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EXHIBIT 10.35
AIRCRAFT LEASE AGREEMENT
Dated as of
April 29, 1996
between
POLARIS AIRCRAFT LEASING K.B.
as
Lessor
and
AIR SOUTH AIRLINES, INC.
as
Lessee
in respect of Boeing 737-2P6 Advanced Aircraft
Serial Number 21733
equipped with Stage 3 hushkit
Ref. 21733A
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THIS AGREEMENT is made as of the 29th day of April, 1996 between:-
(1) POLARIS AIRCRAFT LEASING K.B., a limited partnership formed under the
laws of Sweden whose principal office is at Birger ▇▇▇▇▇▇▇▇▇▇ ▇▇,
▇-▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ("Lessor"); and
(2) AIR SOUTH AIRLINES, INC., a company incorporated under the laws of the
State of Illinois whose chief executive office is at 1800 St. Julian
Place, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇.▇.▇. ("Lessee").
WHEREAS: Lessor wishes to lease to Lessee and Lessee is willing to
lease from Lessor the Aircraft (MSN 21733) on the terms of this
Agreement.
IT IS AGREED as follows:-
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following expressions have the meanings set out
opposite:-
AGREED MAINTENANCE PERFORMER Lessee (up to and including
B Check) or any FAA approved
maintenance facility (for C
Check and higher) or any
other person agreed to from
time to time in writing by
Lessor.
AGREED MAINTENANCE PROGRAMME the Lessee Maintenance
Programme agreed to from time
to time in writing by Lessor,
an FAA and Air Authority
approved maintenance programme
for the Aircraft encompassing
scheduled maintenance
(including block maintenance),
condition monitored
maintenance, and/or
on-condition maintenance of
Airframe, Engines and Parts,
including but not limited to,
servicing, testing, preventive
maintenance, repairs,
structural inspections, system
checks, overhauls, approved
modifications, service
bulletins, engineering orders,
airworthiness directives,
corrosion control, inspections
and treatments.
AGREED VALUE $10,600,000 or such other
amount as Lessor may require
from time to time provided
such other amount does not
exceed 115% of the fair
market value of the Aircraft.
AIR AUTHORITY the Irish Aviation Authority
or any successor thereto.
AIRCRAFT the aircraft described in
Part 1 of Schedule 1, (which
term includes where the
context admits a separate
reference to all Engines,
Parts and Aircraft
Documents).
AIRCRAFT COMMITMENT FEE all amounts paid pursuant to
Clause 5.1 of the March
1995 Lease.
AIRCRAFT DOCUMENTS the documents, data and
records identified in Part 2
of Schedule 1 and all
additions, renewals,
revisions and replacements
from time to time made in
accordance with this
Agreement.
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AIRFRAME the Aircraft, excluding the
Engines and Aircraft
Documents.
APU the auxiliary power unit
installed on the Aircraft on
the Previous Delivery Date
and any replacement auxiliary
power unit installed in
accordance with this
Agreement.
BANKS such financial institution(s)
which from time to time
finance the Aircraft for
Owner and/or for whose
benefit security over, or
rights relating to, the
Aircraft and/or this
Agreement is granted by Owner
or at its request.
BASIC RENT means the rent payable for
the Aircraft during the Term
pursuant to Clause 5.3 of
this Agreement.
BOEING The Boeing Company, a
Delaware corporation with its
principal office in Seattle,
State of Washington, U.S.A.
BUSINESS DAY a day (other than a Saturday
or Sunday) on which business
of the nature required by
this Agreement is carried out
in Sweden and the State of
Incorporation or where used
in relation to payments on
which banks are open for
business in London and New
York.
CERTIFICATED AIR CARRIER shall mean any corporation
(except the United States
Government) domiciled in the
United States of America and
holding a Certificate of
Convenience and Necessity
issued under Section 401 of
the Federal Aviation Act by
the Department of
Transportation or any
predecessor or successor
agency thereto, or, in the
event such Certificates shall
no longer be issued, any
corporation (except the
United States Government)
domiciled in the United
States of America and legally
engaged in the business of
transporting for hire
passengers or cargo by air
predominantly to, from or
between points within the
United States of America,
and, in either event,
operating commercial jet
aircraft, which also is
certificated so as to fall
within the purview of Section
1110 of Title
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or any analogous statute.
COLD SECTION REFURBISHMENT the completion of the
following tasks with respect
to an Engine: completely
unstack both high and low
compressors and accomplish
complete visual inspection;
deblade disks as necessary;
accomplish visual inspections
of all disks; measure to
ensure all snap diameters on
disks are within limits;
inspect blades for proper
chord dimensions and
cracking; repair or replace
blades below minimums;
inspect and repair stators as
necessary; blade up disks
using new lock plates;
assemble compressor rotors;
balance both rotors; and
install rotors in such
Engine.
CYCLE one take-off and landing of
the Aircraft.
DAMAGE NOTIFICATION THRESHOLD $100,000.
DEFAULT any Event of Default and any
event or condition which with
the giving of notice or lapse
of time would constitute an
Event of Default.
DELIVERY DATE the date hereof.
DELIVERY LOCATION Columbia, South Carolina or
such other location as the
parties may agree.
DOLLARS AND $ the lawful currency of the
United States of America.
ENGINE whether or not installed on
the Aircraft:-
(a) each engine of the
manufacture and model
specified in Part 1 of
Schedule 1 (each of
which has 750 or more
rated takeoff horsepower
or the equivalent of
such horsepower);
or
(b) any engine which has
replaced that engine,
title to which has or
should have, passed to
Owner in accordance with
this Agreement;
and in each case
includes all modules and
Parts from time to time
belonging to or
installed in
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that engine but excludes
any properly replaced
engine title to which
has, or should have,
passed to Lessee
pursuant to this
Agreement.
EVENT OF DEFAULT an event or condition
specified in Clause 13.1
or Letter Agreement No. 1.
EVENT OF LOSS with respect to the Aircraft
(including for the purposes
of this definition the
Airframe):-
(a) the actual or
constructive total loss
of the Aircraft
(including any damage to
the Aircraft which
results in an insurance
settlement on the basis
of a total loss, or
requisition for use or
hire which results in an
insurance settlement on
the basis of a
total loss); or
(b) it being destroyed,
damaged beyond repair or
permanently rendered
unfit for normal use
for any reason
whatsoever, or
(c) the requisition of
title, or other
compulsory acquisition,
capture, seizure,
deprivation,
confiscation or
detention for any reason
of the Aircraft by the
government of the State
of Registration or other
competent authority
(whether de jure or de
facto), but excluding
requisition for use or
hire not involving
requisition of title;
or
(d) the hi-jacking, theft,
condemnation,
confiscation, seizure or
requisition for use or
hire of the Aircraft
which deprives any
person permitted by this
Agreement to have
possession and/or use of
the Aircraft of its
possession and/or use
for more than 15 days.
EXPIRY DATE subject to Clause 4.5, May
27, 1998 or if earlier the
date on which:-
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(a) the Aircraft has been
redelivered in accordance
with this Agreement; or
(b) Lessor receives the
Agreed Value following
an Event of Loss.
FAA the Federal Aviation
Administration of the United
States of America and any
successor thereof.
FEDERAL AVIATION ACT United States Federal
Aviation Act of 1958,
as amended, or any similar
legislation of the United
States of America enacted in
substitution or replacement
thereof.
FINANCIAL INDEBTEDNESS any indebtedness in respect
of:-
(a) moneys borrowed or
raised;
(b) any liability under any
debenture, bond, note,
loan stock, acceptance,
documentary credit or
other security;
(c) the acquisition cost of
any asset to the extent
payable before or after
the time of acquisition
or possession; or
(d) any guarantee, indemnity
or similar assurance
against financial loss
of any person in respect
of the above.
FINANCING STATEMENTS Uniform Commercial Code
Financing Statements in
respect of this Agreement and
the collateral described
therein prepared in a form
acceptable for filing with
the applicable Government
Entities in the Habitual
Base, the State in which the
chief executive office (as
that term is defined in
Article 9 of the Uniform
Commercial Code as in effect
in the State of South
Carolina) and such other
jurisdiction as Lessor shall
reasonably require.
FLIGHT HOUR each hour or part thereof
(rounded up to two decimal
places) elapsing from the
moment the wheels of the
Aircraft leave
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the ground on take off until
the wheels of the Aircraft
next touch the ground.
GOVERNING LAW the laws of the State of New
York.
GOVERNMENT ENTITY (a) any national government,
political subdivision
thereof, or local
jurisdiction therein;
(b) any instrumentality,
board, commission, court
or agency of any
thereof, however
constituted; and
(c) any association,
organization, or
institution of which any
of the above is a member
or to whose jurisdiction
any thereof is subject
or in whose activities
any of the above is a
participant.
HABITUAL BASE the State of South Carolina
or, subject to the prior
written consent of Lessor,
any other state, country or
countries in which the
Aircraft is for the time
being habitually based.
HEAD LEASE the aircraft lease agreement
between Owner and Sub Lessor
in respect of the Aircraft.
HOT SECTION REFURBISHMENT the complete visual
inspection and repair as
necessary of the combustion
section of an Engine. In
conducting such inspection
and repair, the engine shop
must completely unstack the
high pressure turbine and
accomplish complete visual
inspection; de-blade disks as
necessary; accomplish visual
inspections of all disks;
measure to ensure all snap
diameters on disks are within
limits; inspect blades for
proper chord dimensions and
cracking; repair or replace
blades below minimums;
inspect and repair stators as
necessary; blade up disks
using new lock plates;
assemble turbine rotors;
balance both rotors; and
install rotors in such
Engine.
INDEMNITEES each of Owner, Sub
Lessor, Lessor and Banks
including any of their
respective successors and
assigns, shareholders,
subsidiaries, affiliates,
partners,
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contractors, directors,
officers, servants, agents and
employees.
LANDING GEAR the landing gear assembly of
the Aircraft excluding any
rotable components.
LESSOR LIEN (a) any security interest
whatsoever from time to
time created by or
through Lessor, Sub
Lessor or Owner in
connection with the
financing of the
Aircraft;
(b) any other security
interest in respect of
the Aircraft which
results from acts of or
claims against Lessor,
Sub Lessor or Owner not
related to the
transactions
contemplated by or
permitted under this
Agreement; and
(c) liens in respect of the
Aircraft for Lessor
Taxes.
LESSOR TAXES Taxes:-
(a) imposed as a direct
result of activities of
Lessor, Sub Lessor or
Owner in the
jurisdiction imposing
the liability unrelated
to Lessor's dealings
with Lessee or to the
transactions
contemplated by this
Agreement or the
operation of the
Aircraft by Lessee; or
(b) imposed on the income,
profits or gains of
Lessor, Sub Lessor or
Owner by any Government
Entity in (x) Sweden; or
(y) the U.S.A.; or
(c) imposed with respect to
any period commencing or
event occurring after
the Expiry Date and
unrelated to Lessor's
dealings with Lessee or
to the transactions
contemplated by this
Agreement.
LETTER AGREEMENT NO. 1 Letter Agreement No 1. of
even date herewith between
Lessor and Lessee in
respect of the Aircraft, the
terms of which
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constitute an integral part
of this Agreement.
MAINTENANCE PROGRAMME an FAA and Air Authority
approved maintenance
programme for the
Aircraft encompassing
scheduled maintenance
(including block
maintenance), condition
monitored maintenance, and/or
on condition maintenance of
Airframe, Engines and Parts,
including but not limited to,
servicing, testing,
preventive maintenance,
repairs, structural
inspections, system checks,
overhauls, approved
modifications, service
bulletins, engineering
orders, airworthiness
directives, corrosion
control, inspections and
treatments.
MAJOR CHECKS any C-Check, multiple
C-Check, D-Check or
annual heavy maintenance
visit or segment thereof
suggested for commercial
aircraft of the same model as
the Aircraft by its
manufacturer (however
denominated) as set out in
the Agreed Maintenance
Programme.
MANUFACTURER Boeing.
MARCH 1995 LEASE the Aircraft Lease Agreement,
dated as of March 21, 1995,
between Lessor and Lessee, as
supplemented and amended,
relating to the Aircraft which
agreement has heretofore been
terminated by agreement of the
parties hereto.
MARCH 29 1996 LETTER AGREEMENT Letter Agreement, dated March
29, 1996, between Lessor,
Lessee, Polairs Holding
Company and GE Capital
Aviation Services, Inc.
MINIMUM LIABILITY COVERAGE $400,000,000 on each
occurrence.
OCTOBER 1994 LEASE the Aircraft Lease
Agreement, dated as of
October 24, 1994, between
Lessor and Lessee, as
supplemented and amended,
relating to the Aircraft
which agreement has
heretofore been terminated by
agreement of the parties
hereto.
OTHER AGREEMENTS any agreement (other than
this Agreement) made or to be
made between Lessor (or an
affiliate, associate or
subsidiary of lessor) and
Lessee (or an affiliate,
associate or Subsidiary of
Lessee), including without
limitation the March 1995
Lease and the March 29 1996
Letter Agreement.
OWNER Polaris Aircraft Leasing
K.B., a Swedish partnership
in which Polaris Aircraft
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Leasing A.B. is the general
partner which is owned by
Polaris Aircraft Leasing
Corporation, a United States
corporation since December,
1989.
PART whether or not installed on
the Aircraft:-
(a) any component,
furnishing or equipment
(other than a complete
Engine) furnished with
the Aircraft on the
Delivery Date; and
(b) any other component,
furnishing or equipment
(other than a complete
Engine) title to which
has, or should have
passed to Owner pursuant
to this Agreement;
but excludes any such
items title to which
has, or should have,
passed to Lessee
pursuant to this
Agreement.
PERMITTED LIEN (a) any lien for Taxes not
assessed or, if
assessed, not yet due
and payable, or being
contested in good faith
by appropriate
proceedings;
(b) any lien of a repairer,
mechanic, carrier,
hangarkeeper or other
similar lien arising in
the ordinary course of
business or by operation
of law in respect of
obligations which are
not overdue or are being
contested in good faith
by appropriate
proceedings;
but only if (in the case
of both (a) and (b)) (i)
adequate reserves have
been provided by Lessee
for the payment of the
Taxes or obligations;
and (ii) such
proceedings, or the
continued existence of
the lien, do not give
rise to any likelihood
of the sale, forfeiture
or other loss of the
Aircraft or any interest
therein or of criminal
liability on Owner, Sub
Lessor, Lessor or any
Bank; and
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(c) any Lessor Lien.
PERSON shall mean and include any
individual person,
corporation, partnership,
firm, joint stock company,
joint venture, trust, estate,
unincorporated organisation,
association, Government
Entity, or organisation or
association of which any of
the above is a member or a
participant.
PREVIOUS DELIVERY DATE the date on which the
Aircraft was delivered by
Lessor to Lessee pursuant to
the Previous Lease.
PREVIOUS LEASE the Aircraft Lease Agreement
dated as of 10 August, 1994
between Lessor and Lessee
which will have expired or
otherwise been terminated
prior to the delivery of the
Aircraft by Lessor to Lessee
pursuant to this Agreement.
REDELIVERY LOCATION ▇▇▇▇ ▇▇▇▇▇▇ World Airport,
Oklahoma City, Oklahoma or
such other location in the
United States as Lessor shall
advise Lessee or such other
location as the parties may
agree.
RENT means, collectively, Basic
Rent, Supplemental Rent and
all other amounts,
liabilities and obligations
which Lessee assumes or
agrees to pay to Lessor or
other Persons hereunder
(other than Basic Rent and
Supplemental Rent) or under
any Other Agreement,
including without limitation
the payment of deposits,
indemnities and the Agreed
Value.
RENTAL PERIOD each period ascertained in
accordance with Clause 5.2.
RENT DATE the first day of each Rental
Period.
SECURITY INTEREST any mortgage, charge, pledge,
lien, assignment,
hypothecation, right of
set-off or any agreement or
arrangement having the effect
of creating a security
interest other than a
Permitted Lien, or any
agreement to create the
foregoing other than a
Permitted Lien.
STATE OF INCORPORATION the State of Illinois.
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STATE OF REGISTRATION Ireland.
SUB LEASE the aircraft lease agreement
between Sub Lessor and
Lessor in respect of the
Aircraft.
SUB LESSOR Dormacken Limited, a company
incorporated under the laws
of Ireland whose registered
office is at ▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇, ▇▇▇▇▇▇▇.
SUBSIDIARY (a) in relation to any
reference to accounts,
any company whose
accounts are
consolidated with the
accounts of Lessee in
accordance with
accounting principles
generally accepted under
accounting standards of
the State of
Incorporation;
(b) for any other purpose
an entity from time to
time:-
(i) of which another has
direct or indirect
control or owns
directly or
indirectly more than
50 per cent. of the
voting share
capital; or
(ii) which is a direct
or indirect
subsidiary of
another under the
laws of the
jurisdiction of its
incorporation.
SUPPLEMENTAL RENT all amounts payable under
Clause 5.4(a).
TAXES taxes, duties and the like
of all kinds and any other
amount corresponding to any
taxation together with any
penalties, fines, surcharge
or interest thereon.
TERM the period commencing on the
Delivery Date and ending on
the Expiry Date.
1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention is stated, a
reference to:-
(i) each of "Owner", "Sub Lessor", "Lessor" or "Lessee" or any
other person includes without prejudice to the provisions of
this Agreement any successor in title to it and any permitted
assignee;
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(ii) words importing the plural shall include the singular and vice
versa;
(iii) any document shall include that document as amended, novated
or supplemented;
(iv) a law (1) includes any statute, decree, constitution,
regulation, order, judgment or directive of any Government
Entity; (2) includes any treaty, pact, compact or other
agreement to which any Government Entity is a signatory or
party; (3) includes any judicial or administrative
interpretation or application thereof and (4) is a reference
to that provision as amended, substituted or re-enacted;
(v) a Clause or a Schedule is a reference to a clause of or a
schedule to this Agreement; and
(b) the headings in this Agreement are to be ignored in construing this
Agreement.
2. REPRESENTATIONS AND WARRANTIES
2.1 Lessee's Representations and Warranties: Lessee represents and
warrants to Lessor that:-
(a) STATUS: Lessee is a corporation duly incorporated and validly existing
in good standing under the laws of the State of Incorporation and has
the corporate power to own its assets and carry on its business as it
is being conducted and is the holder of all necessary air
transportation licences required in connection therewith and with the
use and operation of the Aircraft;
(b) POWER AND AUTHORITY: Lessee has the corporate power to enter into and
perform, and has taken all necessary corporate action to authorise the
entry into, performance and delivery of, this Agreement and the
transactions contemplated by this Agreement;
(c) LEGAL VALIDITY: this Agreement constitutes Lessee's legal, valid and
binding obligation;
(d) NON-CONFLICT: the entry into and performance by Lessee of, and the
transactions contemplated by, this Agreement do not and will not:-
(i) conflict with any laws binding on Lessee; or
(ii) conflict with the constitutional documents of Lessee; or
(iii) conflict with or result in default under any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, bank loan or credit agreement or other
agreement which is binding upon Lessee or any of its assets
nor result in the creation of any Security Interest over any
of its assets;
(e) AUTHORISATION: all authorisations, consents, registrations and
notifications required in connection with the entry into, performance,
validity and enforceability of, this Agreement and the transactions
contemplated by this Agreement, have been (or will on or before the
Delivery Date have been) obtained or effected (as appropriate) and are
(or will on their being obtained or effected be) in full force and
effect;
(f) NO IMMUNITY:
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(i) Lessee is subject to civil commercial law with respect to its
obligations under this Agreement; and
(ii) neither Lessee nor any of its assets is entitled to any right
of immunity and the entry into and performance of this
Agreement by Lessee constitute private and commercial acts;
(g) ACCOUNTS: the audited consolidated accounts of Lessee and its
Subsidiaries most recently delivered to Lessor:-
(i) have been prepared in accordance with accounting principles
and practices generally accepted and consistently applied in
the State of Incorporation; and
(ii) fairly represent the consolidated financial condition of
Lessee and its Subsidiaries as at the date to which they were
drawn up;
(h) CHIEF EXECUTIVE OFFICE: Lessee's chief executive office (as that term
is defined in Article 9 of the Uniform Commercial Code as in effect in
the State of South Carolina) is located at ▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(i) CERTIFICATED AIR CARRIER: Lessee is a Certificated Air Carrier and
Lessor, as lessor of the Aircraft to Lessee, is entitled to the
benefits of Section 1110 of Title 11 of the United States Code with
respect to the Aircraft; and
(j) CITIZEN OF THE UNITED STATES: Lessee is a "citizen of the United
States" as defined in Section 101(16) of the Federal Aviation Act.
2.2 LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES: Lessee further
represents and warrants to Lessor that:-
(a) NO DEFAULT:
(i) no Default has occurred and is continuing or might result from
the entry into or performance of this Agreement; and
(ii) no other event or condition has occurred and is continuing
which constitutes (or with the giving of notice, lapse of
time, determination of materiality or the fulfilment of any
other applicable condition or any combination of the
foregoing, might constitute) a material default under any
indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, lease, bank loan or credit
agreement or other agreement which is binding on Lessee or any
assets of Lessee;
(b) REGISTRATION:
(i) it is not necessary or advisable under the laws of the State
of Incorporation or the Habitual Base in order to ensure the
validity, effectiveness and enforceability of this Agreement
or to, establish, perfect or protect the property rights of
Owner, Sub Lessor or Lessor in the Aircraft or any Engine or
Part that this Agreement or any other instrument relating
thereto be filed, registered or recorded or that any other
action be taken or if any such filings, registrations,
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recordings or other actions are necessary or advisable, the
same have been effected or will have been effected on or
before the Delivery Date; and
(ii) under the laws of the State of Incorporation and the Habitual
Base the property rights of Owner, Sub Lessor and Lessor in
the Aircraft, have been fully established, perfected and
protected and this Agreement will have priority in all
respects over the claims of all creditors of Lessee;
(c) LITIGATION: no litigation, arbitration or administrative proceedings
are pending or to Lessee's knowledge threatened against Lessee which,
if adversely determined, would have a material adverse effect upon its
financial condition or business or its ability to perform its
obligations under this Agreement;
(d) PARI PASSU: the obligations of Lessee under this Agreement rank at
least pari passu with all other present and future unsecured and
unsubordinated obligations (including contingent obligations) of
Lessee, with the exception of such obligations as are mandatorily
preferred by law and not by virtue of any contract;
(e) MATERIAL ADVERSE CHANGE: there has been no material adverse change in
the consolidated financial condition of Lessee and its Subsidiaries or
the financial condition of Lessee since the date to which the accounts
most recently provided to Lessor on or prior to the Delivery Date were
drawn up;
(f) TAXES: Lessee has delivered all necessary returns and payments due to
the tax authorities in the State of Incorporation and the Habitual
Base and all other jurisdictions in which Lessee is required to pay
taxes and/or file tax returns or reports and Lessee is not required by
law to deduct any Taxes from any payments under this Agreement;
(g) INFORMATION: the financial and other information furnished by Lessee
in connection with this Agreement does not contain any untrue
statement or omit to state facts, the omission of which makes the
statements therein, in the light of the circumstances under which they
were made, misleading, nor omits to disclose any material matter to
Lessor and all forecasts and opinions contained therein were honestly
made on reasonable grounds after due and careful enquiry by Lessee;
(h) FOREIGN ASSET CONTROL: as of the date of this Agreement, Lessee does
not hold any contract or other obligation to operate the Aircraft to
any of the countries designated under the United States Foreign Asset
Control Regulations (31 C.F.R. Parts 500-599), including, as of the
date hereof, Cuba, Haiti, Iraq, Libya, North Korea, and the Federal
Republic of Yugoslavia (Serbia and Montenegro);
(i) ERISA: Lessee is not engaged in any transaction in connection with
which it could be subjected to either a civil penalty assessed
pursuant to Section 502(c) of ERISA or any tax imposed by Section 5975
of the Internal Revenue Code; no material liability of the Pension
Benefit Guaranty Corporation has been or is expected by Lessee to be
incurred with respect to any employee pension benefit plan (as defined
in Section 3 of ERISA) maintained by Lessee; there has been no
reportable event (as defined in Section 4043(b) of ERISA) with respect
to any such employee pension benefit plan. There is no event of
termination of any such employee pension benefit plan by the Pension
Benefit Guaranty Corporation; and no accumulated funding deficiency
(as defined in Section 302 of ERISA
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or Section 412 of the Internal Revenue Code), whether or not waived,
exists with respect to any such employee pension benefit plan; and
(j) MAINTENANCE PROGRAMME: the Maintenance Programme for the Aircraft
complies with all FAA requirements.
2.3 REPETITION: The representations and warranties in Clause 2.1 and
Clause 2.2 will survive the execution of this Agreement. The
representations and warranties contained in Clause 2.1 will be deemed
to be repeated by Lessee on each Rent Date as if made with reference
to the facts and circumstances then existing.
2.4 LESSOR'S REPRESENTATIONS AND WARRANTIES: Lessor represents and
warrants to Lessee that:-
(a) STATUS: Lessor is a limited partnership existing under the laws of
Sweden and has the power to own its assets and carry on its business
as it is now being conducted;
(b) POWER AND AUTHORITY: Lessor has the power to enter into and perform,
and has taken all necessary action to authorise the entry into,
performance and delivery of, this Agreement and the transactions
contemplated by this Agreement;
(c) LEGAL VALIDITY: this Agreement constitutes Lessor's legal, valid and
binding obligation;
(d) NON-CONFLICT: the entry into and performance by Lessor of, and the
transactions contemplated by, this Agreement do not and will not:-
(i) conflict with any laws binding on Lessor; or
(ii) conflict with the constitutional documents of Lessor; or
(iii) conflict with any document which is binding upon Lessor or any
of its assets;
(e) AUTHORISATION: so far as concerns the obligations of Lessor, all
authorisations, consents, registrations and notifications required
under the laws of Sweden in connection with the entry into,
performance, validity and enforceability of, and the transactions
contemplated by, this Agreement by Lessor have been (or will on or
before the Delivery Date have been) obtained or effected (as
appropriate) and are (or will on their being obtained or effected be)
in full force and effect; and
(f) NO IMMUNITY:
(i) Lessor is subject to civil commercial law with respect to its
obligations under this Agreement; and
(ii) neither Lessor nor any of its assets is entitled to any right
of immunity and the entry into and performance of this
Agreement by Lessor constitute private and commercial acts.
3. CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT: Lessor's obligation to deliver and lease the
Aircraft under this Agreement is subject to satisfaction, or waiver
by Lessor, of each of the following conditions:-
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(a) receipt by Lessor from Lessee not later than the date set forth in, or
determined in accordance with, Clause 4.1 of the following
satisfactory in form and substance to Lessor:-
(i) CONSTITUTIONAL DOCUMENTS: a copy of the constitutional
documents of Lessee;
(ii) RESOLUTIONS: a copy of a resolution of the board of directors
of Lessee approving the terms of, and the transactions
contemplated by, this Agreement, resolving that it enter into
this Agreement, and authorising a specified person or persons
to execute this Agreement and accept delivery of the Aircraft
on its behalf.-
(iii) OPINION: evidence that an opinion in the form of Schedule 5
will be issued on the Delivery Date by legal counsel
acceptable to Lessor in the Habitual Base and the State of
Incorporation;
(iv) FAA OPINION: evidence that there will be issued an opinion of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other counsel acceptable to
Lessor who are recognised specialists with regard to FAA
registration matters in a form acceptable to Lessor as to the
due filing for recordation of this Agreement;
(v) APPROVALS: evidence of the issue of each approval, licence and
consent which may be required in relation to the performance
by Lessee of any of its obligations hereunder (including,
without limitation, any consent to the export of the Aircraft
from the Habitual Base upon the termination of the leasing of
the Aircraft under this Agreement);
(vi) [INTENTIONALLY OMITTED)
(vii) LICENCES: copies of Lessee's air transport licence, air
operator's certificates and all other licences, certificates
and permits required by Lessee in relation to, or in
connection with, the operation of the Aircraft;
(viii) PROCESS AGENT: a letter from the process agent appointed by
Lessee in this Agreement accepting that appointment;
(ix) CERTIFICATE: a certificate of a duly authorised officer of
Lessee:-
(a) setting out a specimen of each signature referred to in Clause
3.1(a)(ii); and
(b) certifying that each document specified in this Clause is
correct, complete and in full force and effect; and
(c) certifying the matters set forth in sub-clause 3.1(a)(x)
below;
(x) AIR TRAFFIC CONTROL: a letter from Lessee addressed to all
relevant air traffic control authorities pursuant to which
Lessee authorises the addressee to issue to Lessor, upon
Lessor's request from time to time, a statement of account of
all sums due by Lessee to the authority in respect of all
aircraft (including, without limitation, the Aircraft)
operated by Lessee except as otherwise set forth in a
schedule thereto; and
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(xi) GENERAL: such other documents as Lessor may reasonably
request;
(b) the receipt by Lessor on or before the Delivery Date of:-
(i) OPINIONS: a signed original of each of the opinions referred
to in Clauses 3.1(a)(iii) and (iv);
(ii) PAYMENTS: all sums due to Lessor under this Agreement on or
before the Delivery Date including, without limitation, the
payment of Rent;
(iii) INSURANCES: certificates of insurance, an undertaking from
Lessee's insurance broker and other evidence satisfactory to
Lessor that Lessee is taking the required steps to ensure due
compliance with the provisions of this Agreement as to
Insurances with effect on and after the Delivery Date;
(iv) ACCOUNTS: the latest available accounts of Lessee as described
in Clause 8.2(b)(i) and (ii);
(v) DOCUMENTS: a confirmation of receipt of the Aircraft Documents
delivered with the Aircraft on the Previous Delivery Date;
(vi) GENERAL: such other documents as Lessor may reasonably
request;
(c) receipt by Lessor of such information and documents relating to the
proposed Agreed Maintenance Programme as Lessor may require on or prior
to the Delivery Date; and
(d) evidence that on the Delivery Date the Aircraft has been validly
registered under the laws of the State of Registration, that the
Financing Statements have been duly filed and that all filings,
registrations, recordings and other actions have been or will be taken
which are necessary or advisable to ensure the validity, effectiveness
and enforceability of this Agreement and to protect the property
rights of Owner, Sub Lessor and Lessor in the Aircraft or any Part.
3.2 FURTHER CONDITIONS PRECEDENT: The obligations of Lessor to deliver and
lease the Aircraft under this Agreement are subject to the further
conditions precedent that:-
(a) the representations and warranties of Lessee under Clauses 2.1 and 2.2
are correct and would be correct if repeated on delivery of the
Aircraft under this Agreement; and
(b) no Default has occurred and is continuing or might result from the
leasing of the Aircraft to Lessee under this Agreement.
3.3 WAIVER: The conditions specified in Clauses 3.1 and 3.2 are for the
sole benefit of Lessor and may be waived or deferred in whole or in
part and with or without conditions by Lessor. If any of those
conditions are not satisfied on the Delivery Date and Lessor (in its
absolute discretion) nonetheless agrees to deliver the Aircraft to
Lessee, Lessee will ensure that those conditions are fulfilled within
15 days after the Delivery Date and Lessor may treat as an Event of
Default the failure of Lessee to do so.
4. COMMENCEMENT
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4.1 LEASING: Lessor will lease the Aircraft to Lessee and Lessee will take
the Aircraft on lease in accordance with this Agreement for the
duration of the Term. Lessor will deliver and Lessee will accept the
Aircraft on or about April 29, 1996 or such other day as may be
agreed. After delivery the Aircraft and every Part will be in every
respect at the sole risk of Lessee, who will bear all risk of loss,
theft, damage or destruction to the Aircraft from any cause
whatsoever.
4.2 DELIVERY: The Aircraft will be constructively delivered to and
accepted by Lessee as is at the Delivery Location or such other
location as may be agreed. Lessee will effect acceptance of the
Aircraft by execution and delivery to Lessor of the duly completed and
executed Certificate of Acceptance in the form of Schedule 2.
4.3 [INTENTIONALLY OMITTED]
4.4 [INTENTIONALLY OMITTED]
4.5 Lessee's Lease Term Option.
(a) Notwithstanding any other provision of this Agreement to the contrary,
Lessor hereby grants Lessee the option (the "Lease Term Option") to
terminate or extend the Term two (2) months earlier or later than the
numerically corresponding day twenty-four (24) months after the
Delivery Date provided that:
(i) Lessee shall give Lessor six months prior written notice (the
"Option Notice") of Lessee's intention to exercise the Lease Term
Option to either terminate or extend the Term by two (2) months, which
Option Notice, once given, shall be irrevocable; and
(ii) no Default shall have occurred and be continuing on the date that
the Option Notice is given;
(b) Option Exercised: Upon exercise by Lessee of the Lease Term Option,
but without prejudice to all the other terms and conditions of this
Agreement (including, without limitation, Lessee's obligation to
fulfil the conditions contained in Clause 4.5(a)) which shall remain
in full force and effect, the definition of "Expiry Date" contained in
Clause 1 of this Agreement shall be deemed to be amended such that the
words "Subject to any amendment pursuant to Clause 4.5(b), the day
preceding the numerically corresponding day 24 months after the
Delivery Date" shall be replaced with the words "the day preceding the
numerically corresponding day twenty-two (22) or twenty-six months
after the Delivery Date subject in all cases to the term identified in
the Option Notice".
(c) Option Not Exercised: If Lessee has not furnished Lessor with the
Option Notice on or before the date specified in sub-clause (a) above,
the Lease Term Option shall be forfeited, no longer available to
Lessee and of no further effect.
4.6 [Intentionally Omitted]
4.7 [Intentionally Omitted]
5. PAYMENTS
5.1 AIRCRAFT COMMITMENT FEE: Lessor hereby acknowledges receipt from
Lessee of the Aircraft Commitment Fee in the amount set forth in
Letter Agreement No. 1.
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5.2 RENTAL PERIODS: The Term will be divided into Rental Periods. The
first Rental Period will commence on the Delivery Date and end May 26,
1996, the second Rental Period will commence on May 20 and each
subsequent Rental Period will commence on May 27, 1996 and each
subsequent Rental Period will commence on the date succeeding the last
day of the previous Rental Period. Each Rental Period will end on the
date immediately preceding the numerically corresponding day in the
next month except that:-
(a) if there is no such numerically corresponding day in that month, it
will end on the last day of that month; and
(b) if a Rental Period would otherwise overrun the Expiry Date, it will
end on the Expiry Date.
5.3 RENT: Except as otherwise set forth in Letter Agreement No. 1, on each
Rent Date Lessee will pay to Lessor or its order Basic Rent in advance
in the amount set forth in paragraph A of Letter Agreement No. 1.
Payment must be initiated adequately in advance of the Rent Date to
ensure that Lessor receives credit for the payment on the Rent Date.
If a Rental Period begins on a non-Business Day, the Basic Rent payable
in respect of that Rental Period shall be paid on the Business Day
immediately preceding the date on which such Rental Period commences.
5.4 SUPPLEMENTAL RENT:
(a) AMOUNT: Except as otherwise set forth in Letter Agreement No. 1,
Lessee will further pay to Lessor Supplemental Rent in relation to
each Rental Period (including without limitation the last Rental
Period of the Term) on the 10th day following the end of that Rental
Period as follows:-
(i) in respect of the Airframe, the amount set forth in paragraph
B (i)(a) of Letter Agreement No. 1 in respect of each Flight
Hour operated by the Aircraft during that Rental Period
("Airframe Supplemental Rent"); and
(ii) in respect of each Engine, the amount set forth in paragraph B
(i)(b) of Letter Agreement No. 1 in respect of each Flight
Hour operated by that Engine during that Rental Period
("Engine Refurbishment Supplemental Rent"); and
(iii) in respect of each Engine, the amount set forth in paragraph B
(i)(c) of Letter Agreement No. 1 in respect of each Flight
Hour operated by that Engine during that Rental Period
("Engine Life Limited Parts Supplemental Rent"); and
(v) in respect of the Landing Gear, the amount set forth in
paragraph B (i)(d) of Letter Agreement No. 1 in respect of
each Flight Hour operated by the Landing Gear during that
Rental Period ("Landing Gear Supplemental Rent").
Notwithstanding the foregoing, with respect to any Engine, provided
that (x) no Default shall have occurred and be continuing; and (y)
there shall have been no material adverse change in Lessee's financial
position since the Delivery Date, if at any time commencing from the
Previous Delivery Date and falling during the Term the aggregate
amount of Engine Refurbishment Supplemental Rent and Engine Life
Limited Parts Supplemental Rent previously paid by Lessee in respect
of that Engine less any amount paid by Lessor with respect to that
Engine pursuant to Clause 7.2 equals or exceeds $600,000, then
Lessee's obligation to pay Engine Refurbishment Supplemental Rent and
Engine Life
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Limited Parts Supplemental Rent in respect of that Engine shall ▇▇▇▇▇.
Lessee's obligation to pay Engine Refurbishment Supplemental Rent and
Engine Life Limited Parts Supplemental Rent shall recommence at such
time as the aggregate amount of Engine Refurbishment Supplemental Rent
and Engine Life Limited Parts Supplemental Rent held by Lessor in
respect of that Engine less any amount paid by Lessor with respect to
that Engine pursuant to Clause 7.2 falls below $600,000.
(b) ADJUSTMENT: the rate of Supplemental Rent shall be adjusted upwards
annually by Lessor at the rate of 5% per annum commencing 1 January,
1997. In addition, but not limited to the foregoing, Lessee
acknowledges that the rates of Supplemental Rent currently provided for
in this Agreement are based upon the assumptions that (i) the Aircraft
will be operated on a one Flight Hour to one Cycle ratio; and (ii) the
Agreed Maintenance Programme for the Aircraft during the Term will be
substantially the same as that in effect on the Delivery Date. In the
event that either or both of the foregoing assumptions prove to be
incorrect at any time during the Term, Lessor and Lessee agree that
Lessor shall have the right, upon written notice to Lessee, to adjust
the rate of Supplemental Rent in accordance with the Table set forth in
Letter Agreement No. 1. In the event that the Agreed Maintenance
Programme changes during the Term (any such change to be in accordance
with the relevant terms and conditions of this Agreement), Lessor shall
make the aforementioned adjustment in the manner which Lessor
determines, in its reasonable discretion, is necessary to maintain the
rates of Supplemental Rent at levels which accurately reflect the costs
associated with obtaining maintenance services at prevailing industry
rates. Each such notice shall specify the revised rate of Supplemental
Rent and the effective date of such revision. Lessee agrees to advise
Lessor, in writing, of any circumstances or events which would result
in the foregoing assumptions becoming incorrect at any time during the
Term.
5.5 PAYMENTS: All payments by Lessee to Lessor under this Agreement will
be made for value on the due date in Dollars and in immediately
available funds settled through the New York Clearing House System or
such other funds as may for the time being be customary for the
settlement in New York City of international payments in Dollars by
telegraphic transfer to ABN Amro Bank ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Account number ▇▇▇▇-▇▇▇-▇▇▇ for credit to the account of Polaris
Aircraft Leasing K.B. or to such other account as Lessor may advise
Lessee in writing.
5.6 GROSS-UP:
(a) All payments by Lessee under or in connection with this Agreement will
be made without set-off or counterclaim, free and clear of and without
deduction for or on account of all Taxes (other than Lessor Taxes);
(b) all Taxes (other than Lessor Taxes) in respect of payments under this
Agreement shall be for the account of and will be paid by Lessee for
its own account prior to the date on which penalties apply; and
(c) if Lessee is compelled by law to make payment subject to any Tax
(other than Lessor Taxes) and Lessor does not actually receive for its
own benefit on the due date a net amount equal to the full amount
provided for under this Agreement, Lessee will pay all necessary
additional amounts to ensure receipt by Lessor of the full amount so
provided for.
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5.7 TAXATION: Lessee will on demand pay and indemnify Lessor against all
Taxes (other than Lessor Taxes) levied or imposed against or upon
Owner, Sub Lessor, Lessor or Lessee and relating to or attributable to
Lessee, this Agreement or the Aircraft directly or indirectly in
connection with the importation, exportation, registration, ownership,
leasing, subleasing, delivery, possession, use, operation, repair,
maintenance, overhaul, transportation, landing, storage, presence or
redelivery of the Aircraft or any part thereof or any rent, receipts,
insurance proceeds, income or other amounts arising therefrom.
5.8 VALUE ADDED TAX:
(a) For the purposes of this sub-clause:-
(i) "VAT" means value added tax and any sales or turnover tax,
imposition or levy of a like nature;
(ii) "supply" includes anything on which VAT is chargeable;
(b) Lessee will pay to Lessor the amount of any VAT chargeable in respect
of any supply of goods or services for VAT purposes under this
Agreement; and
(c) each amount stated as payable by Lessee under this Agreement is
exclusive of VAT (if any) and is accordingly to be construed as a
reference to that amount plus any VAT in respect of it.
5.9 INFORMATION: If Lessee is required by any applicable law, or by any
third party, to deliver any report or return in connection with any
Taxes, Lessee will complete the same in a manner satisfactory to
Lessor and in particular will state therein that Lessee is exclusively
responsible for the use and operation of the Aircraft and for any
Taxes arising therefrom, and Lessee will, on request, supply a copy of
the report or return to Lessor.
5.10 TAXATION OF INDEMNITY PAYMENTS:
(a) If and to the extent that any sums payable to Lessor by Lessee under
this Agreement by way of indemnity are insufficient, by reason of any
Taxes (other than Lessor Taxes) payable in respect of those sums, for
Lessor to discharge the corresponding liability to the relevant third
party (including any taxation authority), or to reimburse Lessor for
the cost incurred by it to a third party (including any taxation
authority) Lessee will pay to Lessor such sum as will after the tax
liability has been fully satisfied leave Lessor with the same amount
as it would have been entitled to receive in the absence of that
liability together with interest on the amount of the deficit at the
rate of interest stated in Clause 5.11 in respect of the period
commencing on the date on which the payment of taxation is finally due
until payment by Lessee (both before and after judgment); and
(b) If and to the extent that any sums constituting (directly or
indirectly) an indemnity to Lessor but paid by Lessee to any person
other than Lessor are treated as taxable in the hands of Lessor,
Lessee will pay to Lessor such sum as will after the tax liability has
been fully satisfied indemnify Lessor to the same extent as it would
have been indemnified in the absence of such liability together with
interest on the amount payable by Lessee under this sub-clause at the
rate of interest stated in Clause 5.11 in respect of the period
commencing on the date on which the payment of taxation is finally due
until payment by Lessee (both before and after judgment) provided
however that Lessee will not be liable
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for any Lessor Taxes incurred as a result of the payment of the Agreed
Value pursuant to Clause 11.
5.11 DEFAULT INTEREST: If Lessee fails to pay any amount payable under this
Agreement on the due date, Lessee will pay on demand from time to time
to Lessor interest (both before and after judgment) on that amount,
from the due date to the date of payment in full by Lessee to Lessor,
at the rate calculated by Lessor to be one month Dollar LIBOR plus 500
basis points per annum. All such interest will be compounded monthly
and calculated on the basis of the actual number of days elapsed and a
360 day year.
5.12 CONTEST: If Lessee disputes the payment of any Taxes payable by Lessor
for which Lessee is responsible under this Agreement, Lessor will
consider with Lessee the taking of such action as Lessee may
reasonably request at Lessee's expense to contest that payment but
will not be obliged to take any such action:-
(a) which Lessor considers in its sole discretion may prejudice it; or
(b) which Lessor considers does not have a reasonable prospect of success;
or
(c) for which Lessee has not made adequate provision to the satisfaction
of Lessor in respect of the expense concerned.
5.13 ABSOLUTE: Lessee's obligations under this Agreement are absolute and
unconditional irrespective of any contingency whatsoever including
(but not limited to):-
(a) any right of set-off, counterclaim, recoupment, defence or other right
which either party to this Agreement may have against the other;
(b) any unavailability of the Aircraft for any reason, including, but not
limited to, a requisition of the Aircraft or any prohibition or
interruption of or interference with or other restriction against
Lessee's use, operation or possession of the Aircraft;
any lack or invalidity of title or any other defect in title,
airworthiness, merchantability, fitness for any purpose, condition,
design, or operation of any kind or nature of the Aircraft for any
particular use or trade, or for registration or documentation under
the laws of any relevant jurisdiction, or any Event of Loss in respect
of or any damage to the Aircraft;
(d) any insolvency, bankruptcy, reorganisation, arrangement, readjustment
of debt, dissolution, liquidation or similar proceedings by or against
Lessor or Lessee;
(e) any invalidity or unenforceability or lack of due authorisation of, or
other defect in, this Agreement; and
(f) any other cause which but for this provision would or might otherwise
have the effect of terminating or in any way affecting any obligation
of Lessee under this Agreement.
5.14 SECURITY:
(a) It is intended by Lessor and Lessee that the Aircraft Commitment Fee
paid by Lessee to Lessor and referenced in Clause 5.1, the
Supplemental Rent and, if applicable, the Insurance Security Deposit
contemplated by the first paragraph of Schedule 4 are amounts
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paid by Lessee to Lessor in consideration for Lessor removing the
Aircraft from the market, the use of the Aircraft by Lessee and the
satisfaction of Lessor's obligations under this Agreement and that,
once paid, those monies irrevocably and unconditionally shall be the
property of Lessor. Notwithstanding that stated intent, if and to the
extent that those monies or any thereof, under any applicable law or
otherwise, are determined to be security deposits or otherwise the
property of Lessee or if it is so determined those monies are a debt
owed to Lessee or that Lessee shall have any interest in those monies
(the "Charged Monies"), the parties agree that subclauses (b), (c) and
(d) shall apply;
(b) To the fullest extent permitted by law and by way of continuing
security Lessee charges and grants a security interest in the Charged
Monies and all rights of Lessee to payment thereof, the debt
represented thereby and/or any and all interest of Lessee therein to
Lessor by way of first priority security interest and first fixed
charge as security for Lessee's obligations and liabilities under this
Agreement and the Other Agreements (the "Secured Liabilities").
Except as expressly permitted under this Agreement, Lessee will not be
entitled to payment of the Charged Monies. Lessee will not assign,
transfer or otherwise dispose of all or part of its rights in the
Charged Monies and Lessee agrees that it will enter into any
additional documents and instruments necessary or reasonably requested
by Lessor to evidence, create or perfect Lessor's rights to the
Charged Monies.
(c) If Lessee fails to comply with any provision of this Agreement or any
Event of Default has occurred and is continuing Lessor may immediately
or at any time thereafter, without prior notice to Lessee:-
(i) set-off all or any part of the Secured Liabilities against the
liabilities of Lessor in respect of the Charged Monies; or
(ii) apply or appropriate the Charged Monies in or towards the
payment or discharge of the Secured Liabilities in such order as
Lessor sees fit; and
(d) If Lessor has exercised the set-off described in sub-clause (c) above,
Lessee shall, following a demand in writing from Lessor, promptly
restore the Charged Monies to the level at which they stood
immediately prior to such set-off.
6 MANUFACTURER'S WARRANTIES
6.1 ASSIGNMENT: Notwithstanding this Agreement, Lessor will remain
entitled to the benefit of each warranty, express or implied, with
respect to the Aircraft, any Engine or Part so far as concerns any
manufacturer, vendor, subcontractor or supplier. Except to the extent
Lessor otherwise directs, Lessor hereby authorises Lessee to pursue
any claim thereunder in relation to defects affecting the Aircraft,
any Engine or Part and Lessee agrees diligently to pursue any such
claim which arises at its own cost. Lessee will notify Lessor
promptly upon becoming aware of any such claim.
6.2 PROCEEDS: Except to the extent Lessor otherwise agrees in a particular
case, provided no Default has occurred and is continuing all proceeds
of any such claim will be paid directly to Lessee if and to the extent
that such claim relates:-
(a) to defects affecting the Aircraft which Lessee has rectified and
Lessor has received from Lessee evidence satisfactory to Lessor that
Lessee has rectified the relevant defect; or
(b) to compensation for loss of use of the Aircraft, an Engine or any Part
during the Term; and
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6.3 PARTS: Except to the extent Lessor otherwise agrees in a particular
case, Lessee will procure that all engines, components, furnishings or
equipment provided by the manufacturer, vendor, subcontractor or
supplier in replacement of a defective Engine or Part pursuant to the
terms of any warranty will be installed promptly by Lessee, that title
thereto free of Security Interests vests in Owner. On installation
those items will be deemed to be an Engine or Part as applicable.
6.4 AGREEMENT: To the extent any warranties relating to the Aircraft are
made available under an agreement between any manufacturer, vendor,
subcontractor or supplier and Lessee, this Clause 6 is subject to that
agreement. However Lessee will:-
(a) apply the proceeds of any claim thereunder to Lessor to be applied
pursuant to Clause 6.2 and pending such payment will hold the claim
and the proceeds on trust for Lessor; and
(b) Lessee will take all such steps as are necessary at the end of the
Term to ensure the benefit of any of those warranties which have not
expired are vested in Lessor.
7. LESSOR'S COVENANTS
7.1 QUIET ENJOYMENT: Lessor will not interfere with the quiet use,
possession and enjoyment of the Aircraft by Lessee but the exercise by
Lessor of its rights under or in connection with this Agreement will
not constitute such an interference.
7.2 MAINTENANCE CONTRIBUTION: Provided no Default has occurred and is
continuing Lessor will pay to Lessee, by way of contribution to the
cost of maintenance of the Aircraft, upon submission by Lessee to
Lessor within 6 months of the commencement of that maintenance and
before the Expiry Date of an invoice and supporting documentation
reasonably satisfactory to Lessor evidencing:-
(a) with respect to the Airframe, the completion, in accordance with this
Agreement, of those items of maintenance characterised by the
Manufacturer's maintenance planning document and best industry
practice as D Check and/or individual structural inspections having an
interval of not less than 15,000 Flight Hours or 6 years for the
Aircraft (but not including repairs arising as the result of
operational or maintenance mishandling and not including airworthiness
directives), the lesser of (i) the amount of that invoice and (ii) an
amount equal to the aggregate amount of Airframe Supplemental Rent
paid under this Agreement at the time of commencement of such
maintenance less the aggregate amount previously paid by Lessor under
this sub-clause;
(b) with respect to any Engine, the performance, in accordance with this
Agreement, of a Hot Section Refurbishment or a Cold Section
Refurbishment (other than (i) repairs arising as a result of foreign
object damage or operational or maintenance mishandling and/or (ii)
removal, installation, maintenance and repair of QEC (Quick Engine
Change) kits and/or airworthiness directives), the lesser of (i) the
amount of that invoice and (ii) an amount equal to the aggregate
amount of Engine;
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(c) with respect to any Engine, the replacement, in accordance with this
Agreement, of life limited Parts (other than replacement which is
occassioned by foreign object damage or operational or maintenance
mishandling and other than replacement occassioned by airworthiness
directives or elective replacement), the lesser of (i) the amount of
that invoice and (ii) an amount equal to the aggregate amount of
Engine Life Limited Parts Supplemental Rent paid in respect of that
Engine under this Agreement at the time of commencement of such
maintenance less the aggregate amount previously paid in respect of
that Engine by Lessor under this sub-clause; and
(d) with respect to the Landing Gear, the performance in accordance with
this Agreement, of all work on the Landing Gear in the nature of
overhaul and requiring removal and disassembly (other than repairs
arising as the result of operational or maintenance mishandling and/or
airworthiness directives), the lesser of (i) the amount of that
invoice and (ii) an amount equal to the aggregate amount of Landing
Gear Supplemental Rent paid under this Agreement at the time of
commencement of such maintenance less the aggregate amount previously
paid by Lessor under this sub-clause.
Lessor will make the payment to Lessee within 14 days of the receipt of
the invoice referred to above.
To the extent that any Engine undergoes maintenance and repairs as a
result of foreign object damage and the work performed on the Engine at
the time of the maintenance and repair includes work which would have
been performed at the time of the Hot Section Refurbishment and/or Cold
Section Refurbishment or includes the replacement of life limited Parts
(in each and all cases, the "Betterment") then Lessor shall pay to
Lessee the lesser of (i) the amount of the invoice which relates solely
to the Betterment and (ii) an amount equal to the aggregate amount of
Engine Hot Section Refurbishment Supplemental Rent, Engine Cold Section
Refurbishment Supplemental Rent and/or Engine Life Limited Parts
Supplemental Rent, as the case may be, paid in respect of that Engine
under this Agreement at the time of commencement of such maintenance
and repair less the aggregate amount previously paid in respect of that
Engine by Lessor under sub-clause (b), (c) and/or (d) respectively.
7.3 LESSOR OBLIGATIONS FOLLOWING EXPIRY DATE: Within 5 Business Days of:-
(a) redelivery of the Aircraft to Lessor in accordance with and in the
condition required by this Agreement; or
(b) payment to Lessor of the Agreed Value following an Event of Loss after
the Delivery Date;
or in each case such later time as Lessor is satisfied Lessee has
irrevocably paid to Lessor all Rent which may then be outstanding or
become payable under this Agreement or the Other Agreements and
provided that no Default shall have occurred and is continuing, Lessor
will pay to Lessee:-
(i) an amount equal to (x) the amount of the Aircraft Commitment
Fee paid by Lessee and referenced in Clause 5.1; plus (y) the
amount of interest at the rate and otherwise calculated in
accordance with Letter Agreement No. 1 which would have
accrued on the amount referred to in (x); and
(ii) the amount of any Basic Rent received in respect of any period
falling after the date of redelivery of the Aircraft or
payment of the Agreed Value, as the case may be; and
(iii) an amount equal to (x) the aggregate amount of Supplemental
Rent previously paid by Lessee under this Agreement; minus (y)
the aggregate amount previously paid by Lessor under Clause
7.2 without payment of interest.
8. LESSEE'S COVENANTS
8.1 DURATION: The undertakings in this Clause and in Clause 12 will:-
(a) except as otherwise stated, be performed at the expense of Lessee; and
(b) remain in force until the Expiry Date in accordance with this
Agreement and thereafter to the extent of any accrued rights of Lessor
in relation to those undertakings.
8.2 INFORMATION: Lessee will:-
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(a) notify Lessor forthwith of the occurrence of any Default or any other
event which might adversely affect Lessee's ability to perform any of
its obligations under this Agreement;
(b) furnish to Lessor:-
(i) on a quarterly and annual basis, the consolidated management
accounts of Lessee (comprising a balance sheet and profit and
loss statement) prepared for the most recent previous
financial quarter certified by Lessee's chief financial
officer as being true and correct;
(ii) as soon as available but not in any event later than 120 days
after the last day of each financial year of Lessee, its
audited consolidated balance sheet as of such day and its
audited consolidated profit and loss statement for the year
ending on such day;
(iii) at the same time as it is issued to the shareholders or
creditors of Lessee, a copy of each notice or circular issued
to Lessee's shareholders or creditors as a group;and
(iv) on request from time to time such other information relevant
to the transaction contemplated by this Agreement regarding
Lessee and its business and affairs as Lessor may reasonably
request;
(c) keep Lessor informed as to current serial numbers of the Engines and
any engine installed on the Aircraft;
(d) promptly furnish to Lessor all information Lessor from time to time
reasonably requests regarding the Aircraft, any Engine or any Part,
its use, location and condition including, without limitation, the
hours available on the Aircraft and any Engine until the next
scheduled check, inspection, overhaul or shop visit, as the case may
be;
(e) on request, within 10 days after the end of any Rental Period, furnish
to Lessor evidence satisfactory to Lessor of payment of all Taxes due
during that or any previous Rental Period;
(f) on request, furnish to Lessor evidence satisfactory to Lessor that all
Taxes and charges incurred by Lessee with respect to the Aircraft,
including without limitation all payments due to the relevant air
traffic control authorities, have been paid and discharged in full;
(g) provide Lessor with a monthly report on the Aircraft and each Engine
in the form required from time to time by Lessor;
(h) give Lessor not less than 30 days' written notice as to the time and
location of all Major Checks; and
(i) promptly notify Lessor of:-,
(i) any loss, theft, damage or destruction to the Aircraft, any
Engine or any Part, or any modification to the Aircraft if the
potential cost may exceed the Damage Notification Threshold;
and
(ii) any claim or other occurrence likely to give rise to a claim
under the Insurances
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(but in the case of hull claims only in excess of the Damage
Notification Threshold) and details of any negotiations with
the insurance brokers over any such claim.
8.3 LAWFUL AND SAFE OPERATION: Lessee will:-
(a) comply with the law for the time being in force in any country or
jurisdiction which may for the time being be applicable to the
Aircraft or, so far as concerns the use and operation of the Aircraft
or an owner or operator thereof and take all reasonable steps to
ensure that the Aircraft is not used for any illegal purpose;
(b) not use the Aircraft in any manner contrary to any recommendation of
the manufacturers of the Aircraft, any Engine or any Part or any
recommendation or regulation of the Air Authority or for any purpose
for which the Aircraft is not designed or reasonably suitable;
(c) ensure that the crew and engineers employed by it in connection with
the operation and maintenance of the Aircraft have the qualifications
and hold the licences required by the Air Authority and applicable
law;
(d) use the Aircraft solely in commercial or other operations for which
Lessee is duly authorised by the Air Authority and applicable law;
(e) not use the Aircraft for the carriage of:-
(i) whole animals living or dead except in the cargo compartments
according to I.A.T.A. regulations, and except domestic pet
animals carried in a suitable container to prevent the escape
of any liquid and to ensure the welfare of the animal;
(ii) acids, toxic chemicals, other corrosive materials, explosives,
nuclear fuels, nuclear wastes, or any nuclear assemblies or
components, except as permitted for passenger aircraft under
the "Restriction of Goods" schedule issued by I.A.T.A. from
time to time and provided that all the requirements for
packaging or otherwise contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which could
reasonably be expected to cause damage to the Aircraft and
which would not be adequately covered by the Insurances; or
(iv) any illegal item or substance;
(f) not utilise the Aircraft for purposes of training, qualifying or
re-confirming the status of cockpit personnel except for the benefit
of Lessee's cockpit personnel, and then only if the use of the
Aircraft for such purpose is not disproportionate to the use for such
purpose of other aircraft of the same type operated by Lessee;
(g) not cause or permit the Aircraft to proceed to, or remain at, any
location which is then the subject of a prohibition order (or any
similar order or directive), sanctions or restrictions by:-
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(i) the United Nations Security Council, the U.S. International
Economic Emergency Powers Act or U.N. Security Council
directives (including, as of the date hereof, Haiti, Iraq,
Libya and the Federal Republic of Yugoslavia (Serbia and
Montenegro) and the Unita Rebels of Angola) or the U.S. Export
Administration Act Regulations (15 C.F.R. Parts 730-799)
(including as of the date hereof Cuba, Iran, North Korea,
Sudan, Syria and Vietnam), except as may be permitted by
operating in accordance with the conditions specified by the
U.S. Export Administration Regulations, General License GATS
(15 C.F.R. Part 771.19);
(i) any Government Entity of the State of Registration or the
Habitual Base;
(iii) any Government Entity of the country in which such location is
situated; or
(iv) any Government Entity having jurisdiction over Owner, Sub
Lessor, Lessor, the Banks or the Aircraft;
(h) obtain and maintain in full force all certificates, licences, permits
and authorisations required for the use and operation of the Aircraft
for the time being, and for the making of payments required by, and
the compliance by Lessee with its other obligations under, this
Agreement;
(i) not operate or locate the Aircraft or suffer or permit the Aircraft to
be operated or located during the Term in any area excluded from
coverage by any insurance policy issued pursuant to the requirements
of this Agreement; and
(j) not operate or locate the Aircraft in, to or over any country which is
(x) the subject of sanctions under the U.S. International Economic
Emergency Powers Act or United Nations Security Council Directives
(currently Iraq, Libya, the Federal Republic of Yugoslavia (Serbia and
Montenegro) and the Unita Rebels of Angola) and/or (y) restricted
under the United States Trading with the Enemy Act or the United
States Export Administration Act except as may be permitted by
operating in accordance with the conditions specified by the United
States Export Administration Regulations, General Licence GATS (15 CFR
Part 771.19) (currently Cuba, Iran, North Korea and Syria).
8.4 TAXES AND OTHER OUTGOINGS: Lessee will promptly pay:-
(a) all licence and registration fees, Taxes (other than Lessor Taxes) and
other amounts of any nature imposed by any Government Entity with
respect to the Aircraft, including without limitation the purchase,
ownership, delivery, leasing, possession, use, operation, return, sale
or other disposition of the Aircraft; and
(b) all rent, fees, charges, Taxes (other than Lessor Taxes) and other
amounts in respect of any premises where the Aircraft or any Part
thereof is located from time to time;
except to the extent that in the reasonable opinion of Lessor such
payment is being contested in good faith by appropriate proceedings,
in respect of which adequate reserves have been provided by Lessee and
non-payment of which does not give rise to any material likelihood of
the Aircraft or any interest therein being sold, forfeited or
otherwise lost or of criminal liability on the part of Owner, Lessor,
Sub Lessor or any Bank.
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8.5 SUB-LEASING: LESSEE WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR, SUB-LEASE OR OTHERWISE PART WITH POSSESSION OF THE AIRCRAFT,
THE ENGINES OR ANY PART EXCEPT THAT LESSEE MAY PART WITH POSSESSION
(A) WITH RESPECT TO THE AIRCRAFT, THE ENGINES OR ANY PART TO THE
RELEVANT MANUFACTURERS FOR TESTING OR SIMILAR PURPOSES OR TO THE
AGREED MAINTENANCE PERFORMER FOR SERVICE, REPAIR, MAINTENANCE OR
OVERHAUL WORK, OR ALTERATIONS, MODIFICATIONS OR ADDITIONS TO THE
EXTENT REQUIRED OR PERMITTED BY THIS AGREEMENT, AND (B) WITH RESPECT
TO AN ENGINE OR PART, AS EXPRESSLY PERMITTED BY THIS AGREEMENT.
8.6 INSPECTION:
(a) Lessor and any person designated by Lessor may at any time visit,
inspect and survey the Aircraft, any Engine or any Part and for such
purpose may, subject to any applicable Air Authority regulation,
travel on the flight deck as observer;
(b) Lessee will pay to Lessor on demand all reasonable out-of-pocket
expenses incurred by Lessor in connection with any such visit,
inspection or survey; and
(c) Lessor will:
(i) have no duty or liability to make, or arising out of any such
visit, inspection or survey; and
(ii) so long as no Default has occurred and is continuing, not
exercise such right other than on reasonable notice and so as
not to disrupt unreasonably the commercial operations of
Lessee.
8.7 OWNERSHIP; PROPERTY INTERESTS; RELATED MATTERS: Lessee will:-
(a) not do or knowingly permit to be done or omit or knowingly permit the
omission of any act or thing which might reasonably be expected to
jeopardise the rights of Owner as owner of the Aircraft, the rights of
Sub Lessor as sub lessor of the Aircraft and the rights of Lessor as
lessor of the Aircraft;
(b) on all occasions when the ownership of the Aircraft, any Engine or any
Part is relevant, make clear to third parties that title is held by
Owner;
(c) not at any time (i) represent or hold out Owner, Sub Lessor, Lessor or
the Banks as carrying goods or passengers on the Aircraft or as being
in any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which may be undertaken
by Lessee or (ii) pledge the credit of Owner, Sub Lessor, Lessor or
the Banks;
(d) ensure that there is always affixed, and not removed or in any way
obscured, a fireproof plate (having dimensions of not less than 10 cm.
x 7 cm.) in a reasonably prominent position in the cockpit of the
Aircraft adjacent to the certificate of airworthiness and on each
Engine stating:-
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"This Aircraft/ Engine is owned by Polaris Aircraft Leasing K.B. and
is leased to Air South Airlines, Inc. and may not be operated by any
other person without the prior written consent of Polaris Aircraft
Leasing K.B.";
(e) not create or permit to exist any Security Interest upon the Aircraft,
any Engine or any Part;
(f) not do or permit to be done anything which may reasonably be expected
to expose the Aircraft, any Engine or any Part to penalty, forfeiture,
impounding, detention, appropriation, damage or destruction and
without prejudice to the foregoing, if any such penalty, forfeiture,
impounding, detention or appropriation, damage or destruction occurs,
give Lessor notice and use best endeavours to procure the immediate
release of the Aircraft, any Engine or the Part, as the case may be;
(g) not abandon the Aircraft, the Engine or any Part;
(h) pay and discharge or cause to be paid and discharged when due and
payable or make adequate provision by way of security or otherwise for
all debts, damages, claims and liabilities which have given or might
give rise to a Security Interest over or affecting the Aircraft, any
Engine or any Part; and
(i) not attempt, or hold itself out as having any power, to sell, lease or
otherwise dispose of the Aircraft, any Engine or any Part.
8.8 GENERAL: Lessee will:-
(a) not liquidate or dissolve (except in connection with a transaction
otherwise permitted by this Clause 8.8 (a)), and Lessee shall not
consolidate with or merge into, any other corporation, and Lessee
shall not convey, transfer, lease or otherwise dispose of all or
substantially all of its property and other assets, whether in one or
a series of related transactions unless in the case of any such
consolidation, merger, conveyance, transfer, lease or other
disposition:-
(i) the corporation formed by or surviving such consolidation or
merger or the corporation which acquires by conveyance,
transfer, lease or other disposition all or a material portion
of such property and other assets or stock (the "Successor
Entity")--
(A) shall be a corporation organised and existing under
the laws of the United States or any state thereof;
(B) immediately after giving effect to such transaction,
shall be Lessee or shall have acquired or succeeded
to all or substantially all of the property and other
assets (including, without limitation, all or
substantially all of Lessee's property and other
assets) as an entirety; and .
(C) shall execute and deliver to Lessor an agreement, in
form and substance reasonably satisfactory to Lessor,
which is a legal, valid, binding and enforceable
assumption by such Successor Entity of the due and
punctual performance and observance of each covenant
and condition of this Agreement and agreement to be
bound thereby, and
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shall execute, deliver and/or file such recordations
and filings with any Government Entity and such other
documents as Lessor shall reasonably deem to be
necessary or advisable (including, without
limitation, to preserve and protect the interests of
Lessor) to evidence, or in connection with, such
consolidation, merger, sale, lease, transfer or other
disposition or acquisition and an officer's
certificate from a responsible officer of the
Successor Entity confirming the legal, valid, binding
and enforceable nature of such assumption, and to the
effect that the other requirements of this paragraph
have been satisfied, and a legal opinion from counsel
confirming the legal, valid, binding and enforceable
nature of such assumption and otherwise in such form
and substance reasonably satisfactory to Lessor; and
(ii) prior to and immediately after giving effect to such
transaction, no Default or Event of Default shall have
occurred and be continuing.
No such permitted disposition to a Successor Entity shall relieve or
release Lessee of or from any obligations hereunder which arose or
existed prior to such disposition. Promptly following the closing of
such disposition, Lessee shall provide Lessor with a certificate
signed by Lessee's chief financial officer to the effect that such
disposition will not have a material adverse effect on Lessee's
ability to perform its obligations under this Agreement;
(b) ensure that no change will occur in the Habitual Base of the Aircraft
without the prior written consent of Lessor. Lessor agrees that it
shall not withhold its consent to a change in the Habitual Base to
another state of the United States if Lessee shall have provided
Lessor with an opinion of counsel practising in the state of the
United States proposed by Lessee to be the Habitual Base in form and
in substance reasonably satisfactory to Lessor to the effect that the
rights and interests of Lessor are duly protected;
(c) not, without giving Lessor 30 days prior written notice (in accordance
with this Agreement), change its chief executive office (as such term
is defined in Article 9 of the Uniform Commercial Code as in effect in
the State of South Carolina) from ▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
(d) remain a Certificated Air Carrier and maintain, without limitation,
its status so as to fall within the purview of Section 1110 of Title
11 of the United States Code or any analogous Statute; and
(e) remain a "citizen of the United States" as defined in Section 101(16)
of the Federal Aviation Act.
8.9 RECORDS: Lessee will:-
(a) cause accurate, complete and current records of all flights made by,
and all maintenance carried out on, the Aircraft (including in
relation to each Engine and Part subsequently installed, before the
installation) to be kept; keep the records in such manner as the Air
Authority may from time to time require, and ensure that they comply
with the recommendations of any manufacturers of the Aircraft, any
Engine or any Part. All records must be maintained in English. The
records will form part of the Aircraft Documents; and
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(b) procure access to a revision service in respect of, and will maintain
with appropriate revisions in English, all Aircraft Documents,
records, logs, and other materials required by applicable laws and
best practice of major international air transport operators in
respect of the Aircraft.
8.10 PROTECTION: Lessee will:-
(a) maintain the registration of the Aircraft with the Air Authority in
the name of Lessor and, to the extent permitted under the laws of the
State of Registration, reflecting the respective interests of Owner
and Sub Lessor and not do or suffer to be done anything which might
adversely affect that registration; and
(b) do all acts and things (including, without limitation, making any
filing or registration with the Air Authority or any other Government
Entity) and execute and deliver, notarise, file, register and record
all documents (including, without limitation, any amendment of this
Agreement) as may be required by Lessor:-
(i) following any change or proposed change in the ownership or
financing of the Aircraft or in the manner of securing Owner's
and/or Sub Lessor's and/or Lessor's obligations to the Banks;
or
(ii) following any modification of the Aircraft, any Engine or any
Part or the permanent replacement of any Engine or Part in
accordance with this Agreement, so as to ensure that the
rights of Owner as owner of the Aircraft, the rights of Sub
Lessor as sub lessor of the Aircraft and the rights of Lessor
as lessor of the Aircraft and under this Agreement apply with
the same effect as before; or
(iii) to establish, maintain, preserve, perfect and protect the
rights of Lessor under this Agreement or the interest of Sub
Lessor as sub lessor of the Aircraft and the interest of Owner
as owner of the Aircraft.
8.11 MAINTENANCE AND REPAIR: Lessee will:-
(a) keep the Aircraft airworthy in all respects and in good repair and
condition;
(b) not materially change the Agreed Maintenance Programme or the schedule
of the Agreed Maintenance Programme without the written consent of
Lessor;
(c) maintain the Aircraft in accordance with the Agreed Maintenance
Programme through the Agreed Maintenance Performer and perform (at the
respective intervals provided in the Agreed Maintenance Programme) all
Major Checks;
(d) maintain the Aircraft in accordance with FAA Federal Air Regulations
Part 121 and any other rules and regulations of the FAA as may be
applicable to passenger category aircraft and in at least the same
manner and with at least the same care, including, without limitation,
maintenance scheduling, modification status and technical condition,
as is the case with respect to similar aircraft owned or otherwise
operated by Lessee and as if Lessee were to retain the Aircraft in its
fleet and continue to operate the Aircraft after the Expiry Date and
including, without limitation, all maintenance to the Airframe, any
Engine or any Part required to maintain all warranties, performance
guarantees or service life policies in full force and effect;
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(e) comply with all mandatory inspection and modification requirements and
airworthiness directives applicable to the Aircraft, any Engine or
Part issued during the Term having a compliance date during the Term
or within 180 days after the Expiry Date (except as provided in
paragraph (f) of Section 1 of Schedule 3) and which are required by the
Air Authority, and/or the FAA and/or the laws of the state of
manufacture of the Aircraft, any Engine or Part and/or recommended by
any manufacturer of the Aircraft, any Engine or Part (each of the
foregoing being hereinafter referred to as a "Relevant AD").
The cost of compliance with any single Relevant AD shall be allocated
among Lessor and Lessee as follows:-
(i) Lessee shall be responsible for the first $100,000 of such
cost;
(ii) Lessor and Lessee shall share, on an equal basis, the portion
of such cost (if any) which exceeds $100,000 up to and
including $200,000; and
(iii) Lessor shall be wholly responsible for the portion of such
cost (if any) which exceeds $200,000 (subject always to the
provisions of the following paragraph).
Notwithstanding the foregoing, in the event that the total cost of any
single Relevant AD (such total cost to be mutually agreed, in good
faith, between Lessor and Lessee) exceeds $200,000 (the "Threshold
Amount"), Lessor may elect not to make its contribution to the cost of
compliance with such Relevant AD as described in (iii) above. If
Lessor shall so elect, Lessee shall be entitled, by giving prior
written notice to Lessor, to terminate this Agreement and redeliver
the Aircraft to Lessor in accordance with Clause 12 and Schedule 3
(except for compliance with the Relevant AD which gave rise to such
termination) on the earlier of (x) the date which is 30 days after the
date of such notice from Lessee to Lessor; or (y) the date on which
the Aircraft is required to be removed from service by reason of
non-compliance with the applicable Relevant AD. Such notice shall
specify the proposed redelivery date of the Aircraft by Lessee and,
upon the receipt of such notice by Lessor, the then current definition
of Expiry Date shall be deemed to have been amended accordingly. Upon
any termination of this Agreement pursuant to this Clause 8.11 (e),
neither party shall be under any further obligation to the other
hereunder except for (x) accrued obligations of Lessee hereunder; and
(y) obligations hereunder which are expressed to continue
notwithstanding the expiration of the Term and provided further that
Lessor shall, if applicable having regard to the provisions of Clause
7.3, make the rebate described in Clause 7.3 (i) and the adjustment
payments described in Schedule 3 shall be payable by Lessee;
(f) comply with all applicable laws and the regulations of the Air
Authority and other aviation authorities with jurisdiction over Lessee
or the Aircraft, any Engine or Part regardless of upon whom such
requirements are imposed and which relate to the maintenance,
condition, use or operation of the Aircraft or require any
modification or alteration to the Aircraft, any Engine or Part;
(g) maintain in good standing a current certificate of airworthiness (in
the appropriate category for the nature of the operations of the
Aircraft) for the Aircraft issued by the Air Authority except where
the Aircraft is undergoing maintenance, modification or repair
required or permitted by this Agreement and will from time to time
provide to Lessor a copy on request;
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(h) if required by the Air Authority, maintain a current certification as
to maintenance issued by or on behalf of the Air Authority in respect
of the Aircraft and will from time to time provide to Lessor a copy on
request; and
(i) procure promptly the replacement of any Engine or Part which has
become time, cycle or calendar expired, lost, stolen, seized,
confiscated, destroyed, damaged beyond repair, unserviceable or
permanently rendered unfit for use, with an engine or part complying
with the conditions set out in Clause 8.13(a).
8.12 REMOVAL OF ENGINES AND PARTS: Lessee will ensure that no Engine or
Part installed on the Aircraft is at any time removed from the
Aircraft other than:-
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance with the
Agreed Maintenance Programme; or
(c) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or the Aircraft, as the
case may be; or
(ii) as part of a normal engine or part rotation programme; or
(iii) for the purpose of making such modifications to the Engine or
the Aircraft, as the case may be, as are permitted under this
Agreement;
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Clause 8.13(a) as soon as practicable
and in any event no later than the Expiry Date.
8.13 INSTALLATION OF ENGINES AND PARTS: Lessee will:-
(a) ensure that, except as permitted by this Agreement, no engine or part
is installed on the Aircraft unless:-
(i) in the case of an engine, it is an engine of the same model
as, or an improved or advanced version of the Engine it
replaces, which is in the same or better operating condition
and has the same or greater value and utility as the replaced
Engine;
(ii) in the case of a part, it is in as good operating condition,
has substantially similar hours available until the next
scheduled checks, inspections, overhauls and shop visits,
is of the same or a more advanced make and model and
is of the same interchangeable modification status as the
replaced Part;
(iii) in each case, it has become and remains the property of Owner
free from Security Interests and on installation on the
Aircraft will without further act be subject to the Head
Lease, the Sub Lease and this Agreement; and
(iv) in each case, Lessee has full details as to its source and
maintenance records;
(b) if no Default has occurred which is continuing, be entitled to install
any engine or part on the Aircraft by way of replacement
notwithstanding Clause 8.13(a) if:-
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(i) there is not available to Lessee at the time and in the place
that such engine or part is required to be installed on the
Aircraft, a replacement engine or part, as the case may be,
complying with the requirements of Clause 8.13(a);
(ii) it would result in an unreasonable disruption of the operation
of the Aircraft and/or the business of Lessee to ground the
Aircraft until an engine or part, as the case may be,
complying with Clause 8.13(a) becomes available for
installation on the Aircraft; and
(iii) as soon as practicable after installation of the same on the
Aircraft but, in any event, no later than the Expiry Date,
Lessee removes any such engine or part and replaces it with
the Engine or Part replaced by it or by an engine or part, as
the case may be, complying with Clause 8.13(a).
8.14 NON-INSTALLED ENGINES AND PARTS: Lessee will:-
(a) ensure that any Engine or Part which is not installed on the Aircraft
(or any other aircraft as permitted by this Agreement) is, except as
expressly permitted by this Agreement, properly and safely stored, and
kept free from Security Interests;
(b) notify Lessor whenever any Engine is removed from the Aircraft and,
from time to time, on request procure that any person to whom
possession of an Engine is given acknowledges in writing to Lessor, in
form and substance satisfactory to Lessor, that it will respect the
interests of Owner as owner, Sub Lessor as sub lessor and Lessor as
lessor of the Engine and will not seek to exercise any rights
whatsoever in relation to it;
(c) (notwithstanding the foregoing provisions of this sub-clause), be
permitted, if no Default has occurred and is continuing, to install
any Engine or Part on an aircraft, or in the case of a Part, an
engine:-
(i) owned and operated by Lessee free from Security Interests; or
(ii) leased or hired to Lessee pursuant to a lease or conditional
sale agreement on a long-term basis and on terms whereby
Lessee has full operational control of that aircraft or
engine; or
(iii) acquired by Lessee and/or financed or refinanced, and operated
by Lessee, on terms that ownership of that aircraft or engine,
as the case may be, pursuant to a lease or conditional sale
agreement, or a Security Interest therein, is vested in or
held by any other person;
provided that in the case of (ii) and (iii):-
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
interests of Owner as owner, Sub Lessor as sub lessor and
Lessor as lessor of that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the holder of such Security Interest, as the
case may be, has confirmed and acknowledged in writing to
Lessor, in form and substance satisfactory to Lessor, that it
will respect the interest of Owner as owner, Sub Lessor as sub
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lessor and Lessor as lessor of that Engine or Part and that it
will not seek to exercise any rights whatsoever in relation
thereto.
8.15 POOLING OF ENGINES AND PARTS: So long as no Default has occurred and is
continuing Lessee may lease, let or hire or charter or otherwise part
with possession of an Engine or Part (on terms conferring no more than
a contractual right against Lessee but not rights against the Engine or
Part) pursuant to pooling arrangements to which Lessee is a party and a
copy of which agreement has been provided to Lessor and which:-
(a) are arrangements involving responsible, solvent scheduled
commercial air carriers or aircraft operators or the
manufacturers or suppliers of the Engine or Part previously
approved in writing by Lessor;
(b) are arrangements which involve engines and parts with
traceability consistent with the Engine or Part;
(c) do not contemplate transfer of title to the pooled Engine or
Part; and
(d) either provide that Lessor will be sole loss payee in respect
of any loss or damage to the Engine or Part or provide for
Lessor to acquire title to a substitute engine satisfying the
conditions set out in Clause 8.13(a) if the Engine or Part is
destroyed;
or are otherwise acceptable to Lessor in its sole discretion.
8.16 EQUIPMENT CHANGES:
(a) Lessee will not make any modification or addition to the Aircraft
(each an "Equipment Change"), except for an Equipment Change which:-
(i) is expressly permitted by this Agreement, or
(ii) has the prior written approval of Lessor and which does not
diminish the value, utility, condition, or airworthiness of
the Aircraft; and
(b) So long as a Default has not occurred and is continuing, Lessee may
remove any Equipment Change if it can be removed from the Aircraft
without diminishing or impairing the value, utility, condition or
airworthiness of the Aircraft.
8.17 TITLE ON AN EQUIPMENT CHANGE:
(a) Title to all Engines and Parts installed on the Aircraft whether by
way of replacement, as the result of an Equipment Change or otherwise
(except those installed pursuant to Clause 8.13(b)) will on
installation, without further act, vest in Owner subject to this
Agreement, the Head Lease and the Sub Lease free and clear of all
Security Interests. Lessee will at its own expense take all such
steps and execute, and procure the execution of, all such instruments
as Lessor may require and which are necessary to ensure that title so
passes to Owner according to all applicable laws. At any time when
requested by Lessor, Lessee will provide evidence to Lessor's and
Owner's satisfaction (including the provision, if required, to Lessor
and Owner of one or more legal opinions) that title has so passed to
Owner;
(b) Lessor may require Lessee to remove any Equipment Change and to
restore the Aircraft to its condition prior to that Equipment Change;
and
(c) Except as referred to in Clause 8.17(b) any Engine or Part at any time
removed from the Aircraft will remain the property of Owner until a
replacement has been made in accordance with this Agreement and until
title in that replacement has passed, according to applicable laws, to
Owner subject to this Agreement, the Head Lease and the Sub Lease free
of all Security Interests whereupon title to the replaced Engine or
Part will pass to Lessee.
8.18 THIRD PARTY: Lessee will procure that no person (other than Owner, Sub
Lessor, Lessor or any Bank) will act in any manner inconsistent with
its obligations under this Agreement and that all persons will comply
with those obligations as if references to "Lessee" included a
separate reference to those persons.
9. INSURANCE
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9.1 INSURANCES: Lessee will maintain in full force during the Term
insurances in respect of the Aircraft in form and substance
satisfactory to Lessor (the "Insurances" which expression includes,
where the context so admits, any relevant re-insurance(s)) through
such brokers and with such insurers and having such deductibles and
being subject to such exclusions as may be approved by Lessor. The
Insurances will be effected either:-
(a) on a direct basis with insurers of recognised standing who normally
participate in aviation insurances in the leading international
insurance markets and led by reputable underwriter(s) approved by
Lessor; or
(b) with a single insurer or group of insurers approved by Lessor who
does not retain the risk but effects substantial reinsurance with
reinsurers in the leading international insurance markets and through
brokers each of recognised standing and acceptable to Lessor for a
percentage acceptable to Lessor of all risks insured (the
"Reinsurances").
9.2 REQUIREMENTS: Lessor's current requirements as to required Insurances
are as specified in this Clause and in Schedule 4. Lessor may from
time to time stipulate other requirements for the Insurances so that
the scope and level of cover is maintained in line with best industry
practice and the interests of Lessor, Sub Lessor and Owner protected.
9.3 CHANGE: If at any time Lessor wishes to revoke its approval of any
insurer, reinsurer, insurance or reinsurance, Lessor and/or its
brokers will consult with Lessee and Lessee's brokers (as for the
time being approved by Lessor) regarding whether that approval should
be revoked to protect the interests of the parties insured. If,
following the consultation, Lessor considers that any change should
be made, Lessee will then arrange or procure the arrangement of
alternative cover satisfactory to Lessor.
9.4 INSURANCE COVENANTS: Lessee will:-
(a) ensure that all legal requirements as to insurance of the Aircraft,
any Engine or any Part which may from time to time be imposed by the
laws of the State of Registration or any state to, from or over which
the Aircraft may be flown, in so far as they affect or concern the
operation of the Aircraft, are complied with and in particular those
requirements compliance with which is necessary to ensure that (i)
the Aircraft is not in danger of detention or forfeiture, (ii) the
Insurances remain valid and in full force and effect, and (iii) the
interests of the Indemnitees in the Insurances and the Aircraft or
any Part are not thereby prejudiced;
(b) not use, cause or permit the Aircraft, any Engine or any Part to be
used for any purpose or in any manner not covered by the Insurances
or outside any geographical limit imposed by the Insurances;
(c) comply with the terms and conditions of each policy of the Insurances
and not do, consent or agree to any act or omission which:-
(i) invalidates or may invalidate the Insurances; or
(ii) renders or may render void or voidable the whole or any part
of any of the Insurances; or
(iii) brings any particular liability within the scope of an
exclusion or exception to the Insurances;
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(d) not take out without the prior written approval of Lessor any
insurance or reinsurance in respect of the Aircraft other than those
required under this Agreement unless relating solely to hull total
loss, business interruption, profit commission and deductible risk;
(e) commence renewal procedures at least 30 days prior to expiry of any
of the Insurances and provide to Lessor:-
(i) if requested by Lessor, a written status report of renewal
negotiation 14 days prior to each expiry date;
(ii) telexed confirmation of completion of renewal prior to each
expiry date;
(iii) certificates of insurance (and where appropriate certificates
of reinsurance), and broker's (and any reinsurance brokers')
letter of undertaking in a form acceptable to Lessor in
English, detailing the coverage and confirming the insurers'
(and any reinsurers') agreement to the specified insurance
requirements of this Agreement within 7 days after each
renewal date;
(f) on request, provide to Lessor copies of documents evidencing the
Insurances;
(g) on request, provide to Lessor evidence that the Insurance premiums
have been paid;
(h) not make any modification or alteration to the Insurances material
and adverse to the interests of any of the Indemnitees;
(i) be responsible for any deductible under the Insurances; and
(j) provide any other insurance and reinsurance related information, or
assistance, in respect of the Insurances as Lessor may reasonably
require.
9.5 FAILURE TO INSURE: If Lessee fails to maintain the Insurances in
compliance with this Agreement, each of the Indemnitees will be
entitled but not bound, (without prejudice to any other rights of
Lessor under this Agreement):-
(a) to pay the premiums due or to effect and maintain insurances
satisfactory to it or otherwise remedy Lessee's failure in such
manner (including, without limitation to effect and maintain an
"owner's interest" policy) as it considers appropriate. Any sums so
expended by it will become immediately due and payable by Lessee to
Lessor together with interest thereon at the rate specified in Clause
5.11, from the date of expenditure by it up to the date of
reimbursement by Lessee; and
(b) at any time while such failure is continuing to require the Aircraft
to remain at any airport or to proceed to and remain at any airport
designated by it until the failure is remedied to its satisfaction.
9.6 CONTINUING INDEMNITY: Lessor may require Lessee to effect and to
maintain insurance after the Expiry Date with respect to its
liability under the indemnities in Clause 10 for such period as
Lessor may reasonably require (but in any event not more than 3
years) which provides for each Indemnitee to be named as additional
insured. Lessee's obligation in this Clause shall not be affected by
Lessee ceasing to be lessee of the Aircraft and/or any of the
Indemnitees ceasing to have any interest in respect of the Aircraft.
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9.7 APPLICATION OF INSURANCE PROCEEDS:
As between Lessor and Lessee:-
(a) all insurance payments received as the result of an Event of Loss
occurring during the Term will be paid to Lessor and Lessor will pay
the balance of those amounts to Lessee after deduction of all amounts
which may be or become payable by Lessee to Lessor under this
Agreement (including under Clause 11.1(b));
(b) all insurance proceeds of any property, damage or loss to the
Aircraft, any Engine or any Part occurring during the Term not
constituting an Event of Loss and in excess of the Damage Notification
Threshold will be paid to Lessor and applied in payment (or to
reimburse Lessee) for repairs or replacement property within 10 days
of Lessor being satisfied that the repairs or replacement have been
effected in accordance with this Agreement. Insurance proceeds in
amounts below the Damage Notification Threshold may be paid by the
insurer directly to Lessee. Any balance remaining may be retained by
Lessor;
(c) all insurance proceeds in respect of third party liability will,
except to the extent paid by the insurers to the relevant third
party, be paid to Lessor to be paid directly in satisfaction of the
relevant liability or to Lessee in reimbursement of any payment so
made;
(d) notwithstanding Clauses 9.7(a), (b) or (c), if at the time of the
payment of any such insurance proceeds a Default has occurred and is
continuing, all such proceeds will be paid to or retained by Lessor
to be applied toward payment of any amounts which may be or become
payable by Lessee in such order as Lessor sees fit or as Lessor may
elect.
10. INDEMNITY
10.1 GENERAL: Lessee agrees to assume liability for, defend, indemnify and
hold harmless the Indemnitees on an after tax basis from and against
any and all claims, proceedings, losses, liabilities, damages
(whether direct, indirect, special, incidental or consequential)
suits, judgments, costs, expenses (including, without limitation,
legal fees and expenses), penalties (whether civil or criminal) or
fines (each a "Claim") (regardless of when the same is made or
incurred, whether during or after the Term (but not before)):-
(a) which may at any time be suffered or incurred directly or
indirectly as a result of or in any manner connected with the
possession, delivery, performance, management, ownership,
registration, control, maintenance, condition, service,
repair, overhaul, leasing, use, operation or return of the
Aircraft, any Engine or Part (either in the air or on the
ground) whether or not the Claim may be attributable to any
defect in the Aircraft, any Engine or any Part or to its
design, testing or use or otherwise, and regardless of when
the same arises or whether it arises out of or is attributable
to any act or omission, negligent or otherwise, of any
Indemnitee;
(b) which arise out of any act or omission which invalidates or
which renders voidable any of the Insurances;
(c) which may at any time be suffered or incurred as a consequence
of any design, article or material in the Aircraft, any Engine
or any Part or its operation or use constituting an
infringement of patent, copyright, trademark, design or other
proprietary right or a breach of any obligation of
confidentiality owed to any person;
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(d) which results from Lessee's breach of any of its
representations or warranties or any other Event of Default
under this Agreement.
but excluding any Claim in relation to a particular Indemnitee to the
extent that such Claim is covered pursuant to another indemnity
provision of this Agreement or to the extent it arises solely as a
result of the willful misconduct of such Indemnitee or Lessor as a
result of Lessor Taxes or a Lessor Lien.
10.2 DURATION: The indemnities contained in this Agreement will continue
in full force after the Expiry Date.
11. EVENTS OF LOSS
11.1 If an Event of Loss occurs after delivery of the Aircraft to Lessee,
Lessee will pay the Agreed Value to Lessor on or prior to the earlier
of (i) 5 Business Days after the Event of Loss and (ii) the date of
receipt of insurance proceeds in respect of that Event of Loss.
Subject to the rights of any insurers and reinsurers or other third
party, upon irrevocable payment in full to Lessor of that amount and
all other amounts which may be or become payable to Lessor under this
Agreement, Lessor will without recourse or warranty (except as to
Lessor's Liens) and without further act, be deemed to have
transferred to Lessee all of Lessor's rights to any Engines and Parts
not installed when the Event of Loss occurred, all on an as-is
where-is basis, and will at Lessee's expense, execute and deliver
such bills of sale and other documents and instruments as Lessee may
reasonably request to evidence (on the public record or otherwise)
the transfer and the vesting of Lessor's rights in such Engines and
Parts in Lessee, free and clear of all rights of Lessor and Lessor
Liens.
11.2 REQUISITION: During any requisition for use or hire of the Aircraft,
any Engine or Part which does not constitute an Event of Loss:-
(a) the Rent and other charges payable under this Agreement will not be
suspended or abated either in whole or in part, and Lessee will not
be released from any of its other obligations under the Agreement
(other than operational obligations with which Lessee is unable to
comply solely by virtue of the requisition);
(b) so long as no Default has occurred and is continuing, Lessee will be
entitled to any hire paid by the requisitioning authority in respect
of the Term. Lessee will, as soon as practicable after the end of
any such requisition, cause the Aircraft to be put into the condition
required by this Agreement. Lessor will be entitled to all
compensation payable by the requisitioning authority in respect of
any change in the structure, state or condition of the Aircraft
arising during the period of requisition, and Lessor will apply such
compensation in reimbursing Lessee for the cost of complying with its
obligations under this Agreement in respect of any such change, but
so that, if any Default has occurred and is continuing, Lessor may
apply the compensation or hire in or towards settlement of any
amounts owing by Lessee under this Agreement.
12. RETURN OF AIRCRAFT
12.1 RETURN: On the Expiry Date or termination of the leasing of the
Aircraft under this Agreement Lessee will unless an Event of Loss has
occurred, at its expense, redeliver the Aircraft and Aircraft
Documents to Lessor at the Redelivery Location or such other airport
as is mutually acceptable to the parties hereto, in a condition
complying with Schedule 3, free and clear of all Security Interests
and Permitted Liens (other than Lessor
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Liens) and in a condition qualifying for immediate certification of
airworthiness by the FAA or as otherwise agreed by Lessor and Lessee,
and thereupon cause the Aircraft to be deregistered by the Air
Authority.
12.2 FINAL INSPECTION: Immediately prior to redelivery of the Aircraft,
Lessee will make the Aircraft available to Lessor for inspection
("Final Inspection") in order to verify that the condition of the
Aircraft complies with this Agreement. The Final Inspection will be
long enough to permit Lessor to:-
(a) inspect the Aircraft Documents;
(b) inspect the Aircraft and uninstalled Parts and Lessor shall
use reasonable efforts to carry out the Final Inspection at the time
the Aircraft undergoes the final C Check;
(c) inspect the Engines, including without limitation (i) at Lessor's
expense, a borescope inspection of (A) the low pressure and high
pressure compressors and (B) turbine area and (C) combustion section
and (ii) at Lessee's expense engine condition runs as installed on
the Airframe; and
(d) observe a 2 hour demonstration flight (with Lessor's representatives
as on-board observers).
12.3 NON-COMPLIANCE: To the extent that, at the time of Final Inspection,
the condition of the Aircraft does not comply with this Agreement,
Lessee will at Lessor's option:-
(a) immediately rectify the non-compliance and to the extent the
non-compliance extends beyond the Expiry Date, the Term will be
automatically extended and this Agreement will remain in force until
the non-compliance has been rectified; or
(b) redeliver the Aircraft to Lessor and indemnify Lessor, and provide to
Lessor's satisfaction cash as security for that indemnity, against the
cost of putting the Aircraft into the condition required by this
Agreement.
12.4 REDELIVERY: Upon redelivery Lessee will provide to Lessor all
documents necessary to export the Aircraft from the Habitual Base
(including, without limitation, a valid and subsisting export licence
for the Aircraft) and required in relation to the deregistration of
the Aircraft with the Air Authority.
12.5 ACKNOWLEDGEMENT: Provided Lessee has complied with its obligations
under this Agreement, following redelivery of the Aircraft by Lessee
to Lessor at the Redelivery Location, Lessor will deliver to Lessee an
acknowledgement confirming that Lessee has redelivered the Aircraft to
Lessor in accordance with this Agreement.
12.6 MAINTENANCE PROGRAMME:
(a) Prior to the Expiry Date and upon Lessor's request, Lessee will
provide Lessor or its agent reasonable access to the Agreed
Maintenance Programme and the Aircraft Documents in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet;
(b) Lessee will, if requested by Lessor to do so, upon return of the
Aircraft deliver to Lessor a certified true current and complete copy
of the Agreed Maintenance Programme together with a letter authorising
Lessor to use such copy for "bridging" purposes for the next lessee of
the Aircraft. Lessor acknowledges that the Agreed Maintenance
Programme is proprietary and agrees that it will not disclose the
contents of the Agreed Maintenance Programme to any person or entity
except to the extent necessary to monitor Lessee's compliance with this
Agreement and/or to bridge the maintenance programme for the Aircraft
from the Agreed Maintenance Programme to another programme after the
Expiry Date.
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12.7 FUEL: Upon redelivery of the Aircraft to Lessor, an adjustment will be
made in respect of fuel on board on the Previous Delivery Date and the
Expiry Date at the price then prevailing at the Redelivery Location.
12.8 AIRCRAFT STORAGE: During the period of 90 days after the Expiry Date,
Lessor shall have the right to require Lessee to maintain, store and
insure the Aircraft at a location having a facility capable of
performing required maintenance of the Aircraft (to be nominated by
Lessor). Any maintenance, storage or insurance cost actually incurred
in connection with the foregoing and which is in excess of the costs
payable by Lessee in meeting its obligations under this Agreement,
shall be payable by Lessor at Lessee's direct cost without "▇▇▇▇-up".
Prior to the Expiry Date, Lessor shall advise Lessee as to whether
Lessor requires Lessee to provide the services contemplated by this
Clause 12.8.
13. DEFAULT
13.1 EVENTS: Each of the following events or conditions will constitute an
Event of Default and a repudiation of this Agreement by Lessee
(whether any such event or condition is voluntary or involuntary or
occurs by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any Government Entity):-
(a) NON-PAYMENT: Lessee fails to make any payment of Rent under this
Agreement on the due date and such failure continues for 3 Business
Days; or
(b) INSURANCE: Lessee fails to comply with any provision of Clause 9 or
any insurance required to be maintained under this Agreement is
canceled or terminated or notice of cancellation is given in respect
of any such insurance; or
(c) BREACH: Lessee fails to comply with any other provision of this
Agreement and, if such failure is in the reasonable opinion of Lessor
capable of remedy, the failure continues for 10 Business Days after
notice from Lessor to Lessee; or
(d) REPRESENTATION: any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Agreement or in any
document or certificate or statement is or proves to have been
incorrect in any material respect when made or deemed to be repeated;
or
(e) CROSS DEFAULT:
(i) any Financial Indebtedness of Lessee or any of its
Subsidiaries is not paid when due; or
(ii) any such Financial Indebtedness becomes due or capable of
being declared due prior to the date when it would otherwise
have become due; or
(iii) the security for any such Financial Indebtedness becomes
enforceable; or
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(iv) any event of default or termination event, howsoever
described, occurs under any Other Agreement or under any
lease, hire purchase, conditional sale or credit sale
agreement of Lessee or any of its Subsidiaries; or
(f) APPROVALS: any consent, authorisation, licence, certificate or
approval of or registration with or declaration to any Government
Entity in connection with this Agreement (including, without
limitation):-
(i) required by Lessee to authorise, or in connection with, the
execution, delivery, validity, enforceability or admissibility
in evidence of this Agreement or the performance by Lessee of
its obligations under this Agreement; or
(ii) the registration of the Aircraft (to the extent that the same is
within the control of Lessee); or
(iii) any airline licence or air transport licence including, without
limitation, authority to operate the Aircraft under Part 121 of
the Federal Aviation Regulations and a Certificate of
Convenience and Necessity issued under Section 401 of the
Federal Aviation Act;
is modified in a manner unacceptable to Lessor or is withheld, or is
revoked, suspended, canceled, withdrawn, terminated or not renewed, or
otherwise ceases to be in full force; or
(g) BANKRUPTCY, ETC:
(i) Lessee or any Subsidiary consents to the appointment of a
custodian, receiver, trustee or liquidator of itself or all or
any material part of Lessee's property or Lessee's consolidated
property, or Lessee or any Subsidiary admits in writing its
inability to, or is unable to, or does not, pay its debts
generally as they come due, or makes a general assignment for
the benefit of creditors, or Lessee or any Subsidiary files a
voluntary petition in bankruptcy or a voluntary petition seeking
reorganisation in a proceeding under any bankruptcy or
insolvency laws (as now or hereafter in effect), or an answer
admitting the material allegations of a petition filed against
Lessee or any Subsidiary in any such proceeding, or Lessee or
any Subsidiary by voluntary petition, answer or consent seeks
relief under the provisions of any other bankruptcy, insolvency
or other similar law providing for the reorganisation or
winding-up of corporations, or provides for an agreement,
composition, extension or adjustment with its creditors, or any
corporate action (including, without limitation, any board of
directors or shareholder action) is taken by Lessee or any
Subsidiary in furtherance of any of the foregoing, whether or
not the same is fully effected or accomplished; or
(ii) an order, judgment or decree is entered by any court appointing,
without the consent of Lessee or any Subsidiary, a custodian,
receiver, trustee or liquidator of Lessee or any Subsidiary, or
of all or any material part of Lessee's property or Lessee's
consolidated property is sequestered, and any such order,
judgment or decree of appointment or sequestration remains in
effect, undismissed, unstayed or unvacated for a period of 30
days after the date of entry thereof or at any time an order for
relief is granted; or
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(iii) an involuntary petition against Lessee or any Subsidiary in a
proceeding under the United States Federal Bankruptcy laws or
other insolvency laws (as now or hereafter in effect) is filed
and is not withdrawn or dismissed within 30 days thereafter or
at any time an order for relief is granted in such proceeding,
or if, under the provisions of any law providing for
reorganisation or winding-up of corporations which may apply to
Lessee or any Subsidiary, any court of competent jurisdiction
assumes jurisdiction over, or custody or control of, Lessee or
any Subsidiary or of all or any material part of Lessee's
property, or Lessee's consolidated property and such
jurisdiction, custody or control remains in effect,
unrelinquished, unstayed or unterminated for a period of 30 days
or at any time an order for relief is granted in such
proceeding; or
(h) UNLAWFUL: it becomes unlawful for Lessee to perform any of its
obligations under this Agreement or this Agreement becomes wholly or
partly invalid or unenforceable; or
(i) SUSPENSION OF BUSINESS: Lessee or any of its Subsidiaries suspends or
ceases or threatens to suspend or cease to carry on all or a
substantial part of its business as a Certificated Air Carrier; or
(j) DISPOSAL: Lessee or any of its Subsidiaries disposes, conveys or
transfers or threatens to dispose, convey or transfer of all or a
material part of its assets, liquidates or dissolves or consolidates
or merges with any other Person whether by one or a series of
transactions, related or not, other than for the purpose of a
reorganisation of the terms of which have received the previous
consent in writing of Lessor; or
(k) RIGHTS: the existence, validity, enforceability or priority of the
rights of Owner as owner, the rights of Sub Lessor as sub lessor and
the rights of Lessor as lessor in respect of the Aircraft are
challenged by Lessee or any other person claiming by or through
Lessee; or
(l) CHANGE OF OWNERSHIP: any single person, or group of persons acquire
control of Lessee without the previous consent in writing of Lessor;
or
(m) DELIVERY: Lessee fails to accept delivery of the Aircraft when validly
tendered pursuant to this Agreement by Lessor; or
(n) ADVERSE CHANGE: any event or series of events occurs which, in the
reasonable opinion of Lessor might have a material adverse effect on
the financial condition or operations of Lessee and its Subsidiaries
or on the ability of Lessee to comply with its obligations under this
Agreement.
13.2 RIGHTS: If an Event of Default occurs, Lessor may at its option (and
without prejudice to any of its other rights under this Agreement), at
any time thereafter (without notice to Lessee except as required under
applicable law):-
(a) accept such repudiation and by notice to Lessee and with immediate
effect terminate the letting of the Aircraft (but without prejudice
to the continuing obligations of Lessee under this Agreement),
whereupon all rights of Lessee under this Agreement shall cease;
and/or
(b) proceed by appropriate court action or actions to enforce performance
of this Agreement or to recover damages for the breach of this
Agreement; and/or
(c) either:-
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(i) take possession of the Aircraft, for which purpose Lessor may
enter any premises belonging to or in the occupation of or
under the control of Lessee where the Aircraft may be located,
or cause the Aircraft to be redelivered to Lessor at ▇▇▇▇▇▇▇
International Airport, Co. Clare, Ireland (or such other
location as Lessor may require), and Lessor is hereby
irrevocably by way of security for Lessee's obligations under
this Agreement appointed attorney for Lessee in causing the
redelivery or in directing the pilots of Lessee or other
pilots to fly the Aircraft to that airport and will have all
the powers and authorisations necessary for taking that
action; or
(ii) by serving notice require Lessee to redeliver the Aircraft to
Lessor at ▇▇▇▇▇▇▇ International Airport, Ireland (or such
other location as Lessor may require).
13.3 DEREGISTRATION: If an Event of Default occurs, Lessor may sell or
otherwise deal with the Aircraft free and clear of any leasehold or
other interest of Lessee as if this Agreement had never been made and
Lessee will at the request of Lessor take all steps necessary to
effect (if applicable) deregistration of the Aircraft and its export
from the country where the Aircraft is for the time being situated and
any other steps necessary to enable the Aircraft to be redelivered to
Lessor in accordance with this Agreement; Lessee hereby irrevocably
and by way of security for its obligations under this Agreement
appoints (which appointment is coupled with an interest) Lessor as its
attorney to execute and deliver any documentation and to do any act or
thing required in connection with the foregoing.
13.4 DEFAULT PAYMENTS: If:-
(a) a Default occurs; or
(b) the Aircraft is not delivered on the proposed Delivery Date by
reason of failure of Lessee to satisfy any conditions to that
delivery;
Lessee will indemnify Lessor on its own behalf and on behalf of Owner
and Sub Lessor on demand against any loss (including loss of profit),
damage, expense, cost or liability which Lessor, Sub Lessor or Owner
may sustain or incur directly or indirectly as a result including but
not limited to:-
(a) any loss of profit suffered by Lessor, Sub Lessor or Owner
because of Lessor's or Owner's inability to place the Aircraft
on lease with another lessee on terms as favourable to Lessor
as this Agreement or because whatever use, if any, to which
Lessor, Sub Lessor or Owner is able to put the Aircraft upon
its return to Lessor, or the funds arising upon a sale or
other disposal of the Aircraft, is not as profitable to
Lessor, Sub Lessor or Owner as this Agreement;
(b) any amount of principal, interest, fees or other sums
whatsoever paid or payable on account of funds borrowed in
order to carry any unpaid amount;
(c) any loss, premium, penalty or expense which may be incurred in
repaying funds raised to finance the Aircraft or in unwinding
any swap, forward interest rate agreement or other financial
instrument relating in whole or in part to Lessor's, Sub
Lessor's or Owner's financing of the Aircraft; and
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(d) any loss, cost, expense or liability sustained or incurred by
Lessor owing to Lessee's failure to redeliver the Aircraft on
the date, at the place and in the condition required by this
Agreement.
14. ASSIGNMENT
14.1 LESSEE WILL NOT ASSIGN, TRANSFER (VOLUNTARILY OR INVOLUNTARILY BY
OPERATION OF LAW OR OTHERWISE) OR CREATE OR PERMIT TO EXIST ANY
SECURITY INTEREST OVER, ANY OF ITS RIGHTS UNDER THIS AGREEMENT.
14.2 Owner and/or Lessor may assign or transfer all or any of its rights
under this Agreement and in the Aircraft provided that Lessor will in
the case of an assignment other than by way of security have no
further obligation under this Agreement following the assignment of
all its rights under this Agreement but notwithstanding that
assignment will remain entitled to the benefit of each indemnity and
the liability insurances effected under this Agreement. Lessee will
comply with all reasonable requests of Owner and/or Lessor, their
successors and assigns in respect of any such assignment. Lessor will
promptly notify Lessee of any assignment.
14.3 If Lessor desires to effect any assignment or transfer of its rights
and obligations under this Agreement, Lessee agrees to cooperate and
take all such steps as Lessor may reasonably request to give the
transferee the benefit of this Agreement. Any reasonable expenses
incurred by Lessee directly as a result of any assignment contemplated
by Clause 14.2.
15. ILLEGALITY
If it is or becomes unlawful in any jurisdiction for Lessor to give
effect to any of its obligations as contemplated by this Agreement or
to continue this Agreement Lessor may by notice in writing to Lessee
terminate the leasing of the Aircraft under this Agreement and Lessee
will forthwith redeliver the Aircraft to Lessor in accordance with
Clause 12. Without prejudice to the foregoing Lessor will consult in
good faith with Lessee as to any steps which may be taken to
restructure the transaction to avoid that unlawfulness but will be
under no obligation to take any such steps.
16. MISCELLANEOUS
16.1 WAIVERS, REMEDIES CUMULATIVE: The rights of Lessor under this
Agreement:-
(i) may be exercised as often as necessary;
(ii) are cumulative and not exclusive of its rights under any law;
and
(iii) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right will not
constitute a waiver of that right.
16.2 DELEGATION: Lessor may delegate to any person or persons all or any of
the trusts, powers or discretions vested in it by these presents and
any such delegation may be made upon such terms and conditions and
subject to such regulations (including power to subdelegate) as Lessor
in its absolute discretion thinks fit.
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16.3 CERTIFICATES: Save where expressly provided in this Agreement, any
certificate or determination by Lessor as to any rate of interest or
as to any other amount payable under this Agreement will, in the
absence of manifest error, be conclusive and binding on Lessee.
16.4 APPROPRIATION: If any sum paid or recovered in respect of the
liabilities of Lessee under this Agreement is less than the amount
then due, Lessor may apply that sum to amounts due under this
Agreement in such proportions and order and generally in such manner
as Lessor may determine at its sole discretion.
16.5 CURRENCY INDEMNITY:
(a) If Lessor receives an amount in respect of Lessee's liability under
this Agreement or if such liability is converted into a claim, proof,
judgment or order in a currency other than the currency (the
"contractual currency") in which the amount is expressed to be payable
under this Agreement:-
(i) Lessee will indemnify Lessor as an independent obligation
against any loss arising out of or as a result of such
conversion;
(ii) if the amount received by Lessor, when converted into the
contractual currency (at the market rate at which Lessor is
able on the date of receipt by Lessor (or on the next date
thereafter on which under normal banking practice Lessor is
able to convert the amount received into the contractual
currency) to purchase the contractual currency in London or at
its option New York with that other currency) is less than the
amount owed in the contractual currency, Lessee will,
forthwith on demand, pay to Lessor an amount in the
contractual currency equal to the deficit; and
(iii) Lessee will pay to Lessor on demand any exchange costs and
Taxes payable in connection with the conversion; and
(b) Lessee waives any right it may have in any jurisdiction to pay any
amount under this Agreement in a currency other than that in which it
is expressed to be payable.
16.6 SET-OFF: Lessor may set off any matured obligation owed by Lessee
under this Agreement or the Other Agreements (to the extent
beneficially owned by Lessor) against any obligation (whether or not
matured) owed by Lessor to Lessee, regardless of the place of payment
or currency. If the obligations are in different currencies, Lessor
may convert either obligation at the market rate of exchange available
in London or at its option New York for the purpose of the set-off.
If an obligation is unascertained or unliquidated, Lessor may in good
faith estimate that obligation and set off in respect of the estimate,
subject to the relevant party accounting to the other when the
obligation is ascertained or liquidated. Lessor will not be obliged
to pay any amounts to Lessee under this Agreement so long as any sums
which are then due from Lessee under this Agreement or the Other
Agreements remain unpaid and any such amounts which would otherwise be
due will fall due only if and when Lessee has paid all such sums
except to the extent Lessor otherwise agrees or sets off such amounts
against such payment pursuant to the foregoing.
16.7 SEVERABILITY: If a provision of this Agreement is or becomes illegal,
invalid or unenforceable in any jurisdiction, that will not affect:-
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(a) the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or
(b) the legality, validity or enforceability in any other jurisdiction of
that or any other provision of this Agreement.
16.8 REMEDY: If Lessee fails to comply with any provision of this
Agreement, Lessor may, without being in any way obliged to do so or
responsible for so doing and without prejudice to the ability of
Lessor to treat the non-compliance as a Default or an Event of
Default, effect compliance on behalf of Lessee, whereupon Lessee shall
become liable to pay immediately any sums expended by Lessor together
with all costs and expenses (including legal costs) in connection
therewith.
16.9 EXPENSES: Whether or not the Aircraft is delivered to Lessee pursuant
to this Agreement, Lessee will pay to Lessor on demand:-
(a) all expenses (including legal, professional, and out-of-pocket
expenses) incurred or payable by Lessor in connection with any
amendment to or extension of or other documentation in
connection with, or the granting of any waiver or consent
under this Agreement or, where a Default has occurred, the
monitoring of compliance by Lessee with this Agreement; and
(b) all expenses (including legal, survey and other costs) payable
or incurred by Lessor in contemplation of, or otherwise in
connection with, the enforcement of or preservation of any of
Lessor's or Owner's rights under this Agreement, or in respect
of the repossession of the Aircraft.
All expenses payable pursuant to this Clause 16.9 will be paid in the
currency in which they are incurred by Lessor.
16.10 TIME OF ESSENCE: The time stipulated in this Agreement for all
payments payable by Lessee to Lessor and for the performance of
Lessee's other obligations under this Agreement will be of the essence
of this Agreement.
16.11 NOTICES: All notices under, or in connection with, this Agreement
will, unless otherwise stated, be given in writing by letter, telex,
facsimile or SITA. Any such notice is deemed effectively to be given
as follows:-
(i) if by letter, when delivered;
(ii) if by telex, when despatched, but only if, at the time of
transmission, the correct answerback appears at the start and
at the end of the sender's copy of the notice; and
(iii) if by facsimile or SITA, when transmitted and full
transmission has been confirmed by a printout of a facsimile
transmittal confirmation by the transmitting party.
The address, telex numbers, SITA, facsimile and telephone numbers of
Lessee, Sub Lessor, Lessor and Owner are as follows:
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Lessee: Address: ▇▇▇▇
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attn: President
Telex: None
SITA: None
Facsimile: ▇▇▇ ▇▇▇ ▇▇▇▇
Telephone: ▇▇▇ ▇▇▇ ▇▇▇▇
Sub Lessor: Address: ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇
Telex: None
SITA: None
Facsimile: 353 1 6613278
Telephone: ▇▇▇ ▇ ▇▇▇▇▇▇▇
Lessor and Owner: Address: Birger ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇-▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
Telex: None
SITA: None
Facsimile: 46 8 611 34 34
Telephone: ▇▇ ▇ ▇▇▇ ▇▇ ▇▇
with a copy to: Address: GE Capital Aviation
Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attn: Senior Vice President,
Portfolio Management
Facsimile: 212-357-4585
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
16.12 LAW AND JURISDICTION:
(a) THIS AGREEMENT IN ALL RESPECTS IS GOVERNED BY THE GOVERNING LAW;
(b) For the benefit of Lessor, Lessee agrees that the courts of the State
of New York are to have non exclusive jurisdiction to settle any
disputes in connection with this Agreement and submits itself and its
property to the nonexclusive jurisdiction of the courts of the State
of New York in connection with this Agreement;
(c) Without prejudice to any other mode of service, Lessee:-
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(i) appoints CT Corporation System, New York as its agent for
service of process relating to any proceedings before the New
York courts in connection with this Agreement and agrees to
maintain the process agent in New York notified to Lessor;
(ii) agrees that failure by a process agent to notify Lessee of the
process shall not invalidate the proceedings concerned;
(iii) consents to the service of process relating to any such
proceedings by prepaid mailing of a copy of the process to
Lessee's agent at the address identified in paragraph (i);
(d) Lessee:-
(i) waives objection to the courts of the State of New York on
grounds of inconvenient forum or otherwise as regards
proceedings in connection with this Agreement;
(ii) agrees that a judgment or order of a court of the State of New
York in connection with this Agreement is conclusive and
binding on it and may be enforced against it in the courts of
any other jurisdiction;
(e) Nothing in this Clause limits the right of Lessor to bring proceedings
against Lessee in connection with this Agreement:-
(i) in any other court of competent jurisdiction; or
(ii) concurrently in more than one jurisdiction;
(f) Lessee irrevocably and unconditionally:-
(i) agrees that if Lessor brings legal proceedings against it or
its assets in relation to this Agreement no immunity from such
legal proceedings (which will be deemed to include without
limitation, suit, attachment prior to judgment, other
attachment, the obtaining of judgment, execution or other
enforcement) will be claimed by or on behalf of itself or with
respect to its assets;
(ii) waives any such right of immunity which it or its assets now
has or may in the future acquire;
(iii) consents generally in respect of any such proceedings to the
giving of any relief or the issue of any process in connection
with such proceedings including, without limitation, the
making, enforcement or execution against any property
whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such
proceedings.
16.13 SOLE AND ENTIRE AGREEMENT: This Agreement, Letter Agreement No. 1 and
any related side-letters are the sole and entire agreement between
Lessor and Lessee in relation to the leasing of the Aircraft, and
supersede all previous agreements in relation to that leasing.
16.14 INDEMNITIES: All rights expressed to be granted to each Indemnitee
under this Agreement (other than Lessor) are given to Lessor on behalf
of that Indemnitee.
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16.15 COUNTERPARTS: This Agreement may be executed in counterparts each of
which will constitute one and the same document.
16.16 LANGUAGE: All notices to be given under this Agreement will be in
English. All documents delivered to Lessor pursuant to this Agreement
will be in English, or if not in English, will be accompanied by a
certified English translation. If there is any inconsistency between
the English version of this Agreement and any version in any other
language, the English version will prevail.
16.17 NO BROKERS: Each party agrees to indemnify and hold the other harmless
from and against any and all claims, suits, damages, costs and
expenses (including, but not limited to, reasonable attorneys' fees)
asserted by any agent, broker or other third party for any commission
or compensation of any nature whatsoever based upon the lease of the
Aircraft, if such claim, suit, damage, cost or expense arises out of
any action or alleged action by the indemnifying party, its employees
or agents. Lessee hereby represents and warrants that it has not
paid, agreed to pay or caused to be paid directly or indirectly in any
form, any commission, percentage, contingent fee, brokerage or other
similar payments of any kind, in connection with the establishment or
operation of this Agreement, to any employee of Lessor or to any
person or entity in the State of Incorporation or elsewhere, except to
Excluded Persons, as defined below. For the purposes hereof, the term
"Excluded Persons" shall mean (x) in the case of Lessor, any of its
officers, directors, employees, attorneys or other professional
advisors, wherever located; and (y) in the case of Lessee, any of its
officers, directors, employees, attorneys or other professional
advisors, wherever located.
17. DISCLAIMERS AND WAIVERS
17.1 EXCLUSION: THE AIRCRAFT IS DELIVERED "AS IS, WHERE IS" AND LESSEE
AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN THIS
AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR
HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN, ANY WARRANTIES
OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO, THE AIRCRAFT,
INCLUDING BUT NOT LIMITED TO:-
(a) THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR ANY
PARTICULAR USE OR PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE
AIRCRAFT OR ANY PART; OR
(b) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR
NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED; OR
(c) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD
PARTY, OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
17.2 WAIVER: LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL
ITS RIGHTS IN RESPECT OF ANY WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER
AND WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE OPERATION
OR PERFORMANCE OF THE AIRCRAFT OR THIS AGREEMENT EXCEPT TO THE EXTENT
ARISING UNDER CLAUSE 2.4.
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17.3 CONFIRMATION: LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS
OF THIS CLAUSE AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE BEEN
CALCULATED BASED ON ITS PROVISIONS.
18. SECTION 1110
Lessee acknowledges that Lessor would not have entered into this
Agreement unless it had available to it the benefits of a lessor under
Section 1110 of Title 11 of the United States Code. Lessee
covenants and agrees with Lessor that to better ensure the
availability of such benefits, Lessee shall support any motion,
petition or application filed by Lessor with any bankruptcy court
having jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in
any way oppose such action by Lessor unless Lessee shall have complied
with the requirements of said Section 1110 to be fulfilled in order to
entitle Lessee to continued use and possession of the Aircraft
hereunder. In the event said Section 1110 is amended, or if it is
repealed and another statute is enacted in lieu thereof, Lessor and
Lessee agree to amend this Agreement and take such other action not
inconsistent with this Agreement as Lessor reasonably deems necessary
so as to afford to Lessor the rights and benefits as such amended or
substituted statute confers upon owners and lessors of aircraft
similarly situated to Lessor.
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SCHEDULE 1
PART 1
DESCRIPTION OF AIRCRAFT
AIRCRAFT
MANUFACTURER: Boeing
MODEL: 737-2P6
SERIAL NUMBER: 21733
ENGINES
ENGINE TYPE AND NO.: ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-15 x 2 equipped with Stage 3
Hushkits
SERIAL NOS: As set out in the Certificate of Acceptance
On the Delivery Date, the Aircraft shall be delivered constructively in "as is,
where is" condition.
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PART 2
AIRCRAFT DOCUMENTS
A. CERTIFICATES
- FAA Certificate of Airworthiness
B. AIRCRAFT STATUS RECORDS
- Log Books
- Airframe Maintenance Status Report
- Supplemental Structural Inspection Document Status (if
applicable)
- Manufacturer's Service Bulletin Status Report
- Airworthiness Directive Compliance Report
(terminated and repetitive)
- Modification Status Report List
(documents will be provided upon request)
- Last Weighing Report
- List of Life Limited Components with remaining hours/cycles
C. AIRCRAFT MAINTENANCE RECORDS (LAST HEAVY MAINTENANCE VISITS)
- Test Flight Reports
- X-ray pictures
- Last annual check and heaviest maintenance check Work Cards
D. AIRCRAFT HISTORY RECORDS
- Aircraft Maintenance History Cards
- Service Difficulty Report
- Accident or Incident Report (Major Structural Repair)
E. ENGINE RECORDS (FOR EACH ENGINE)
- Engine time and cycle records
- Last overhaul and repair documents (including FAA Forms 337)
- Airworthiness Directive Compliance Report
(terminated and repetitive)
- Manufacturer's Service Bulletin Status Report
- List of Time Controlled Components with remaining hours and
cycles
- Modification Status Report
- Engine Disc Sheets
- Engine Build Specifications
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F. APU RECORDS
- Last Overhaul and Repair Documents
(including modification status)
- Airworthiness Directive Compliance Report
(terminated and repetitive)
- Manufacturer's Service Bulletin Status Report
- List of Time Controlled Components with remaining hours/cycles
- Modification Status Report
G. COMPONENT RECORDS
- Time Controlled Component Historical Records with
Installation and Serviceability Tags
H. MANUALS
- Airplane Flight Manual (Manufacturer Approved, FAA Approved)
- Flight Crew Operating Manual
- Weight and Balance Manual
- Wiring Diagram Manual (microfilm and hard copy if available)
- Illustrated Parts Catalog (microfilm)
- Aircraft Maintenance Manual (microfilm)
- Manufacturer's Engine Maintenance Manual and any approved
engineering changes, as applicable
I. MISCELLANEOUS TECHNICAL DOCUMENTS
- Maintenance Program Specifications
- Interior Configuration Drawings
- Original Delivery Documents
- Loose Equipment Inventory
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SCHEDULE 2
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on the date set out below
by Air South Airlines, Inc. ("Lessee"), to Polaris Aircraft Leasing
K.B. ("Lessor"), pursuant to the Aircraft Lease Agreement dated April
29, 1996 between Lessor and Lessee (the "Agreement"). The capitalised
terms used in this Certificate shall have the meaning given to such
terms in the Agreement.
1. DETAILS OF ACCEPTANCE
Lessee hereby confirms to Lessor that Lessee has on this 29th day
of April, 1996, at Columbia, South Carolina, accepted the Aircraft
described below in "where is, as is" condition:-
(a) Boeing 737-2P6 Advanced airframe, Manufacturer's Serial No. 21733;
(b) 2 ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-15 Engines:-
Engine Number Manufacturer's Serial No.
1 ; and
2 ;
(Each of which shall have more than 750 rated takeoff horsepower or
the equivalent of such horsepower).
(c) Fuel Status: (N/A - see Previous Delivery Date Certificate of
Acceptance) and
(d) Loose Equipment Check List: as per list signed by Lessor and Lessee and
attached hereto.
2. CONFIRMATION
Lessee confirms to Lessor that as at the time indicated above, being
the Delivery Date:-
(a) the representations and warranties contained in Clause 2 are hereby
repeated;
(b) the Aircraft is insured as required by the Agreement;
(c) Lessee confirms that there have been affixed to the Aircraft and the
Engines the fireproof notices required by Clause 8.7(d) of the
Agreement; and
(d) Lessee's authorised technical experts have inspected the Aircraft to
ensure the Aircraft conforms to Lessee's requirements. The Aircraft
is in accordance with the specifications of the Agreement and
satisfactory in all respects.
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IN WITNESS WHEREOF, Lessee has, by its duly authorised representative,
executed this Certificate as of April 29, 1966.
LESSEE: Air South Airlines, Inc.
By:
----------------------------
Title:
----------------------------
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SCHEDULE 3
OPERATING CONDITION AT REDELIVERY
On the Expiry Date the Aircraft, subject to fair wear and tear
generally, will be in the condition set out below:-
1. GENERAL CONDITION
The Aircraft will:-
(a) be clean by airline standards;
(b) have installed the full complement of engines and other equipment,
parts and accessories and loose equipment as is normally installed in
the Aircraft, and be in a condition suitable for immediate operation
in commercial service;
(c) have in existence a valid certificate of airworthiness (or if required
by Lessor, a valid export certificate of airworthiness) with respect
to the Aircraft issued by the Air Authority. The Aircraft will also
be eligible for an FAA Certificate of Airworthiness, shall meet all
requirements for U.S. domestic operations under FAR Part 121 and will
meet the requirements of FAR Part 36, appendix C, Stage 2 noise
compliance without waiver or restriction, except as provided by the
hushkit manufacturer. There will be no deferred, open or carryover
items on the Aircraft or any Engine on the Expiry Date;
(d) comply with the manufacturer's original specifications;
(e) have undergone, immediately prior to redelivery, a C check (including
all phases and multiples thereof) so that all Airframe inspections
falling due within the next following C Check interval in accordance
with the Agreed Maintenance Programme, have been accomplished. The
time since the heaviest maintenance inspection (complete block
overhaul/D Check) will not be more than when the Aircraft was
delivered by Lessor to Lessee under the Previous Lease.
Notwithstanding the foregoing, Lessee may redeliver the Aircraft to
Lessor with fewer Flight Hours remaining until the next D Check
(complete block overhaul) than as at the Previous Delivery Date as a
percentage of the allowed interval between such overhauls if (x)
a maximum of 7,500 Flight Hours elapsed since the last D Check
(complete block check) (determined in accordance with the Agreed
Maintenance Programme); and (y) Lessee pays to Lessor on the Expiry
Date the product of (xx) the difference (if greater than zero) between
the number of Flight Hours so remaining on the Expiry Date and the
number of Flight Hours that were so remaining on the Previous Delivery
Date; and (yy) the then current rate of Airframe Supplemental Rent;
(f) have had accomplished all outstanding airworthiness directives
affecting that model of Aircraft issued by the FAA which, if the
Aircraft were registered with the FAA, would have to be complied with
during the Term and within 180 days after the Expiry Date, except that
such AD's requiring repetitive compliance at intervals of less than
180 days between each accomplishment ("Repetitive AD's'') shall be
complied with by Lessee immediately prior to the Expiry Date and
Lessee shall not be responsible for any subsequent repetitive
compliance of the Repetitive AD after the Expiry Date;
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(g) have installed all applicable vendor's and manufacturer's service
bulletin kits received free of charge by Lessee that are appropriate
for the Aircraft and to the extent not installed, those kits will be
furnished free of charge to Lessor;
(h) be sanded and freshly painted and in such external livery as advised
by Lessor; and
(i) have all signs and decals clean, secure and legible.
2. COMPONENTS
(a) The time since overhaul on all time controlled (other than the APU, the
Engines and the Landing Gear) shall be not less than as on the
Previous Delivery Date.
(b) Each "on-condition" and "condition monitored" component will be
serviceable;
(c) The APU will be in the same operational condition as at the Previous
Delivery Date having no more than 1,500 Flight Hours used since the
last APU hot section inspection with temperatures and air outputs
within the APU manufacturer's limits at all operational settings.
Notwithstanding Paragraphs (a) to (c) above, if the time remaining to
overhaul of each time, cycle and calendar controlled component in the
Aircraft (excluding each Engine and the Landing Gear but including any
time, cycle or calendar controlled components thereon) is less on the
Expiry Date than at the Previous Delivery Date Lessee will pay to
Lessor on the Expiry Date an amount determined by (i) subtracting the
hours, days and cycles (whichever is the more limiting factor)
remaining on such component on the Expiry Date from the hours, days or
cycles, as the case may be, remaining on the Previous Delivery Date and
(ii) by multiplying the difference calculated in (i) above by an amount
determined by dividing the standard overhaul cost for such component as
charged by an FAA approved repair station approved by Lessor by the
number of hours, days and cycles between overhauls for such component.
In any event and notwithstanding the preceding sentence no component
shall have less than 1 calendar year or 3,000 hours and cycles
(whichever is the more limiting factor) remaining to the next overhaul
in accordance with the Agreed Maintenance Programme (the ""Minimum
Requirement''). Any such component which has less than the Minimum
Requirement shall have zero time since the last overhaul.
3. ENGINES
Each Engine will be installed on the Aircraft and if not the engines
installed on the Previous Delivery Date will be accompanied by all
documentation Lessor may require to evidence that title thereto is
properly vested in Owner and:-
(a) each life limited part within each Engine will have at least the same
life remaining as when delivered by Lessor to Lessee under this
Agreement.
Notwithstanding Paragraph 3 (a) above, Lessee may redeliver an Engine
to Lessor with less life so remaining if (x) at least 2,000 Flight
Hours and Cycles remaining and have a two engine aggregate of no less
than 6,000 Flight Hours of life remaining until the next scheduled life
limited Parts replacement (determined in accordance with the Agreed
Maintenance Programme); and (y) Lessee pays to Lessor on the Expiry
Date the product of (xx) the difference (if greater than zero) between
the average number of Flight Hours and Cycles so remaining on the
Expiry Date and the average number of Flight Hours and Cycles that were
so remaining on the Previous Delivery Date; and (yy) the then current
rate of Engine Life Limited Parts Supplemental Rent.
(b) each Engine will have no more time since last Hot Section
Refurbishment and no more time since the last Cold Section
Refurbishment than as when delivered by Lessor to Lessee under this
Agreement.
Notwithstanding Paragraph 3 (b) above, Lessee may redeliver an Engine
to Lessor with fewer Flight Hours remaining until the next Hot Section
Refurbishment or Cold Section Refurbishment, as applicable than as at
the Previous Delivery Date if (x) at least 2,000 Flight Hours and
Cycles remaining and have a two engine aggregate of no less than 6,000
Flight Hours of life remaining until the next Hot Section Refurbishment
or Cold Section Refurbishment, as applicable (determined in accordance
with the Agreed Maintenance Programme); and (y) Lessee pays to Lessor
on the Expiry Date the product of (xx) the difference (if greater than
zero) between the number of Flight Hours and Cycles so remaining on the
Expiry Date and the number of Flight Hours that were so remaining on
the Previous Delivery Date; and (yy) the then current rate of Engine
Refurbishment Supplemental Rent.
(c) each Engine will have had a complete hot (including combustion
chamber) and cold section video boroscope inspection, at Lessor's
expense, and a power assurance run in accordance with the Engine
manufacturer's maintenance manual and all items beyond such
manufacturer's limits will be repaired at Lessee's expense. No Engine
will be "on watch" for any reason requiring any special or out of
sequence inspection.
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4. FUSELAGE, WINDOWS AND DOORS
(a) The fuselage will be free of major dents and abrasions exceeding the
limits defined in the Boeing Structural Repair Manual ("SRM") and
applicable maintenance manuals and loose or pulled or missing rivets;
(b) Doors will be free moving, correctly rigged and be fitted with
serviceable seals.
5. WINGS AND EMPENNAGE
(a) Leading edges will be free from damage exceeding the limits defined in
SRM and applicable maintenance manuals;
(b) Wings will be free of fuel leaks.
6. INTERIOR
(a) Ceilings, sidewalls and bulkhead panels will be clean and free of
cracks and stains.
(b) Carpets and seat covers will be in good condition, clean and free of
stains and meet FAR burn certification regulations;
(c) Seats will be serviceable, in good condition and repainted as
necessary; and
(d) Emergency equipment having a calendar life will have a minimum of 1
year or 100% of its total approved life, whichever is less, remaining.
7. COCKPIT
(a) Trim panels shall be free of stains and cracks, will be clean secure
and repainted as necessary;
(b) Seat covers will be in good condition, clean and free of stains and
will conform to FAR burn certification regulations; and
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8. CARGO COMPARTMENTS
(a) Panels will be in good condition; and
(b) Nets will be in good condition.
9. LANDING GEAR
Time since overhaul on the Landing Gear will not be greater than as at
the Previous Delivery Date. Each life limited part within the landing
gear will have at least the same time remaining as at the Delivery
Date. The Landing Gear and wheel ▇▇▇▇▇ will be clean, free of leaks
and repaired as necessary.
Notwithstanding the foregoing, Lessee may redeliver the Landing Gear
to Lessor with fewer Flight Hours remaining until the next overhaul
than as at the Previous Delivery Date as a percentage of the allowable
interval between such overhauls if (x) at least 7,500 Flight Hours
remain until the next overhaul (determined in accordance with the
Agreed Maintenance Programme); and (y) Lessee pays to Lessor on the
Expiry Date the product of (xx) the difference (if greater than zero)
between the number of Flight Hours so remaining on the Expiry Date and
the number of Flight Hours that were so remaining on the Previous
Delivery Date; and (yy) the then current rate of Landing Gear
Supplemental Rent.
10. CORROSION
(a) The Aircraft will have been inspected and treated with respect to
corrosion as defined in the Agreed Maintenance Programme and/or Boeing
Document No.D6-38528 relative to compliance with the Corrosion
Prevention and Control Program (CPCP). The entire fuselage will be
substantially free from corrosion and will be adequately treated and
an approved corrosion prevention programme will be in operation; and
(b) Fuel tanks will be free from contamination and corrosion and a tank
treatment programme will be in operation.
Notwithstanding anything contained in this Schedule 3, Lessor shall not be
required to make any payments to Lessee in the event that any or all of the
Airframe, the Engines, the Landing Gear, any time, cycle or calendar controlled
component is returned to Lessor in a condition better than that specified in
Clause 12 and this Schedule 3.
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SCHEDULE 4
INSURANCE REQUIREMENTS
The Insurances required to be maintained are as follows:-
(a) HULL ALL RISKS of Loss or Damage whilst flying and on the ground with
respect to the Aircraft on an "agreed value basis" for the Agreed Value
and with a deductible not exceeding $350,000, or such other amount
agreed by Lessor from time to time. Without prejudice to the
foregoing, (x) with the prior written consent of Lessor, Lessee may
increase the aforesaid deductible amount to $500,000 if, prior to doing
so, Lessee shall have paid to Lessor the sum of $150,000 by way of an
insurance security deposit (the "Insurance Security Deposit") (which
Insurance Deposit shall also be available to be applied to deductible
losses between $350,000 and $500,000 in relation to B737-2P6 Advanced
Aircraft Serial Numbers 21356, 21612 and 21677 leased, or to be leased,
to Lessee pursuant to Other Agreements); and (y) provided no Default
shall have occurred and, in Lessor's reasonable opinion, Lessee remains
in good financial standing, following the expiration of Rental Period
12, Lessor, without being under any obligation, will consider a request
from Lessee to increase the aforementioned deductible amount to
$500,000 without the requirement for Lessee to pay an Insurance
Security Deposit. The Insurance Security Deposit, which shall be held
by Lessor as security for the performance by Lessee of its obligations
under this Agreement (and under the Other Agreement), shall be returned
to Lessee on the Expiry Date if all amounts payable by Lessee under
this Agreement and any Other Agreement shall have been paid in full and
no Default shall have occurred and be continuing. With Lessor's prior
consent, the Insurance Deposit may be provided by Lessee by way of
Letter of Credit issued by a bank acceptable to Lessor and in form and
in substance acceptable to Lessor.
In the event that the Insurance Security Deposit is applied to a loss
claim thereby reducing the balance thereof, Lessee will either (a)
replace any deficiency in such balance; or (b) lower the all risk hull
insurance deductible to $500,000 within 15 days after the
aforementioned application.
(b) HULL WAR AND ALLIED PERILS, being such risks excluded from the Hull
All Risks Policy to the fullest extent available from the leading
international insurance markets including confiscation and requisition
by the State of Registration for the Agreed Value;
(c) ALL RISKS (INCLUDING WAR AND ALLIED RISK except when on the ground or
in transit other than by air) property insurance on all Engines and
Parts when not installed on the Aircraft on an "agreed value" basis
for their full replacement value and including engine test and running
risks;
(d) AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER, BAGGAGE, CARGO AND
MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING PRODUCTS) LEGAL
LIABILITY for a Combined Single Limit (Bodily Injury/Property Damage)
of an amount not less than the Minimum Liability Coverage for the time
being any one occurrence (but in respect of products and personal
injury liability this limit may be an aggregate limit for any and all
losses occurring during the currency of the policy). War and Allied
Risks are also to be covered under the Policy to the fullest extent
available from the leading international insurance markets;
(e) All required hull and spares insurance (as specified above), so far as
it relates to the Aircraft will: -
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(i) name Owner, Sub Lessor, Lessor and their respective successors
and assigns as additional assureds for their respective rights
and interests, warranted, each as to itself only, no
operational interest;
(ii) provide that any loss will be settled jointly with Lessor and
Lessee, subject to final prior approval of Owner and will be
payable in Dollars to Owner, for the account of all interests
except where the loss does not exceed the Damage Notification
Threshold, and neither Lessor nor Owner has notified the
insurers to the contrary, in which case the loss will be
settled with and paid to Lessee;
(iii) include a notice and/or acknowledgement of assignment in a
form acceptable to Lessor;
(iv) if separate Hull "all risks" and "war risks" insurances are
arranged, include a 50/50 provision in accordance with market
practice (AVS. 103 is the current market language);
(v) confirm that the insurers are not entitled to replace the
Aircraft in the event of an insured Event of Loss;
(vi) confirm that the insurers will not obtain a valid discharge of
the obligations under the Insurances by payment to the broker,
notwithstanding market practice to the contrary;
(f) All required liability insurances (specified above) will:-
(i) include Owner, Sub Lessor, Lessor and their respective
successors and assigns and their respective shareholders,
subsidiaries, directors, officers, agents, employees and
indemnitees as additional insureds for their respective rights
and interests, warranted, each as to itself only, no
operational interest;
(ii) include a Severability of Interest Clause which provides that
the insurance, except for the limit of liability, will operate
to give each assured the same protection as if there was a
separate policy issued to each assured;
(iii) contain a provision confirming that the policy is primary
without right of contribution and the liability of the
insurers will not be affected by any other insurance of which
Owner, Sub Lessor, Lessor or Lessee have the benefit so as to
reduce the amount payable to the additional insureds under
such policies;
(g) All Insurances will:-
(i) be in accordance with normal industry practice of persons
operating similar aircraft in similar circumstances;
(ii) provide cover denominated in Dollars and any other currencies
which Lessor may reasonably require in relation to liability
insurance;
(iii) operate on a worldwide basis subject to such limitations and
exclusions as Lessor may agree;
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(iv) acknowledge the insurer is aware (and has seen a copy) of this
Agreement and that the Aircraft is owned by Owner and is
subject to the Head Lease and the Sub Lease;
(v) provide that, in relation to the interests of each of the
additional assureds the Insurances will not be invalidated by
any act or omission by Lessee, or any other person other than
the respective additional assured seeking protection and shall
insure the interests of each of the additional assureds
regardless of any breach or violation by Lessee, or any other
person other than the respective additional assured seeking
protection of any warranty, declaration or condition,
contained in such Insurances;
(vi) provide that the insurers will hold harmless and waive any
rights of recourse and/or subrogation against the additional
assureds or to be subrogated to any rights of the Banks
against Lessor, Sub Lessor, Owner or Lessee;
(vii) provide that the additional assureds will have no obligation
or responsibility for the payment of any premiums due (but
reserve the right to pay the same should any of them elect so
to do) and that the insurers will not exercise any right of
set-off or counter-claim in respect of any premium due against
the respective interests of the additional assureds other than
outstanding premiums relating to the Aircraft, any Engine or
Part the subject of the relevant claim;
(viii) provide that the Insurances will continue unaltered for the
benefit of the additional assureds for at least 30 days after
written notice by registered mail or telex of any
cancellation, change, event of non-payment of premium or
installment thereof has been sent to Lessor, Sub Lessor and
Owner, except in the case of war risks for which 7 days (or
such lesser period as is or may be customarily available in
respect of war risks or allied perils) will be given, or in
the case of war between the 5 great powers or nuclear peril
for which termination is automatic;
(ix) if reinsurance is a requirement of this Agreement such
reinsurance will (i) be on the same terms as the original
insurances and will include the provisions of this Schedule,
(ii) provide that notwithstanding any bankruptcy, insolvency,
liquidation, dissolution or similar proceedings of or affecting
the reinsured that the reinsurers' liability will be to make
such payments as would have fallen due under the relevant
policy of reinsurance if the reinsured had (immediately before
such bankruptcy, insolvency, liquidation, dissolution or
similar proceedings) discharged its obligations in full under
the original insurance policies in respect of which the then
relevant policy of reinsurance has been effected; and (iii)
contain a "cut-through" clause in the following form (or
otherwise, satisfactory to Lessor): "The Reinsurers and the
Reinsured hereby mutually agree that in the event of any claim
arising under the reinsurances in respect of a total loss or
other claim where as provided by the Aircraft Lease Agreement
dated as of April 29, 1996 and made between Polaris Aircraft
Leasing K.B. and Air South, Inc. such claim is to be paid to
the person named as sole loss payee under the primary
insurances, the Reinsurers will in lieu of payment to the
Reinsured, its successors in interest and assigns pay to the
person named as sole loss payee under the primary insurances
effected by the Reinsured that portion of any loss due for
which the Reinsurers would otherwise be liable to
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pay the Reinsured (subject to proof of loss), it being
understood and agreed that any such payment by the Reinsurers
will (to the extent of such payment) fully discharge and
release the Reinsurers from any and all further liability in
connection therewith"; subject to such provisions not
contravening any law of the State of Incorporation;
(x) contain a provision entitling Lessor, Owner, Sub Lessor or any
insured party to initiate a claim under any policy in the
event of the refusal or failure of Lessee to do so; and
(xi) accept and insure the indemnity provisions of the Head Lease
and the Sub Lease and of this Agreement to the extent of the
risks covered by the policies.
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SCHEDULE 5
FORM OF LEGAL OPINION
To: [Owner] [Sub Lessor] [Lessor]
[Date]
Dear Sirs
1. You have asked us to render an opinion in connection with the
transaction governed, inter alia, by the under mentioned documents.
Words and expressions used herein will bear the same meanings as
defined in an Aircraft Lease Agreement (the "Lease") dated [ ]
1995 between Polaris Aircraft Leasing K.B. ("Lessor") and Air South,
Inc. ("Lessee") in respect of one Boeing 737-2P6 Advanced aircraft
with manufacturer's serial number 21733 together with the 2
installed ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-15 engines (the "Aircraft").
1.1. the Lease;
1.2. the Memorandum and Articles of Association of Lessee;
1.3. all other documents, approvals and consents of whatever nature and
wherever kept which it was, in our judgment and to our knowledge,
necessary or appropriate to examine to enable us to give the
opinion expressed below.
2. Having considered the documents listed in paragraph 1 above, and
having regard to the relevant laws of [] we are pleased to advise
that in our opinion:-
(a) Lessee is a corporation duly organised and validly existing under
the laws of [], is qualified to do business as a foreign
corporation in each jurisdiction where failure to so qualify would
have a materially adverse effect on Lessee's business or its
ability to perform its obligations under the lease is subject to
suit in its own name, and, to the best of our knowledge, no steps
have been, or are being, taken to appoint a receiver, liquidator,
trustee or similar officer over, or to wind up, Lessee;
(b) Lessee has the corporate power to enter into and perform, and has
taken all necessary corporate action to authorise the entry into,
performance and delivery of, the Lease and the transactions
contemplated by the Lease;
(c) the entry into and performance by Lessee of, and the transactions
contemplated by, the Lease do not and will not:-
(i) conflict with any laws binding on Lessee; or
(ii) conflict with the Certificate of Incorporation of By Laws
of Lessee; or
(iii) conflict with or result in default under any indenture,
mortgage, chattel mortgage, deed of trust, conditional
sales contract, lease, bank loan or credit agreement or
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other agreement which is binding upon Lessee or any of its
assets or result in the creation of any Security Interest
over any of its assets.
(d) no authorisations, consents, licences, approvals and registrations
(other than those which have been obtained and of which copies are
attached hereto) are necessary or desirable to be obtained from any
governmental or other regulatory authorities in having jurisdiction
over Lessee or its properties to enable Lessee:-
(1) to enter into and perform the transactions contemplated by
the Lease;
(2) to import the Aircraft into the United States and [ ] for
the duration of the Term;
(3) to operate the Aircraft in the United States for the
transport of fare-paying passengers; or
(4) to make the payments provided for in the Lease;
(e) except for the filing and recordation of the Lease with the FAA and
the filing of the Financial Statements with [] (which filing has
been duly made on or before this date) it is not necessary or
desirable, to ensure the priority, validity and enforceability of
all the obligations of Lessee under the Lease that the Lease be
filed, registered, recorded or notarised in any public office or
elsewhere or that any other instrument relating thereto be signed,
delivered, filed, registered or recorded, that any tax or duty be
paid or that any other action whatsoever be taken;
(f) no steps are necessary or desirable to record or perfect either
Lessor's, Sub Lessor's or Owner's interest in the Aircraft in the
United States or [];
(g) on termination of the Lease (whether on expiry or otherwise) as
contemplated in the Lease, Lessor would be entitled:-
(1) to repossess the Aircraft;
(2) to export the Aircraft from the United States and [];
without requiring any further consents, approvals or
licences from any governmental or regulatory authority in
the United States or [];
(h) the Lease has been properly signed and delivered on behalf of
Lessee and the obligations on the part of Lessee contained therein,
assuming them to be valid and binding according to the Governing
Law, are valid and legally binding on and enforceable against
Lessee respectively under the laws of [];
(i) the events described in Clause 13.1(g), (h) and (i) of the Lease
comprise an accurate and complete statement of all events and
situations provided for by the laws of [] which may lead to the
cessation of activities, winding up or dissolution of Lessee;
(j) Lessee is a Certificated Air Carrier;
(k) Lessee is a "citizen of the United States" as defined in Section
101(16) of the Federal Aviation Act;
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(l) Lessor is entitled to the benefits of Section 1110 of Title 11 of
the United States Code;
(m) Lessee's chief executive office (as defined in the Uniform
Commercial in effect in []) is located at [].
(n) the obligations of Lessee under the Lease rank at least pari passu
with all other present and future unsecured and unsubordinated
(including contingent obligations) of Lessee;
(o) there is no withholding tax or other Tax to be deducted from any
payment whatsoever which may be made by Lessee pursuant to the
Lease; with respect to any withholdings, the provisions of Clauses
5.6, 5.7 and 5.10 of the Lease are fully effective; and the
arrangements contemplated by the Lease do not give rise to any
charge whatsoever to Taxes in [];
(p) there is no applicable usury or interest limitation law in [] which
may restrict the recovery of payments in accordance with the Lease;
(q) there are no registration, stamp or other taxes or duties of any
kind payable in [] in connection with the signature, performance or
enforcement by legal proceedings of the Lease;
(r) Lessor will not violate any law or regulation in [] nor become
liable to tax in [] by reason of entering into the Lease with
Lessee, or performing its obligations thereunder;
(s) it is not necessary to establish a place of business in [] in order
to enforce any provisions of the Lease;
(t) the choice of the Governing Law to govern the Lease will be upheld
as a valid choice of law in any action in the Courts of [];
(u) the consent to the jurisdiction by Lessee contained in the Lease is
valid and binding on Lessee and not subject to revocation;
(v) any judgement for a definite sum given by the courts of [ ]
against Lessee would be recognised and accepted by the courts of []
without re-trial or examination of the merits of the case;
(w) (i) Lessee is subject to civil commercial law with respect to
its obligations under the Lease; and
(ii) neither Lessee nor any of its assets is entitled to any
right of immunity and the entry into and performance of the
Lease by Lessee constitute private and commercial acts;
(x) there are no laws or other rules in [] (including, without
limitation, Emergency Powers laws) pursuant to which Lessee may be
deprived of the Aircraft by any Government Entity or any other
person, other than Lessor or any assignee of Lessor.
Yours faithfully,
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LETTER AGREEMENT NO. 1
April 29, 1996
Air South Airlines, Inc.
▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
Re: Aircraft Lease Agreement, dated as of April 29, 1996, relating to one
Boeing 737-2P6 aircraft bearing MSN 21733 and Irish Registration Number EI-CLK.
Dear Sirs:
Reference is made to the Aircraft Lease Agreement, dated this date (THE "LEASE
AGREEMENT"), between Polaris Aircraft Leasing K.B., a limited partnership
formed under the laws of Sweden ("LESSOR") and Air South Airlines, Inc., an
Illinois corporation (THE "LESSEE"), for the lease of one used Boeing 737-2P6
aircraft bearing MSN 21733 and Irish Registration Number EI-CLK (THE
"AIRCRAFT") and the Letter Agreement, dated March 29, 1996, as amended by the
Letter Agreements, dated April 11 and April 26, 1996 between Lessee and GECAS
(AS AMENDED, THE "MARCH LETTER AGREEMENT"), between the Lessee, GE Capital
Aviation Services, Inc. ("GECAS"), Polaris Holding Company ("PHC" AND
COLLECTIVELY WITH THE LESSOR, THE "LESSORS") and the Lessor. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to such
terms in the Lease Agreement or the March Letter Agreement, as applicable.
Each party hereto hereby agrees that such party shall preserve the
confidentiality of, and shall not disclose, the information set forth in this
Letter Agreement No. 1 (THIS "LETTER AGREEMENT") to any other Person without
obtaining the prior written consent of the other party except to the extent
required by applicable law; provided that Lessor shall not be required to seek
such consent of Lessee following an Event of Default which has not been cured.
Lessor and Lessee have agreed that certain provisions referred to in the Lease
Agreement, and certain other terms, shall be set forth in this Letter
Agreement. If the Lease Agreement and this Letter Agreement shall differ as to
any term or condition, this Letter Agreement shall prevail, notwithstanding
anything to the contrary contained in the Lease Agreement. In that connection
and in order to preserve the confidentiality of certain of the business terms
of the Lease Agreement, Lessor and Lessee hereby agree as to (A) certain
provisions regarding Basic Rent, a Restructuring Fee and certain arrearages
of Rent; (B) certain provisions relating to Supplemental Rent; (C) certain
provisions regarding Events of Default; (D) certain provisions relating to the
Aircraft Commitment Fee; (E) certain provisions relating to the application of
supplemental rent under the Other Agreements; (F) certain provisions relating
to the payment of legal fees of Lessors; (G) further assurances; (H) governing
law; and (I) counterparts.
A. RENT.
(i) BASIC RENT AND RENT ARREARAGE. Lessee shall pay to Lessor Basic Rent
in respect of each Rental Period pursuant to Clause 5.3 of the Lease Agreement
in an amount equal to $122,500. Lessee may accrue arrearages of Basic Rent
during the Term from the date hereof to a date on or before September 27, 1996
(THE "RENT ARREARAGE"); provided, however, that the Rent Arrearage shall not
exceed $12,500 per month and, in the aggregate for the lease of all Aircraft by
Lessee from the Lessors, such aggregate Rent Arrearage shall not exceed a total
of $350,417.00. Any Rent Arrearage accrued by Lessee shall be subject to a fixed
rate of interest of 10.44% which interest shall be calculated from the date
Basic Rent shall be otherwise due and payable to the date of payment of the
Rent Arrearage. The full amount of Rent Arrearage and any
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interest due thereon shall be paid in full on or before the earlier to occur of
(x) the date of the IPO or PPO as referenced below or (y) September 30, 1996.
(ii) PAYMENT OF BASIC RENT. From the date hereof to September 27, 1996
Lessee shall pay Basic Rent and Supplemental Rent in the aggregate for all five
(5) Aircraft on the dates and in the amounts as are set forth in Table IV of
Schedule C attached hereto. A pro-rata portion of each payment of Rent, based
upon the amount of Basic Rent otherwise due and payable, shall be allocated to
each Aircraft. On the Rent Payment Date next succeeding September 30, 1996,
Basic Rent for the Aircraft shall be due and payable in monthly increments in
advance for the remainder of the Term on the Rent Payment Dates as set forth in
Clause 5.3 of the Lease Agreement.
(iii) RESTRUCTURING FEE AND ADJUSTMENT OF RENT. In consideration of the
restructuring of the Other Agreements and the lease of the Aircraft pursuant to
the Lease Agreements (as such term is defined in Schedule A attached hereto),
the Lessee shall pay to GECAS, on behalf of the Lessors, a restructuring fee
(THE "RESTRUCTURING FEE") on the terms and conditions as set forth herein. If
the Lessee completes an initial public offering ("IPO") of common stock of
Lessee, par value $.001 per share (THE "COMMON STOCK"), or a private placement
(A "PPO") of Common Stock, then, upon the occurrence of such IPO or PPO, Lessee
shall pay GECAS, on behalf of the Lessors, a Restructuring Fee in an amount as
set forth in Schedule A attached hereto. The Restructuring Fee shall be
reduced by the difference between (1) aggregate Basic Rent actually paid by
the Lessee to the Lessors, pursuant to all Lease Agreements (and excluding any
Rent Arrearages) from the date hereof to the date the Restructuring Fee is due
and payable and (2) the aggregate of the Initial Rents as such term is defined
in Schedule A for the same period. Upon the payment of the Restructuring Fee
and commencing with the Rent Payment Date next succeeding such payment of the
Restructuring Fee, the amount of Basic Rent for the Aircraft thereafter due and
payable shall be adjusted, based upon the initial base amount of the
Restructuring Fee prior to adjustment, to equal the amount set forth for such
Aircraft in Schedule B attached hereto with respect to the Lease Agreement.
The Restructuring Fee shall be paid in cash, warrants or a combination
thereof, as GECAS may elect. If the Restructuring Fee is due and payable on a
date other than a Rent Payment Date, any adjustments to the Restructuring Fee
or Basic Rent shall be made on a pro-rata basis using a 30 day calendar month.
(iv) WARRANTS FOR COMMON STOCK. In the event that GECAS shall elect to be
paid the Restructuring Fee in whole or in part by a warrant or warrants for
Common Stock (THE "WARRANT"), such Warrant shall be substantially in the form
attached hereto as Exhibit I and shall otherwise be reasonably acceptable to
GECAS. The Warrant shall be issued by Lessee to GECAS on the request of GECAS
and shall comply with the following terms and conditions: (a) the Warrant shall
not require the payment of any additional amounts by GECAS or the Lessors to
the Lessee; (b) the number of shares of Common Stock issuable pursuant to the
Warrant shall equal the amount of the Restructuring Fee elected by GECAS to be
paid in Warrants divided by the selling price of the Common Stock in the IPO or
PPO, net of underwriting discounts, commissions and expenses; (c) the holder of
such Warrant shall be granted "piggy-back" registration rights, (d) the Warrant
shall be exercisable for a period of five years after its date of issuance and
(e) shall otherwise be on terms and conditions mutually satisfactory to Lessor
and Lessee.
B. SUPPLEMENTAL RENT.
(i) SUPPLEMENTAL RENT. The amount of Supplemental Rent payable pursuant
to Clause 5.4 of the Lease Agreement shall be as follows:
(a) Airframe Supplemental Rent - $ 66.15 per Flight Hour;
(b) Engine Refurbishment Supplemental Rent - $72.45 per Flight Hour
in respect of each Engine;
(c) Engine Life Limited Parts Supplemental Rent - $12.60 per Flight
Hour in respect of each
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Engine; and
(d) Landing Gear Supplemental Rent - $ 8.40 per Flight Hour.
(ii) ADJUSTMENT OF SUPPLEMENTAL RENT. Lessor and Lessee acknowledge that
the rates of Supplemental Rent specified herein are based upon the assumptions
that (i) the Aircraft will operate on average not less than 1 Flight Hour per
Cycle ratio and (ii) the Agreed Maintenance Programme applicable to the
Aircraft during the Term will be the same as the Agreed Maintenance Programme
in effect on the Delivery Date. In the event that either or both of the
foregoing assumptions prove to be incorrect at any time during the Term, Lessor
and Lessee agree that Lessor shall have the right, upon written notice to
Lessee, to adjust the rate of Supplemental Rent. In the case of a change in
the ratio of Flight Hours per Cycle relating to Aircraft operation, the
adjustment of Supplemental Rent shall be as follows:
HOUR/CYCLE RATIO .5 1.0 1.5 2.0 2.5 3.0 3.5
$/hr. $/hr. $/hr. $/hr. $/hr. $/hr. $/hr.
ENGINE
REFURBISHMENT 98.70 72.45 65.10 58.80 54.60 52.50 50.40
SUPPLEMENTAL RENT
$/cyc. $/cyc. $/cyc. $/cyc. $/cyc. $/cyc. $/cyc.
ENGINE LLP
SUPPLEMENTAL RENT 12.60 12.60 12.60 12.60 12.60 12.60 12.60
In the event that the Agreed Maintenance Programme is revised, Lessor shall
make the adjustment in the manner which Lessor determines, in its reasonable
discretion, is necessary to maintain the rate of Supplemental Rent at levels
which accurately reflect the costs associated with obtaining maintenance
services at prevailing industry rates. Each such notice shall specify the
revised Supplemental Rent and the effective date of such revision. Lessee
agrees to advise Lessor, in writing, promptly following the occurrence of any
circumstances or events which would result in the foregoing assumptions
becoming incorrect at any time during the Term.
(iii) SUPPLEMENTAL RENT ABATEMENT. Lessor agrees to ▇▇▇▇▇ temporarily
Lessee's obligation to pay Supplemental Rent towards specific Engine
Refurbishment and Life Limited Parts in cases where the Lessee uses its own
funds ("OUT-OF-POCKET EXPENSES") to pay for respective Engine overhauls during
the Term. Lessee's Out-of-Pocket Expenses shall be defined as the excess of
(x) the actual cost for the over-haul of such Engine paid by Lessee as duly
substantiated to Lessor's satisfaction and (y) the individual Supplemental Rent
balance for such Engine at the time of its overhaul. Overhaul work scopes
shall be preapproved by the Lessor. The overhaul cost shall relate to the
actual overhaul and shall not include any ancillary or consequential costs
including, but not limited to (1) substitute equipment leases and (2)
transportation charges. The periods of Supplemental Rent abatement shall
commence respectively, on the first day that the Engine is returned to service
after its overhaul and shall continue until such time that the Engine has
lapsed Flight Hours and Cycles such that, when multiplied by the Supplemental
Rent rate defined herein, the total dollar amount equals the Out-of-Pocket
Expenses that the Lessee paid for the respective overhaul.
(iv) ESTIMATED SUPPLEMENTAL RENT. From the date hereof to September 27,
1996, Lessee shall pay Lessor an estimated amount of Supplemental Rent pursuant
to Schedule C hereof in the aggregate for all Aircraft. Such amount shall take
into account all Supplemental Rent abatements granted pursuant to paragraph
(iii) above. Each month, Lessee shall submit to Lessor a summary of the hours
and cycles of operation of the Aircraft. Credit and debits against the
Supplemental Rent actually due and payable shall be accrued until September 30,
1996. Prior to October 10, 1996, Lessor shall provide Lessee with an
accounting of all Supplemental Rent due and payable and actual Supplemental
Rent paid. Any arrears payments or credits
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with respect to overpayments with respect to Supplemental Rent shall be paid by
Lessee to Lessor or credited by Lessor to Lessee, as applicable, on October 10,
1996.
C. EVENTS OF DEFAULT.
For purposes of the Lease Agreement, each of the following shall constitute a
Event of Default, in addition to the Events of Default as set forth in Clause
13.1 of the Lease Agreement: (i) the failure to pay the Current Arrearage and
all interest due thereon on or before April 29, 1996; (ii) the failure to pay
the Rent Arrearage and all interest due thereon on or before the earlier of (x)
the IPO or PPO or (y) September 30, 1996; and (iii) the failure to pay any Rent
when due and owing under the March Letter Agreement or the Lease Agreement,
including without limitation the amount of Rent Adjustment as set forth in
paragraph A of this Letter Agreement.
D. AIRCRAFT COMMITMENT FEE.
Lessor acknowledges that Lessee, pursuant to the March 1994 Lease, has paid
to Lessor an Aircraft Commitment Fee in an amount equal to (x) $270,000 plus
(y) Relevant Interest (as hereinafter defined) calculated from the date the
Aircraft Commitment Fee or any part thereof was actually paid. For purposes of
this Letter Agreement, Relevant Interest shall mean interest on the sum of
$225,000 accrued over a period commencing from the date following the Previous
Delivery Date on which the Aircraft Commitment Fee or any part thereof was
actually paid to the Expiry Date, at the average rate over such period of
General Electric Capital Corporation Commercial Paper (for 240 to 270 days) as
reported from time to time in The Wall Street Journal less 25 basis points
(i.e. 0.25% per annum).
E. ACCRUAL AND APPLICATION OF CERTAIN SUPPLEMENTAL RENT.
The reconciliation of all Rent previously due and owing pursuant to the Other
Agreements shall be set forth in Schedule C attached hereto. In addition,
Lessor shall credit certain Supplemental Rent against approved maintenance
performed on the Aircraft in the amounts as set forth in Schedule C. All
discrepancies in the accrual, payment and application of Rent attributable to
the October 1994 Lease are set forth and shall be resolved as between the
Lessor and Lessee in accordance with Schedule C.
F. LEGAL FEES.
Lessee hereby agrees to pay to GECAS, on behalf of the Lessors, on the date
hereof legal fees in the amount of $30,000 for the reasonable costs and
expenses of Lessors' counsel in connection with the restructuring Lessee's
obligations under the Other Agreements and the preparation, negotiation and
documentation of the March Letter Agreement, this Letter Agreement, the
Warrant, the Lease Agreements and negotiation of certain other matters
including the transactions contemplated herein and therein. Reasonable legal
counsel fees and expenses incurred by GECAS or the Lessors in connection with
the administration and enforcement of Lessors' rights and remedies under the
March Letter Agreement, the Warrant, the Lease Agreement or this Letter
Agreement shall be for the account of Lessee and Lessee shall upon written
demand by the Lessor reimburse and indemnify the Lessor for such costs and
expenses.
G. FURTHER ASSURANCES.
Lessee, at Lessee's expense, shall execute and deliver such further agreements,
leases, documents, certificates or any supplements or additions hereto as may
reasonably be requested by GECAS of the Lessors in furtherance of the
agreements herein contained.
4
74
SCHEDULE A
SIZE OF IPO/PPO RESTRUCTURING FEE UNADJUSTED
More than $20 million $3 million
$15 million to $20 million $2 million
Less than $15 million but greater
than $4 million $1.5 million
Less than $4 million $ - 0 -
CERTAIN DEFINITIONS: AIRCRAFT LEASE AGREEMENTS
Aircraft Lease Agreement, dated as of November 11, 1994, between Polaris
Holding Company, as lessor, and Air South, Inc., as lessee, in respect of one
used Boeing 737-242 advanced aircraft (the "21186 Aircraft") bearing
manufacturers serial number 21186 (as supplemented and amended, "LEASE 21186")
and FAA Registration Number N159PL.
Aircraft Lease Agreement, dated as of March 21, 1995, between Polaris Aircraft
Leasing K.B., as lessor and Air South, Inc., as lessee, in respect of one used
Boeing 737-2P6 advanced aircraft (the "21733 Aircraft") bearing manufacturers
serial number 21733 and Irish Registration Number EI-CLK (as supplemented and
amended, "LEASE 21733") equipped with Stage 3 hushkit.
Aircraft Lease Agreement, dated as of December 12, 1994, between Polaris
Aircraft Leasing K.B., as lessor, and Air South, Inc., as lessee, in
respect of one used Boeing 737-2P6 advanced aircraft (the "21677 Aircraft"),
bearing manufacturers serial number 21677 and Irish Registration Number GKW (as
supplemented and amended, "LEASE 21677").
Aircraft Lease Agreement, dated as of October 25, 1994, between Polaris
Aircraft Leasing K.B., as lessor, and Air South, Inc., as lessee, in respect
of one used Boeing 737-2P6 advanced aircraft (the "21612 Aircraft"), bearing
manufacturers serial number 21612 and Irish Registration Number EI-CKK (as
supplemented and amended, "LEASE 21612").
Aircraft Lease Agreement, dated as of November 9, 1994, between Polaris
Aircraft Leasing K.B., as lessor, and Air South, Inc., as lessee, in respect
of one used Boeing 737-200A advanced aircraft (the "21356 Aircraft"), bearing
manufacturers serial number 21356 and Irish Registration Number CKL (as
supplemented and amended, "LEASE 21356").
For purposes of Letter Agreement No. 1, Lease 21186, Lease 21733, Lease 21677,
Lease 21612 and Lease 21356 shall collectively be defined as the "LEASE
AGREEMENTS" and the 21186 Aircraft, 21733 Aircraft, 21677 Aircraft, 21612
Aircraft and 21356 Aircraft shall collectively be defined as the "AIRCRAFT".
6
75
INITIAL RENTS: For purposes of this Letter Agreement No. 1, Initial Rents shall
be defined as the following amounts for the Lease Agreements as indicated:
Lease 21186 Initial Rent: $90,000
Lease 21733 Initial Rent: $97,500
Lease 21677 Initial Rent: $75,000
Lease 21612 Initial Rent: $75,000
Lease 21356 Initial Rent: $75,000
7
76
SCHEDULE B
ADJUSTMENTS TO BASIC RENT
Restructuring Fee (Base Amount, Unadjusted) Basic Rent as Adjusted:
$3,000,000 Lease 21186: $90,000
Lease 21733: $97,500
Lease 21677: $75,000
Lease 21612: $75,000
Lease 21356: $75,000
$2,000,000 Lease 21186: $98,333
Lease 21733: $105,833
Lease 21677: $83,833
Lease 21612: $83,833
Lease 21356 $83,833
$1,500,000 Lease 21186: $102,500
Lease 21733: $110,000
Lease 21677: $87,500
Lease 21612: $87,500
Lease 21356: $87,500
8
77
SCHEDULE C
Rent Reconciliation
TABLE I - UNADJUSTED ARREARAGE
1 2 1-2
CATEGORY ACCRUED PAID DELTA
-------- ------- ---- -----
Rent $ 7,020,390 $ 7,020,390 $ -
Deposits $ 1,170,000 $ 1,170,000 $ -
Maintenance $ 3,655,313 $ 2,922,746 $ 732,567
Other $ 26,042 $ 26,042 $ -
----------- ----------- ----------
TOTAL $11,871,745 $11,139,178 $ 732,567
TABLE II - ADJUSTMENTS
MRF Claim 3040 $ (113,894)
MRF Claim 3040(b) $ (67,488)
MRF Claim 3241 $ (199,543)
MRF Claim 3262 $ (24,849)
Misc Adjustment $ (3,897)
----------
TOTAL $ (409,670)
TABLE III - INTERIM RENT CALCULATIONS W/O DEFERRAL W/ DEFERRAL
START DATE 4/29/96 0 1
CONTRACT INTERIM CONTRACT INTERIM
MSN DATE DAYS RENT (/M) RENT RENT (/M) RENT
--- ---- ---- --------- ---- --------- ----
21356 (CKL) 5/6/96 7 $ 100,000 $ 23,333 $ 87,500 $ 20,417
21186 (N159PL) 5/13/96 14 $ 115,000 $ 53,667 $ 102,500 $ 47,833
21677 (GKW) 5/20/96 21 $ 100,000 $ 70,000 $ 87,500 $ 61,250
21612 (EI-CKK) 5/20/96 21 $ 100,000 $ 70,000 $ 87,500 $ 61,250
21733 (EI-CLK) 5/27/96 28 $ 122,500 $ 114,333 $ 110,000 $ 102,667
----------- ----------- ----------- -----------
TOTAL $ 537,500 $ 331,333 $ 475,000 $ 293,417
INTERIM DEF $ 37,917
TABLE IV - WEEKLY PAYMENT CALCULATIONS (SEPARATE SHEET)
TABLE V - APRIL 29,1996 PAYMENT SUMMARY W/ PAYMENTS ON LEASE PAYMENT DATES
TOTAL from TABLE I $ 732,567
TOTAL from TABLE II $ (409,670)
TOTAL from TABLE III $ 293,417
Legal Costs $ 30,000
-----------
TOTAL $ 646,313
===========
TABLE VI - APRIL 29,1996 PAYMENT SUMMARY W/ EVEN WEEKLY PAYMENTS THRU 9/23/96
TOTAL from TABLE I $ 732,567
TOTAL from TABLE II $ (409,670)
TOTAL from TABLE IV $ 169,928
Legal Costs $ 30,000
------------
TOTAL $ 522,825
============
9
78
SCHEDULE C
Rent Reconciliation
TABLE IV - Weekly Payment Calculations
WEEKLY PMT $ 169,928 INT RATE 10.44%
DEFERRED RENT $ 12,500 /AC/M 1M LIBOR +5%
INTERIM DEF Y/N 1
---------------------------------------------------------------------------------------------------------------------------
CONTRACT RENT/ TOTAL WEEKLY TOTAL RENT TOTAL INTEREST
DATE EST MX (RUNNING) PAYMENT (RUNNING) DEFERRAL (RUNNING) (DEFERRAL)
---- ------ --------- ------- --------- -------- --------- ----------
4/29/96 $ 293,417 $ 293,417 $ 169,928 $ 169,928 $ 37,917 $ 37,917 $ -
5/6/96 87,500 380,917 169,928 339,856 12,500 50,417 76
5/10/96 214,000 594,917 - 339,856 - 50,417 134
5/13/96 102,500 697,417 169,928 509,784 12,500 62,917 177
5/20/96 175,000 872,417 169,928 679,712 25,000 87,917 303
5/27/96 110,000 982,417 169,928 849,640 12,500 100,417 479
6/3/96 - 982,417 169,928 1,019,568 - 100,417 680
6/6/96 87,500 1,069,917 - 1,019,568 12,500 112,917 766
6/10/96 214,000 1,283,917 169,928 1,189,496 - 112,917 895
6/13/96 102,500 1,386,417 - 1,189,496 12,500 125,417 992
6/17/96 - 1,386,417 169,928 1,359,424 - 125,417 1,136
6/20/96 175,000 1,561,417 - 1,359,424 25,000 150,417 1,243
6/24/96 - 1,561,417 169,928 1,529,352 - 150,417 1,415
6/27/96 110,000 1,671,417 - 1,529,352 12,500 162,917 1,544
7/1/96 - 1,671,417 169,928 1,699,280 - 162,917 1,731
7/6/96 87,500 1,758,917 - 1,699,280 12,500 175,417 1,964
7/8/96 - 1,758,917 169,928 1,869,208 - 175,417 2,064
7/10/96 214,000 1,972,917 - 1,869,208 - 175,417 2,165
7/13/96 102,500 2,075,417 - 1,869,208 12,500 187,917 2,315
7/15/96 - 2,075,417 169,928 2,039,136 - 187,917 2,423
7/20/96 175,000 2,250,417 - 2,039,136 25,000 212,917 2,691
7/22/96 - 2,250,417 169,928 2,209,064 - 212,917 2,813
7/27/96 110,000 2,360,417 - 2,209,064 12,500 225,417 3,118
7/29/96 - 2,360,417 169,928 2,378,992 - 225,417 3,247
8/5/96 - 2,360,417 169,928 2,548,920 - 225,417 3,698
8/6/96 87,500 2,447,917 - 2,548,920 12,500 237,917 3,762
8/10/96 214,000 2,661,917 - 2,548,920 - 237,917 4,035
8/12/96 - 2,661,917 169,928 2,718,848 - 237,917 4,171
8/13/96 102,500 2,764,417 - 2,718,848 12,500 250,417 4,239
8/19/96 - 2,764,417 169,928 2,888,777 - 250,417 4,668
8/20/96 175,000 2,939,417 - 2,888,777 25,000 275,417 4,740
8/26/96 - 2,939,417 169,928 3,058,705 - 275,417 5,213
8/27/96 110,000 3,049,417 - 3,058,705 12,500 287,917 5,292
9/2/96 - 3,049,417 169,928 3,228,633 - 287,917 5,786
9/6/96 87,500 3,136,917 - 3,228,633 12,500 300,417 6,115
9/9/96 - 3,136,917 169,928 3,398,561 - 300,417 6,373
9/10/96 214,000 3,350,917 - 3,398,561 - 300,417 6,459
9/13/96 102,500 3,453,417 - 3,398,561 12,500 312,917 6,717
9/16/96 - 3,453,417 169,928 3,568,489 - 312,917 6,985
9/20/96 175,000 3,628,417 - 3,568,489 25,000 337,917 7,343
9/23/96 - 3,628,417 169,928 3,738,417 - 337,917 7,633
9/27/96 110,000 3,738,417 - 3,738,417 12,500 350,417 8,020
10