more
effectively the intent and purpose of this Novation and to establish and protect
the rights and remedies created or intended to be created in favor of the
parties, including, without limitation, if requested by Lessor, at the expense
of Lessor, the recording or filing of this Novation or any other document or
financing statement with respect to the transactions contemplated hereby so as
to more effectively carry out the intent of such transactions, in accordance
with the laws of such jurisdictions as either party from time to time reasonably
requests.
(d) ENTIRE AGREEMENT. This Novation embodies the entire agreement and
understanding between the parties relating to the matters provided for herein,
and supersedes all prior agreements and understandings relating thereto.
(e) SUCCESSORS AND ASSIGNS. This Novation shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns.
(f) GOVERNING LAW. THIS NOVATION SHALL IN ALL RESPECTS, INCLUDING WITHOUT
LIMITATION, ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) EXPENSES. Each of the parties hereto shall bear its own expenses in
connection with this Novation and the transactions contemplated hereby,
including, without limitation, its own attorneys' fees, except that KGAL and
TACA shall each pay one half of any expenses in connection with any Aviation
Authority or other filings, including the fees and disbursements of special
local counsel retained in connection therewith. All expenses incurred by WestPac
for which it is entitled to reimbursement pursuant to the Engine Lease shall be
for the account of TACA except any such expenses relating solely to the
negotiation, preparation, execution and delivery of the Amended and Restated
Engine Lease, which shall be for the account of KGAL.
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IN WITNESS WHEREOF, the parties hereto have each caused this Novation
to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, (formerly First
Security Bank of Utah, National Association), not in its
individual capacity but solely as Owner Trustee under the
1997 Trust Agreement
By:_____________________________________________
Name:
Title:
TACA INTERNATIONAL AIRLINES, S.A.
By:______________________________________________
Name:
Title:
WESTERN PACIFIC AIRLINES, INC.
By:______________________________________________
Name:
Title:
