EXHIBIT 10.3
LEASE
(S/N 143)
DATED AS OF AUGUST 25, 2004
BETWEEN
FLEET NATIONAL BANK
AS LESSOR
AND
PRIORITY FULFILLMENT SERVICES, INC.
AS LESSEE
THIS IS COUNTERPART NO. __ OF A TOTAL OF 3 COUNTERPARTS. ONLY COUNTERPART NO. 1
SHALL BE CONSIDERED CHATTEL PAPER FOR PURPOSES OF THE UNIFORM COMMERCIAL CODE
AND A SECURITY INTEREST MAY BE PERFECTED ONLY BY POSSESSION OF COUNTERPART NO.
1.
TABLE OF CONTENTS
Page
SECTION 1 Lease 3
SECTION 2 Closing Conditions 3
SECTION 3 Term and Rent 3
SECTION 4 Title; Quiet Enjoyment 4
SECTION 5 Disclaimer and Assignment of Warranties 4
SECTION 6 Representations, Warranties and Agreements of Lessee 4
SECTION 7 Net Lease 6
SECTION 8 Taxes 6
SECTION 9 Compliance, Use and Maintenance 7
SECTION 10 Loss or Damage 8
SECTION 11 Indemnification 9
SECTION 12 Assignment, Sublease, Management and Chartering 10
SECTION 13 Events of Default and Remedies 11
SECTION 14 Notices; Reports and Further Assurances 14
SECTION 15 Transaction Expenses 15
SECTION 16 Miscellaneous 15
SECTION 17 Truth in Leasing 16
EXHIBIT A - Definitions
EXHIBIT B - Special Tax Indemnity Rider
EXHIBIT C - Warranty Xxxx of Sale
Insurance Addendum
Closing Terms Addendum
Purchase, Early Purchase and Renewal Option Addendum
Early Termination Option Addendum
Return Addendum
Lease Supplement
Schedule No. 1 to Lease Supplement
Schedule No. 2 to Lease Supplement
Schedule No. 2-A to Lease Supplement
Schedule No. 3 to Lease Supplement
Schedule No. 4 to Lease Supplement
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This LEASE (S/N 143) (together with all Supplements, Exhibits, Riders and
Addenda hereto, the "Lease") is made and entered into as of AUGUST 25, 2004, by
and between FLEET NATIONAL BANK ("Lessor"), a Rhode Island corporation having an
office at Xxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000, and PRIORITY FULFILLMENT
SERVICES, INC. ("Lessee"), a Delaware corporation having an office at 000 Xxxxx
Xxxxxxx Xxxxxxxxxx, 0xx Xxxxx, Xxxxx, Xxxxx 00000. Certain capitalized terms as
used in this Lease are defined in Exhibit A hereto, and such definitions are
incorporated herein and made a part hereof as though set forth in full herein.
SECTION 1. LEASE. Subject to the terms and conditions provided in this Lease,
Lessor agrees to lease the Aircraft to Lessee, and Lessee agrees to lease the
Aircraft from Lessor. Lessor hereby appoints Lessee as Lessor's agent for the
sole and limited purpose of accepting delivery of the Aircraft from the
Supplier. The execution by Lessee of the Lease Supplement will evidence that the
Aircraft is leased under, and is subject to all of the terms, provisions and
conditions of, this Lease and shall constitute Lessee's unconditional and
irrevocable acceptance of the Aircraft for all purposes of this Lease.
SECTION 2. CLOSING CONDITIONS. Lessor's obligations to purchase the Aircraft
from the Supplier and to lease the Aircraft to Lessee shall be conditioned upon
the satisfaction of all of the following conditions: (a) Lessor receives the
Required Documents and Purchase Documents, in form and substance satisfactory to
Lessor, at least one (1) Business Day prior to the anticipated closing date; (b)
all representations and warranties in this Lease, including the Lease
Supplement, are materially true and correct; (c) Lessee accepts the Aircraft
from Supplier on Lessor's behalf, under the Purchase Documents and under this
Lease, on the Acceptance Date (which date shall be no later than the Last
Acceptance Date); and (d) (i) FAA Counsel confirms to Lessor that (A) it has
received in escrow all of the FAA Documents, and (B) upon filing the FAA
Documents, (1) title to the Airframe and the Engines will be vested in Lessor,
and (2) the Aircraft (including the Airframe and Engines) will be free and clear
of all Liens, other than this Lease, and (ii) Lessee authorizes (A) the release
from escrow of all Required Documents and FAA Documents held by Lessor or its
FAA Counsel or other counsel, and (B) Lessor or FAA Counsel to file the FAA
Documents and any other filings at the FAA and any other applicable filing
offices; provided, such authorization shall be deemed to have been automatically
made by Lessee (whether or not so confirmed) immediately upon the receipt by
Lessee, Supplier or any other Person (as directed in any pay proceeds letter
executed by Lessee in connection with this Lease ) of the funds constituting the
Lessor's Cost. Lessee acknowledges and agrees that (i) any advance of funds by
Lessor prior to the satisfaction of all of the preceding conditions shall not
constitute a waiver by Lessor of any such condition, and (ii) Lessee shall be
irrevocably obligated to satisfy all of such conditions prior to the FAA filing
deadline on the day on which such funds are received.
SECTION 3. TERM AND RENT.
(a) Term. The lease of the Aircraft to Lessee shall commence on the
Acceptance Date and end on the Expiration Date, unless extended or earlier
terminated or cancelled pursuant to this Lease.
(b) Rent. Lessee shall pay to Lessor the following daily and periodic rent
amounts ("Basic Rent") (i) on the Acceptance Date, an amount equal to the
product of the Daily Rent Percentage times the Lessor's Cost, for each day
starting with the Acceptance Date, to but excluding the Rent Commencement Date
("Daily Rent"), and (ii) on the First Basic Rent Date and on each Basic Rent
Date following that date, an amount equal to the product of the Lessor's Cost
multiplied by the applicable Basic Rent Percentage set forth on Schedule No. 2A
for the Basic Rent number corresponding to any such Basic Rent Date. Lessee
shall also pay the following amounts as "Supplemental Rent" (together with all
Basic Rent, the "Rent"): (i) as and when due, any other amount that Lessee is
obligated to pay under this Lease to Lessor or others (including, Casualty Value
and/or any amounts due pursuant to any Addendum), (ii) interest accruing at the
Late Payment Rate on any Rent not paid when due, until paid, and (iii) the
Administrative Charge with respect to any Rent not paid when due (as
compensation to Lessor for the expenses attributable to Lessee's failure to pay,
and not as a penalty). Lessee's obligation to pay Supplemental Rent shall
survive the expiration, cancellation or other termination of this Lease. All
payments of Rent shall be made to Lessor, in United States Dollars ("U.S.
Dollars"), in immediately available funds on the date payable hereunder at the
address designated by Lessor for payment, or by wire transfer to an account
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specified by Lessor, or at such other address or to such other Person as Lessor
may direct by notice in writing to Lessee.
SECTION 4. TITLE; QUIET ENJOYMENT. Lessee acknowledges and agrees that upon
Lessor's acquiring the Aircraft on the Acceptance Date, Lessor is and shall
remain the owner of the Aircraft (unless Lessor sells the Aircraft pursuant to
an applicable provision of this Lease), and Lessee shall not acquire any right,
title or interest in or to the Aircraft except the right to use the Aircraft
pursuant to the terms of this Lease. Lessor warrants that during the Term, so
long as no Event of Default has occurred, Lessee's possession and use of the
Aircraft shall not be interfered with by Lessor or anyone rightfully claiming an
interest through Lessor. The preceding warranty is in lieu of all other
warranties by Lessor, whether written, oral or implied, with respect to this
Lease or the Aircraft, and without limiting the provisions of Section 7, any
actual or purported breach of this warranty shall not give rise to any
Abatement, and Lessor shall not be deemed to have modified in any respect the
obligations of Lessee pursuant to Section 7, which obligations are and shall
remain absolute, irrevocable and unconditional under all events and
circumstances whatsoever.
SECTION 5. DISCLAIMER AND ASSIGNMENT OF WARRANTIES. LESSOR SHALL NOT BE DEEMED
TO HAVE MADE, AND HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, AS TO THE AIRCRAFT, INCLUDING ANY ENGINE, PART OR RECORD, OR
ANY MATTER WHATSOEVER, INCLUDING, THE AIRCRAFT'S DESIGN, CONDITION,
MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, TITLE, ABSENCE OF ANY
PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT (WHETHER OR NOT
DISCOVERABLE BY LESSEE), COMPLIANCE OF THE AIRCRAFT WITH ANY APPLICABLE LAW,
CONFORMITY OF THE AIRCRAFT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE
DOCUMENT OR TO THE DESCRIPTION SET FORTH IN THIS LEASE, OR ANY INTERFERENCE OR
INFRINGEMENT (EXCEPT AS EXPRESSLY PROVIDED IN SECTION 4), OR ARISING FROM ANY
DEFECTS OR FROM ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR USAGE OF TRADE,
NOR SHALL LESSOR BE LIABLE, FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT; AND LESSEE
HEREBY WAIVES ANY CLAIMS ARISING OUT OF ANY OF THE FOREGOING. Without limiting
the foregoing, Lessor will not be responsible to Lessee or any other Person with
respect to, and Lessee agrees to bear sole responsibility for, any risk or other
matter that is the subject of Lessor's disclaimer. So long as no Event of
Default has occurred, Lessee may exercise Lessor's rights, if any, under any
warranty of Manufacturer or Supplier with respect to the Aircraft. Lessee's
exercise of such rights shall be at its sole cost and risk, shall not result in
any prejudice to Lessor, and may be exercised only during the Term. Lessee shall
not attempt to enforce any such warranty by legal proceeding without Lessor's
prior written approval.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LESSEE. Lessee
represents, warrants and agrees as follows:
(a) Due Organization, Name, Organizational Number, Etc. Lessee has the
form of business organization indicated and is and will remain duly organized
and existing in good standing under the laws of the state specified in Schedule
No. 2 and is duly qualified to do business wherever necessary to perform its
obligations under this Lease, including the jurisdiction of the Primary Hangar
Location. Lessee's exact legal name is as shown in the caption of this Lease;
Lessee's organizational identification number and the address of Lessee's mail,
chief executive offices and principal place of business are all as respectively
set forth in Schedule No. 2. Lessee agrees that it shall not change its name,
organizational number or any such address without prior written notice to
Lessor. Within the previous four (4) years Lessee has not changed its name, done
business under any other name, changed its chief place of business from its
present location, or merged or been the surviving entity of any merger, except
as disclosed to Lessor in writing.
(b) Due Authorization; No Violation. This Lease has been duly authorized
by all necessary action on the part of Lessee consistent with its form of
organization, does not require the approval of, or giving notice to, any
governmental authority and does not contravene or constitute a default under any
Applicable
4
Law, certificate or articles of incorporation or organization or by-laws or
partnership certificate or agreement, or any agreement, indenture, or other
instrument to which Lessee is a party or by which it may be bound.
(c) Enforceability. This Lease has been duly executed and delivered by
authorized representatives of Lessee and constitutes a legal, valid and binding
obligation of Lessee enforceable in accordance with its terms except to the
extent that the enforcement of remedies may be limited under applicable
bankruptcy and insolvency laws, and the equitable discretion of any court of
competent jurisdiction.
(d) Litigation; Claims There are no proceedings pending or, so far as the
officers, managers, or members of Lessee know, threatened against or affecting
Lessee or any of its property before any court, administrative officer or
administrative agency that could impair Lessor's title to the Aircraft, or that,
if decided adversely, could affect the financial condition or operations of
Lessee or the ability of Lessee to perform its obligations under this Lease.
Lessee has no pending claims and has no knowledge of any facts upon which a
future claim may be based, against any prior owner, the Manufacturer or Supplier
of the Aircraft, or of any Engine or part thereof for breach of warranty or
otherwise.
(e) Good Title. Lessor will be the owner of the Aircraft as of the
Acceptance Date and will have good and marketable title to the Aircraft, free
and clear of all Liens other than any Liens created in favor of Lessor under
this Lease.
(f) No Competing Lienholders. No Lien exists, or will hereafter attach,
against the Aircraft, the Rent or any other rights under this Lease, or any
Collateral, or any interest of Lessee or Lessor therein (other than any Lessor's
Liens), pursuant to any mortgage, conditional sale or security agreement or
other agreement to which Lessee or any Person claiming through Lessee is a
party, nor will any of the transactions contemplated under this Lease constitute
a breach of any provision of any such agreement.
(g) MSP Contract. Commencing on the Acceptance Date and continuing
throughout the Term, the MSP Contract shall be maintained in full force and
effect and Lessee will provide Lessor with evidence satisfactory to Lessor of
the acknowledgment of Honeywell, Inc. of the Lessor's rights and interests under
such MSP Contract.
(h) Wholly-owned Corporation. Lessee shall at all times during the Term of
this Lease be a wholly-owned and controlled corporation of the Guarantor;
provided, however, that any such ownership and/or control shall be in compliance
with all Applicable Law and any and all FARs.
(i) Due Organization and Authorization, Etc. Guarantor has the form of
business organization indicated and is and will remain duly organized and
existing in good standing under the laws of the state as specified in the
Guaranty and is duly qualified to perform its obligations under the Guaranty.
The Guaranty has been duly authorized by all necessary action on the part of
Guarantor consistent with its form of organization, does not require the
approval of, or giving notice to, any governmental authority and does not
contravene or constitute a default under any Applicable Law, certificate or
articles of incorporation or organization or by-laws or partnership certificate
or agreement, or any agreement, indenture, or other instrument to which
Guarantor is a party or by which it may be bound.
(j) Binding Obligation. The Guaranty does not contravene or constitute a
default under any Applicable Law, or any contract, mortgage, agreement,
indenture, or other instrument to which Guarantor is a party or by which it may
be bound.
(k) Enforceability. The Guaranty has been duly executed and delivered by
Guarantor and constitutes a legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms except to the extent that the
enforcement of remedies may be limited under applicable bankruptcy and
insolvency laws, and the equitable discretion of any court of competent
jurisdiction.
(l) Litigation. There are no proceedings pending or, so far as the
officers, managers, or members of Guarantor know, threatened against or
affecting Guarantor or any of its property before any court, administrative
officer or administrative agency that, if decided adversely, could materially
affect the
5
financial condition or operations of Guarantor or the ability of Guarantor to
perform its obligations under the Guaranty.
(m) Not a Consumer Transaction. The transaction contemplated in this Lease
is not a "consumer transaction" as defined in the UCC and the Aircraft and any
Collateral was not or will not be purchased or held primarily for personal,
family, or household purposes.
(n) Guarantor Obligations. Lessee shall cause the Guarantor to fully and
timely comply with all the terms and provisions of the Guaranty, including,
without limitation, any financial reporting requirements or obligations, and/or
any financial covenants, requirements or obligations, set forth in such
Guaranty.
SECTION 7. NET LEASE. This Lease is a net lease, and Lessee acknowledges and
agrees that (a) Lessee's obligation to pay, and Lessor's right to receive, all
Rent in accordance with this Lease shall be absolute, irrevocable, independent
and unconditional and shall not be subject to (and Lessee hereby waives and
agrees not to assert) any abatement, reduction, setoff, defense, counterclaim or
recoupment (collectively, "Abatements") for any reason or under any circumstance
whatsoever as to any such Rent, and without limiting the foregoing, Lessee also
hereby waives any and all existing and future claims to any Abatement against or
as to such Rent, (b) it will pay all such Rent regardless of any Abatement, and
(c) this Lease, and Lessee's payment and other obligations hereunder, are
non-cancelable and non-terminable by Lessee (except as expressly provided in any
Addendum).
SECTION 8. TAXES. Lessee agrees to: (a) (i) if permitted by law, file in
Lessee's own name or on Lessor's behalf, directly with all appropriate taxing
authorities all registrations, declarations, returns, inventories and other
documentation with respect to any personal property taxes (or any other taxes in
the nature of or imposed in lieu of property taxes) due or to become due with
respect to the Aircraft, and if not so permitted by law, to promptly notify
Lessor and provide it with all information required in order for Lessor to
timely file all such declarations, returns, inventories, or other documentation,
and (ii) pay on or before the date when due all such taxes assessed, billed or
otherwise payable with respect to the Aircraft directly to the appropriate
taxing authorities, (b) (i) pay when due as requested by Lessor, and (ii) defend
and indemnify Lessor on a net after-tax basis against liability for all license
and/or registration fees, assessments, and sales, use, property, excise,
privilege, value added and other taxes (including any related interest or
penalties) or other charges or fees now or hereafter imposed by any governmental
body or agency upon the Aircraft or with respect to landing, airport use,
manufacturing, ordering, shipment, purchase, ownership, delivery, installation,
leasing (pursuant to this Lease, any sublease, or otherwise), chartering,
operation, possession, use, return, or other disposition thereof or the Rent or
other rentals hereunder (other than taxes on or measured solely by the net
income of Lessor), and (c) defend and indemnify Lessor against any penalties,
charges, interest or costs imposed with respect to any items referred to in (a)
and (b) above (the items referred to in (a), (b), and (c) above being referred
to herein as "Impositions"). Any Impositions which are not paid when due and
which are paid by Lessor shall, at Lessor's option, become immediately due from
Lessee to Lessor. Notwithstanding the foregoing, Lessee shall pay, indemnify
Lessor for, and hold Lessor harmless on a net after-tax basis from and against,
any Imposition on or measured by the net income of Lessor imposed against Lessor
by any local or foreign government or other local or foreign taxing authority if
and to the extent that Lessor would not have incurred such Imposition but for
the operation or presence of the Aircraft within the jurisdiction imposing it.
Lessee's obligations under this Section 8 shall survive any expiration,
cancellation or other termination of this Lease.
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SECTION 9. COMPLIANCE, USE AND MAINTENANCE.
(a) Compliance and Use. On the Acceptance Date, and at all times
thereafter until the Aircraft is returned to Lessor pursuant to this Lease,
Lessee shall cause the Aircraft to be and remain duly registered in only the
Lessor's name at the FAA, in accordance with the Transportation Code. Lessee
agrees to comply with all Applicable Law related to this Lease and/or the
Aircraft, including its operation, maintenance and security. Lessee will operate
the Aircraft under and in compliance with Part 91 of the FARS, for purposes that
are incidental to Lessee's business, and in a manner that is consistent with the
transactions hereunder being deemed commercial (and not consumer) transactions
under Applicable Law. This Lease is being made and the Aircraft will be used for
business or commercial purposes, and not primarily for personal, family, or
household purposes. Unless otherwise expressly permitted hereunder, Lessee shall
not operate or permit the Aircraft to be operated for air taxi operations or
otherwise under Part 135 of the FARS. The Aircraft shall be used solely in a
passenger configuration for which Lessee is duly authorized by the FAA. Lessee
will not operate or permit the Aircraft to be operated in any manner at any time
or in any geographic area when or where insurance required by the provisions
hereof shall not be in effect. Unless otherwise expressly permitted by Section
12 of this Lease, Lessee shall (i) retain operational control of the Aircraft at
all times from the Acceptance Date until returning the Aircraft in accordance
with this Lease; and (ii) base the Aircraft at the Primary Hangar Location set
forth in Schedule No. 2. The Aircraft will, at all times be operated by duly
qualified pilots having (a) the required FAA type rating for the Aircraft, (b)
the required FAA pilot certificates and ratings, (c) a valid FAA Medical
Certificate, (d) satisfied all security requirements imposed by any governmental
authority having jurisdiction and (e) met any and all requirements established
and specified by (i) the FAA, the Transportation Security Administration and any
other applicable governmental authority and (ii) the insurance policies required
under this Lease.
(b) Use Outside of U.S. The Aircraft shall not be operated, used or
located outside the Continental U.S. except that it may be flown temporarily to
any country in the world for any purpose expressly permitted under this Lease.
Notwithstanding the foregoing, the Aircraft shall not be flown, operated, used
or located in, to or over any such country or area (temporarily or otherwise),
(i) which is excluded from the required insurance coverages, or would otherwise
cause Lessee to be in breach of the insurance requirements or other provisions,
of this Lease, (ii) with which the U.S. does not maintain favorable diplomatic
relations, (iii) in any area of recognized or threatened hostilities, (iv) in
violation of any Applicable Law, including any U.S. law or United Nations
Security Council Directive, or (v) in a manner that causes it to be deemed to
have been used or operated "predominantly" outside of the United States, as that
phrase is used in Section 168(g)(1)(A) of the Code.
(c) Maintenance and Operation. During the Term, Lessee shall (i) maintain,
inspect, service, repair, overhaul and test the Airframe and each Engine and any
APU in accordance with all Maintenance Requirements, all Applicable Law, and
(ii) maintain (in the English language) all Records in accordance with the
Applicable Law and all Maintenance Requirements, and as required under this
Lease. All maintenance procedures shall be performed in accordance with all
Applicable Law and by properly trained, licensed, and certified maintenance
sources and maintenance personnel utilizing replacement parts approved by the
FAA and the Manufacturer, so as to keep the Airframe and each Engine, any APU
and each Part in good operating condition, ordinary wear and tear, from proper
use alone, excepted, and to enable the airworthiness certificate for the
Aircraft to be continually maintained. Without limiting the foregoing, Lessee
shall comply with all mandatory service bulletins and airworthiness directives
by causing compliance to such bulletins and/or directives to be completed
through corrective modification in lieu of operating manual restrictions.
(d) Loaner Engines. In the event any Engine is damaged, being inspected,
repaired or overhauled and provided no Event of Default or Default has occurred
and is continuing, Lessee, at its option, may temporarily substitute another
engine of the same make and model as the Engine being repaired or overhauled
(any such substitute engine being hereinafter referred to as a "Loaner Engine")
during the period of such repair or overhaul, and provided further (i)
installation of the Loaner Engine is performed by a maintenance facility
certified by the FAA and manufacturer with respect to an aircraft of this type,
(ii) the Loaner Engine is removed and the repaired or overhauled original Engine
is reinstalled on the Airframe promptly upon completion of the repair or
overhaul but in no event later than the earlier of ninety (90) days
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after removal, or the expiration, cancellation or earlier termination of this
Lease, and (iii) the Loaner Engine is free and clear of any Lien that might
impair Lessor's rights or interests in the Aircraft and is maintained in
accordance herewith.
(e) Additions, Alterations and Replacement Parts. Lessee may install on
the Aircraft any additional accessory, device or equipment ("Additions") but
only if such Additions (i) are ancillary to the Aircraft; (ii) are not required
to render the Aircraft complete for its intended use by Lessee; (iii) will not
impair the originally intended function or use of the Aircraft or diminish the
value of the same; (iv) can be readily removed without causing material damage
to the Aircraft; and (v) do not result in a Tax Loss. Title to each Addition not
removed prior to the return of the Aircraft to Lessor shall immediately vest in
Lessor upon such return without any payment by, or any cost or expense to,
Lessor. Lessee shall make any alteration or modification ("Alterations") to the
Aircraft that may at any time during the Term be required to comply with
airworthiness directives or other Applicable Law. Lessee will promptly replace
all Parts which become worn out, lost, stolen, taken, destroyed, damaged beyond
repair or permanently rendered or declared unfit for use for any reason
whatsoever. Lessee shall repair all damage to the Aircraft resulting from the
installation and removal of Additions and/or Alterations so as to restore the
Aircraft to its condition prior to installation. Alterations and/or replacement
parts shall be deemed accessions, and title thereto shall be immediately vested
in Lessor without cost or expense to Lessor. Except as permitted under this
Section 9(e) or as expressly permitted in the Aircraft Purchase Agreement,
Lessee will not modify the Aircraft (including any change in configuration) or
affix or remove any accessory to the Aircraft leased hereunder.
(f) Aircraft Marking. Lessee agrees to (i) prominently display on the
Aircraft the FAA Registration number, specified in Schedule No. 1 or such other
"N" number as has been approved by and exclusively reserved to Lessor in its
name and duly recorded with the FAA; and (ii) notify Lessor in writing thirty
(30) days prior to making any change in the appearance or coloring of the
Aircraft.
(g) Security. Without limiting Lessee's indemnities and other agreements
under this Lease, Lessee hereby: (i) expressly assumes sole responsibility for
the determination and implementation of all security measures and systems
reasonably necessary or appropriate for the proper protection of the Aircraft
(whether on the ground or in flight) against theft, vandalism, hijacking,
destruction, bombing, terrorism or similar acts directly or indirectly affecting
the Aircraft, any part thereof, or any persons who (whether or not on board the
Aircraft) may sustain any injury or damage as a result of any such acts, and
(ii) agrees to provide to Lessor promptly upon request with evidence of Lessee's
compliance with its obligations under this Section 9(g) (but in no event shall
Lessor, in its capacity as lessor, owner or otherwise, be deemed to have any
duty with respect to any security measures imposed by this Lease or applicable
law, whether or not complied with by Lessee, as the full and exclusive
assumption of responsibility by Lessee of such responsibility is of the essence
of this Lease, and a condition to Lessor's participation in the transactions
contemplated herein).
SECTION 10. LOSS OR DAMAGE.
(a) Event of Loss with Respect to the Aircraft. Upon the occurrence of any
Event of Loss with respect to the Airframe and/or Aircraft, Lessee shall notify
Lessor within five (5) days of the date thereof. On (i) the second (2nd) Basic
Rent Date immediately following the date of such notice, or (ii) if such Event
of Loss occurs after the Last Basic Rent Date, within sixty (60) days after such
notice (any such date described in subclause (i) or (ii) above the "Casualty
Payment Date"), Lessee shall pay to Lessor any Rent then due, plus the Casualty
Value of the Aircraft determined as of the Casualty Payment Date, (but if the
Casualty Payment Date is after the last Basic Rent Date, the Casualty Value for
such date shall be the amount equal to the Lessor's Cost multiplied by the
applicable percentage set forth on Schedule No. 3 for the last Basic Rent Date
or the corresponding Basic Rent number), together with interest at the Late
Payment Rate for the period (if any) from the Casualty Payment Date through the
date of payment. Upon making the applicable payment required hereby, Lessee's
obligation to pay further Basic Rent for the Aircraft subsequent to such payment
shall cease, but Lessee shall remain liable for, and pay as and when due, all
Supplemental Rent. If recoverable, Lessor shall be entitled to recover
possession of the Aircraft and to any salvage value in excess of the Casualty
Value paid to Lessor, but subject to the requirements of any third party
insurance carrier in order to settle an insurance claim. Lessor shall be
entitled to receive and retain all amounts
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payable by the Manufacturer with respect to a Return to Manufacturer or by any
governmental authority with respect to any Requisition of Use, as the case may
be, except that such amounts received in good collected funds shall be applied
against Lessee's obligation to pay Casualty Value or, so long as no Event of
Default has occurred, remitted to Lessee (up to the amount of the Casualty Value
paid by Lessee to Lessor in good and indefeasible funds). Lessor shall be under
no duty to Lessee to pursue any claim against any Person in connection with an
Event of Loss.
(b) Event of Loss with Respect to an Engine or an APU. Upon an Event of
Loss with respect to any Engine or any APU, but not the Airframe on which it was
installed, Lessee shall (i) give Lessor prompt written notice thereof, (ii) by
the earlier of the ninetieth (90th) day after the occurrence of such Event of
Loss or the receipt of the applicable insurance proceeds, if any, duly convey to
Lessor title to an engine or APU, as applicable, of the same make and model
number as the Engine or any APU suffering the Event of Loss, and (iii) comply
with the other provisions of this Section 10(b). Such engine or any APU, as
applicable, shall be free and clear of all Liens, have a value, utility, and
useful life at least equal to, and be in as good an operating condition as, the
Engine or any APU suffering the Event of Loss, assuming such Engine or any APU
was in the condition and repair required by the terms hereof immediately prior
to the occurrence of such Event of Loss. Lessee shall furnish to Lessor such
documents to evidence such conveyance as Lessor shall request. Upon full
compliance by Lessee with the terms of this paragraph, Lessor will transfer to
Lessee all of Lessor's right, title and interest, if any, in and to such Engine
or any APU, which transfer shall be "AS-IS, WHERE-IS". Each such replacement
engine or APU, as applicable, shall, after such conveyance to Lessor, be deemed
an "Engine" or "APU", as applicable, as defined herein and shall be deemed part
of the same Aircraft as was the Engine or any APU replaced thereby.
(c) Risk of Loss. Lessee shall bear the risk of loss, theft, confiscation,
taking, unavailability, damage or partial destruction of the Aircraft and shall
not be released from its obligations hereunder in the event of any damage or
Event of Loss to the Aircraft or any part thereof. Without limiting any other
provision hereof, Lessee shall repair all damage to the Aircraft from any and
all causes, including as provided in Sections 9(c) and (e), and shall provide
written notice to Lessor of any Material Damage concurrently with its report of
same to the applicable governmental authority, and if no such report is
required, within ten (10) days of the occurrence of such damage. The required
notice must be provided together with any damage reports provided to the FAA or
any other governmental authority, the insurer or Supplier, and any documents
pertaining to the repair of such damage, including copies of work orders, and
all invoices for related charges.
(d) Credit for Insurance Payments. If Lessor receives a payment under an
insurance policy required under this Lease in connection with an Event of Loss
of an Airframe and/or an Engine or any APU, and such payment is both
unconditional and indefeasible, then provided no Default or Event of Default
shall have occurred and be continuing, and Lessee shall have complied with the
provisions of Section 10(a) or 10(b), Lessor shall either (i) remit such
proceeds to Lessee up to an amount equal to (A) the amount paid by Lessee to
Lessor as the Casualty Value pursuant to Section 10(a), or (B) the amount of the
replacement costs actually incurred by Lessee with respect to the replacement of
any Engine or APU pursuant to Section 10(b), or (ii) credit such proceeds
against any amounts owed by Lessee pursuant to Section 10(a). Any excess
insurance proceeds shall be retained by Lessor.
SECTION 11. INDEMNIFICATION. Lessee shall indemnify, protect, save, defend and
keep harmless Lessor, its agents, employees, officers, directors, shareholders,
subsidiaries, affiliates and Assignees (each an "Indemnitee"), on a net
after-tax basis, from and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, demands, costs, expenses and
disbursements (including legal fees and expenses) of any kind and nature
whatsoever ("Claims") which may be imposed on, incurred by or asserted against
any Indemnitee, whether or not such Indemnitee shall also be indemnified as to
any such Claim by any other Person, in any way relating to or arising out of (a)
this Lease or any of the other Lease Documents, or the performance, breach
(including any Default or Event of Default) or enforcement of any of the terms
hereof or thereof, or (b) the Aircraft, including the assertion or enforcement
of any manufacturer's, vendor's, dealer's or other supplier's warranties on the
Aircraft or any part thereof, or the manufacture, inspection, construction,
purchase, pooling, interchange, acceptance, rejection, ownership, titling or
re-titling, delivery, lease, sublease, charter, possession, use,
9
operation, maintenance, management, security, condition, registration or
re-registration, sale, return, removal, repossession, storage or other
disposition of the Aircraft or any part thereof or any accident in connection
therewith, including, Claims involving or alleging environmental damage,
criminal acts, hijacking, acts of terrorism or similar acts, product liability
or strict or absolute liability in tort, latent and other defects (whether or
not discoverable), for patent, trademark or copyright infringement and for any
other risk or matter, the responsibility for which Lessee has agreed to bear in
Section 5, including any of the same that result in injuries, death,
destruction, or other harm or loss to Persons or property, without regard as to
who may have operational control of the Aircraft from time to time.
Notwithstanding the foregoing, Lessee shall not be required to indemnify an
Indemnitee under this Section 11 for (i) any Claim caused solely and directly by
the gross negligence or willful misconduct of such Indemnitee (except as imputed
by law), (ii) any Impositions, or (iii) any Claim in respect of the Aircraft
arising from acts or events which occur after (A) the Aircraft has been
redelivered to such Indemnitee in accordance with this Lease, and (B) any and
all other obligations of any kind whatsoever of the Lessee under this Lease have
been fully paid or performed, as the case may be, unless any such Claims were
caused by Lessee, or anyone claiming through Lessee, or resulted directly or
indirectly, from any acts, events or omissions of any kind whatsoever during the
Term of this Lease. Lessee's obligations under this Section 11 shall survive any
expiration, cancellation or other termination of this Lease. If any Claim is
made against Lessee or an Indemnitee, the party receiving notice of such Claim
shall promptly notify the other, but the failure of the party receiving notice
to so notify the other shall not relieve Lessee of any obligation hereunder.
SECTION 12. ASSIGNMENT, MANAGEMENT AND CHARTERING.
(a) Lessee's Conveyances; and Liens. Except as expressly permitted below,
Lessee shall not sell (or offer or advertise the sale of), assign, charter,
sublease, timeshare, pool, interchange, convey, mortgage or otherwise transfer
or encumber this Lease, the Aircraft, including any Engine, any APU or any Part
or any Collateral, or its interest with respect thereto, and any such transfer
or encumbrance, whether by operation of law or otherwise, shall be null and
void, in all respects. In addition, Lessee shall not relinquish possession of
the Airframe, any APU, or any Engine or Part or install any APU or any Engine or
Part, or permit any APU or any Engine or Part to be installed, on any Airframe
other than the Airframe leased hereunder except as expressly set forth herein.
The foregoing shall not be deemed to prohibit the delivery of possession of the
Aircraft, any APU, any Engine or Part to another Person for testing, service,
repair, maintenance, overhaul or, to the extent permitted hereby, for alteration
or modification. Lessee will not create or suffer to exist any Liens on or with
respect to the Aircraft, any APU, any Engine or Part, any Collateral, or
Lessee's interest therein other than Permitted Liens. Lessee will promptly take
such action as directed by Lessor to duly discharge any such Lien. If Lessee
fails to remove a Lien, Lessor may take such action as it deems appropriate to
remove such Lien, but without waiving its other rights hereunder. Lessee shall
reimburse Lessor on demand for any costs incurred by Lessor in connection with
such action, together with interest at the Late Payment Rate.
(b) Lessor's Conveyances. Lessor, may at any time, with or without notice
to Lessee, grant a security interest in, sell, assign or otherwise transfer (an
"Assignment") all or any part of its interest in the Lease Documents or the
Aircraft or any Rent due or to become due hereunder, and Lessee shall perform
all of its obligations under the Lease Documents, to the extent so transferred,
for the benefit of the beneficiary of such Assignment (such beneficiary,
including any successors and assigns, an "Assignee") except that the interest of
any such Assignee shall be subject to Lessee's rights to the extent provided in
this Lease. Lessee waives any right and agrees not to assert against any
Assignee any defense, setoff, recoupment, claim, counterclaim or any other
Abatement that Lessee may have against Lessor, unless expressly assumed by such
Assignee, in which case, Lessor shall be relieved of any such assumed
obligations. The foregoing waiver is not intended to contradict or otherwise
limit or modify the provisions of Section 7. If so directed in writing, Lessee
shall pay all Rent and all other sums due or to become due under the Lease
Documents directly to the Assignee or any other party designated in writing by
Lessor. Lessee acknowledges and agrees that Lessor's right to enter into an
Assignment is essential to Lessor, and, accordingly, waives any restrictions
under Applicable Law with respect to an Assignment and any related remedies.
Upon the request of Lessor or any Assignee, Lessee also agrees (a) to promptly
execute and deliver to Lessor or to such Assignee an acknowledgment of
assignment in form and substance satisfactory to the requesting party, an
insurance certificate and such other documents and assurances reasonably
10
requested by Lessor or Assignee, and (b) to comply with the reasonable
requirements of any such Assignee in order to perfect any such assignment or
transfer.
(c) Successors and Assigns. This Lease shall be binding upon and inure to
the benefit of, and may be enforced by (i) Lessor and its successors and other
Assignees, or other express third party beneficiaries, and (ii) Lessee and its
successors and assigns (subject to Section 12(a)).
Notwithstanding the foregoing, provided that no Default or Event of
Default has occurred and is continuing, Lessee may contract with the Manager to
provide certain management services with respect to the Aircraft, and to charter
the Aircraft to any customer of the Manager from time to time pursuant to the
Management Agreement, in each case, as specified in the Consent to Management
Agreement, subject to the satisfaction of the following conditions: (a) Manager
is and remains a solvent, domestic corporation holding a current and valid Air
Carrier Certificate issued by the FAA; (b) the average annual flight hours in
charter operation shall not exceed 40% percent of the total average annual
flight hours of the operation of the Aircraft and/or the charter operation (or
chartering) shall not result in any loss of any Assumed Tax Benefits, and (c)
the Management Agreement and any such charter entered into pursuant thereto (i)
do not convey any Lien or other interest in or against the Aircraft, and (ii)
expressly (A) remain, subject and subordinate to the Lease and the rights of
Lessor hereunder and in and to the Aircraft (including, without limitation,
Lessor's right to repossess the Aircraft and to avoid such Management Agreement
or charter pursuant to Section 13(b) hereof), (B) do not permit any further
disposition, (C) do not contain provisions that are inconsistent with the
provisions of this Lease or cause Lessee to breach any of its representations,
warranties or agreements under this Lease, and (D) otherwise conform to the
Consent to Management Agreement. Lessor acknowledges that certain of the duties
and obligations of Lessee hereunder may be performed by Manager, however, this
acknowledgment on the part of Lessor does not constitute an acceptance by Lessor
of such performance by Manager of such duties and obligations unless the
performance of such duties and obligations fully and completely satisfies the
requirements of the Lease. The terms and conditions of the Consent to Management
Agreement are hereby incorporated herein by their reference. No such arrangement
by Lessee will reduce any of the obligations of Lessee hereunder or the rights
of Lessor hereunder, and all of the obligations of Lessee hereunder shall be and
remain primary and shall continue in full force and effect as the obligations of
a principal and not of a guarantor or surety.
SECTION 13. EVENTS OF DEFAULT AND REMEDIES.
(a) Events of Default. The term "Event of Default" means (i) non-payment
of any Basic Rent, Supplemental Rent (including Casualty Value, if applicable)
and/or any other amount due pursuant to any Rider, Addendum or Supplement hereto
within ten (10) days after any or all of the same shall become due and payable,
or, upon demand, any other amount required to be paid herein or in connection
with any Rider, Addendum or Supplement hereto or under any other agreement with
Lessor; (ii) failure to maintain, use, or operate the Aircraft in compliance
with Applicable Law; (iii) any use of the Aircraft outside of the U.S. that is
prohibited by this Lease, or use for any illegal purpose; (iv) failure to
obtain, maintain and/or comply with all of the insurance coverages required
under this Lease; (v) any prohibited transfer or encumbrance, or the existence
of any unpermitted Lien, or any other action or circumstance that is prohibited
by, or any violation of, Section 12(a); (vi) failure to return the Aircraft to
Lessor on the date and in the manner required by this Lease; (vii) a default by
Lessee under any loan, note, security agreement, lease, guaranty, conditional
sale or other agreement with, or other financial obligation to, Lessor or its
Affiliates; (viii) a default by Lessee in any payment or other obligation to any
Person other than Lessor or its Affiliates, if the aggregate amount of such
respective payment or obligation, or if the aggregate amount of the underlying
agreement, document or obligation regarding any such default, is in excess of
$1,000,000.00; (ix) a material inaccuracy in any representation or breach of
warranty by Lessee (including any false or misleading representation or
warranty) in any financial statement or Lease Document; (x) the commencement of
any bankruptcy, insolvency, receivership or similar proceeding by or against
Lessee or any of its properties or business (unless, if involuntary, the
proceeding is dismissed within sixty (60) days of the filing thereof) or the
rejection of this Lease or any other Lease Document in any such proceeding; (xi)
the failure by Lessee generally to pay its debts as they become due and its
admission in writing of such inability; (xii) the occurrence of any of
11
the following events: (A) Lessee enters into any transaction of merger or
consolidation, unless Lessee is the surviving corporation; (B) Lessee ceases to
do business as a going concern, or liquidates, or dissolves; (C) Lessee sells,
transfers, or otherwise disposes of all or substantially all of its assets or
property, or enters into a leveraged buyout; (D) Lessee changes the form of
organization of its business; (E) if privately owned, Lessee permits any
substantial change in the ownership or control of its capital stock or
membership interests such that less than 50% of such equity interest remain with
the holder(s) of such equity interests as of the date of this Lease; or (F) if
publicly held when it entered into this Lease, any change so that Lessee is no
longer subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, or no longer registered under Section 12 of the Securities Act
of 1933, as amended, if it so reported or registered as of the date of this
Lease; (xiii) a material adverse change in the business, operations, financial
reporting, or financial condition of the Lessee or in its ability to comply with
any Lease Documents since the date of this Lease as determined by Lessor, in its
sole discretion and in good faith; (xiv) failure by Lessee to notify Lessor of
any Default or Event of Default within ten (10) business days of its occurrence;
(xv) breach by Lessee of any other covenant, condition or agreement (other than
those in items (i)-(xiv)) under this Lease or any of the other Lease Documents
that continues for thirty (30) days after Lessor's written notice to Lessee (but
such notice and cure period will not be applicable unless such breach is curable
by practical means within such notice period); (xvi) the repudiation or
rescission, or attempted repudiation or rescission, or unenforceability of the
Guaranty or any other Lease Document to which Guarantor is a party, or any
allegation that the Guaranty or any such Lease Document is unenforceable; (xvii)
Guarantor's failure generally to pay its debts as they become due and its
admission in writing of such inability; (xviii) a material adverse change in the
business, operations, financial reporting, or financial condition of Guarantor
or in its ability to comply with the Guaranty or any other Lease Documents to
which it is a party since the date of the Guaranty as determined by Lessor, in
its sole discretion and in good faith; (xix) failure by Guarantor to notify
Lessor of any Event of Default or event, which with the giving of notice or
passing of time or both, would constitute an Event of Default, in each case,
pertinent to Guarantor or the Guaranty, within ten (10) business days of its
occurrence; (xx) any event or condition set forth in subsections (vii) through
(xii) of this Section 13(a) shall occur with respect to Guarantor or any other
guarantor or other Person responsible, in whole or in part, for payment or
performance of this Lease; (xxi) to the extent not already covered in any other
subsection of this Section 13(a), any Default (as defined in the Guaranty) shall
occur; or (xxii) if Lessee contracts with the Manager to provide, among other
things, certain management services with respect to the Aircraft pursuant to
Section 12 of this Lease, any event or condition set forth in subsections (ii)
through (v) and subsection (x) of this Section 13(a) shall occur with respect to
the Manager.
(b) Remedies. If an Event of Default occurs, Lessor may exercise any one
or more of the following remedies (in its sole discretion): (i) proceed at law
or in equity, to enforce specifically Lessee's performance or to recover
damages; (ii) declare this Lease in default, and/or cancel this Lease or
otherwise terminate Lessee's right to use of the Aircraft and Lessee's other
rights, but not its obligations under this Lease, and Lessee shall immediately
return the Aircraft to Lessor in accordance with the terms of this Lease; (iii)
enter the premises where the Aircraft is located and take immediate possession
of and remove (or disable in place) the Aircraft (and/or the APU, any Engines
and Parts then unattached to the Aircraft) by self-help, summary proceedings or
otherwise without liability; (iv) use Lessee's premises for storage as set forth
in this Lease without liability; (v) sell, re-lease or otherwise dispose of the
Aircraft (or any Engine or Part), whether or not in Lessor's possession, at
public or private sale, with or without notice to Lessee, and apply or retain
the net proceeds of such disposition, with Lessee remaining liable for any
deficiency and with any excess being retained by Lessor, or keep the Aircraft
idle; (vi) apply any deposit or other cash collateral, or any proceeds of any
Collateral, at any time to reduce any amounts due to Lessor; (vii) demand and
recover from Lessee the Liquidated Damages and other Rent whenever the same
shall be due; (viii) terminate any Management Agreement and any charter, without
regard as to the existence of any event of default thereunder and recover or
cause Lessee and Manager to relinquish possession and return the Aircraft,
including the Engines and Parts, pursuant to this Section 13, and/or exercise
any and all other remedies under the Consent to Management Agreement, or in
Lessee's stead, to the extent provided for under, or otherwise available to
Lessee in connection with any Management Agreement; and (ix) exercise any and
all other remedies allowed by Applicable Law, including the UCC. Without
limiting the generality of the foregoing, (A) upon the occurrence of an Event of
Default, Lessor may, among other things, demand and recover from Lessee the
Casualty Value (calculated as contemplated in the definition of Liquidated
Damages) or other applicable Liquidated Damages (in lieu of
12
future Basic Rent, and not as a penalty) and other Rent then due, and/or demand
that Lessee return the Aircraft in accordance with this Lease; and (B) if Lessee
returns the Aircraft, and after Lessor disposes of it, Lessor will determine the
amount, if any, of any credit or reimbursement or deficiency, as applicable,
with respect to Lessee's obligation to pay such Casualty Value or other
Liquidated Damages (all as contemplated in the definition of such term).
(c) Lessor's Performance. If Lessee fails to perform any of its agreements
contained in this Lease, including its obligations to keep the Aircraft free of
Liens, comply with Applicable Law, or obtain the requisite insurance coverages,
Lessor shall have the right, but shall not be obligated, to effect such
performance and any expenses incurred by Lessor in connection with effecting
such performance, together with interest thereon at the Late Payment Rate, shall
be payable by Lessee promptly upon demand. Any such action shall not be a cure
or waiver of any Default or Event of Default hereunder.
(d) Power-of-Attorney. Lessee irrevocably appoints Lessor as its
attorney-in-fact to act in Lessee's name and on its behalf to make, execute,
deliver and file any instruments or documents (including any filings at the
FAA), settle, adjust, receive payment, make claim or proof of loss, endorse
Lessee's name on any checks, drafts or other instruments in payment of any
insurance claims and to take any action as Lessor deems reasonably necessary or
appropriate to carry out the intent of this Lease; provided, however, Lessor
agrees that it will not exercise this power unless an Event of Default has
occurred or a Default has occurred and is continuing. This appointment is
coupled with an interest, is irrevocable, and shall terminate only upon payment
in full of the obligations set forth in this Lease and/or any other Lease
Documents.
(e) Enforcement Costs. Lessee shall be liable for, and pay to Lessor upon
demand, all costs, charges and expenses incurred by Lessor in enforcing or
protecting its rights under this Lease, whether by reason of any Default or
Event of Default, or otherwise, including, legal fees, disbursements, insurance,
expert witness fees, consultant fees, repossession, taxes, lien removal,
recovery, storage, inspection, appraisal, repair, costs of transportation,
refurbishing, advertising and brokers' fees, and other carrying costs and costs
of sale, re-lease or other disposition of the Aircraft.
(f) Cumulative Remedies, Etc. No right or remedy is exclusive. Each may be
used successively and cumulatively and in addition to any other right or remedy
referred to above or otherwise available to Lessor at law or in equity,
including, such rights and/or remedies as are provided for in the UCC, but in no
event shall Lessor be entitled to recover any amount in excess of the maximum
amount recoverable under applicable law with respect to any Event of Default. No
express or implied waiver by Lessor of any Default or Event of Default hereunder
shall in any way be, or be construed to be, a waiver of any future or subsequent
Default or Event of Default. The failure or delay of Lessor in exercising any
rights granted it hereunder upon the occurrence of any of the contingencies set
forth herein shall not constitute a waiver of any such right upon the
continuation or reoccurrence of any such contingencies or similar contingencies,
and any single or partial exercise of any particular right by Lessor shall not
exhaust the same or constitute a waiver of any other right provided for or
otherwise referred to herein. Lessee hereby waives any rights under the UCC to
cancel or repudiate this Lease or any of the other Lease Documents, to reject or
revoke acceptance of the Aircraft or any component thereof, to suspend
performance, and to recover from Lessor any general, special, incidental or
consequential damages, for any reason whatsoever. All remedies set forth herein
shall survive the expiration, cancellation or other termination of this Lease
for any reason whatsoever.
13
SECTION 14. NOTICES, REPORTS, FURTHER ASSURANCES AND INSPECTIONS.
(a) Notices. All communications and notices provided for herein shall be
in writing and shall become effective (i) upon hand delivery, or (ii) upon
delivery by an overnight delivery service, or (iii) upon two (2) Business Days
after being deposited in the U.S. mail with proper postage for first-class mail
prepaid, sent by registered or certified mail, return receipt requested, and
addressed to Lessor or Lessee at their respective addresses set forth under the
signatures hereto or such other address as either party may hereafter designate
by written notice to the other, or (iv) when sent by telecopy (with customary
confirmation of receipt of such telecopy) on the Business Day when sent or upon
the next Business Day if sent on other than a Business Day.
(b) Reports. Lessee will provide Lessor with the following in writing
within the time periods specified: (i) notice of any Lien which attaches to the
Aircraft, and the full particulars of the Lien, within ten (10) days after
Lessee becomes aware of the Lien; (ii) (A) Guarantor's consolidated balance
sheet and statement of retained earnings, prepared in accordance with GAAP,
certified by a recognized firm of certified public accountants, within ninety
(90) days of the close of each fiscal year of Guarantor, (B) Guarantor's
consolidated quarterly financial report certified by the chief financial officer
of Guarantor, within forty-five (45) days of the close of each fiscal quarter of
Guarantor, (C) all of Guarantor's Forms 10-K and 10-Q, if any, filed with the
SEC within thirty (30) days after the date on which they are filed (by
furnishing these SEC Forms, or making them publicly available in electronic
form, Lessee shall be deemed to have satisfied the requirements of clauses
(b)(ii)(A), (B), or (C)); (iii) notice to Lessor of any change of the Primary
Hangar Location, ten (10) days prior to any such change; (iv) notice of any loss
or damage to the Aircraft in accordance with Section 10; (v) notice of any
accident involving the Aircraft causing bodily injury or property damage to
third parties, within five (5) days of such accident; and (vi) ten (10) days
prior to the policy expiration date for any insurance coverage required by this
Lease, evidence (having the form and substance consistent with Section 2(g) of
the Closing Terms Addendum) of the renewal or replacement of such coverage
complying with the terms hereof. Lessee will also provide Lessor with the
following in writing promptly upon Lessor's request: (i) a copy of any insurance
policy required by this Lease; (ii) notice to Lessor of the Aircraft's location,
and the location of all Records relating to the Aircraft and its use,
maintenance and/or condition; (iii) such information as may be necessary to
enable Lessor to file any reports required by any governmental authority due to
Lessor's ownership of the Aircraft; (iv) copies of any manufacturer's
maintenance service program contract for the Airframe or Engines; (v) copies of
all Records evidencing Lessee's compliance with FAA airworthiness directives and
mandatory service bulletins and of compliance with the provisions of Section 9
hereof and of the Return Addendum, and any other requested Records; and (vi)
such other reports or information as Lessor may reasonably request.
(c) Further Assurances. Lessee will promptly execute or otherwise
authenticate any documents, filings and other records, including, amendments to
this Lease, UCC and FAA filings and acknowledgments of assignment, and will take
such further action as Lessor may reasonably request in order to carry out more
effectively the intent and purposes of this Lease and to establish and protect
Lessor's rights and remedies under this Lease, or otherwise with respect to the
Aircraft and/or the Collateral. Lessee irrevocably authorizes Lessor to file
UCCs with respect to the Aircraft or Collateral. Lessee agrees not to file any
corrective or termination statements with respect to any UCC or other filings
relating to the Aircraft or any Collateral. Lessee agrees to cause Guarantor to
furnish to Lessor, from time to time, such information relating to Guarantor as
Lessor shall reasonably request.
(d) Inspection. Lessor shall have the right, but not the duty, to inspect
the Aircraft, any component thereof and/or the Records, at any reasonable time
and from time to time, wherever located, upon reasonable prior written notice to
Lessee; except that no advance notice shall be necessary prior to any inspection
conducted, and such inspection may be conducted at any time, after the
occurrence of a Default or an Event of Default. Upon request of Lessor, Lessee
shall promptly confirm to Lessor the location of the Aircraft and/or the
Records. Lessee shall be responsible for the cost of any inspection conducted
after the occurrence of a Default or an Event of Default, and shall pay Lessor
such amount as additional Rent within ten (10) days of demand.
14
SECTION 15. TRANSACTION EXPENSES. Without limiting any other provision of this
Lease, Lessee shall perform and comply with all of its obligations, and possess,
use, operate, insure, maintain, and comply with Applicable Law, service, return
and/or store the Aircraft (or cause any or all of the same to be done) and take
all other actions contemplated in this Lease and the other Lease Documents at
its sole risk, cost and expense. Lessee shall pay all fees, costs and expenses
actually incurred by or on behalf of Lessor at any time in connection with this
Lease, whether or not the transactions contemplated hereby are consummated,
including, without limitation, appraisal and inspection fees, Lessor's counsel
(provided, that the fees, costs and expenses relating only to the execution and
delivery of this Lease and the Lease Supplement and payable by the Lessee shall
not, in the aggregate, exceed $30,000.00, but shall not be limited as to any
other fees, costs and expenses, including, without limitation, attorneys' fees
and expenses, incurred by or behalf of Lessor at any time after the execution
and delivery of this Lease and the Lease Supplement) and FAA Counsel's fees and
expenses, UCC, FAA or other applicable title and lien searches, reports, filing
and recording fees, charges and taxes, and costs and expenses incurred in
connection with Lessee's exercise of any option or other right granted under, or
any amendment or other modification to any of, the Lease Documents.
SECTION 16. MISCELLANEOUS.
(a) Interpretation. Time is of the essence in the payment and performance
of all of Lessee's obligations under this Lease. Any provision of this Lease
which may be determined to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective in such jurisdiction to the
extent thereof without invalidating the remaining provisions of this Lease. The
division of this Lease into sections, the provision of a table of contents and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Lease. The execution hereof on
behalf of Lessee and Lessor shall be deemed to constitute the acceptance by
Lessee and Lessor of the terms and conditions of each and every addendum, rider,
supplement, schedule, annex and exhibit hereto as if such document was
separately and individually executed on behalf of such party hereto and shall
constitute a part of this Lease. THIS LEASE MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS AND BY THE PARTIES HERETO ON SEPARATE COUNTERPARTS. ONLY
COUNTERPART NO. 1 OF THIS LEASE AND THE LEASE SUPPLEMENT SHALL BE CONSIDERED
"CHATTEL PAPER" FOR PURPOSES OF THE UCC.
(b) Granting Clause. In order to secure the prompt and full payment and
performance as and when due of any and all obligations and indebtedness of
Lessee to Lessor, now existing or hereafter created of any kind whatsoever,
Lessee hereby collaterally assigns, grants, and conveys to Lessor, a security
interest in and lien on all of Lessee's right, title and interest in and to all
of the following (the "Collateral"): (i) this Lease and any present and future
subleases, management agreements, interchange agreements, charter agreements,
purchase agreements and any other present and future agreements of any kind
whatsoever relating to the Aircraft or any part thereof and all rent, charter
payments, reimbursements and other disbursements, remittances or other amounts
payable with respect thereto; (ii) (in the event that contrary to the intentions
of Lessee and Lessor, a court determines that this Lease is not a "true" lease
under the UCC) the Aircraft and all present and future parts, accessories,
accessions and attachments thereto, and all present and future replacements,
substitutions and exchanges for such goods; and (iii) proceeds of the foregoing,
including all related goods, accounts, chattel paper, documents, instruments,
general intangibles, letters of credit, letters of credit rights, investment
property, deposit accounts, and supporting obligations, insurance proceeds,
warranty and requisition payments, and all present and future books and records
relating to any of the foregoing and/or the Aircraft (including, without
limitation, all tapes, cards, computer programs, computer runs and computer data
in the possession or control of the Lessee, any computer service bureau, or
other third party). The collateral assignment, security interest and lien
granted herein shall survive the termination, cancellation or expiration of this
Lease until such time as Lessee's obligations under this Lease are fully and
indefeasibly discharged.
(c) Entire Agreement. This Lease, and each of the other Lease Documents,
the Purchase Documents, and Required Documents, collectively constitute, and are
intended to collectively constitute, the complete and exclusive statement of the
terms of the agreement between Lessor and Lessee with respect to the purchase
and leasing of the Aircraft. This Lease, the Purchase Documents, and the other
Required
15
Documents cancel and supersede any and all prior or contemporaneous oral or
written understandings, memoranda, negotiations, communications, agreements, and
other records, with respect thereto including, any proposal letter, commitment
letter, and/or term sheet delivered to the Lessee by Lessor, or to Lessor by
Lessee. NO TERM OR PROVISION OF THIS LEASE MAY BE AMENDED, ALTERED, WAIVED,
DISCHARGED, OR TERMINATED EXCEPT IN A WRITING SIGNED BY A DULY AUTHORIZED
OFFICER OF THE PARTY AGAINST WHOM THE ENFORCEMENT OF THE AMENDMENT, ALTERATION,
WAIVER, DISCHARGE OR TERMINATION IS SOUGHT.
(d) Governing Law, Choice of Forum and Jury Trial Waiver. Lessee
acknowledges and agrees that this Lease has been executed and delivered in Rhode
Island; however, BOTH PARTIES AGREE THAT THIS LEASE SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF BOTH PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT
OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY, AND PERFORMANCE. Lessee hereby irrevocably consents and agrees that
any legal action, suit, or proceeding arising out of or in any way in connection
with this Agreement may be instituted or brought in the courts of the State of
New York or the U.S. District Court for the Southern District of New York, as
Lessor may elect, and by execution and delivery of this Lease, Lessee hereby
irrevocably accepts and submits to, for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of any such court,
and to all proceedings in such courts. LESSEE ALSO HEREBY KNOWINGLY AND FREELY
WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING HEREFROM OR IN
RELATION HERETO.
SECTION 17. TRUTH IN LEASING. THE AIRCRAFT, AS EQUIPMENT, BECAME SUBJECT TO THE
MAINTENANCE REQUIREMENTS OF PARTS 91 AND/OR 135, AS APPLICABLE, OF THE FEDERAL
AVIATION REGULATIONS ("FARS") UPON THE REGISTRATION OF THE AIRCRAFT WITH THE
FAA. LESSEE CERTIFIES THAT DURING THE TWELVE (12) MONTHS (OR PORTION THEREOF
DURING WHICH THE AIRCRAFT HAS BEEN SUBJECT TO U.S. REGISTRATION) PRECEDING THE
EXECUTION OF THIS LEASE, THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER
PARTS 91 AND/OR 135, AS APPLICABLE, OF THE FARS. LESSEE CERTIFIES THAT THE
AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PARTS 91 AND/OR 135, AS
APPLICABLE, OF THE FARS FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. UPON
EXECUTION OF THIS LEASE, AND DURING THE TERM HEREOF, THE LESSEE, WHOSE NAME AND
ADDRESS ARE SET FORTH IMMEDIATELY BELOW, ACTING BY AND THROUGH THE SIGNATORY
HERETO, WHO EXECUTES THIS SECTION SOLELY IN HER/HIS CAPACITY OF THE LESSEE SET
FORTH BELOW HER/HIS SIGNATURE, CERTIFIES THAT LESSEE SHALL BE RESPONSIBLE FOR
THE OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE (WHILE IT HAS
POSSESSION OF THE AIRCRAFT), UNLESS OPERATIONAL CONTROL OF THE AIRCRAFT IS
PROVIDED TO AN AIR TAXI OPERATOR CERTIFICATED UNDER PART 135 OF THE FARS, IF AND
TO THE EXTENT PERMITTED HEREUNDER. THE LESSEE FURTHER CERTIFIES THAT IT
UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FARS, PROVIDED
HOWEVER, THAT THE LESSEE SHALL NOT BE DEEMED TO BE RESPONSIBLE FOR THE
OPERATIONAL CONTROL OF THE AIRCRAFT FOR SO LONG AS THE AIRCRAFT IS IN POSSESSION
OF ANY SUCH AIR TAXI OPERATOR HAVING OPERATIONAL CONTROL TO THE EXTENT PERMITTED
HEREUNDER. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND
PERTINENT FARS CAN BE OBTAINED FROM THE NEAREST FEDERAL AVIATION FLIGHT STANDARD
DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE, OR AIR CARRIER DISTRICT
OFFICE.
[this space intentionally left blank]
16
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed as of the date first written above by their respective officers
thereunto duly authorized.
Lessor: Lessee:
FLEET NATIONAL BANK PRIORITY FULFILLMENT SERVICES, INC.
By:__________________________________ By:__________________________________
Title:_______________________________ Title:_______________________________
Print Name:__________________________ Print Name:__________________________
Address: x/x Xxxxx Xxxxxxx Xxxxxxxxxxx Xxxxxxx: 000 Xxxxx Xxxxxxx Expressway,
Xxx Xxxxxxxxx Xxxxx, 0xx Xxxxx 0xx Xxxxx Xxxxx, Xxxxx 00000
Xxxxxxxxxx, XX 00000
THIS IS COUNTERPART NO. __ OF A TOTAL OF 3 COUNTERPARTS. ONLY COUNTERPART NO. 1
SHALL BE CONSIDERED CHATTEL PAPER FOR PURPOSES OF THE UNIFORM COMMERCIAL CODE
AND A SECURITY INTEREST MAY BE PERFECTED ONLY BY POSSESSION OF COUNTERPART NO.
1.
17
EXHIBIT A
DEFINITIONS
(a) All References in the Lease to designated Sections and other subdivisions
are to such designated Sections and other subdivisions only, and the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
the Lease as whole and not to any particular Section or other subdivision.
(b) Except as otherwise indicated, all the agreements and instruments defined
herein or in the Lease shall mean such agreements and instruments as the same
may from time to time be supplemented or amended, or as the terms thereof may be
expressly waived or modified to the extent permitted by, and in accordance with,
the terms thereof.
(c) The word "including" means including without limitation.
(d) The terms defined herein and in the Lease shall, for purposes of the Lease
and the Lease Supplement, addenda, riders, annexes, schedules, and exhibits
thereto, have the meanings assigned to them and shall include the plural as well
as the singular as the context requires.
(e) The following terms shall have the following meanings for all purposes of
the Lease:
Basic Rent Date, Basic Rent Percentage, Basic Term, Renewal Term, Daily Rent
Percentage, Expiration Date, First Basic Rent Date, Last Acceptance Date, Last
Basic Rent Date, Lessor's Cost, Primary Hangar Location, and Rent Commencement
Date shall have the meanings set forth in Schedules No. 2 and 2-A to the Lease.
Abatements shall have the meaning set forth in Section 7 of the Lease.
Acceptance Date shall mean the date on which Lessee irrevocably and
unconditionally accepts the Aircraft for lease under the Lease as evidenced by
the execution and delivery of the Lease Supplement dated such date (and is set
forth in the Lease Supplement).
Additions shall have the meaning set forth in Section 9 of the Lease.
Administrative Charge shall mean an amount equal to five percent (5%) of the
amount payable to which such charge applies.
Affiliate shall mean any affiliated person, firm or entity controlling,
controlled by or under common control with Lessee or Lessor, as applicable.
Aircraft Purchase Agreement shall mean that certain Swap Agreement dated as of
August 10, 2004 between Lessee and Supplier and any and all schedules,
supplements, riders, consents, amendments or modifications to said Swap
Agreement and any exhibits executed or delivered in connection therewith.
Alterations shall have the meaning set forth in Section 9 of the Lease.
Aircraft shall mean (i) the Airframe, (ii) the Engines, (iii) any APU, and (iv)
the Records.
Airframe shall mean (i) the Aircraft described in Schedule No. 1, and shall not
include the Engines or any APU, and (ii) any and all Parts from time to time
incorporated in, installed on, or attached to such Aircraft and any and all
Parts removed therefrom so long as title thereto shall remain vested in Lessor
in accordance with the applicable terms of the Lease after removal from the
Aircraft.
Applicable Law shall mean all applicable laws including all statutes, treaties,
conventions, judgments, decrees, injunctions, writs and orders of any court,
governmental agency or authority and rules,
18
regulations, orders, directives, licenses and permits of any governmental body,
instrumentality, agency or authority as amended and revised, and any judicial or
administrative interpretation, of any of the same, including the airworthiness
certificate issued with respect to the Aircraft, all FARS, Supplemental FARS,
airworthiness directives, and/or any of the same relating to noise, the
environment, national security, public safety, exports or imports or contraband.
APU shall mean any auxiliary power unit described and listed by manufacturer's
serial number in Schedule No. 1 and currently installed on the Airframe whether
or not thereafter installed on such Airframe or any other airframe from time to
time; (ii) any auxiliary power unit which may from time to time be substituted,
pursuant to the applicable terms of the Lease, for any auxiliary power unit
leased hereunder; and (iii) in each case set forth in clauses (i) and (ii)
hereof, with any and all Parts incorporated in or installed on or attached to
any such auxiliary power unit, engine or any and all Parts removed therefrom so
long as title thereto shall remain vested in Lessor in accordance with the
applicable terms of the Lease after removal from any such auxiliary power unit.
The term "APU" means, as of any date of determination, any auxiliary power unit
leased hereunder.
AS-IS, WHERE-IS shall mean "AS-IS WHERE-IS", AND "WITH ALL FAULTS", WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND WHATSOEVER, BY, OR
ANY RECOURSE OF ANY KIND WHATSOEVER TO, LESSOR.
Assignee shall have the meaning set forth in Section 12 of the Lease.
Assignment shall have the meaning set forth in Section 12 of the Lease.
Assumed Tax Benefits shall have the meaning set forth in the Special Tax
Indemnity Rider to the Lease.
Basic Rent shall have the meaning set forth in Section 3 of the Lease.
Business Day shall mean any day other than a Saturday, Sunday or other day on
which banks located in Providence, Rhode Island are closed or are authorized to
close.
Casualty Payment Date shall have the meaning set forth in Section 10(a) of the
Lease.
Casualty Value for any Basic Rent Date shall be the amount equal to the Lessor's
Cost multiplied by the applicable percentage set forth on Schedule No. 3 for
such Basic Rent Date (or the corresponding Basic Rent number), or if the
Casualty Payment Date is after the last Basic Rent Date, the Casualty Value for
such date shall be the amount equal to the Lessor's Cost multiplied by the
applicable percentage set forth on Schedule No. 3 for the last Basic Rent Date
(or the corresponding Basic Rent number); provided, however, in the case of an
Event of Loss covered by the insurance covering loss or damage to the Aircraft
required to be maintained by Lessee pursuant to the Lease (or which would have
been covered by such insurance, had such insurance been maintained as required),
Casualty Value shall mean the higher of Fair Market Sales Value or the amount
equal to the Lessor's Cost multiplied by the applicable percentage set forth on
Schedule No. 3 for the applicable Basic Rent Date (or the corresponding Basic
Rent number).
Claims shall have the meaning set forth in Section 11 of the Lease.
Collateral shall have the meaning set forth in Section 17(b) of the Lease.
Code shall have the meaning set forth in the Special Tax Indemnity Rider.
Consent to Management Agreement shall mean any Consent to Management Agreement
(Charter) Agreement and Assignment required by Lessor in connection with the
Lease and which shall be in form and substance satisfactory in all respects to
Lessor.
Daily Rent shall have the meaning set forth in Section 3 of the Lease.
19
Default shall mean an event or circumstance which, after the giving of notice or
lapse of time, or both, would become an Event of Default.
Early Purchase Date shall mean each of the Basic Rent Number(s) designated as
such on Schedule No. 2-A to the Lease Supplement.
Early Purchase Option Amount shall be the amount payable by the Lessee in the
event that it exercises its option to purchase the Aircraft pursuant to
paragraph (e) of the Purchase, Early Purchase and Renewal Option Addendum to the
Lease, and shall be determined by multiplying the Lessor's Cost of the Aircraft
by the percentage set forth opposite the applicable Early Purchase Date set
forth on Schedule No. 2-A to the Lease Supplement.
Engine shall mean (i) each of the engines described and listed by manufacturer's
serial numbers in Schedule No. 1 and currently installed on the Airframe covered
by such Lease Supplement whether or not thereafter installed on such Airframe or
any other airframe from time to time; (ii) any engine which may from time to
time be substituted, pursuant to the applicable terms of the Lease, for an
Engine leased hereunder; and (iii) in each case set forth in clauses (i) and
(ii) hereof, with any and all Parts incorporated in or installed on or attached
to such Engine, engine or any and all Parts removed therefrom so long as title
thereto shall remain vested in Lessor in accordance with the applicable terms of
the Lease after removal from such Engine. The term "Engines" means, as of any
date of determination, all Engines leased hereunder.
Estimated Annual Hours shall mean the anticipated number of average annual
flight hours as shown on Schedule No. 2-A.
Event of Default shall have the meaning set forth in Section 13 of the Lease.
Event of Loss with respect to the Aircraft, the Airframe or any Engine or any
APU, shall mean any of the following events with respect to such property (i)
loss of such property or the use thereof due to theft, disappearance,
destruction, damage beyond repair or rendition of such property permanently
unfit for normal use for any reason whatsoever; (ii) any damage to such property
which results in an insurance settlement with respect to such property on the
basis of a total loss or constructive total loss; (iii) the condemnation,
confiscation or seizure of, or requisition of title to or use of, such property
by the act of any government (foreign or domestic) or of any state or local
authority or any instrumentality or agency of the foregoing ("Requisition of
Use"); (iv) as a result of any rule, regulation, order or other action by any
government (foreign or domestic) or governmental body (including, without
limitation, the FAA or any similar foreign governmental body) having
jurisdiction, the use of such property shall have been prohibited, or such
property shall have been declared unfit for use, for a period of six (6)
consecutive months, unless Lessee, prior to the expiration of the six-month
period, shall have undertaken and, in the reasonable opinion of the Lessor,
shall be diligently carrying forward all steps which are necessary or desirable
to permit the normal use of such property by Lessee or, in any event, if use
shall have been prohibited, or such property shall have been declared unfit for
use, for a period of twelve (12) consecutive months (unless waived by Lessor in
its sole and absolute discretion) or such prohibition shall exist on the
expiration or earlier cancellation or termination of the Lease; (v) with respect
to an Engine or any APU, the removal thereof from the Airframe for a period of
six (6) consecutive months or longer, whether or not such Engine or any APU, as
the case may be, is operational, or (unless waived by Lessor in its sole and
absolute discretion) such prohibition shall exist on the expiration or earlier
cancellation or termination of the Lease; (vi) an Engine or any APU is returned
to the Manufacturer, other than for modification in the event of patent
infringement or for repair or replacement (any such return being herein referred
to as a "Return to Manufacturer"); or (vii) (unless waived by Lessor in its sole
and absolute discretion) the Aircraft is not returned to Lessor upon the
expiration or earlier termination or cancellation of the Lease, unless Lessee or
a third party purchaser purchases the Aircraft pursuant to Lessee's exercise of
an option contemplating such purchase under any applicable provision of the
Lease. The date of such Event of Loss shall be the date of such theft,
disappearance, destruction, damage, Requisition of Use, prohibition, unfitness
for use for the stated period, removal for the stated period or Return to
Manufacturer. An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe. An Event
of Loss with
20
respect to any Engine or any APU shall not, without loss of the Airframe, be
deemed an Event of Loss with respect to the Aircraft.
Excess Hours shall have the meaning set forth in the definition of Fair Market
Sales Value.
FAA shall mean the U.S. Federal Aviation Administration and/or the Administrator
of the Federal Aviation Administration and the Department of Transportation, or
any person, governmental department, bureau, authority, commission or agency
succeeding to the functions of any of the foregoing, including, where
applicable, the Transportation Security Administration.
FAA Counsel shall mean Daugherty, Fowler, Peregrin & Xxxxxx, 000 Xxxxx Xxxxxxxx,
Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxx 00000, or such other counsel as Lessor may
designate.
FAA Documents shall have the meaning set forth in the Closing Terms Addendum.
Fair Market Sales Value and Fair Market Rental Value shall mean those certain
values determined on the following basis: (i) the subject value shall be the
amount which would be obtained in an arm's length transaction between an
informed and willing buyer or lessee (who is neither a lessee in possession nor
a used equipment dealer), and an informed and willing seller or lessor, as the
case may be, under no compulsion to sell or lease, as the case may be; (ii) the
costs of removal of the Aircraft from its then location shall not be a deduction
from such value; and (iii) in determining any such value, it shall be assumed
(whether or not the same be true) (A) that the Aircraft has been maintained by
Lessee and is in the condition in which it is required to be returned to Lessor,
in each case, in accordance with the Lease, (B) such value has not been
diminished due to the existence of any damage history, and (C) that the total
number of Airframe hours (including any component with hourly overhaul
schedules) accumulated from the Acceptance Date to the Expiration Date or other
date of termination or cancellation do not exceed the product of Estimated
Annual Hours times the number of twelve month periods and any portion thereof,
from the Acceptance Date to such expiration, termination, or cancellation date
(any such excess, the "Excess Hours").
FARs shall mean the Federal Aviation Regulations, any Supplemental Federal
Aviation Regulations and all successor regulations thereto.
GAAP shall mean generally accepted accounting principles consistently applied.
Guarantor shall mean PFSWeb, Inc., a Delaware corporation with its principal
place of business and chief executive office at 000 Xxxxx Xxxxxxx Xxxxxxxxxx,
0xx Xxxxx, Xxxxx, Xxxxx 00000.
Guaranty shall mean the Guaranty dated as of August 25, 2004 executed by PFSWeb,
Inc., a Delaware corporation, having an office at 000 Xxxxx Xxxxxxx Xxxxxxxxxx,
0xx Xxxxx, Xxxxx, Xxxxx 00000, in favor of the Lessor and any and all schedules,
supplements, riders, consents, amendments or modifications to said Guaranty and
any exhibits executed or delivered in connection therewith.
Impositions shall have the meaning set forth in Section 8 of the Lease.
Late Payment Rate shall mean the lesser of a rate equal to 1.5% per month or the
highest rate permitted by Applicable Law. The Late Payment Rate shall be
computed on the basis of a 360 day year and a 30 day month.
Lease Documents shall mean the Lease (including the Lease Supplement), and all
documents, instruments and agreements entered into or provided by Lessee, any
guarantors and or other third party pursuant to or in connection with the Lease.
Lease Supplement shall mean a supplement to the Lease to be entered into as of
the Acceptance Date by Lessee, which supplement shall be substantially in the
form as attached to the Lease, and upon execution by Lessee shall constitute a
part of the Lease.
21
Lessor's Liens shall mean any Liens created or granted by Lessor resulting from
claims against Lessor not related to Lessor's ownership of the Aircraft or
otherwise contemplated under the Lease.
Liens shall mean all liens, charges, security interests, leaseholds, and
encumbrances of every nature and description whatever, including, without
limitation, any of the same arising in connection with or created by any
Impositions, (other than Lessor's Liens) and rights of third parties under
management, charter, pooling, interchange, sublease, timeshare, overhaul, repair
or other similar agreements or arrangements.
Liquidated Damages shall mean the liquidated damages (all of which, Lessee
hereby acknowledges and agrees, are damages to be paid in lieu of future Basic
Rent and are reasonable in light of the anticipated harm arising by reason of an
Event of Default, and are not a penalty) described in parts (i), (ii), or (iii)
below, as determined by whether the Aircraft is returned or otherwise recovered,
and if returned or recovered, the time and manner of the disposition of the
Aircraft:
(i) If Lessor recovers and sells the Aircraft, or Lessee has not returned
the Aircraft in the manner and condition required by the Lease, an amount
calculated as the Casualty Value of the Aircraft (determined as of the next
Basic Rent Date after the date of the occurrence of the subject Event of
Default), together with all other Rent due hereunder as of such determination
date, less a credit for any disposition proceeds, if applicable pursuant to the
application provisions in the next sentence. If Lessor demands the liquidated
damages under this part (i), and recovers and sells the Aircraft, any proceeds
of such disposition by Lessor, to the extent received by Lessor in good and
indefeasible funds, shall be applied by Lessor (A) first, to pay all costs,
charges and expenses, payable pursuant to Section 13, (B) second, to pay to
Lessor an amount equal to any unpaid Rent due and payable, together with the
liquidated damage amounts specified in this part (i), to the extent not
previously paid, (C) third, to pay to Lessor any interest accruing on the
amounts covered by the preceding clauses, at the Late Payment Rate, from and
after the date the same become due and payable pursuant to the terms hereof
through the date of payment, and (D) fourth, to reimburse Lessee for such
amounts to the extent paid by Lessee as liquidated damages pursuant to this part
(i) (up to the amount of the Casualty Value calculated as provided in the first
sentence of this part (i)). Any amount remaining thereafter shall be retained by
Lessor as owner of the Aircraft.
(ii) If Lessor recovers the Aircraft and disposes of it pursuant to a
lease which is substantially similar to the Lease, then an amount equal to the
sum of (A) any accrued and unpaid Rent under the Lease as of the date of
commencement (the "Commencement Date") of the term of the new lease, plus (B)
the present value as of the Commencement Date of the total Basic Rent for the
then remaining term of the Lease, minus (C) the present value as of the
Commencement Date of the rent payable under the new lease, but only for the
period of the new lease term which commences on the commencement date of the new
lease and expires on the Expiration Date of the Lease.
(iii) If Lessor recovers the Aircraft and disposes of it by a lease that
is not substantially similar to the Lease, or elects not to dispose of the
Aircraft, an amount equal to the sum of (A) any accrued and unpaid Rent as of
the date Lessor repossesses the Aircraft or such earlier date as Lessee tenders
possession of the Aircraft to Lessor, plus (B) the present value as of the date
of delivery under clause (A) of the total Basic Rent for the then remaining Term
of the Lease, minus (C) the present value, as of that certain date which may be
determined by taking into account Lessor's having a reasonable opportunity to
repossess and remarket the Aircraft, of the "market rent" (as computed pursuant
to Article 2-A of the UCC) in the continental U.S. on that date, computed for
the same lease term; provided, however, Lessee acknowledges and agrees that if
Lessor is unable after reasonable effort to dispose of the Aircraft at a
reasonable price or the circumstances reasonably indicate that such an effort
will be unavailing, the "market rent" in such event will be deemed to be $0.00,
but in the event that Lessor does eventually re-lease or otherwise dispose of
the Aircraft, it will apply the net proceeds of such disposition, to the extent
received in good and indefeasible funds, as a credit or reimbursement, as
applicable, in a manner consistent with the applicable provisions of Article
2-A.
22
For purposes of computing liquidated damages under parts (ii) or (iii) above
only, any amounts discounted to present value, shall be discounted at the rate
of the Index Rate plus one percent (1%) per annum, compounded annually. For
purposes of computing liquidated damages under parts (ii) or (iii) above only,
"Index Rate" shall mean the "one-month" "London Interbank Offered Rate (LIBOR)"
as published in The Wall Street Journal in effect, as the case may be, two days
prior to the Acceptance Date. Lessor shall have no obligation to make any of the
remittances to Lessee that are contemplated in any part of this definition if
Lessor has paid such amounts to any guarantor or other Person having a right of
subrogation with respect to such amounts, or such guarantor or other Person has
demanded the payment of such amount.
Loaner Engine shall have the meaning set forth in Section 9(d) of the Lease.
Maintenance Requirements shall mean, with respect to the Airframe, any Engine,
any APU or any Part, all compliance requirements set forth in or under (i) all
maintenance manuals initially furnished with respect thereto, including any
subsequent amendments or supplements to such manuals issued by the Manufacturer
or Supplier from time to time, (ii) all mandatory service bulletins issued,
supplied, or available by or through the Manufacturer and/or the Manufacturer of
any Engine, any APU or Part with respect thereto, (iii) all applicable
airworthiness directives issued by the FAA or similar regulatory agency having
jurisdictional authority, (iv) all conditions to the enforcement of any
warranties pertaining thereto, (v) Lessee's FAA approved maintenance program
with respect thereto, and (vi) all additional requirements, if any, set forth in
the Supplemental Maintenance Addendum.
Management Agreement shall mean all of the documents and agreements constituting
the management agreement referenced in the Consent to Management Agreement,
which documents and agreements shall be in form and substance satisfactory in
all respects to Lessor.
Manager shall mean the manager referenced in the Consent to Management
Agreement, which manager shall be satisfactory in all respects to Lessor.
Manufacturer shall mean each manufacturer identified on Schedule No. 1 and its
successors and assigns.
Material Damage shall mean any damage: (a) required to be reported pursuant to
any governmental reporting requirement, (b) with respect to which an insurance
claim is being made, or (c) requiring that the Aircraft or any Engine be taken
out of service for more than one (1) day to repair.
MSP Contract shall mean a Honeywell Maintenance Service Plan or such other
maintenance agreements which shall be entered into from time to time between
Honeywell, Inc. (or such other vendor as Lessor may designate or approve in its
sole discretion) and Lessee, and which shall be in form and substance
satisfactory in all respects to Lessor in its sole discretion, which provide for
the maintenance and/or overhaul of the Engines and the APU.
Parts shall mean all appliances, avionics, parts, instruments, appurtenances,
accessories, furnishings and other equipment or property of whatever nature
(other than Additions or Engines), which may from time to time be incorporated
or installed in or attached to the Airframe or any Engine or any APU for so long
as title thereto shall be vested in Lessor in accordance with the applicable
terms of the Lease.
Permitted Liens shall mean (a) the respective rights of others under subleases,
management agreements, or charters, if any, to the extent expressly provided and
permitted by the terms of Section 12 of the Lease, (b) Lessor's Liens, and (c)
Liens for taxes either not yet due or being contested by Lessee in good faith,
and inchoate materialmen's, mechanic's, workmen's, repairmen's, employee's, or
other like Liens arising in the ordinary course of business of Lessee for sums
not yet delinquent or being contested in good faith, (and for the payment of
which adequate assurances and/or security have, in Lessor's sole judgment, been
provided to Lessor) with due diligence and by appropriate proceedings, if Lessor
shall have determined in its sole judgment that the nonpayment of any such tax
or Lien or the contest of any such payment in such proceedings does not and will
not adversely affect the title, property or rights of Lessor.
23
Person shall mean any individual, partnership, corporation, limited liability
company, trust, association, joint venture, joint stock company, or
non-incorporated organization or government or any department or agency thereof,
or any other entity of any kind whatsoever.
Purchase Documents shall mean all fully executed purchase agreements in
connection with the acquisition of the Aircraft, including the Engines,
assignments of any or all of the Purchase Documents, in form and substance
satisfactory to Lessor, invoices and bills of sale from Supplier, naming Lessor
as purchaser and any other documents required in Section A.1(a) of the Closing
Terms Addendum.
Records shall mean any and all logs, manuals, certificates and data and
inspection, modification, maintenance, engineering, technical, and overhaul
records (whether in written or electronic form) with respect to the Aircraft
(whether in existence as of, or created at any time after, the Acceptance Date),
including, without limitation, all records required to be maintained by the FAA
or any other governmental agency or authority having jurisdiction with respect
to the Aircraft or any Manufacturer or Supplier of the Aircraft (or any part
thereof) with respect to the enforcement of warranties or otherwise, which
Records shall be at all times the property of the Lessor after the Acceptance
Date.
Rent shall have the meaning set forth in Section 3 of the Lease.
Required Documents shall have the meaning set forth in the Closing Terms
Addendum.
Requisition of Use shall have the meaning set forth in the Event of Loss
definition contained herein.
Return to Manufacturer shall have the meaning set forth in the Event of Loss
definition contained herein.
Schedules Xx. 0, 0, 0-X, 0 or 4 shall mean any of Schedules Xx. 0, 0, 0-X, 0 or
4, as applicable, to the Lease Supplement.
SEC shall mean the Securities and Exchange Commission.
Supplemental Rent shall have the meaning set forth in Section 3 of the Lease.
Supplier shall mean the "Supplier" or "Suppliers", as the case may be,
identified as such on Schedule No. 1 and their respective successors and
assigns.
Tax Loss shall have the meaning set forth in the Tax Rider.
Term shall mean the Basic Term together with (i) the period, if any, from and
including the Acceptance Date through, but not including, the Rent Commencement
Date, and (ii) any Renewal Term or Renewal Terms, if any, entered into pursuant
to the Lease.
Transportation Code shall mean Title 49, Subtitle VII of the United States Code,
as then in effect.
UCC shall mean the Uniform Commercial Code as in effect in the applicable
jurisdiction.
Warranty Xxxx of Sale shall mean a warranty xxxx of sale in the form of Exhibit
C hereto or such other form of warranty xxxx of sale as Lessor in its sole
discretion shall deem satisfactory.
24
EXHIBIT B
SPECIAL TAX INDEMNITY RIDER ("Tax Rider") to Lease (S/N 143) dated as of
August 25, 2004, (the "Lease") by and between FLEET NATIONAL BANK, as lessor
("Lessor"), and PRIORITY FULFILLMENT SERVICES, INC., as lessee ("Lessee").
All capitalized terms not defined in this Tax Rider are defined in the
Lease. Execution of the Lease by Lessee and Lessor shall be deemed to constitute
execution and acceptance of the terms and conditions of this Tax Rider, and it
shall supplement and be a part of the Lease.
1. LESSOR'S ASSUMPTIONS. In entering into the Lease and the transactions
contemplated thereby, Lessor has assumed that: (a) Lessor will be entitled, for
federal, state and local income tax purposes, to the following tax benefits (the
"Assumed Tax Benefits"): (i) cost recovery deductions under section 168 of the
Internal Revenue Code of 1986, as amended (the "Code") commencing in Lessor's
taxable year which includes the Acceptance Date, calculated using the 200%
declining balance method, switching to the straight line method for the first
taxable year for which that method yields a larger deduction, (ii) the half year
convention, (iii) a basis equal to 100% of Lessor's Cost, (iv) zero salvage
value, and (v) a recovery period of 5 years. and (b) Lessor will be taxed for
federal, state and local corporate income and franchise tax purposes at an
effective combined tax rate of 37.50% (the "Assumed Tax Rate").
2. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessee represents,
warrants, and covenants that: (a) the Aircraft will not constitute "property
used predominantly outside the United States", "public utility property", or
"tax-exempt use property" within the meaning of Sections 168(i)(10) or 168(h) of
the Code and (b) neither Lessee nor any member of any group of corporations,
limited liability companies, partnerships, or other organizations with which
Lessee files consolidated, combined or unitary income or franchise tax returns
will file any tax return or other document which is inconsistent with the
treatment of the Lessor as the owner of the Aircraft for income tax purposes.
3. INDEMNITY FOR LESSEE'S ACTS OR OMISSIONS.
(a) Indemnity. Upon the occurrence of any Tax Loss, Lessee shall pay to
Lessor at Lessor's option either: (i) an amount or amounts that, after reduction
by the net amount of all federal, state and local taxes required to be paid by
Lessor with respect to the receipt of such amount or amounts, equals the
aggregate additional federal, state and local income taxes payable by Lessor as
a result of such Tax Loss plus any interest, fines, additions to tax or
penalties relating to or in connection with such Tax Loss, which amount shall be
payable within thirty (30) days after written notice from Lessor to Lessee that
a Tax Loss has occurred, or (ii) additional Rent on each Basic Rent Date,
beginning on the Basic Rent Date specified in written notice from Lessor to
Lessee that a Tax Loss has occurred, in such amounts as are necessary to
maintain Lessor's net after-tax economic yield and overall net after-tax cash
flow for the entire Term at the same level that would have been available if
such Tax Loss had not occurred, plus any interest, penalties or additions to tax
that may be imposed in connection with such Tax Loss. In the event of any Tax
Loss, the Casualty Value and any affected option amounts shall be adjusted
appropriately by Lessor. Any amount payable by Lessee with respect to a Tax Loss
shall be calculated based on the assumptions set forth in Section 1 above.
(b) Tax Loss. For the purposes of this indemnity, any of the following
events shall constitute a "Tax Loss": (i) as the result of any act or failure to
act of Lessee (regardless of whether any such act or failure to act is permitted
by the terms of the Lease or otherwise), or the breach of any of Lessee's
representations, warranties, or covenants set forth in this Tax Rider, Lessor
shall lose, or shall not have the right to claim, or shall suffer a disallowance
or recapture with respect to, or shall receive a lower than anticipated economic
benefit from, all or any portion of the Assumed Tax Benefits; (ii) for federal,
foreign, state or local income tax purposes, any item of income, loss or
deduction with respect to the Aircraft is treated as derived from, or allocable
to, sources outside the U.S., and as a result Lessor's allowable foreign tax
credit for federal income tax purposes for any year is less than the credit to
which Lessor would have been entitled if all such income, loss and deduction had
been from U.S. sources; or (iii) during the Term there shall be included in
Lessor's gross income for federal, state or local income tax purposes any amount
25
on account of any Addition, Alteration or other modification or improvement to
or in respect of the Aircraft made or paid for by Lessee, or due to an exchange
of the Aircraft or any portion of the Aircraft, which results in any reduction
to Lessor's anticipated net after-tax economic yield and overall net after-tax
cash flow from or as to the Lease.
4. BENEFICIARIES OF THE INDEMNITY. For purposes of this Tax Rider, (a) "Lessor"
includes any entity identified as the Lessor, its successors in interest, each
assignee and each of their respective successors in interest and assigns, any
Consolidated Group (hereinafter defined) of which Lessor or any such assignee or
any of their respective successors in interest or assigns is, or may become a
member, and each member of such Consolidated Group; and (b) "Consolidated Group"
means an affiliated group (within the meaning of Section 1504 of the Code) that
files consolidated returns for federal income tax purposes and any group filing
combined, unitary or consolidated returns pursuant to the rules of any state
taxing authority.
5. SURVIVAL. The indemnification obligations of Lessee under this Tax Rider
shall survive the expiration, cancellation or termination of the Lease. Provided
that Lessee fully, timely and indefeasibly performs its indemnification
obligations under this Tax Rider in accordance with the terms hereof and of the
Lease, Lessor shall have no additional remedies with respect to the occurrence
of a Tax Loss.
26
IN WITNESS WHEREOF, the parties hereto have each caused this Tax Rider to
be duly executed by their respective officers, thereunto duly authorized as of
the date first written above.
FLEET NATIONAL BANK
By:__________________________________
Name:________________________________
Title:_______________________________
PRIORITY FULFILLMENT SERVICES,
INC.
By:__________________________________
Name:________________________________
Title:_______________________________
27
EXHIBIT C
WARRANTY XXXX OF SALE
Bombardier Aerospace Corporation (the "Seller"), in consideration of the
sum of __________________________________ and __/100 Dollars ($____________)
paid by FLEET NATIONAL BANK (the "Buyer"), receipt of which is acknowledged,
hereby grants, sells, assigns, transfers and delivers to Buyer the aircraft
described below together with the engines installed thereon and all appliances,
parts, instruments, appurtenances, accessories, furnishings, avionics,
components and other equipment of whatever nature installed on said aircraft and
all logbooks, manuals, certificates, data and inspection, modification,
maintenance, engineering, technical, overhaul and all other books and records
(including all computerized data, records and materials) as pertain to the
operation and maintenance of such aircraft (all of the foregoing hereinafter
collectively referred to as the "Aircraft"), along with whatever claims and
rights Seller may have against the manufacturer and/or supplier of the Aircraft,
including, but not limited to, all warranties and representations. At Buyer's
request, Seller will cause the manufacturer and/or supplier of the Aircraft to
execute an Acknowledgment in form and substance satisfactory to Buyer in its
sole discretion.
DESCRIPTION OF AIRCRAFT
Learjet Inc. Model 31A aircraft bearing U.S. Registration Xxxx N122BX (formerly
known as N122FX) and manufacturer's serial number 143 and two (2) Honeywell TFE
731-2-3B aircraft engines respectively bearing manufacturer's serial numbers
P-99407 and P-99406.
(See also Schedule A attached hereto and made a part hereof for further
description of the Aircraft.)
Seller represents, warrants and agrees to Buyer that (1) Seller is the
lawful owner of the full title to the Aircraft and that Buyer will acquire by
the terms of this Warranty Xxxx of Sale good and merchantable full title to the
Aircraft free and clear of all mortgages, leases, security interests, claims,
charges, liens and encumbrances of any kind whatsoever; (2) Seller has the right
to sell the Aircraft as aforesaid; (3) there have been no Form 337's issued
concerning any damage history to the Aircraft; (4) to the best of Seller's
knowledge, all logs and records relating to the Aircraft are complete and
accurate; (5) Seller shall warrant and defend title to the Aircraft and
indemnify Buyer against the claims of any person, party, firm, corporation or
entity of any kind whatsoever; and (6) the Aircraft had been delivered to Buyer
in good order and condition and conforms to the specifications and the
requirements and standards applicable thereto.
Seller agrees to save and hold harmless Buyer from and against any and all
foreign, Federal, state, municipal and local license fees and taxes of any kind
or nature, including, without limiting the generality of the foregoing, any and
all excise, personal property, privilege, use and sales taxes, and from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions and suits, including, without limitation, attorney's fees,
resulting therefrom and imposed upon, incurred by or asserted against Buyer as a
consequence of the sale of the Aircraft to the Buyer.
Seller agrees and acknowledges that the terms and conditions of this
Warranty Xxxx of Sale, including, without limitation, all representations,
warranties and agreements for the benefit of Buyer, shall survive the delivery
of the Aircraft and the delivery, execution and recording of this Warranty Xxxx
of Sale or any Federal Aviation Administration Xxxx of Sale.
IN WITNESS WHEREOF, Seller has executed this Warranty Xxxx of Sale this
____ day of August, 2004.
SELLER:
Bombardier Aerospace Corporation
By: ____________________________
Name: __________________________
Title: _________________________
28
SCHEDULE A
One (1) Learjet Inc. Model 31A aircraft bearing U.S. Registration Xxxx N122BX
(formerly known as N122FX) and manufacturer's serial number 143
Together with:
Two (2) Honeywell TFE 731-2-3B aircraft engines respectively bearing
manufacturer's serial numbers P-99407 and P-99406
AVIONICS
Bendix King KFC-3100 System:
Dual Bendix King KCP 420 Digital Flight Guidance Computers
Dual Bendix King KDC 481T Air Data Computers
Universal UNS-1M Flight Management System
Dual Bendix King XXX 000 XXXX Computers
ED 551A Five Tube EFIS/MFD with 5" Xxxxxxxx
XXX000 Speed/Temperature Display
Triple Bendix Xxxx XX 465 Symbol Generators
Bendix King RDR-2000 Weather Radar
Dual Bendix King VN-411B Nav Units
Dual Bendix Xxxx XX-441B DME
Bendix Xxxx XX-431B Automatic Direction Finder
Dual Bendix Xxxx XX-401B Comm Units
Dual MST-67A Mode S Transponders
Bendix King TPU-67A TCAS II
Universal CVR-30A Cockpit Voice Recorder
Bendix King KRA 405 Rad Alt
Bendix King DM441B DME
Dual KAV 485T Altimeter Vertical Speed / RA Indicators
Dual KAI 487 Airspeed Indicators
Allied Signal Xxxx VII GPWS
ADDITIONAL EQUIPMENT
Xxx Xxxxxx TR-4000 Thrust Reversers
Dual Davtron Chronometers Cockpit Clocks
Heads Up Technology Cabin Briefer System
Artex ELT 406 w/Nav Interface
36" Main Cabin Cargo Door
Allied Signal Digital Electronic Engine Controls (DEEC's)
B&D 2700 Cabin Display
Magnastar C-2000
Xxxxxxxx Aft Storage Locker
INTERIOR
Configuration: Eight (8) passengers including a belted lavatory. The forward
cabin features a belted private lavatory with a bulkhead divider
to separate it from the cabin. The right hand side has an
additional storage cabinet. The mid-cabin has two (2) aft facing
and two (2) fwd facing club seats with a foldout executive table
on either side. The aft cabin has a 3-place divan. The interior
is FIREBLOCKED and is FAR 25.853 (a) and FAR 25.853 (c)
compliant.
29
Colors: The cabin seats, armrests and lower side panels are covered with
dark blue leather. The headliner and upper side panels are covered
with doe colored ultra leather. The cabinets are covered with medium
color laminate. The carpet is Kalogridis loop "Xxxxxxxxxx"
parchment.
EXTERIOR Wichita Executive Aircraft, January 2004
Aircraft base color is Matterhorn White with 2 stripes that run from
the radome to the tail. The stripes are Navy Blue and Xxxx in color.
AND ALL STANDARD EQUIPMENT, ALL ADDITIONS, ACCESSIONS, MODIFICATIONS,
IMPROVEMENTS, REPLACEMENTS, SUBSTITUTIONS, AND ACCESSORIES THERETO AND THEREFOR,
ALL AVIONICS, ONBOARD EQUIPMENT, LOOSE EQUIPMENT LOCATED IN THE AIRCRAFT,
RECORDS, MANUALS, AND LOGBOOKS, IN BOTH WRITTEN AND COMPUTER DATA FORM, AND
WHETHER NOW EXISTING OR HEREAFTER ACQUIRED.
30
INSURANCE ADDENDUM ("Insurance Addendum") to Lease (S/N 143) dated as of
August 25, 2004, (the "Lease") by and between FLEET NATIONAL BANK, as lessor
("Lessor"), and PRIORITY FULFILLMENT SERVICES, INC., as lessee ("Lessee").
All capitalized terms not defined in this Insurance Addendum are defined
in the Lease. Execution of the Lease by Lessee and Lessor shall be deemed to
constitute execution and acceptance of the terms and conditions of this
Insurance Addendum, and it shall supplement and be a part of the Lease.
(a) Liability Insurance. Lessee shall maintain at its sole cost and
expense for the entire Term with insurers of recognized reputation and
responsibility satisfactory to Lessor (but in no event having an A.M. Best or
comparable agency rating of less than "A-") (i) comprehensive aircraft and
general liability insurance against bodily injury or property damage claims
including, without limitation, contractual liability, public liability, death
and property damage liability, public and passenger legal liability coverage,
and sudden accident pollution coverage, in an amount not less than
$50,000,000.00 for each single occurrence (provided, however, that in the event
the Aircraft is chartered to any Person pursuant to Section 12 of the Lease or
otherwise, such insurance coverage amount shall not be in an amount of less than
$100,000,000.00 for each single occurrence), and (ii) personal injury liability
in an amount not less than $25,000,000.00.
(b) "All-Risk" Hull Insurance. Lessee shall maintain at its sole cost and
expense for the entire Term with insurers of recognized reputation and
responsibility satisfactory to Lessor (but in no event having an A.M. Best or
comparable agency rating of less than "A-"), "all-risk" ground, taxiing, and
flight hull insurance on an agreed-value basis, covering the Aircraft, provided
that such insurance shall at all times be in an amount not less than the
Casualty Value of the Aircraft (such amount determined at the Acceptance Date
and at each anniversary of the Rent Commencement Date for each succeeding year
throughout the Term).
(c) War Risk and Allied Perils. Lessee shall also maintain war risk and
allied perils (including confiscation, appropriation, expropriation, terrorism
and hijacking insurance) in the amounts required in Paragraph (a) and Paragraph
(b), as applicable.
(d) Additional Policy Requirements. Any policies of insurance carried in
accordance with this Insurance Addendum and any policies taken out in
substitution or replacement of any such policies (i) shall be endorsed to name
Lessor as the owner of the Aircraft and as additional insured as its interests
may appear (but without responsibility for premiums), (ii) with respect to
insurance carried in accordance with Paragraphs (b) or (c), as applicable, shall
provide that any amount payable thereunder shall be paid to Lessor and Lessee as
joint loss payees, (iii) shall provide for thirty (30) days written notice by
such insurer of cancellation, material change, or non-renewal; provided,
however, that as to only any nonpayment of premium, shall provide for ten (10)
days written notice by such insurer of cancellation with regard to any such
nonpayment of premium, (iv) include a severability of interest clause providing
that such policy shall operate in the same manner as if there were a separate
policy covering each insured, (v) waive any right of set-off against Lessee or
Lessor, and any rights of subrogation against Lessor, (vi) shall provide that in
respect of the interests of Lessor in such policies, the insurance shall not be
invalidated by any action or inaction of Lessee or any other Person operating or
in possession of the Aircraft regardless of any breach or violation of any
warranties, declarations or conditions contained in such policies by or binding
upon Lessee or any other Person operating or in possession of the Aircraft, and
(vii) shall be primary, not subject to any co-insurance clause and shall be
without right of contribution from any other insurance. Notwithstanding clause
(ii) of the preceding sentence, so long as no Default has occurred and is
continuing, and no Event of Default or Event of Loss with respect to the
Aircraft has occurred, the amounts referred to in clause (ii) may be paid, as
applicable, either (A) if $100,000.00, or more, in the aggregate, to Lessor and
Lessee, jointly, as their interests may appear, and released by Lessor to Lessee
or other appropriate Persons in payment of the costs actually incurred with
respect to repairs made to the Aircraft so as to restore it to the operating
condition required by the Return Addendum or any other applicable provision of
the Lease, or shall be disbursed by Lessor as otherwise required by the Lease,
or (B) if less than $100,000.00 in the aggregate, to Lessee (and such amounts
shall be applied by Lessee to pay the costs of such repairs).
31
(e) World Wide Coverage. All of the coverages required in this Insurance
Addendum shall be in full force and effect worldwide throughout any geographical
areas to, in, or over which the Aircraft is operated.
(f) No Right To Self-Insure. Lessee shall not self-insure (by deductible,
premium adjustment, or risk retention arrangement of any kind) the insurance
required to be maintained hereunder.
(g) U.S. Dollars. All insurance proceeds payable under the requisite
policies shall be payable in U.S. Dollars.
(h) Adjustments to Coverage. Lessee agrees that it shall obtain and
maintain such other insurance coverages, or cause adjustments to be made to the
scope, amount or other aspects of the existing insurance coverages, promptly
upon Lessor's request, as and when Lessor reasonably determines such additional
insurance coverages or modifications to be appropriate in light of any changes
in Applicable Law, prudent industry practices, the insurance market, Lessee's
anticipated use of the Aircraft or other pertinent circumstances.
32
CLOSING TERMS ADDENDUM ("Closing Terms Addendum") to Lease (S/N 143) dated
as of August 25, 2004, (the "Lease") by and between FLEET NATIONAL BANK, as
lessor ("Lessor"), and PRIORITY FULFILLMENT SERVICES, INC. ("Lessee").
All capitalized terms not defined in this Closing Terms Addendum are
defined in the Lease. Execution of the Lease by Lessee and Lessor shall be
deemed to constitute execution and acceptance of the terms and conditions of
this Closing Terms Addendum, and it shall supplement and be a part of the Lease.
A. Purchase and Required Documents. On or prior to the Acceptance Date and
at least one full Business Day prior to closing, Lessee shall have delivered or
caused to be delivered the following to Lessor, as applicable:
1. "Purchase Documents" including copies of the following:
(a) All purchase and warranty agreements entered into by Lessee or any
predecessors in connection with the acquisition of the Aircraft, including the
assignment of such purchase agreements to Lessor; (b) warranty bills of sale
conveying title to the Aircraft, including the Engines, from Supplier to Lessor;
(c) invoices in Lessor's name for the purchase of the Aircraft, including the
Engines; (d) evidence of Lessee's tax exempt status for purposes of sales and
use tax in evidence and form satisfactory to Lessor, if applicable; and (e) all
exhibits, addenda, supplements and revisions, and such other documents relating
to the purchase or conveyance of title as Lessor may request.
2. "Required Documents" shall mean and include the following:
(a) All Lease Documents, including four (4) executed counterparts of the
Lease, Lease Supplement and Schedules thereto.
(b) UCC assignments, releases and/or termination statements, where needed,
relating to the Aircraft and the Collateral in all places which are, in Lessor's
opinion, necessary or appropriate to protect Lessor's interest therein.
(c) [This subsection (c) intentionally left blank].
(d) Certificate(s) of good standing for each of Lessee and Guarantor from
its state of its organization and the state(s) where the Primary Hangar Location
and each of Lessee's and Guarantor's chief executive offices and principal place
of business are located.
(e) A certificate or certificates, executed by the secretary or other
authorized representative for each of Lessee and Guarantor certifying: (i) that
such party's executing, delivering and performing the Lease and all ancillary
documentation and entering into the transactions contemplated hereby and thereby
have been authorized, and (ii) the name(s) of the person(s) authorized to
execute and deliver such documents on behalf of such party together with
specimen signature(s) of such person.
(f) Copies of the articles of incorporation or organization and by-laws,
or manager's or member's certificate, certificate of formation, and operating
agreement, as applicable, for each of Lessee and Guarantor.
(g) Evidence in form and substance satisfactory to Lessor as to the
insurance coverage required under the Insurance Addendum, including, but not
limited to, a certificate of insurance, copies of endorsements (including a
Lessor endorsement), applicable policies and written confirmation from the
insurance underwriter or broker that the insurance coverage provided is in
compliance with the requirements of the Insurance Addendum of the Lease.
(h) If required by Lessor, an inspection report and/or appraisal
satisfactory to Lessor with respect to the Aircraft prepared by inspector(s) or
appraiser(s) acceptable to Lessor.
33
(i) Three (3) duplicate original counterparts of the Guaranty.
(j) Such other documents, certificates and opinions, and evidence of such
other matters, as Lessor, Lessor's counsel or FAA Counsel may reasonably
request.
B. FAA Documents. On or prior to the Acceptance Date and at least one full
Business Day prior to closing, Lessee shall have delivered to FAA counsel the
following "FAA Documents", as applicable:
1. Evidence of reservation of a FAA registration number for the Aircraft
and/or an Assignment of Special Registration Number (FAA AC Form 8050-64)
assigning rights in such "N" number to Lessor with respect to the Aircraft.
2. Evidence of the issuance by the FAA of a Standard Airworthiness
Certificate (FAA AC Form 8100-2) for the Aircraft.
3. (a) The executed FAA Aircraft Xxxx of Sale (FAA AC Form 8050-2) (the
"FAA Xxxx of Sale") in the name of Lessor; (b) the executed FAA Aircraft
Registration Application (FAA AC Form 8050-1) (the "Registration Application")
(except for the pink copy which shall be available to be placed on the Aircraft
upon acceptance thereof); (c) executed releases of any Liens in form and
substance satisfactory to FAA Counsel, Lessor's counsel and/or Lessor; (d) one
(1) fully executed counterpart of the Lease, and the Lease Supplement and
Schedules thereto, all the foregoing being in proper form for filing with the
FAA; (e) such other documents as are necessary, in the opinion of FAA Counsel,
to vest good title to the Aircraft in the name of Lessor, free and clear of
Liens; (f) a Declaration of International Operations if Lessee will fly the
Aircraft out of the continental U.S. within thirty (30) days after Closing; and
(g) if applicable, a LLC Application or statement acceptable to the FAA.
C. Conditions Subsequent.
1. On or subsequent to the Acceptance Date, but not later than the date of
the Aircraft's first flight under the leasehold conveyed herein, Lessee shall
confirm to Lessor that pertinent copies of the Registration Application,
Standard Airworthiness Certificate, and the Lease, including the Lease
Supplement, have been properly placed on the Aircraft. In addition, for all
operations outside the continental U.S., the Lessee shall maintain either a
permanent Certificate of Registration or "fly-time wire" (FAA Standard Form 14)
on-board the Aircraft.
2. Lessee shall confirm to Lessor that (a) within 24 hours following
execution thereof, a copy of the Lease was mailed to the Flight Standards
Technical Division of the FAA; and (b) Lessee has notified the FAA (such
notification to have been given by facsimile transmission, telephone, or in
person to the FAA Flight Standards District Office, General Aviation District
Office nearest the airport where such flight will originate) concerning the
first flight of the Aircraft under the Lease at least forty-eight (48) hours
prior to takeoff.
3. Within five (5) business days after the closing, Lessor shall receive
an opinion of FAA Counsel satisfactory to Lessor that title to the Airframe is
vested in Lessor, that Lessor has a valid and perfected security interest in the
Engines, and that the Aircraft (including the Airframe and Engines) is free and
clear of all other Liens of record.
34
PURCHASE, EARLY PURCHASE AND RENEWAL OPTION ADDENDUM ("Option Addendum")
to Lease (S/N 143) dated as of August 25, 2004, (the "Lease"), by and between
FLEET NATIONAL BANK, as lessor ("Lessor"), and PRIORITY FULFILLMENT SERVICES,
INC., as lessee ("Lessee").
All capitalized terms not defined in this Option Addendum are defined
herein in the Lease. Execution of the Lease by Lessee and Lessor shall be deemed
to constitute execution and acceptance of the terms and conditions of this
Option Addendum, and it shall supplement and be a part of the Lease.
Purchase and Renewal Options.
(a) End of Term Purchase Option. So long as (i) no Event of Default shall
have occurred, and (ii) Lessee shall not have exercised its renewal option
pursuant to Paragraph (b) hereof, Lessee may, upon giving its irrevocable
written notice to Lessor at least one hundred fifty (150) days but no more than
two hundred forty (240) days prior to the Expiration Date, purchase the Aircraft
at the expiration of the Basic Term for an amount, payable in immediately
available funds, equal to the Fair Market Sales Value of the Aircraft as of the
end of the Basic Term determined in accordance with Paragraph (c) hereof plus
any applicable Impositions resulting from such sale, together with any Basic
Rent due and payable on or before the Expiration Date and all other accrued and
unpaid Rent. Lessor's sale of the Aircraft shall be on an "AS-IS WHERE-IS"
basis.
(b) Renewal Option. So long as (i) no Default or Event of Default shall
have occurred, and (ii) Lessee shall not have exercised its purchase options
pursuant to either Paragraph (a) or (e) hereof, Lessee may renew the Lease for
the Renewal Term referred to on Schedule 2-A commencing upon the expiration of
the Basic Term. Lessee's option to renew the Lease for a Renewal Term shall be
exercisable by giving irrevocable written notice to Lessor at least one hundred
eighty (180) days but no more than two hundred forty (240) days prior to the
expiration of the Basic Term. All of the provisions of the Lease shall be
applicable during the Renewal Term, except that, the Basic Rent shall be an
amount equal to the Aircraft's Fair Market Rental Value, which shall be
determined in accordance with Paragraph (c) hereof and the Expiration Date shall
be the last day of the Renewal Term. During the Renewal Term, Basic Rent shall
be payable in the same manner and frequency as the Basic Rent was payable during
the Basic Term, which payment dates shall be deemed "Basic Rent Dates" for
purposes of the Lease.
(c) Determination of Fair Market Sales and Rental Values. If Lessee has
elected either of the options specified above, then as soon as practicable
thereafter, Lessor and Lessee shall consult for the purpose of determining the
Fair Market Sales Value or Fair Market Rental Value, as applicable, of the
Aircraft as of the end of the Basic Term, and any values agreed upon in writing
between Lessor and Lessee shall be binding on both parties. If Lessor and Lessee
fail to agree upon any such value prior to one hundred thirty-five (135) days
before the expiration of the Basic Term, Lessor shall then appoint an
independent appraiser (reasonably acceptable to Lessee) to determine the
applicable value, and such determination by the independent appraiser shall be
made within thirty (30) days after such appointment and shall be binding on
Lessor and Lessee. The independent appraiser shall make any such determination
utilizing the definition of Fair Market Sales Value or Fair Market Rental Value,
as the case may be, including all assumptions. Lessee agrees to pay the costs
and expenses of any such determination and appraisal.
(d) Time to Exercise Option. Notwithstanding the provisions of Paragraphs
(a) and (b), Lessee shall be deemed to have waived the foregoing purchase option
and renewal option unless Lessee provides Lessor with written notice of its
irrevocable election to exercise the applicable option within one hundred eighty
(180) days prior to the expiration of the Basic Term.
(e) Early Purchase Option. So long as no Default or Event of Default shall
have occurred, Lessee may, upon giving its irrevocable written notice to Lessor
at least one hundred twenty (120) days but no more than one hundred eighty (180)
days prior to the proposed Early Purchase Date, purchase the Aircraft on the
Early Purchase Date for an amount, payable in immediately available funds, equal
to the applicable Early Purchase Option Amount, plus any applicable Impositions
resulting from such sale, together with any Basic Rent due and payable on or
before the Early Purchase Date and all other accrued
35
and unpaid Rent. Lessor's sale of the Aircraft shall be on an "AS-IS WHERE-IS"
basis. The Lease shall not be deemed terminated unless, on the Early Purchase
Option Date, (i) Lessor receives the amounts specified in the preceding sentence
in indefeasible funds, and (ii) Lessee satisfies any and all other conditions
imposed by Lessor with respect to the sale of the Aircraft.
36
EARLY TERMINATION ADDENDUM ("Early Termination Addendum") to Lease (S/N
143) dated as of August 25, 2004, (the "Lease"), by and between FLEET NATIONAL
BANK, as lessor ("Lessor"), and PRIORITY FULFILLMENT SERVICES, INC., as lessee
("Lessee").
All capitalized terms not defined in this Early Termination Addendum are
defined herein in the Lease. Execution of the Lease by Lessee and Lessor shall
be deemed to constitute execution and acceptance of the terms and conditions of
this Early Termination Addendum, and it shall supplement and be a part of the
Lease.
So long as no Default or Event of Default shall have occurred and be
continuing hereunder and provided that Lessee shall have made a good faith
determination that the Aircraft is economically obsolete or surplus to its
needs, Lessee shall be entitled, at its option, upon at least one hundred twenty
(120) days prior written notice to Lessor to terminate this Lease as of any
Early Termination Date.
During the period from the giving of such notice until the proposed Early
Termination Date, Lessee, as agent for Lessor and at no cost or expense to
Lessor of any kind whatsoever, shall use its best efforts to obtain the highest
possible bids for the purchase of the Aircraft. Lessor may, but shall be under
no obligation to, solicit bids for the purchase of the Aircraft. Lessee shall
promptly certify to Lessor in writing the amount and terms of each bid received
by Lessee and the name and address of the person submitting such bid. All of
such bids shall be subject to the prior written approval of Lessor and Lessee
shall inform all bidders of such requirement when requesting any bids. Without
limiting the generality of any terms of the Lease, prior to soliciting bids for
the sale of the Aircraft, the Aircraft shall be in the condition required under
the Lease. On the Early Termination Date, Lessor shall sell the Aircraft for
cash to the bidder who shall have submitted the highest bid prior to such date,
and title to the Aircraft shall be transferred by Lessor to such bidder on an
"AS-IS WHERE-IS" basis. Lessor may, at its option, elect not to sell the
Aircraft and retain title to the Aircraft whereupon the lease of the Aircraft
shall be terminated as of the Early Termination Date. The total sale price
realized at such sale shall be retained by Lessor and, in addition, on the Early
Termination Date, Lessee will pay to Lessor (1) the excess, if any, of (A) the
greater of the Fair Market Sales Value and the Early Termination Amount of the
Aircraft on the Early Termination Date, over (B) the sale price of the Aircraft
after deducting all taxes, costs and expenses (including legal fees and
expenses) incurred or paid by Lessor in connection with such sale; plus (2) all
Basic Rent due for the Aircraft on such Early Termination Date together with all
accrued and unpaid Rent then due and owing for the Aircraft (all of the amounts
set forth in this subclauses (2) collectively the "outstanding termination
amounts"). If for any reason no sale shall occur on the Early Termination Date,
the lease of the Aircraft hereunder shall continue in full force and effect or,
at Lessor's option, the Lessee shall pay to Lessor the greater of the Fair
Market Sales Value and the Early Termination Amount of the Aircraft on the Early
Termination Date together with the outstanding termination amounts and all
taxes, costs and expenses (including legal fees and expenses) incurred or paid
by Lessor in connection with such any proposed sale whereupon the lease of the
Aircraft shall be terminated as of the Early Termination Date and title to the
Aircraft shall be transferred by Lessor to Lessee on an "AS-IS WHERE-IS" basis.
For purposes of this Early Termination Addendum, the following terms shall have
the following meanings:
"Early Termination Amount" for any Basic Rent Date designated as an Early
Termination Date on Schedule No. 4 to the Lease Supplement to the Lease shall be
the amount determined by multiplying the Lessor's Cost of the Aircraft by the
percentage set forth opposite the applicable Early Termination Date set forth on
Schedule No. 4 to the Lease Supplement.
"Early Termination Date" shall mean each of the Basic Rent Number(s)
designated as such on Schedule No. 4 to the Lease Supplement.
"Fair Market Sales Value" shall mean the value of the Aircraft determined
on the following basis: (i) the value shall be the amount which would be
obtained in an arm's length transaction between an informed and willing buyer or
lessee (who is neither a lessee in possession nor a used equipment dealer), and
an informed and willing seller or lessor, as the case may be, under no
compulsion to sell or lease, as
37
the case may be; (ii) the costs of removal of the Aircraft from its then
location shall not be a deduction from such value; and (iii) in determining any
such value, it shall be assumed (whether or not the same be true) (A) that the
Aircraft has been maintained by Lessee and is in the condition in which it is
required to be returned to Lessor, in each case, in accordance with the Lease,
(B) such value has not been diminished due to the existence of any damage
history, and (C) that the total number of Airframe hours (including any
component with hourly overhaul schedules) accumulated from the Acceptance Date
to the Early Termination Date or other date of termination or cancellation do
not exceed the product of Estimated Annual Hours times the number of twelve
month periods and any portion thereof, from the Acceptance Date to such Early
Termination Date or such other termination or cancellation date.
38
RETURN ADDENDUM ("Return Addendum") to Lease (S/N 143) dated as of August
25, 2004, (the "Lease") by and between FLEET NATIONAL BANK, as lessor
("Lessor"), and PRIORITY FULFILLMENT SERVICES, INC., as lessee ("Lessee").
All capitalized terms not defined in this Return Addendum are defined in
the Lease. Execution of the Lease by Lessee and Lessor shall be deemed to
constitute execution and acceptance of the terms and conditions of this Return
Addendum, and it shall supplement and be a part of the Lease.
(a) Condition Upon Return. Unless purchased by Lessee, upon the
expiration, cancellation, or other termination of the Lease, Lessee will return
the Aircraft (together with all Records) to Lessor at a location specified by
the Lessor within the continental U.S. The Aircraft shall be fully equipped with
the Engines or the same number, make, and model of engines as are set forth on
Schedule No. 1, which shall fully comply with the Lease, and which, in the
opinion of Lessor, have the same or improved utility, value, useful life,
performance, and efficiency (normal wear and tear excepted) as the Engines had
on the Acceptance Date and are suitable for use on the Airframe and owned by
Lessor and properly installed thereon. The Aircraft, at Lessee's expense, upon
redelivery pursuant hereto (i) shall have a currently effective FAA
airworthiness certificate; (ii) shall be free and clear of all Liens other than
the Lease and any Lessor's Liens; (iii) shall be in the same configuration,
coloring and appearance and in the same operating condition, ordinary wear and
tear excepted, as when delivered to Lessee on the Acceptance Date or, at
Lessor's option, Lessee shall pay to Lessor an amount equal to the actual cost
of such restoration; (iv) shall be in good operating condition, physical
condition and appearance (ordinary wear and tear excepted), with all systems
operating normally; (v) shall have no damage history, unless such damage has
been repaired in accordance with the Lease; (vi) shall have no open mandatory
service bulletins or airworthiness directives, and if terminating action is
required within six (6) months of the date of return, Lessee shall comply with
each of the same by terminating action, and shall be in compliance with all
other Applicable Law and Maintenance Requirements; and (vii) shall be otherwise
in the condition and repair required under the Lease.
(b) Damage History and Excess Use Compensation.
(i) Damage History. If Lessor is of the opinion that the Aircraft's
fair market sales value is diminished due to the existence of any damage
history, Lessor and Lessee shall consult for the purpose of determining the
Diminution Amount (as defined below), and any values agreed upon in writing
between Lessor and Lessee shall be binding on both parties. The "Diminution
Amount" shall mean the amount by which (A) the Fair Market Sales Value of the
Aircraft without such damage history, exceeds (B) the Fair Market Sales Value of
the Aircraft with such damage history (and as to this sub-clause (B), without
making the assumption in clause (iii)(B) of the definition of Fair Market Sales
Value). If Lessee and Lessor fail to agree within ten (10) days after the return
of the Aircraft to Lessor, then Lessor shall appoint an independent appraiser
(reasonably acceptable to Lessee) to determine the Diminution Amount. Lessee
agrees to pay the costs and expenses of any such determination and appraisal.
The independent appraiser shall be required to complete such determination as
promptly as practicable, but in any event, not later than forty (40) days after
the date on which it is appointed. A final determination by the independent
appraiser regarding the extent of any Diminution Amount shall be binding on
Lessee and Lessor. Lessee shall pay to Lessor within ten (10) days after the
independent appraiser's determination an amount equal to the Diminution Amount,
if any.
(ii) Excess Use. Upon the return of the Aircraft to Lessor, Lessor
and Lessee shall consult for the purpose of determining the Excess Use Amount
(as defined below), if any, and any amount so agreed upon in writing between
Lessor and Lessee shall be binding on both parties. The "Excess Use Amount"
shall mean the amount, if any, by which (A) the Fair Market Sales Value of the
Aircraft without such Excess Hours, exceeds (B) the Fair Market Sales Value of
the Aircraft with such Excess Hours (and as to this subclause (B), without
making the assumption in clause (iii)(C) of the definition of Fair Market Sales
Value). If Lessor and Lessee fail to agree within ten (10) days after the return
of the Aircraft to Lessor, then Lessor shall appoint a fully qualified and
independent appraiser (reasonably acceptable to Lessee) to determine the Excess
Use Amount. Lessee agrees to pay the costs and
39
expenses of any such determination and appraisal. The independent appraiser
shall be required to complete such determination as promptly as practicable, but
in any event, not later than forty (40) days after the date on which it is
appointed. A final determination by the independent appraiser regarding the
extent of the Excess Use Amount, if any, shall be binding on Lessor and Lessee.
Lessee shall pay to Lessor within ten (10) days after the independent
appraiser's determination an amount equal to the Excess Use Amount.
(c) Mid-Life Condition. Upon return (i) each Engine and APU shall have
available operating hours or months until the next scheduled "hot section"
inspection, mid-life inspection or the next scheduled major overhaul of not less
than fifty percent (50%) of the total operating hours or months available
between such hot section inspection, mid-life inspection, or major overhaul, as
the case may be; (ii) the Airframe shall have remaining not less than (aa) fifty
percent (50%) of the available operating hours allowed between major airframe
inspections; and (bb) fifty percent (50%) of the number of available operating
months allowed between major airframe inspections until the next scheduled major
airframe inspection; and (iii) all life limited parts and components shall have
remaining not less than fifty percent (50%) of the available hours, cycles
and/or months, as the case may be, until the next scheduled replacement. In
addition to the requirements set forth in clauses (i), (ii), and (iii) above,
all inspections and scheduled maintenance required to be performed on the
Airframe, Engines and APU and all life limited parts and components within one
hundred twenty (120) days of the date of return and/or one hundred (100) hours
of additional operation shall have been performed by Lessee.
(d) Engines. If any Engine does not comply with Paragraph (c)(i) above,
for each such Engine, Lessee shall pay Lessor an amount equal to the sum of (i)
the current estimated cost of the next scheduled "hot section" or mid-life
inspection, as the case may be (including in such estimated cost, all required
replacements of life limited parts) multiplied by the fraction wherein the
numerator shall be the greater of (A) zero, and (B) the remainder of (x) the
actual number of operating hours or months since the previous hot section or
mid-life inspection, as the case may be, minus (y) fifty percent (50%) of the
total operating hours or months allowable between hot section or mid-life
inspections, as the case may be, and the denominator shall be the total
operating hours or months allowable between hot section or mid-life inspection,
as the case may be, plus (ii) for each such Engine, the product of the current
estimated cost of the next scheduled major overhaul (including in such estimated
cost, all required replacements of life limited parts) multiplied by the
fraction wherein the numerator shall be the greater of (A) zero, and (B) the
remainder of (x) the actual number of hours of operation since the previous
major overhaul minus (y) fifty percent (50%) of the total operating hours
allowable between major overhauls, and the denominator shall be the total
operating hours allowable between major overhauls. Lessee shall, immediately
upon request, assign to Lessor its rights under any manufacturer's maintenance
service contract or extended warranty for the Aircraft, any engine, any APU, or
part.
(e) Airframe. If the Airframe does not comply with Paragraph (c)(ii)
above, Lessee shall pay to Lessor an amount equal to the sum of the product of
the current estimated cost of the next scheduled major airframe inspection
(including in such estimated cost, all required replacement of life limited
parts) multiplied by the fraction wherein the numerator shall be the greater of
(i) zero, and (ii) the remainder of (x) the actual number of respective
operating hours or months of operation since previous major airframe inspection,
minus (y) 50% of the respective total operating hours or months of operation
allowable between scheduled major airframe and pressure vessel inspections, and
the denominator shall be the respective total operating hours or months of
operation between scheduled major airframe inspections.
(f) Maintenance Contracts. Lessee need not compensate Lessor as
contemplated in Paragraphs (d) or (e), as the case may be, if at the time of the
return of the Aircraft to Lessor:
(i) in the case of Paragraph (d),
(A) both of the Engines are covered by a service and maintenance
contract in form and substance satisfactory to Lessor which provides for
the maintenance and/or overhaul of such property,
40
(B) either (x) adequate reserves for future required maintenance
and/or overhaul shall have been provided for pursuant to such maintenance
contract, or (y) all amounts due and payable pursuant to such maintenance
contract shall have been paid in full through the date of return, and
(C) the entity which provides the maintenance and/or overhaul
services under such maintenance contract shall either (x) recognize the
transfer by Lessee to Lessor of the rights and interests of Lessor (or its
designee) under such maintenance contract, or (y) acknowledge the rights
and interests of Lessor (or its designee) under such maintenance contract,
and
(ii) in the case of Paragraph (e),
(A) the Airframe is covered by a service and maintenance contract in
form and substance satisfactory to Lessor which provides for the
maintenance and/or overhaul of such property,
(B) either (x) adequate reserves for future required maintenance
and/or overhaul shall have been provided for pursuant to such maintenance
contract, or (y) all amounts due and payable pursuant to such maintenance
contract shall have been paid in full through the date of return, and
(C) the entity which provides the maintenance and/or overhaul
services under such maintenance contract shall either (x) recognize the
transfer by Lessee to Lessor of the rights and interests of Lessor (or its
designee) under such maintenance contract, or (y) acknowledge the rights
and interests of Lessor (or its designee) under such maintenance contract.
(g) Parts and Components. If any life limited part or component does not
comply with Paragraph (c)(iii) above, Lessee shall pay to Lessor with respect to
each part or component for which said requirement is not met the dollar amount
obtained by multiplying (i) the ratio that the life expended in excess of fifty
percent (50%) of the available hours, cycles and/or months, as the case may be,
until the next scheduled replacement bears to the total allowable life (measured
in hours, cycles and/or months, as the case may be) for such part or component
by (ii) Lessor's cost of replacement of such part or component. Lessor's cost of
replacement of a part or component shall include Lessor's then current cost of
purchasing the part or component itself and all of Lessor's then current costs
associated with the replacement.
(h) Inspection Overhaul Charges. All restoration costs and prorated
inspection and/or overhaul charges, if any, shall be due upon presentation to
Lessee of an invoice setting forth in reasonable detail the calculation of such
amounts due, including the names of all sources used for the required cost
estimates. Unless both Lessor and Lessee agree to an alternative source, or as
provided herein, the Manufacturers of the Airframe and Engines shall be used as
the sources for all cost estimates.
(i) Fuel. Upon return, each fuel tank shall contain no less than fifty
percent (50%) of its full capacity, or in the case of differences in such
quantity, an appropriate adjustment will be made at the then current market
price of fuel.
(j) Records. Lessee shall deliver all Records to Lessor, including:
(i) All of the following: (A) all records of maintenance,
preventative maintenance, alterations and major repairs, (B) all Airframe
and Engine logbooks endorsed for current total time and cycles for the
airframe, total time and cycles for each Engine and an entry for total
time and cycles since overhaul and hot section inspection for each Engine;
and the Airframe logbook must include all appropriate endorsements (i.e.,
maintenance releases) verifying that the avionics have been periodically
tested and inspected in accordance with all applicable provisions of the
FARS and the applicable maintenance program, (C) a current written summary
certified by a FAA-licensed mechanic listing the status of all applicable
airworthiness directive and service bulletins for the Airframe, Engines,
any APU, Parts and appliances, and (D) a written summary certified by a
FAA-licensed mechanic of the current status of life limited and/or
overhauled components for the Airframe, Engines (in accordance with the
Manufacturer's recommended intervals), Engine
41
accessories, any APU, Parts and appliances as defined in the most current
revision(s) of all Manufacturers' maintenance publications applicable to
the Aircraft.
(ii) The following documentation and data for each component having
an overhaul or inspection requirement of life limit, which components are
identified in pertinent sections of the maintenance program applicable to
the Aircraft as follows: (A) an airworthiness release certificate or
maintenance release tag, (B) the Vendor work order or copy thereof
verifying the details of each component overhaul, and (C) an appropriate
record certifying the date and expended time status of the component when
installed (i.e., copy of log or inspection squawk card), all of which must
be properly organized and provided on board the Aircraft at the time it is
returned to Lessor.
(iii) To the extent not covered above, Lessee will also deliver to
Lessor all work cards, computerized maintenance history, component
serviceability tags, STCs, 337s, maintenance manuals, and structural
repair manuals.
All manuals or other documents delivered to Lessor which are subject to
periodic revision will be fully up-to-date and current to the latest revision
standard of any particular manual or document. If the Aircraft is on a
computerized maintenance program, such program will be up-to-date in accordance
with the Manufacturer's recommended maintenance schedule and fully assignable to
Lessor at redelivery. Lessee will provide all of the following Records to Lessor
upon return of the Aircraft to Lessor, regardless of whether Lessee has
conducted its periodic inspections of the Aircraft pursuant to pertinent
sections of the Maintenance Program or in accordance with an inspection program
approved by the FAA. In the event any Records are missing or incomplete, Lessor
shall have the right to cause any such Records to be reconstructed at Lessee's
expense. All Records shall be in English.
(k) Storage. Upon the expiration, cancellation or other termination of the
Lease, Lessee will, if requested by Lessor, permit Lessor to store the Aircraft
at the Primary Hangar Location for up to thirty (30) days. During such storage
period Lessee will, at its own expense, keep the Aircraft properly hangared and
will permit Lessor or any Person designated by Lessor, including the authorized
representatives of any prospective purchaser, lessee or user of the Aircraft to
inspect the same. Lessee shall bear the risk of loss and shall pay any and all
expenses connected with insuring and maintaining the Aircraft during such
storage period. Notwithstanding the foregoing, upon the cancellation or
termination of the Lease in connection with an Event of Default, the storage
period provided for in this paragraph and the obligation to hangar and insure
the Aircraft shall be unlimited.
(l) Replacement Engines. If any engine not owned by Lessor shall be
installed on the returned Airframe as set forth in Paragraph (a) hereof, then
Lessee will, concurrently with such delivery, at its own expense, furnish Lessor
with a full warranty xxxx of sale, in form and substance satisfactory to Lessor
with respect to each such engine and with a written opinion of FAA Counsel to
the effect that, upon such return, Lessor will acquire a valid and perfected
interest in such engine free and clear of all Liens (except Lessor's Liens).
Thereupon, unless a Default or Event of Default shall have occurred and be
continuing, Lessor will transfer to Lessee, on an "AS-IS, WHERE-IS" basis, all
of Lessor's right, title and interest in and to any Engine not installed on the
Airframe at the time of the return of such Airframe.
(m) Inspections. Not more than forty-five (45) days prior to the
expiration of the Lease, upon the written request of Lessor, Lessee shall
certify to Lessor that the Aircraft is in the condition required by this Return
Addendum, or indicate what maintenance or repair is needed to bring the Aircraft
to the specified condition. Without limiting the provisions of Section 14(d) of
the Lease, Lessor shall have the right, but not the duty, to inspect the
Aircraft, any component thereof and/or the Records, at any reasonable time and
from time to time, wherever located, upon reasonable prior written notice to
Lessee except that no advance notice shall be necessary prior to any inspection
conducted, and such inspection may be conducted at any time, after the
occurrence of a Default or an Event of Default. Upon request of Lessor, Lessee
shall promptly confirm to Lessor the location of the Aircraft and/or the
Records. Lessee shall be responsible for the cost of such inspection and shall
pay Lessor such amount as additional Rent within ten (10) days of demand. If the
results of such inspection indicate that the Aircraft, any Engine, any APU or
Part, has not
42
been maintained or returned in accordance with the provisions of the Lease, in
addition to all other Rent due under the Lease, Lessee shall pay to Lessor
within ten (10) days of demand, as liquidated damages, the estimated cost of
servicing or repairing any such non-complying item. Such amount shall be
determined by Lessor by obtaining two quotes for such service or repair work and
taking their average. Lessee shall bear the cost, if any, incurred by Lessor in
obtaining such quotes.
(n) Holdover Rent. If Lessee fails to return the Aircraft (including the
Records) at the time, place and in the condition specified in this Return
Addendum, all of Lessee's obligations under the Lease shall continue until it is
so returned to Lessor, as liquidated damages, and not as a penalty, and, in
addition to all other Rent due under the Lease, Lessee shall pay to Lessor an
amount equal to the greater of the fair market rent value (which for the
purposes of this Section shall be as determined by Lessor) or the Daily Rent for
each day after the end of the Term to, but excluding the day the Aircraft is
actually returned in accordance with this Return Addendum; provided, however,
that the obligation to pay any such holdover or additional rent shall neither
extend the time to return, nor constitute a waiver of any Default or Event of
Default arising by reason of such failure to return. Such amount shall be
payable upon the earlier of Lessor's demand or the return of the Aircraft in
accordance with the Lease.
(o) Lease Termination. Lessee agrees to execute, if requested by Lessor, a
lease termination statement.
(p) Supplemental Rent. All of the amounts payable under this Return
Addendum shall constitute Supplemental Rent.
(q) Survival. The provisions of this Return Addendum shall survive the
expiration, cancellation or other termination of the Lease and the return of the
Aircraft to Lessor for any reason whatsoever.
(r) Injunctive Relief. Without limiting any other terms or conditions of
the Lease, the provisions of this Return Addendum are of the essence of the
Lease, and upon application to any court of equity having jurisdiction, Lessor
shall be entitled to a decree against Lessee requiring specific performance of
the covenants of Lessee set forth herein.
43
