Exhibit 10.49
DUPLICATE ORIGINAL
AIRCRAFT LEASE AGREEMENT
dated as of
September 27, 1996
between
BANK OF HAWAII,
LESSOR
and
ALOHA AIRLINES, INC.,
LESSEE
RECORDED
FEDERAL AVIATION ADMINISTRATION
Date 10-1-96 Time 2:01
--------- ------
Conveyance Number 2A270153
------------
By /s/ [Illegible]
--------------------
Conveyances Examiner
AIRCRAFT LEASE AGREEMENT
THIS AIRCRAFT LEASE AGREEMENT, made as of this 27th day of September,
1996 (the "Lease"), by and between BANK OF HAWAII, a banking corporation formed
under the laws of Hawaii ("LESSOR"), and ALOHA AIRLINES, INC. a corporation
formed under the laws of Hawaii ("LESSEE").
WHEREAS, LESSEE desires to lease the Aircraft (as hereinafter defined)
from LESSOR and LESSOR is willing to lease the Aircraft to LESSEE, in
accordance with and subject to the terms and conditions of this Lease.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the parties hereto, LESSOR and LESSEE
agree as follows:
SECTION 1
DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Lease and shall be equally applicable to both the singular
and the plural forms of the terms herein defined. Any agreement referred to
below shall mean such agreement, as amended, supplemented and modified from
time to time:
"ACQUISITION COST" means (i) LESSOR's cost to purchase the Aircraft,
plus (ii) all sales and excise taxes paid by LESSOR on, or with respect to the
acquisition of the Aircraft, plus (iii) all costs and expenses approved and
paid by LESSOR in connection with the delivery of the Aircraft.
"ACT" shall mean Subtitle VII of Title 49 of the United States Code and
the rules and regulations promulgated thereunder, as amended from time to time.
"AFFILIATE" shall mean, with respect to any Person, any other Person
which, directly or indirectly, controls or is controlled by or is under common
control with such Person.
"AGREED VALUE" with respect to war risks and all risks insurance shall
mean Twelve Million (US$12,000,000) Dollars with respect to the hull (including
all engines installed thereon).
"AIRGROUP" shall mean Aloha Airgroup, Inc., a corporation formed under
the laws of Hawaii.
"AIR AUTHORITY" shall mean the United States
Federal Aviation Administration, or any predecessor or
successor thereto
2
having jurisdiction over the registration, use, operation and maintenance of the
Aircraft.
"AIR CARRIER" shall mean a citizen of the United States (as defined in
40102 of Title 49 of the United States Code) holding an air carrier operating
certificate issued by the Secretary of Transportation of the United States
pursuant to chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo.
"AIRCRAFT" shall mean the Airframe, together with the two (2) Engines
(or any Replacement Engine substituted for either of such Engines hereunder),
all as more particularly described on Exhibit "A" hereto, whether or not any of
such initial or Replacement Engines may, from time to time, be installed on
such Airframe or may be installed on any other airframe or any other aircraft.
"AIRCRAFT DOCUMENTS" shall mean the items identified in Exhibit "B"
hereto.
"AIRFRAME" means (i) the Boeing model 737-230ADV aircraft (excluding
Engines or engines from time to time installed thereon), bearing United States
registration no. N821AL and manufacturer's serial no. 23155, and (ii) any and
all Parts, so long as the same shall be incorporated in such Airframe, and any
and all Parts removed from such Airframe, so long as title to such Parts shall
remain vested in LESSOR in accordance with the terms of Section 8(A).
"APPROVED INSURER" shall mean any reputable and financially sound
insurance company or insurance broker, in the U.S., London, French, German or
Japanese insurance markets, that provides or confirms the existence of any
insurance required under this Lease.
"AUTHORIZED MAINTENANCE PERFORMER" shall mean LESSEE, Air New Zealand
(▇▇▇▇▇▇ Church), Sabre Tech (Arizona), Pemco (Alabama), Tramco (Washington),
Evergreen Air Center, Inc. (Arizona), Mobile Aerospace (Alabama), Greenwich Air
Services (Florida), TIMCO (North Carolina) or such other FAA certified
maintenance performer of comparable quality and reputation to that of any of
the above listed entities, and which is approved in advance by Lessor.
"BASE TERM" means the period commencing on the Effective Date and
expiring on the Expiration Date.
"BASE RATE" shall mean, at any time, the primary index rate (the "Index
Rate") established by the Bank of Hawaii from time to time in good faith in the
ordinary course of its business and with due consideration of the money market,
and published by intrabank circular letters or memoranda for the guidance of
its loan officers in pricing all of the Bank of Hawaii's loans in respect of
which the interest rate floats with or above the Base Rate; provided that if
the Index Rate is discontinued and replaced by a comparable rate, the
comparable rate shall be substituted in
3
place of the discontinued Index Rate.
"BASIC RENT" shall mean One Hundred Thirty Two Thousand(US$132,000)
Dollars per month during the Base Term.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day
on which banks are required or authorized to close in Honolulu, Hawaii.
"CAPITAL LEASE" shall mean any lease of any property (whether real,
personal or mixed) which, in conformity with generally accepted accounting
principles, is or should be accounted for as a Capital Lease on a balance
sheet.
"CASH FLOW" shall mean LESSEE's net cash provided by operating
activities, as determined in accordance with generally accepted accounting
principles, consistently applied, adjusted for interest paid during such
period, calculated on a rolling twelve month basis and computed at the end of
each calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.
"CERTIFICATE OF ACCEPTANCE" shall mean the written certificate of
LESSEE, in substantially the form of Exhibit "C" hereto, pursuant to which
LESSEE accepts delivery of the Aircraft and confirms that the Aircraft is in
the condition required by this Lease.
"CODE" means the Internal Revenue Code of 1986, as amended and as may
hereafter be amended, and the rules and regulations promulgated pursuant
thereto.
"COMPENSATION" shall have the meaning set forth in Section 12(D).
"COMPONENT INVENTORY" shall have the meaning set forth in Section 3(D)
hereof.
"COVERED MAINTENANCE" shall have the meaning set forth in Section
7(D)(iii) hereof.
"CYCLE" shall mean one takeoff and landing of the Aircraft.
"DEBT SERVICE" shall mean the sum of regularly scheduled principal
payments, interest payments and payments under Capital Leases made by LESSEE,
calculated on a rolling twelve months basis and computed at the end of each
calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.
"DEFAULT" shall mean an event which, with the lapse of time, the giving
of notice, or both, would constitute an Event of Default.
4
"DELIVERY LOCATION" shall mean Berlin, Germany.
"DOLLARS" or "$" shall mean the legal currency of the United States of
America.
"DOT" shall mean the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"EFFECTIVE DATE" shall mean the date on which LESSEE signs and delivers
to LESSOR Lease Supplement No. 1 to this Lease.
"ENGINE" means (i) on the Effective Date, each of the two (2) ▇▇▇▇▇ &
▇▇▇▇▇▇▇ model JT8D-15 engines, bearing manufacturer's serial nos. 687334 and
708328, respectively, whether or not from time to time installed on the
Airframe or installed on any other airframe or any other aircraft, (ii) within
six (6) months of the Effective Date, each of the two (2) ▇▇▇▇▇ & Whitney model
JT8D-9A engines identified on a Lease Supplement to this Lease, whether or not
from time to time installed on the Airframe or installed on any other airframe
or any other aircraft, and (iii) any Replacement Engine, whether or not from
time to time installed on the Airframe or any other airframe or any other
aircraft, together, in each case, with any and all Parts incorporated in such
Engine and any and all Parts removed from such Engine, so long as title to such
Parts shall remain vested in LESSOR in accordance with the terms of Section
8(A). At such time as a Replacement Engine shall be substituted hereunder and
the Engine for which the substitution is made shall be released, such
Replacement Engine shall constitute an Engine hereunder and such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means, as of
any date of determination, all Engines leased hereunder.
"ENGINE MANUFACTURER" means United Technologies Corporation, ▇▇▇▇▇ &
▇▇▇▇▇▇▇ Group, Commercial Products Division, a Delaware corporation, in its
capacity as manufacturer of the Engines, and its successors and
assigns.
"EQUIPMENT CHANGE" shall have the meaning set forth in Section 8(C)
hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 18
hereof.
"EVENT OF LOSS" shall mean, with respect to the Aircraft, Airframe or
any Engine, any of the following events with respect to such property: (i) loss
of such property due to destruction, damage beyond repair or rendition of such
property unfit for normal use by LESSEE by any cause whatsoever, or any damage
to such property which results in an insurance settlement with respect to such
property on the basis of a total loss or a constructive total loss or a
compromised total loss; (ii) the disappearance, loss, theft, hijacking or
condemnation, of such property for a period in excess of thirty (30)
consecutive days; (iii) the confiscation or seizure of, or requisition of use
or title of such property for a period in excess of sixty (60) consecutive
days; or (iv) any
5
divestiture of title to an Engine treated as an Event of Loss pursuant to
Section 12(B) or any other provision hereof. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe which constitutes a part of the Aircraft.
"EXPIRATION DATE" shall mean Sept. 26, 2004.
"FAA" shall mean the Federal Aviation Administration of the DOT or any
governmental person, agency or other authority succeeding to some or all of the
functions of the Federal Aviation Administration.
"FAR" shall mean the United States Federal Aviation Regulations
currently in effect or as hereafter amended or modified.
"FIXED CHARGES COVERAGE RATIO" shall mean Cash Flow divided by Debt
Service.
"FLIGHT HOUR" shall mean each hour or fraction thereof elapsed from the
moment the wheels of the Aircraft leave the ground through the moment the
wheels of the Aircraft touch down upon the ground.
"GOVERNMENTAL ENTITY" shall mean and include: (i) any national
government and any political subdivision thereof or local jurisdiction therein;
(ii) any board, commission, department, division, organ, instrumentality, court
or agency of the foregoing, however constituted; and (iii) any association,
organization or institution of which any of the foregoing is a member, or to
whose jurisdiction any of the foregoing is subject, or in whose activities any
of the foregoing is a participant, but only to the extent that any such
association, organization or institution has jurisdiction over the Aircraft or
its operations.
"HUSHKIT" shall mean one (1) shipset of Nordam high gross weight
hushkits installed on the Aircraft on the Effective Date.
"INDEMNITEE" means LESSOR, and its respective successors and permitted
assigns and its respective directors, officers, shareholders, members and
employees.
"JETZ VENTURES" shall mean Jetz Ventures Inc.
"LAW" shall mean and include: (i) any statute, decree, constitution,
regulation, order or other directive of any Governmental Entity; (ii) any
treaty, pact, compact or other agreement to which any Governmental Entity is a
signatory or party; (iii) any judicial or administrative interpretation or
application of any of the foregoing; and (iv) any amendment or revision of any
of the foregoing.
"LEASE," "THIS LEASE," "THIS AGREEMENT," "HEREBY," "HEREIN," "HEREOF,"
"HEREUNDER" or other like words shall mean this Aircraft Lease Agreement, as
the same may be supplemented or
6
amended, in writing, from time to time.
"LEASE DOCUMENTS" shall mean this Lease, each Lease Supplement, the
Certificate of Acceptance and the Power of Attorney.
"LEASE SUPPLEMENT" means a supplement to this Lease, substantially in
the form attached as Exhibit "D" hereto, subjecting the property described
therein to this Lease.
"LESSEE'S ADDRESS" shall mean ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇;
Attn.: Senior Vice President and CFO; Telefax No.: 808-833-3100.
"LESSOR'S ADDRESS" shall mean ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Attn.: ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇; Telefax ▇▇▇-▇▇▇-▇▇▇▇.
"LESSOR'S LIENS" means the Liens of any Person claiming by, through or
under LESSOR, which arises as a result of (i) claims by or against any such
Person not related to, or expressly permitted by, the Lease, (ii) any act or
omission of any such Person which is not expressly permitted by the Lease,
(iii) taxes or expenses imposed by or against any such Person (or the
consolidated group of taxpayers of which it is a member) for which LESSEE is
not obligated to indemnify pursuant to Section 11, or (iv) claims by or against
any such Person arising out of any transfer by such Person of its interest in
the Aircraft, other than a transfer resulting from LESSOR's exercise of
remedies while an Event of Default has occurred and is continuing pursuant to
Section 19.
"LIEN" shall mean any mortgage, pledge, lien, encumbrance, security
interest or other claim affecting the title to, or any interest in, property.
"LUFTHANSA" shall mean Deutsche Lufthansa Aktiengesellschaft.
"MAINTENANCE PROGRAM" shall mean LESSEE's FAA approved Part 121
maintenance program or the Air Authority FAR Part 121 approved maintenance
program of an approved sublessee, covering scheduled maintenance,
condition-monitored maintenance and on-condition maintenance of airframe,
engines and components of the Aircraft, including, but not limited to,
servicing, testing, preventive maintenance, repairs, structural inspections,
system checks, overhauls, approved modifications, service bulletins,
engineering orders, airworthiness directives, corrosion control inspections and
treatments.
"MANUFACTURER" shall mean The Boeing Company, a Washington corporation,
in its capacity as manufacturer of the Airframe, and its successors and
assigns.
"MINIMUM LIABILITY COVERAGE" shall mean Three Hundred Fifty
Million(US$350,000,000) Dollars per occurrence.
7
"OFFICER'S CERTIFICATE" shall mean a certificate signed by the
chairman, the president, any vice president, the treasurer, any assistant
treasurer, the secretary or any assistant secretary of the Person providing
such certificate.
"OVERDUE RATE" shall mean a floating rate per annum equal to the Base
Rate, plus six percentage points (6%).
"PARTS" means all appliances, parts, instruments, avionics,
appurtenances, accessories, furnishings and other equipment or components, of
whatever nature (other than complete Engines) and other than removable Parts,
along with any seats and galleys leased from third parties, which are, from
time to time, incorporated in the Airframe or any Engine, or so long as title
to such Parts shall remain vested in LESSOR, in accordance with Section 8(A)
hereof, after removal from the Airframe or any Engine.
"PERMITTED LIENS" shall mean, with respect to the Aircraft, the
Airframe or any Engine (a) the respective rights of the parties under this
Lease and each Lease Supplement; (b) LESSOR's Liens; (c) liens for taxes,
assessments or other governmental charges either not yet due or being contested
in good faith by appropriate proceedings, so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft,
the Airframe or any Engine and provided that with respect to such liens,
assessments or governmental charges, LESSEE has provided for adequate reserves,
as determined in accordance with generally accepted accounting principles, to
satisfy in full the amount of such lien plus interest and penalties thereon, or
has posted a bond, issued by a bonding or insurance company reasonably
acceptable to LESSOR, and in an amount sufficient to satisfy in full the amount
of such lien plus interest and penalties thereon; (d) materialmen's,
mechanic's, worker's, repairer's, employee's or other like liens for amounts,
the payment of which is either not yet delinquent for more than thirty (30)
days or is being contested in good faith by appropriate proceedings, so long as
such proceedings do not involve any material danger of the sale, forfeiture or
loss of the Aircraft, the Airframe or any Engine and so long as LESSEE has
provided for adequate reserves, as determined in accordance with generally
accepted accounting principles, to satisfy in full the amount of such lien plus
interest and penalties thereon, or has posted a bond, issued by a bonding or
insurance company reasonably acceptable to LESSOR, and in an amount sufficient
to satisfy in full the amount of such lien plus interest and penalties thereon;
(e) liens arising out of any judgment or award, unless the judgment secured
shall not, within thirty (30) days after entry thereof, have been discharged or
vacated or execution thereof stayed pending appeal or shall not have been
discharged, vacated or reversed within thirty (30) days after the execution of
such stay, and provided such lien presents no material danger of the sale,
forfeiture or loss of the Aircraft, the Airframe or any Engine or of LESSOR's
interest therein and so long as LESSEE has provided for adequate reserves, as
determined in accordance with generally accepted accounting principles, to
satisfy in full the amount of such lien plus interest and penalties
8
thereon, or has posted a bond, issued by a bonding or insurance company
reasonably acceptable to LESSOR, and in an amount sufficient to satisfy in full
the amount of such lien plus interest and penalties thereon.
"PERSON" shall mean and include any individual, corporation, limited
liability company, partnership, limited liability partnership, firm, joint
venture, trust, unincorporated organization, association, Governmental Entity,
or any organization or association of which any of the foregoing is a member or
participant.
"POWER OF ATTORNEY" shall mean that certain power of attorney from
LESSEE to LESSOR, to be executed in the form attached hereto as Exhibit "E",
pursuant to which LESSEE designates LESSOR as attorney-in-fact to do all things
which LESSEE could do under this Lease in the event LESSEE fails to fulfill any
of its obligations hereunder, including but not limited to, terminating this
Lease and LESSEE's interest herein.
"RENT" shall mean Basic Rent and Supplemental Rent.
"RENT DATE" shall mean each date on which a payment of Basic Rent is
due. The first Rent Date shall be the Effective Date and each subsequent Rent
Date shall be the corresponding date in each consecutive month during the Base
Term. If a Rent Date shall in any month not be a Business Day, then the Rent
Date shall be the immediately following Business Day.
"REPLACEMENT ENGINE" shall have the meaning set forth in Section
12(B) hereof.
"RETURN LOCATION" shall mean LESSEE's maintenance facilities in
Honolulu, Hawaii or such location in the western continental United States, as
LESSOR shall designate (provided that facilities exist at such location
designated by LESSOR so as to permit the performance of a boroscope inspection
and engine power assurance run), or such other location as LESSOR and LESSEE
shall agree upon. In the event LESSOR directs LESSEE to return the Aircraft in
the western continental United States, LESSOR shall pay LESSEE's ferry costs
(including the cost of fuel, which cost to LESSOR shall be the same cost as
charged to LESSEE at the point of fueling) from Honolulu to such location
(unless the Aircraft is being returned due to the occurrence of an Event of
Default).
"RETURN OCCASION" shall have the meaning set forth in Section 17(A)
hereof.
"SUPPLEMENTAL RENT" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which LESSEE assumes or agrees to pay to LESSOR or any
other Person hereunder, including, without limitation, all amounts required to
be paid by LESSEE under its indemnification pursuant to Section 14 hereof.
"TAXES" shall mean any and all sales, withholding, use, excise,
personal property, ad valorem, value added, stamp, interest
9
equalization, taxes levied upon LESSEE's income, gross levies, customs or other
duties, or other charges of any nature, together with any penalties, fines or
interest thereon, imposed, levied or assessed by, or otherwise payable to, any
Governmental Entity. Excluded from this definition shall be (i) any taxes
imposed by any taxing authority within the jurisdiction of the Delivery
Location, (ii) any taxes based on or measured by the gross or net income of
LESSOR or any Indemnitee (including, without limitation, any franchise tax, any
capital gains tax, any minimum or alternative minimum tax and any taxes
measured on or by any items of tax preference), and (iii) the Hawaii Capital
Goods Excise Tax and Hawaii General Excise Tax, or any successor thereto,
assessed by the State of Hawaii on the sale of goods or services.
SECTION 2
LEASE OF AIRCRAFT
LESSOR hereby agrees to lease the Aircraft to LESSEE and LESSEE hereby
agrees to lease the Aircraft from LESSOR pursuant to the provisions of this
Lease.
SECTION 3
DELIVERY AND ACCEPTANCE; TERM
(A) DATE OF DELIVERY. LESSEE shall take delivery of the Aircraft and
Aircraft Documents and execute and deliver to Lessor Lease Supplement No. 1 to
this Lease on the Effective Date on not less than five (5) days' prior written
notice from LESSOR to LESSEE.
(B) PLACE OF DELIVERY AND ACCEPTANCE. The Aircraft and Aircraft
Documents shall be delivered to and accepted by LESSEE at the Delivery
Location, unless LESSOR and LESSEE otherwise agree in writing upon another
location subsequent to the execution of this Lease.
(C) CASUALTY TO AIRCRAFT PRECEDING DELIVERY. In the event that an Event
of Loss occurs with respect to the Aircraft prior to the Effective Date hereof,
this Lease shall thereupon terminate and neither LESSOR nor LESSEE shall have
any further obligation to the other hereunder.
(D) ACCEPTANCE OF AIRCRAFT. The Aircraft to be leased hereunder shall be
delivered to LESSEE in its "AS IS," "WHERE IS" condition, SUBJECT TO EACH AND
EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SUBSECTION
6(A) HEREOF, except that the Aircraft shall comply with the conditions set forth
on Exhibit "F". LESSEE shall indicate and confirm its acceptance of the Aircraft
by delivery to LESSOR of a (i) Lease Supplement, and (ii) Certificate of
Acceptance, dated on the Effective Date. At or
10
preceding the time of acceptance of the Aircraft, LESSOR shall deliver to
LESSEE a written equipment inventory of the Aircraft, prepared by LESSOR (the
"Component Inventory") or Lufthansa.
(E) TERM OF LEASE. The term of this Lease, as to the Aircraft, shall be
for the Base Term.
SECTION 4
CONDITIONS PRECEDENT
(A) CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS. LESSOR's obligation
to lease the Aircraft hereunder to LESSEE shall be subject to the receipt by
LESSOR or the performance or occurrence, on or before the Effective Date (or
such other date as provided for herein), of the following from LESSEE, all of
which shall be satisfactory in form and substance to LESSOR:
(1) Certified copy of a resolution of LESSEE's Board of Directors,
certified by an officer of LESSEE, authorizing the entering into and
performance of this Lease together with an incumbency certificate as to the
person or persons authorized to execute and deliver this Lease and the other
Lease Documents on behalf of LESSEE;
(2) Certified copy of LESSEE's articles or certificate of incorporation
and by-laws certified by an officer of LESSEE;
(3) A favorable opinion of counsel to LESSEE, dated the Effective Date,
addressed to LESSOR, and which opinion shall opine, among other things, that
the Lease and all of the terms thereof constitutes the valid and binding
obligation of LESSEE enforceable in accordance with its terms and that the
interests of LESSOR in the Aircraft and this Lease are fully protected and
perfected;
(4) A copy of LESSEE's air carrier operating certificate, as issued by
the Secretary of Transportation of the United States pursuant to Chapter 47 of
Title 49 of the United States Code for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more of cargo, duly certified as being true,
correct, accurate and complete by an officer of LESSEE;
(5) The LESSOR shall be satisfied that all necessary licenses and
permits for the exportation of the Aircraft from Germany and the importation of
the Aircraft into United States have been obtained by LESSEE and remain valid
and in full force and effect and that any applicable customs duties, stamp
duties and all other Taxes, if any, shall have been paid by LESSEE as a
consequence of the importation of the Aircraft, the entering into of this
Lease, the performance of the terms of this Lease and the leasing of the
Aircraft;
(6) An Officer's Certificate of LESSEE, dated as of the Effective Date,
stating that:
11
(a) The representations and warranties contained in Subsection
6(C) hereof are true and accurate on and as of such date as though made
on and at such time (except to the extent that such representations and
warranties relate solely to an earlier date); and
(b) No event has occurred and is continuing, or would result
from the leasing of the Aircraft, which constitutes a Default or an
Event of Default or would constitute a Default or an Event of Default
with the giving of notice or the passage of time or both;
(7) Not less than three (3) Business Days prior to the Effective Date,
certificates and a broker's undertaking letter, signed by an Approved
Insurer(s), as to due compliance with the insurance provisions of Section 13
hereof with respect to the Aircraft;
(8) The Power of Attorney;
(9) A written statement, on the letterhead of LESSEE, for presentation
to the export control authority of the Federal Republic of Germany (Bundesamt
fur Wirtschaft) that neither the Aircraft nor parts thereof nor any spare
parts, if any, delivered to the LESSEE shall directly or indirectly be sold,
leased, released, assigned, transferred, conveyed or in any manner disposed of
in or to any country other than the United States of America without due prior
written consent of the Bundesamt fur Wirtschaft, except to Australia, Austria,
Belgium, Luxembourg, Denmark, France, Greece, Great Britain, Ireland, Italy,
Switzerland or Turkey; and
(10) Such other documents which LESSOR or its counsel may reasonably
require.
(B) CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS. LESSEE's obligation
to lease the Aircraft hereunder from LESSOR shall be subject to the receipt by
LESSEE or the performance or occurrence, on or before the Effective Date (or
such other date as provided for herein),of the following from LESSOR, all of
which shall be satisfactory in form and substance to LESSEE:
(1) The Aircraft shall be in the condition required by Exhibit "F"
hereto;
(2) The Aircraft shall be registered in the United States in the name
of LESSOR;
(3) Lufthansa shall have provided to LESSEE, on a reasonably timely
basis prior to the Effective Date, such information as LESSEE shall reasonably
require in connection with obtaining all necessary licenses, permits and
authorizations for the exportation of the Aircraft from Germany and the
importation of the Aircraft to the United States; and
(4) LESSOR shall have tendered the Aircraft to LESSEE for delivery not
later than November 26, 1996.
12
SECTION 5
RENT AND MAINTENANCE RESERVES
(A) RENT. LESSEE covenants and agrees to pay to LESSOR, or to any of
LESSOR's assigns designated to LESSEE in writing by LESSOR, the Rent.
(1) BASIC RENT. The Basic Rent shall be paid by LESSEE to LESSOR
in respect of the Aircraft, in advance, on each Rent Date. The first
payment of Basic Rent shall be paid by LESSEE to LESSOR on the Effective
Date.
(2) SUPPLEMENTAL RENT. LESSEE agrees to pay to LESSOR, or to
whomsoever shall be entitled thereto, any and all Supplemental Rent
promptly as the same shall become due and owing, and in the event of any
failure on the part of LESSEE to pay any Supplemental Rent, LESSOR shall
have all rights, powers and remedies provided for in this Lease or by
Law or equity or otherwise in the case of nonpayment of Basic Rent.
LESSEE will also pay to LESSOR, on demand, as Supplemental Rent, to the
extent permitted by applicable Law, interest at the Overdue Rate on any
part of any installment of Basic Rent not paid when due for the period
from and including the Rent Date to and including the date of actual
payment in full, and on any Supplemental Rent not paid when due or
demanded by LESSOR for any period for which the same shall be overdue.
(B) FORM OF PAYMENT. Payment of Rent and any other payments due under
this Lease, shall be made in Dollars in immediately available funds to LESSOR
or its assignee at such address and account as LESSOR may specify in writing.
Payment shall be made on the Rent Date, or the Business Day thereafter if the
Rent Date is not a Business Day, so as to reach LESSOR or its designated
depository not later than 3:00 p.m. Hawaii time, on the Rent Date or the
Business Day thereafter, as the case may be.
(C) RENT NOT REDUCED BY TAXES. LESSEE agrees that each payment of Rent
pursuant to this Lease shall be free of all Taxes and, in the event that any
Taxes are imposed, levied, assessed by, or otherwise payable with respect to or
arising out of the leasing or operation of the Aircraft by LESSEE, LESSEE shall
pay such amounts as are necessary to enable LESSOR and each assignee of LESSOR
to whom payments of Rent are to be made by LESSEE, to receive each payment of
Rent hereunder, under any circumstances and in any event, in the full amounts
required hereunder on an aftertax basis, without any reduction whatsoever.
(D) MAINTENANCE RESERVE. Provided Airgroup meets the Credit Standards,
then LESSEE shall not be required to pay Reserves for any period for which
Reserves would otherwise be payable, as
13
provided below. Airgroup shall be deemed to have satisfied the Credit Standards
provided Airgroup maintains (1) a Fixed Charges Coverage Ratio equal to not
less than 1.05, calculated on a rolling twelve month basis and (2) a minimum
tangible net worth (tangible net worth being determined in accordance with
Generally Accepted Accounting Principles, consistently applied) of $4,000,000,
calculated on a rolling twelve month basis and computed at the end of each
calendar quarter, with the first computation being made as of the calendar
quarter ending March 31, 1997.
Commencing as of the calendar quarter ending March 31, 1997, and for
each calendar quarter thereafter (each such date a "Review Date") during the
Base Term, if LESSEE failed to meet the Credit Standards as calculated on a
rolling twelve month basis, LESSEE shall pay to LESSOR Reserves on account of
the operation for the Aircraft for each subsequent month following the Review
Date on which it was determined that LESSEE failed to meet the Credit Standards
up through and including the next Review Date on which it is determined that
LESSEE meets the Credit Standards, in an amount equal to Two Hundred Forty Five
(US$245.00) Dollars per each Flight Hour incurred on the Aircraft in the
previous calendar month, which amount shall be allocated at Seventy Five
(US$75.00) Dollars per Flight Hour for the Airframe (the "Airframe Reserve"),
Seventy (US$70.00) Dollars per Engine for each Engine Flight Hour (the "Engine
Reserve"), Twenty ($20.00) Dollars per Flight Hour for the landing gear (the
"Landing Gear Reserve") and Ten ($10.00) Dollars per Flight Hour for the APU
(the "APU Reserve") (each a "Reserve" and collectively, the "Reserves"). All
Reserves to be paid by LESSEE to LESSOR shall be paid in arrears, not later
than ten (10) days following the last day of the month for which the Reserves
payment was calculated except the Reserve payment for the month immediately
preceding the date of the Return Occasion (as defined in Section 17(A)) shall
be paid on the date of the Return Occasion. All Reserves paid by LESSEE to
LESSOR will be held by LESSOR and shall be disbursed by LESSOR (or LESSOR shall
cause the same to be disbursed) only to pay for Covered Maintenance pursuant to
Section 7(D) hereof.
(E) NET LEASE, LESSEE'S OBLIGATIONS; NO SETOFF; COUNTERCLAIM, ETC. This
is a net operating lease. It is the intent of the parties hereto that this
Lease be a "true lease" and a lease for United States federal income tax
purposes. LESSEE acknowledges and agrees that it has no interest herein other
than that of a lessee. Except as otherwise provided herein, LESSEE's obligation
to pay all Rent payable hereunder shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever, including, without limitation,
(i) any Taxes (other than Taxes applicable to said Rent for which LESSEE has no
indemnification obligation under Section 11 hereof), any setoff, counterclaim,
recoupment, defense or other right which LESSEE may have against LESSOR; (ii)
any defect in the title, airworthiness, condition, design, operation or fitness
for use of, or any damage to or loss or destruction of, the Aircraft, Airframe
or any Engine, or any interruption or cessation in the use or possession
thereof by LESSEE for any reason whatsoever; (iii) any insolvency, bankruptcy,
reorganization or similar proceedings by or against
14
LESSEE; (iv) any restriction, prevention or curtailment of, or interference
with, any use of the Aircraft, Airframe or any Engine; (v) any invalidity or
unenforceability or disaffirmance of this Lease or any provision hereof,
whether against or by LESSEE or otherwise; or (vi) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
The foregoing provisions shall not be construed as a waiver by LESSEE of any
right to bring a separate action against LESSOR to recover amounts allegedly
due from LESSOR to LESSEE.
SECTION 6
REPRESENTATIONS AND WARRANTIES
(A) DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN TO
THE CONTRARY, LESSOR HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE MADE, BY
VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER THIS LEASE, AND LESSOR HEREBY
DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
AIRWORTHINESS, VALUE, CONDITION, COMPLIANCE WITH SPECIFICATIONS, DURABILITY,
RELIABILITY, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE OR
PARTICULAR PURPOSE OF THE AIRCRAFT, OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, OR ANY PART THEREOF, OR AS TO ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT
TO THE AIRCRAFT, OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITY IN CONTRACT, TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE,
STRICT LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR
DEALING OR USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS,
OR OTHER CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES,
AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES.
As an exception to the foregoing, LESSOR represents and warrants
that, on the Effective Date:
(1) LESSOR shall have the lawful right to lease the Aircraft to
LESSEE in accordance with the terms of this Lease;
(2) LESSOR is a Hawaii banking corporation and has the corporate
and banking power and authority to enter into and perform its
obligations under this Lease and all other Lease Documents to which
LESSOR is a party; and
(3) This Lease and all other Lease Documents to which LESSOR is
a party have been duly entered into and delivered by LESSOR and
constitutes a valid, legal and binding obligation of LESSOR, enforceable
in accordance with its terms, except as such enforceability may be
limited by bankruptcy, moratorium, reorganization and similar Laws and
by general principles of equity, whether considered in a proceeding at
Law or in equity.
15
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE PRECEDING
EXCEPTION CLAUSE CONSTITUTE THE SOLE EXCEPTION TO THIS SUBSECTION 6(A)
AND IS EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES
OF LESSOR EXPRESS OR IMPLIED.
(B) MANUFACTURER'S WARRANTIES. So long as no Event of Default under
this Lease has occurred and is continuing, LESSOR agrees to assign or otherwise
make available to LESSEE such rights as LESSOR may have, if any, under any
warranty, express or implied, with respect to the Aircraft made by the
Manufacturer, Engine Manufacturer, any subcontractor or supplier thereof, to
the extent that the same may be assigned or otherwise made available to LESSEE
and, to the extent that the same may not be assigned or otherwise made
available to LESSEE, LESSOR agrees to exert its reasonable efforts, at LESSEE's
sole cost and expense, to enforce such rights as LESSOR may have with respect
thereto for the benefit of LESSEE; provided, however, that upon an Event of
Default all such rights shall, without further action or notice, immediately
revert to LESSOR, including all claims thereunder, whether or not perfected;
provided that notwithstanding any provision in this Lease to the contrary,
LESSEE agrees that the LESSOR shall have the right to assert and prosecute all
of LESSOR's claims with respect to any and all such warranties and to receive
and keep all payments in respect of such claims solely for LESSOR's account to
the extent that such claims of LESSOR do not conflict and are not inconsistent
with the LESSEE's claims in respect thereof as to which LESSEE has asserted or
notified LESSOR in writing that LESSEE will assert.
(C) LESSEE'S REPRESENTATIONS AND WARRANTIES. LESSEE represents and
warrants, as of the Effective Date, and all such representations and warranties
being continuing, that:
(1) LESSEE is a corporation duly organized and existing in good
standing under the Laws of Hawaii and has the corporate power and authority to
carry on its business as presently conducted and to perform its obligations
under this Lease and the other Lease Documents;
(2) LESSEE is not a Governmental Entity or government owned or
controlled and neither LESSEE or its properties is immune from the jurisdiction
of any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) nor does it have the defense of sovereign immunity or similar
defense available to it in any legal action or proceeding;
(3) LESSEE is a citizen of the United States (as defined in 40102
of Title 49 of the United States Code) holding an air carrier operating
certificate issued by the Secretary of Transportation of the United States
pursuant to chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo;
(4) At the time of delivery of the Aircraft to LESSEE, the Aircraft
will be eligible for U.S. registration
16
(assuming LESSOR meets the citizenship requirements for registration of an
Aircraft as set forth in the FAR's) and may be operated by LESSEE in accordance
with all applicable Hawaii and Federal Aviation rules and regulations
notwithstanding the fact, among other things, that the Aircraft will now be
operated in the United States (not having previously been operated in the United
States), will be added to the U.S. aircraft registry and the Aircraft will not
meet the Stage III noise regulations set forth in FAR Part 36;
(5) In the event LESSEE files a petition for relief under Chapter
11 of the United States Bankruptcy Code, as amended, or has such a petition
filed against it, LESSOR will be entitled to the rights provided to a "lessor"
under the provisions of 11 U.S.C. Section 1110(a)(1) and LESSEE will not oppose
and will consent to any motion made by LESSOR under said Section 1110 to take
possession of the Aircraft pursuant to the provisions thereof;
(6) This Lease and all other Lease Documents to which LESSEE is a
party have been duly authorized by all necessary corporate action on the part
of LESSEE, do not require any approval of the stockholders of LESSEE (or if
such approval is required, such approval has been obtained), and neither the
execution and delivery hereof nor the consummation of the transactions
contemplated hereby nor compliance by LESSEE with any of the terms and
provisions hereof will contravene any Law applicable to LESSEE or result in any
breach of, or constitute any default under, or result in the creation of, any
lien, charge or encumbrance upon any property of LESSEE under any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank
loan or credit agreement, corporate charter or by-law, or other agreement or
instrument to which LESSEE is a party or by which LESSEE or its properties or
assets may be bound or affected;
(7) LESSEE has received or has complied with every necessary
consent, approval, order, or authorization of, or registration with, or the
giving of prior notice to, any Governmental Entity having jurisdiction with
respect to the use and operation of the Aircraft and the execution and delivery
of this Lease and all other Lease Documents to which LESSEE is a party or the
validity and enforceability hereof and thereof;
(8) This Lease and all other Lease Documents to which LESSEE is a
party have been duly entered into and delivered by LESSEE and constitutes a
valid, legal and binding obligation of LESSEE, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
reorganization, moratorium or other similar Laws and by general principles of
equity, whether considered in a proceeding at Law or in equity;
(9) There are no suits or proceedings pending, or to the knowledge
of LESSEE, threatened against or affecting LESSEE or its properties, which may
have a material adverse effect on the financial condition or business of LESSEE
or upon LESSEE's ability to perform its obligations hereunder;
(10) LESSEE has filed or caused to be filed all
17
material tax returns which are required to be filed by LESSEE and has paid or
caused to be paid all Taxes shown to be due or payable on said returns or on
any assessment received by LESSEE, except those the validity of which is
contested by LESSEE in good faith by appropriate proceedings duly instituted
and diligently prosecuted;
(11) It is not necessary or advisable under any applicable Law in
order to ensure the validity, effectiveness and enforceability of this Lease
that this Lease or any other instrument relating thereto be filed, registered
or notarized or that any other action be taken, other than the filing and
registration of this Lease with the FAA and filing of UCC-1 financing
statements with the Bureau of Conveyances of the State of Hawaii;
(12) Except for the registrations and filings described in (11)
above, no other filing or registration of any instrument or document is
necessary under any applicable Law in order to protect LESSOR'S title to and
ownership of the Aircraft and interest in this Lease;
(13) Neither the payment of Rent nor the payment of any other
amount required under this Agreement is subject to deduction or withholding
under any applicable Law;
(14) No Default or Event of Default has occurred and is continuing;
(15) The obligations of LESSEE to make payments hereunder will rank
at least PARI PASSU in right of payment with all other unsecured,
unsubordinated obligations of LESSEE;
(16) LESSEE has furnished to LESSOR copies of Airgroup's audited
consolidated financial statements as of December 31, 1995, as certified by
Airgroup's independent certified public accountants, and uncertified quarterly
consolidated financial statements of Airgroup for the quarter ending March 31,
1996, and in each instance prepared in accordance with generally accepted
accounting principles, consistently applied. Such financial statements present
a true and accurate view of the financial condition of LESSEE and Airgroup,
respectively, as of the date of such financial statements. Since the date of
such financial statements, no material adverse change has occurred in LESSEE's
or Airgroup's financial condition or their results of operations, and nothing
has occurred that can reasonably be expected to have a material adverse effect
on the ability of LESSEE and Airgroup to carry on their respective businesses
and operations and for LESSEE to perform its obligations under this Lease;
(17) Neither the financial statements of Airgroup nor any other
material document furnished by or on behalf of LESSEE or Airgroup to LESSOR in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained in this Lease not misleading. LESSEE knows of no
fact that materially adversely affects or, so far as LESSEE can now reasonably
foresee,
18
will materially adversely affect the business, financial condition, operations
or properties of LESSEE or the ability of LESSEE to perform its obligations
under the Lease Documents; and
(18) Airgroup owns one hundred percent (100%) of the issued and
outstanding stock of LESSEE.
(D) NOTIFICATION. During the Term of this Lease, at the end of each
calendar quarter, LESSEE shall send an officer's certificate to LESSOR
notifying LESSOR of any condition that materially changes the content of any of
the representations and warranties made as of the Effective Date under Section
6(C) hereof or certifying that there has been no such change.
SECTION 7
POSSESSION, USE, MAINTENANCE, TITLE AND REGISTRATION
(A) POSSESSION. Except as expressly provided in Subsection 8(B) and
Section 22, LESSEE shall not transfer possession of the Aircraft or any Engine
or part thereof to any Person without the prior written consent of LESSOR,
which consent shall not be unreasonably withheld, provided that, so long as no
Default or Event of Default or event which would constitute an Event of Default
with the giving of notice or lapse of time, or both, shall have occurred and be
continuing and so long as LESSEE shall comply with the provisions of Section 13
hereof, LESSEE may, so long as the action to be taken shall not deprive LESSOR
of any of its title to and interest in the Aircraft, the Airframe or any Engine
and shall not adversely affect the registration of the Aircraft under the Laws
of the United States, without the prior written consent of LESSOR, deliver
possession of the Aircraft, the Airframe or any Engine or other Part thereof to
the Manufacturer, the Engine Manufacturer or Authorized Maintenance Performer,
as appropriate, for testing, service, repair, maintenance or overhaul work on
the Aircraft, the Airframe, any Engine or Part, or for alterations,
modifications, or additions thereto, to the extent required or permitted by the
terms of Subsection 7(D) hereof.
(B) USE. LESSEE shall use the Aircraft solely in commercial passenger
carrying operations in accordance with all Laws applicable to it and shall not
use or permit the Aircraft to be used for any purpose for which the Aircraft is
not designed or reasonably suited. LESSEE shall not use or permit the use of
the Aircraft for the carriage of (i) whole animals, living or dead, except in
cargo compartments according to International Air Transport Association
("I.A.T.A.") regulations and except domestic pet animals carried in suitable
containers to prevent the escape of any fluids and to ensure the welfare of the
animal, (ii) acids, toxic chemicals, other corrosive materials, explosives,
nuclear fuels, nuclear wastes or any other nuclear assemblies except as
permitted for passenger aircraft under the "Restriction of Goods" schedule
issued by I.A.T.A. from time to time, or (iii) any other goods, materials or
items of cargo that would not be adequately covered by the insurance required
or obtained pursuant to this
19
Lease.
(C) LAWFUL INSURED OPERATIONS. LESSEE shall not permit the Aircraft to
be maintained, used, or operated in violation of any Law of any Governmental
Entity having jurisdiction, or contrary to the Manufacturer's or Engine
Manufacturer's operating manuals and instructions, or in violation of any
airworthiness certificate, license, or registration relating to the Aircraft
issued by the FAA or any other Governmental Entity having jurisdiction, unless
the validity thereof is being contested in good faith and by appropriate
proceedings duly instituted and diligently prosecuted, but only so long as such
proceedings will not result in the sale, forfeiture, loss of valid insurance
coverage upon, or loss of, the Aircraft, the Airframe, any Engine or any Part.
LESSEE shall comply with the foregoing, at its sole cost and expense, and shall
maintain the Aircraft in proper condition for operation under such Laws. LESSEE
agrees not to operate the Aircraft, or to permit or suffer the Aircraft to be
operated, within or into any geographic area:
(1) unless the Aircraft is at all such times covered by insurance as
required by the provisions of Section 13 hereof;
(2) contrary to the terms of such insurance as required by the
provisions of Section 13 hereof; and
(3) in violation of any Law, rule, order or regulation of any
Governmental Entity.
LESSEE shall deliver to LESSOR such documents and assurances as LESSOR may
request under the provisions of Section 16 hereof to evidence compliance with
the foregoing.
(D) MAINTENANCE.
(i) LESSEE, at its own cost and expense, shall:
(a) service, repair, maintain, overhaul, test, or cause the
same to be done to the Aircraft so as to keep the Aircraft in as
good operating condition as when delivered to LESSEE hereunder,
ordinary wear and tear excepted, and such operating condition as
required by the Maintenance Program and as may be necessary to
enable the airworthiness certification of the Aircraft to be
maintained in good standing at all times under the applicable rules
and regulations of the FAA;
(b) perform all routine and non-routine services, checks and
corrosion control and inspections, including any structural
inspections requirements (SSID's) and "A", "B", "C" or "D" checks
(or the equivalent thereof) required by the Maintenance Program,
the Manufacturer or the Air Authority;
(c) maintain, in accordance with FAR Part 121,
20
all records, logs and other materials required by applicable Laws
of any Governmental Entity and the Air Authority to be maintained
in respect of the Aircraft, including but not limited to
serviceable component tags required by the Air Authority;
(d) throughout the Base Term of this Lease, at the end of each
calendar quarter, provide LESSOR with a written projection of the
next scheduled commencement date of each "C" or "D" check to be
performed on the Aircraft and each scheduled engine overhaul and
the location where such checks and overhauls are scheduled to be
performed;
(e) designate representatives to coordinate with LESSOR or
LESSOR's representatives on maintenance and warranty matters;
(ii) All maintenance of the Aircraft and Engines shall be performed
by the Authorized Maintenance Performer.
(iii) (A) "Covered Maintenance" means, at any time, the D check for
the Airframe, the scheduled heavy maintenance check or hot section inspection
for the engine, the scheduled overhaul for the landing gear and the scheduled
heavy maintenance check or hot section inspection for the APU, respectively,
pursuant to the Maintenance Program. Excluded from Covered Maintenance shall be
overhaul or repairs caused by F.O.D, operational mishandling or by events that
can be insured against. The cost of Covered Maintenance shall be limited to the
actual cost of replacement parts plus the cost of the associated labor at
LESSEE's in-house labor rates if the work is performed by LESSEE, or at
third-party costs charged to LESSEE if the work is performed by third parties,
and shall in no event include, late charges, interest, ▇▇▇▇-ups or premium
charges by LESSEE or other similar amounts.
(B) Unless an Event of Default shall have occurred and be
continuing, to the extent that LESSEE has paid Reserves pursuant to the terms
of this Lease and such Reserves have not previously been disbursed by LESSOR in
accordance with the terms hereof, the LESSOR shall pay to the LESSEE, within
five (5) Business Days after receipt of:
(a) an Officer's Certificate stating:
(1) that Covered Maintenance has been performed on
the Airframe, Engines, APU or landing gear, respectively, and
the cost thereof, or
(2) that advance payments are required by a
third-party Authorized Maintenance Performer under a contract
covering any such work, and the amount of such payments; and
(b) appropriate documentation with respect to such work
or payments,
an amount equal to the actual cost of such work or such advance
21
payment, as the case may be, up to the amount of the then unutilized Airframe
Reserves for such Covered Maintenance on the Airframe, up to the amount of the
then unutilized Engine Reserves for such Covered Maintenance on the Engines, up
to the amount of the then unutilized APU Reserves for such Covered Maintenance
on the APU and up to the amount of the then unutilized Landing Gear Reserves
for such Covered Maintenance on the landing gear; PROVIDED, HOWEVER, that (i)
at no time shall the amount of any Reserve to be made available by LESSOR for
Covered Maintenance exceed the aggregate amount remaining in such Reserve as of
the date the Covered Maintenance was completed, and (ii) all Reserves
(including but not limited to the Reserves for each Engine) shall be kept
segregated and, except as expressly provided below, LESSEE may only draw upon
the Reserves specifically allocated to the item on which Covered Maintenance
was performed. Upon the termination of this Lease for any reason whatsoever
(including, without limitation, the occurrence of an Event of Default), any
amounts paid to LESSOR as Reserves and not used to reimburse LESSEE for Covered
Maintenance shall be retained by LESSOR free and clear of any claim by LESSEE.
Notwithstanding the foregoing, but subject to the condition precedent that no
Event of Default has occurred and is continuing, in the event that LESSEE
performs or is required to perform Covered Maintenance on the Airframe, either
Engine, the APU or the landing gear, as the case may be, in order to meet in
full, on the Expiration Date, the return conditions set forth herein, and the
allocated Reserve amount for such item is insufficient to pay in full the cost
of the Covered Maintenance for such item, then in any such event, and only in
such event, LESSEE shall be entitled to draw upon and receive from the other
Reserves then held by LESSOR, that amount equal to the difference between the
actual cost of the Covered Maintenance and the amount that was allocated in the
Reserves for such item. Further, so long as no Event of Default has occurred
and is continuing, in the case of a return of the Aircraft on the Expiration
Date where a financial adjustment is due to LESSOR with respect to an item
where Reserves have been paid, LESSEE may draw upon the Reserves then held by
LESSOR and use same solely toward satisfaction of such financial adjustment
obligation.
(f) LESSEE agrees that it will not discriminate against the
Aircraft (as compared to other aircraft of the same TYPE OWNED or
operated by LESSEE) in the operation, use and performance of
maintenance, including, but not limited to, in contemplation of the
expiration or termination of this Lease with respect to the
maintenance of the Aircraft (including, but not limited to, the
substitution or replacements of Parts other than where the failure
to replace Parts would result in LESSEE failing to meet the return
conditions for the Aircraft set forth herein). The foregoing shall
not be deemed to be a prohibition on LESSEE's withdrawing the
Aircraft from revenue service in order to prepare the Aircraft for
return to LESSOR upon the expiration or termination of this Lease
nor shall the foregoing be deemed to expand LESSEE's obligations
beyond those set forth in any specific return provision set forth
herein.
22
(E) AIRWORTHINESS DIRECTIVES; SERVICE BULLETINS.
(i) If the FAA, the Air Authority, the Manufacturer or the Engine
Manufacturer, or the manufacturer of any Parts, publishes an airworthiness
directive, mandatory service bulletin or mandatory modification after the
commencement date of this Lease or already has published such airworthiness
directive, mandatory service bulletin or a mandatory modification which
modification is required to be completed or terminated during the Base Term or
at any time during the ninety (90) day period following the end of the Base
Term or the termination of this Lease, LESSEE shall take all such action as is
necessary to comply with such airworthiness directive, mandatory service
bulletin or mandatory modification prior to the return of the Aircraft by
LESSEE to LESSOR and shall, except as hereinafter stated, bear the entire
expense thereof. As an exception to the foregoing, LESSOR agrees that it will
reimburse LESSEE fifty percent (50%) of the cost (labor and material at the
cost actually incurred by LESSEE without premium, ▇▇▇▇-up, surcharge or
interest expense) in excess of One Hundred Thousand Dollars (US$100,000) for
each airworthiness directive accomplished during the last twenty four (24)
months of the Base Term, and one hundred percent (100%) of the costs for each
airworthiness directive and service bulletin which are accomplished by LESSEE
and fall due within ninety (90) days after the Expiration Date; provided,
however, that LESSOR shall have no obligation to reimburse LESSEE for
airworthiness directives and service bulletins accomplished by LESSEE and which
fall due within ninety (90) days after the Expiration Date unless LESSEE had
prior to accomplishing such airworthiness directive or service bulletin
received written authorization from LESSOR to accomplish same. LESSOR shall pay
to LESSEE its share, if any, of the cost of complying with airworthiness
directives performed by LESSEE, within ten (10) Business Days of receipt from
LESSEE of evidence reasonably satisfactory to LESSOR that the airworthiness
directive has been fully and satisfactorily complied with.
(ii) LESSEE shall comply with all applicable mandatory service,
maintenance, repair and overhaul regulations, directives and instructions of
the FAA, the Air Authority, the Manufacturer, the Engine Manufacturer and the
manufacturer of all Parts and shall bear the entire expense thereof except as
provided in (i) above.
(F) TITLE, REGISTRATION, PERFECTION AND INSIGNIA. LESSEE acknowledges
and agrees that title to the Aircraft shall remain vested in LESSOR during the
Base Term in accordance with the terms of this Lease. The Aircraft shall, at
all times during the Base Term, be registered in the United States in the name
of LESSOR or such Person as LESSOR may designate, in accordance with the Laws
of United States. LESSEE agrees that it shall take no action which shall cause
the Aircraft to cease to be so registered in the name of LESSOR under the
applicable Laws of United States. Unless otherwise requested, within fifteen
(15) days of the Effective Date, LESSEE shall fasten or cause to be fastened in
the cockpit, in a location reasonably adjacent to and not less prominent than
the airworthiness certificate for such Aircraft and on each Engine,
23
an insignia plate supplied by LESSEE and in the form set forth in Exhibit "G"
hereto or in any other form subsequently designated by LESSOR to LESSEE.
LESSEE will not allow the name of any Person to be placed on the
Aircraft or any Engine as a designation that might be interpreted as a claim of
ownership; provided, however, that LESSEE may cause the Aircraft to be lettered
in an appropriate manner for convenience of identification of the interest of
LESSEE therein, including but not limited to, the customary livery of LESSEE.
(G) MAINTENANCE REPORTS AND RECORDS. During the Term, LESSEE shall:
(a) provide maintenance information and reporting requirements
to LESSOR and any other party so designated by LESSOR including but
not limited to: (i) written notification at the end of each
calendar quarter with respect to the issuance during such calendar
quarter of any airworthiness directive or service bulletin, and
written notification, as promptly as possible, of any legal
requirement materially affecting the use, operation or maintenance
of the Aircraft, Airframe, Engines or Parts; (ii) quarterly written
projections of scheduled Airframe, Engine, landing gear and APU
heavy maintenance; (iii) prompt written notification of damage to
the Aircraft, Airframe, Engines or Parts where the estimated cost
of repair is in excess of $500,000 in the aggregate; (iv) promptly
upon the request of LESSOR, written notification of Engine
removals, exchanges or foreign object damage (said report to
include details of circumstances and plan of action to repair); (v)
reports of Flight Hours and Cycles on a monthly basis; (vi)
promptly upon the request of LESSOR, a report of all service
bulletins completed; and (vii) promptly upon the request of LESSOR,
copies of all material reports sent to the Air Authority or any
other Governmental Entity concerning the Aircraft.
(b) LESSEE will, during the Base Term, maintain all records,
logs and other materials required to be maintained with respect to
the Aircraft by Persons in operational control of the Aircraft
under any applicable rules, Laws or regulations and shall supply
all such records, logs and other materials to LESSOR or third
parties, as reasonably requested, as shall be necessary in order to
implement the Maintenance Program and any and all warranties and
guarantees that apply to the Aircraft. LESSEE will provide LESSOR
with copies of all records of maintenance performed during the Base
Term as requested by LESSOR. All such records shall be kept as
required under the rules and regulations of the Air Authority and
shall be maintained in English.
SECTION 8
24
REPLACEMENT OF PARTS: ALTERATIONS,
MODIFICATIONS AND ADDITIONS
(A) REPLACEMENT OF PARTS. Except as otherwise provided herein, LESSEE,
at its own cost and expense, shall promptly replace all Parts which may, from
time to time, be incorporated or installed in, or attached to, the Aircraft,
the Airframe or any Engine and be an accession thereto, and which may, from
time to time, become lost, stolen, seized, confiscated or unserviceable. In
addition, in the ordinary course of maintenance, service, repair, overhaul or
testing, LESSEE may remove any Parts, provided that LESSEE shall replace such
Parts as promptly as may be practicable. All replacement Parts shall be free
and clear of all Liens, except Permitted Liens, shall meet all requirements of
the Air Authority, and shall be in as good operating condition as, and have a
value and utility at least equal to, the Parts replaced, assuming such replaced
Parts were maintained in the condition required pursuant to the requirements of
this Lease.
All Parts owned by LESSOR at any time removed from the Aircraft
shall remain the property of LESSOR, no matter where located, until such time
as such Parts shall be replaced by Parts which have been incorporated or
installed in, or attached to, such Aircraft and which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Parts
becoming incorporated or installed in or attached to the Aircraft as above
provided, and without further act:
(1) title to the removed Part shall vest in LESSEE, free and
clear of all rights of LESSOR and LESSOR Liens;
(2) title to the replacement Parts shall vest in LESSOR, free
and clear of all rights of third parties, including, but not
limited to, LESSEE; and
(3) such replacement Parts shall become subject to this Lease
and shall be deemed part of the Aircraft into which such Parts were
incorporated or with respect to which such Parts were required, for
all purposes hereof to the same extent as the Parts originally
incorporated or installed in, or attached or related to such
Aircraft.
(B) POOLING; ETC.
(i) LESSEE may subject the Aircraft or any Engine to normal
interchange agreements customary among major Air Carriers entered into by the
LESSEE in the ordinary course of its business, and may subject any Engine to
pooling arrangements customary among major Air Carriers and entered into by
the LESSEE in the ordinary course of its business.
(ii) LESSEE may install an Engine on an airframe owned by the
LESSEE provided such airframe is free and clear of all liens and encumbrances,
except
25
(a) Permitted Liens; and
(b) the rights of Air Carriers under normal interchange
arrangements which are customary among major Air Carriers and which
do not contemplate, permit or require the transfer of title to the
Airframe or Engines installed thereon.
(iii) LESSEE may install an Engine on an airframe leased to, or
purchased by the LESSEE, subject to a lease, conditional sale, trust indenture
or other security agreement, but only if
(a) such airframe is clear of all liens and encumbrances,
except Permitted Liens and the rights of the parties to the lease,
conditional sale, trust indenture or other security agreement
covering such airframe; and
(b) LESSOR shall have received from the lessor, conditional
seller, indenture trustee, or secured party of such airframe, a
written agreement (which may be the lease, conditional sale, trust
indenture or other security agreement covering such airframe),
whereby such lessor, conditional seller, indenture trustee or
secured party expressly agrees that neither it nor its successors
or assigns will acquire or claim any right, title or interest in
any Engine by reason of such Engine being incorporated in such
airframe at any time while such Engine is subject to this Lease; and
(c) LESSOR, upon request, shall have received from counsel to
the LESSEE an opinion, in form and substance satisfactory to
LESSOR, to the effect that no creditors of, or bona fide purchasers
from, the lessor, conditional seller, indenture trustee or secured
party of such airframe will acquire any right, title or interest in
such Engine by reason of such Engine being installed on such
airframe at any time while such Engine is subject to this Lease. In
the event that LESSOR requires an opinion, the cost of such opinion
shall be shared equally by LESSOR and LESSEE.
(iv) No permitted interchange or pooling agreement, transfer or
other relinquishment of possession permitted hereunder shall affect the title
to, or registration of or effect any transfer of the Aircraft, Airframe or
Engines or shall constitute consent to any action not permitted to the LESSEE
in this Lease.
(v) LESSOR agrees, for the benefit of any lessor, indenture
trustee or other secured party to LESSEE, that it will not acquire or claim any
right, title or interest in any engine by reason of such engine being
incorporated in the Airframe at any time while such engine is subject to a
lease, conditional sale, trust indenture, or other security agreement covering
such engine.
26
(C) EQUIPMENT CHANGES. LESSEE, at its own expense, shall make such
alterations and modifications in and additions to the Aircraft ("Equipment
Changes") as may be required from time to time to meet the standards of the Air
Authority and of the Governmental Entity in the jurisdiction of which LESSEE
elects to fly the Aircraft and whose approval or consent is required to permit
LESSEE to fly over and/or into any geographical area with respect to which the
Governmental Entity exercises authority. In addition, the term "Equipment
Changes" shall mean modifications to or additions to the Aircraft that LESSEE,
at its own expense, may from time to time deem desirable in the proper conduct
of its business, provided that no such Equipment Change diminishes the value,
utility, condition or airworthiness of the Aircraft below the value, utility,
condition and airworthiness thereof immediately prior to such Equipment Change,
assuming the Aircraft was then in the condition required to be maintained by
the terms of this Lease, and provided further that LESSEE shall not change the
configuration (other than the seating configuration) of the Aircraft during the
Term hereof unless such configuration is approved by the Manufacturer, LESSOR
and the Air Authority. Any Equipment Change with an estimated cost in excess of
Two Hundred Fifty Thousand (US$250,000) Dollars must be approved in advance by
LESSOR, which approval will not be unreasonably withheld.
In connection with the provisions of the preceding paragraph, LESSOR
and LESSEE hereby acknowledge and agree that (1) LESSEE may modify the cockpit
of the Aircraft in order to standardize same with LESSEE's fleet of Boeing
737-200 aircraft (provided such cockpit standardization is performed in
accordance and complies with, the Maintenance Program and the rules and
regulations of the FAA, in each case to the extent applicable, (2) all Parts
removed from the cockpit of the Aircraft in connection with such cockpit
standardization shall become the property of LESSEE (subject to the provisions
of clause (3) of this sentence) and all Parts installed in the cockpit of the
Aircraft in connection with such cockpit standardization shall become the
property of LESSOR and subject to the terms of this Lease, (3) in connection
with the cockpit standardization the Omega Navigation System (▇▇▇▇▇▇ 211) and
the Doppler Radar System (collectively, the "Removed Cockpit Parts") will not
be replaced (and are not required to be replaced) and that such Removed Cockpit
Parts shall be returned to LESSOR upon the completion of such cockpit
standardization and LESSEE shall have no claim, right, title or interest
therein and such Removed Cockpit Parts shall be the property of LESSOR and not
subject to the terms of this Lease, and (4) upon the return of the Aircraft by
LESSEE to LESSOR on a Return Occasion, LESSEE, in its sole discretion, shall
have the right to return the Aircraft with the cockpit configured in LESSEE's
standard configuration for Boeing 737-200 aircraft or in the configuration that
the cockpit was in on the Effective Date. Any and all modifications
contemplated by this paragraph shall be effected at the sole cost and expense
of LESSEE.
Title to all Parts incorporated, installed in, attached or added to
the Aircraft as the result of any such Equipment Change shall, without further
act, vest in LESSOR;
27
provided, however, that during the Base Term LESSEE may remove any such Part
if: (1) such Part is in addition to any Part originally incorporated or
installed in or attached to such Aircraft at the time of delivery thereof
hereunder; and (2) such Part is not required by the Air Authority or the
Governmental Entity having jurisdiction to be incorporated, installed in,
attached or added to the Aircraft; and (3) such Part can be removed from the
Aircraft or can be replaced with a part of equal value to the Part installed
upon delivery without diminishing or impairing the value, utility or
airworthiness which the Aircraft would have had at such time, had such
Equipment Change not occurred. Upon the removal by LESSEE of any Part as above
provided, title thereto shall, without further act, vest in LESSEE and such
Part shall no longer be deemed part of the Aircraft from which it was removed.
Any Part not removed from the Aircraft by LESSEE as provided above prior to a
Return Occasion shall remain the property of LESSOR. Notwithstanding the
foregoing provisions of Section 8(C), LESSOR agrees that LESSEE may install
replacement seats and galleys on the Aircraft. If the replacement seats and
galleys are (i) owned by any third party and leased to LESSEE, (ii) sold to
LESSEE subject to a conditional sales contract or other security interest, or
(iii) lease to LESSEE pursuant to a lease which is subject to a security
interest in favor of any third party, then LESSOR will not acquire or claim, as
against such lessor, conditional vendor or secured party, any right, title or
interest in such seats and galleys as the result of such seats and galleys
being installed in the Aircraft; provided, however (a) that LESSOR's inability
to so acquire or claim is subject to the express condition that such lessor,
conditional vendor or secured party shall not acquire or claim, as against
LESSOR, any right, title or interest in the Aircraft, or any Part other than
its interest in such seats or galleys by reason of such seats or galleys being
installed thereon, and (b) that all of LESSEE's right, title and interest in
and to any seats or galleys (but none of its obligations with respect thereto)
not removed by LESSEE within thirty (30) days after an Event of Default shall,
at such time, automatically become the property of LESSOR and subject to this
Lease.
Notwithstanding anything set forth herein to the contrary, in
connection with a return of the Aircraft by LESSEE to LESSOR on the Expiration
Date, LESSEE shall be entitled to remove and retain (with title vesting in
LESSEE) the avionics black boxes installed by LESSEE with respect to the TCAS
and windshear detection systems. All wiring installed by LESSEE in connection
with the installation of the TCAS and windshear detection systems shall remain
in the Aircraft and shall be deemed the property of LESSOR.
In the event the FAA requires LESSEE to comply with the Stage III noise
regulations set forth in FAR Part 36 and LESSEE cannot obtain an exemption or
deferment for complying, if no Default or Event of Default has occurred and is
continuing, LESSOR will, upon the request of LESSEE, provide financing to
LESSEE for the acquisition of a shipset of Stage III hushkits suitable for
installation on the Aircraft or, at LESSOR's election, provide such hushkits to
LESSEE. Should LESSOR provide financing or the hushkits to LESSEE as
contemplated in the preceding sentence, the Basic Rent will be adjusted upward
so as to fully amortize the
28
financing or the cost of the hushkits over the remaining term of the Lease
based on the amount of the financing or the cost of the hushkits, as the case
may be, and the prevailing interest rates applicable to an entity with the
credit of LESSEE at such time. In the event LESSEE is required to install
hushkits during the last twelve (12) months of the Base Term in order to meet
Stage III noise regulations, LESSEE shall have the option of either (i)
retaining the hushkits at the end of the Base Term (provided no Default or
Event of Default has occurred and is continuing, and further provided, that
LESSEE restores the Aircraft to the condition that it was in prior to the
installation of the hushkits), in which case LESSOR will transfer title to
the hushkits to LESSEE, or (ii) extending the term of the Lease on terms and
conditions mutually acceptable to LESSEE and LESSOR. In the event LESSEE
exercises the option set forth in (ii), LESSEE shall send a notice to LESSOR
not later than one hundred twenty (120) days prior to the end of the Base
Term and LESSOR and LESSEE shall have agreed on the terms and conditions of
such extension not later than sixty (60) days prior to the end of the Base
Term. In the event LESSEE has exercised option (ii), above, and LESSOR and
LESSEE fail to reach an agreement on the terms and conditions for the
extension of the Lease with the time period set forth above, then, in such
event, the Base Term will be deemed to be extended for a one (1) year period
of time from the Expiration Date and all other terms and conditions of this
Lease will remain unchanged, except the amount of Basic Rent which shall be
equal to the greater of (x) the then current fair market rental value for the
Aircraft as of the Expiration Date and (y) the amount of Basic Rent then in
effect immediately prior to the Expiration Date.
LESSOR shall bear no liability in respect of, or cost for, any
Equipment Change, grounding of the Aircraft, suspension of certification
thereof, or loss of revenue therefrom.
(D) (i) On the Effective Date, the Engines installed on the Aircraft
shall be ▇▇▇▇▇ & Whitney model JT8D-15 engines (the "-15's") and the Hushkits
will be installed on the Aircraft. Within six (6) months of the Effective Date,
LESSOR shall deliver, or cause to be delivered, to LESSEE's maintenance base in
Honolulu, Hawaii or to such other location designated in writing by LESSEE, two
▇▇▇▇▇ & ▇▇▇▇▇▇▇ model JT8D-9A engines (the "-9A's"). LESSEE shall, at its cost
and expense (a) remove the -15's and the Hushkits and ship the -15's (along
with all components removed in installing the -9A's) to such location as Jetz
Ventures shall designate and ship the Hushkit to such location as LESSOR shall
designate (in each instance, together with all records, manuals and logs
relating to the -15's and the Hushkits, respectively) to a location designated
by LESSOR, and (b) install the -9A's on the Aircraft. LESSEE agrees that when
installing the -9A's, the mixers from the -15's will be returned to LESSOR as
part of the Hushkit.
(ii) LESSOR and LESSEE agree that the -9A's shall be in the following condition
at the time of delivery of same to LESSEE:
(a) the minimum total number of cycles remaining to the next scheduled
overhaul of each -9A shall be equal to the difference between 5,000 and the
number of cycles consumed by
29
LESSEE in the operation of the -15 that the -9A is replacing, but in no event
shall any -9A engine have less than 2,500 cycles remaining to the next
scheduled overhaul. In the event that LESSEE's utilization of any -15 engine
exceeds 2,500 cycles, LESSEE shall pay to Jetz Ventures (whom LESSEE
understands has agreed to supply the -9A's to LESSOR in exchange for the -15's
in order to enable LESSOR to meet its obligations under the provisions of this
Section 8(D)), with respect to such engine, the dollar amount obtained by
multiplying the number of cycles in excess of 2,500 and ninety Dollars
($90.00);
(b) be in bare ▇▇▇▇▇ & Whitney QEC configuration;
(c) have an FAA serviceable tag from an FAA approved engine
maintenance facility;
(d) have a rated take-off horsepower of 750 or more;
(e) shall be in compliance with all airworthiness directives and
mandatory service bulletins requiring compliance on such date;
(f) be free and clear of all liens and encumbrances and interests of
others;
(g) all logs, manuals, historical information on life limited parts
(including, "back to birth" records), technical information and data and all
inspection, modification and overhaul records required to be maintained with
respect thereto under applicable rules and regulations of the FAA and any other
governmental body having jurisdiction shall be in compliance with such rules
and regulations; and
(h) have undergone a borescope inspection and maximum power assurance
run to evidence that there are no discrepancies outside of the limits set under
the manufacturer's maintenance manual for such engine. Should there be any such
discrepancies, the party tendering such engines shall cause same to be
corrected or propose a substitute engine that will meet the requirements of
this Section.
(iii) LESSOR and LESSEE agree that the -15's shall meet the same conditions set
forth in sub-paragraphs (b)-(h) of sub-section (ii) above at the time of
delivery of same to Jetz Ventures; PROVIDED, HOWEVER, that with respect to
sub-paragraph (c) above, the -15's may be returned with zero time on the lowest
limiter, but otherwise serviceable, and with respect to sub-paragraph (g)
above, LESSEE's obligation is to return only those items delivered to it by
LESSOR with respect to the -15's as updated by LESSEE in accordance with the
Maintenance Program-and applicable FAA rules and regulations.
(iv) Simultaneously with the installation of the -9A's and the removal of the
-15's and the Hushkits, (i) LESSOR and LESSEE shall execute a partial lease
termination for the purpose of releasing the -15's and Hushkit from the terms
of this Lease, (ii) LESSOR and LESSEE shall execute a Lease Supplement to this
Lease for the
30
purpose of subjecting the -9A's to the terms of this Lease, (iii) LESSEE shall
execute and deliver to LESSOR a Delivery Receipt and Acceptance Certificate
with respect to the -9A's, (iv) LESSOR shall execute a Delivery Receipt and
Acceptance Certificate with respect to the Hushkit, (v) LESSOR shall cause Jetz
Ventures to execute a Delivery Receipt and Acceptance Certificate with respect
to the - 15's, and (vi) LESSEE and LESSOR shall execute releases and/or
amendments to all UCC financing statement previously executed and filed to
reflect the release of the -15's and the Hushkit and the inclusion of the
-9A's. LESSOR and LESSEE agree that there shall be no reduction in the amount
of Basic Rent payable by LESSEE to LESSOR as a result of the substitution of
the -9A's for the -15's and the release of the Hushkits from the terms of this
Lease.
SECTION 9
INSPECTION; FINANCIAL INFORMATION
(A) During the Base Term, in addition to the information and reports
required to be provided by LESSEE to LESSOR pursuant to Section 7(G) of this
Lease, LESSEE shall furnish to LESSOR such additional information concerning
the location, condition, use and operation of the Aircraft as LESSOR may
reasonably request.
(B) The right of LESSOR, or its designated representatives, to inspect
the Aircraft during any "C" or "D" check or equivalent (as defined in the
Maintenance Program), performed by or on behalf of LESSEE during the Base Term,
shall be absolute. LESSEE shall also provide LESSOR with maintenance schedules
relating to the Aircraft upon the delivery of the Aircraft to LESSEE, and from
time to time as such maintenance schedules are adjusted or updated. LESSEE
further agrees to provide LESSOR with quarterly written projections of the
scheduled date for "C" and "D" checks, in order to enable LESSOR to inspect the
Aircraft at the time and place such checks occur. During such checks, LESSEE
agrees to allow LESSOR, or its authorized representative, to inspect any area
of the Aircraft which LESSOR requests to inspect which would normally require
inspection during such major checks. LESSEE also shall permit any Person
designated by LESSOR in writing to:
(1) visit and inspect the Aircraft, its condition, use and
operation, and the records maintained in connection therewith;
(2) visit and inspect the properties of LESSEE;
(3) discuss the finances and accounts of LESSEE with the
principal officers of LESSEE,
all at such times and frequencies as LESSOR, or the assignee of LESSOR, may
reasonably request. Notwithstanding the foregoing or any other right to inspect
granted to LESSOR under this Lease, neither LESSOR nor the assignee of LESSOR
shall have any duty to make any such inspection and neither LESSOR nor the
assignee of
31
LESSOR shall incur any liability or obligation by reason of not making any
such inspection;
(4) obtain such other financial information as LESSOR may
reasonably request. In this regard, during the Base Term, LESSEE
shall deliver to LESSOR annual consolidated financial statements of
Airgroup prepared in accordance with generally accepted accounting
principles consistently applied and audited by recognized,
independent certified public accountants reasonably satisfactory to
LESSOR as soon as practicable and in any event within 120 days
after the end of LESSEE's fiscal year, as well as quarterly
unaudited financial statements of LESSEE, certified as being true,
accurate and complete by the chief financial officer of LESSEE,
within 60 days following the close of each of LESSEE's fiscal
quarters; and
(5) inspect LESSEE's Maintenance Program for the Aircraft and
make copies and take extracts thereof.
LESSOR hereby agrees that if LESSOR exercises any of the rights listed in
clauses (1) through (5) above, it shall do so in such a manner so as not to
unreasonably interfere with the business and operations of LESSEE.
(C) LESSEE shall also furnish any other information or records on the
Aircraft that LESSOR may reasonably request.
(D) LESSOR agrees to keep confidential any information provided to it
by LESSEE under the terms of this Lease; provided, however, that LESSOR shall
have no obligation to keep such information confidential (i) if such
information is public information at the time received by LESSOR or becomes
public at the time same is disclosed by LESSOR, (ii) from LESSOR's attorneys,
accountants, auditors and aircraft technical experts, and (iii) if compelled by
court order or the provisions of any Law to disclose same.
SECTION 10
COVENANTS OF LESSEE
LESSEE represents, warrants, covenants and agrees, in addition to all
other representations, warranties and covenants set forth in this Lease, that:
(A) MAINTENANCE OF CORPORATE EXISTENCE. LESSEE shall preserve and
maintain its existence, valid legal status, and all of its rights, privileges,
and franchises necessary to remain duly incorporated and to operate as a
passenger airline under the Laws of the United States and the State of Hawaii.
(B) PAYMENT OF TAXES. LESSEE shall:
32
(1) Pay or cause to be paid all Taxes imposed, levied or
assessed upon LESSEE (or for which LESSEE has assumed the
obligation pursuant to this Lease) or its income or profits, or
upon any property or assets belonging to or used by it, prior to
the date on which penalties attach thereto;
(2) Pay or otherwise discharge all lawful claims, which, if not
paid, might become a Lien or charge upon the property of LESSEE
(provided, however, that LESSEE shall not be required to pay any
such Taxes or claims, the payment of which is being contested in
good faith and by appropriate proceedings and for which adequate
reserves have been provided, except that LESSEE will pay or cause
to be paid all such Taxes or claims forthwith in the event LESSEE
is unable to stay or suspend enforcement or execution of a warrant
of restraint or foreclosure of any Liens which attach as security
therefor).
(C) SALE OF ASSETS, MERGER, ETC. Without the prior written consent of
LESSOR, which consent shall not be unreasonably or arbitrarily withheld, LESSEE
will not sell, lease, assign, transfer or otherwise dispose of substantially
all of its assets, whether now owned or hereafter acquired, except in the
ordinary course of its business as presently conducted and for a full and
adequate consideration, and will not merge or consolidate with or into, or
acquire substantially all of the assets and assume substantially all of the
liabilities of, any corporation or other entity unless the surviving entity is
the LESSEE or the surviving entity assumes this Lease and the financial
condition of LESSEE or the surviving entity after such sale of assets, merger,
consolidation or acquisition is equal to or better than that of LESSEE
immediately prior thereto as LESSOR in its reasonable judgment shall determine.
(D) AIR CARRIER. Throughout the Base Term, LESSEE shall, at all times,
be an Air Carrier in good standing.
(E) U.S. CITIZEN. Throughout the Base Term, LESSEE shall, at all
times, be a citizen of the United States as defined in 40102 of Title 49 of
the United States Code.
(F) AIRWORTHINESS CERTIFICATE. Prior to operating the Aircraft in
revenue service, LESSEE shall provide to LESSOR a copy of the Certificate of
Airworthiness for the Aircraft issued by the Air Authority or other
Governmental Entity having jurisdiction, duly certified as being true, accurate
and complete by an officer of LESSEE.
(G) COMMUNICATIONS. LESSEE shall deliver to LESSOR promptly any
communications received by LESSEE from the Air Authority or any Governmental
Entity which materially affects the Aircraft.
SECTION 11
33
TAXES
(A) GENERAL TAX INDEMNITY. LESSEE agrees to pay and to indemnify and
hold harmless the Indemnitees from all Taxes against or upon any of the
Indemnitees, LESSEE, the Aircraft, or any part thereof during the Base Term and
arising out of this Lease, or upon the leasing, selling, possession, use,
operation, repair, maintenance, overhaul, settlement of any insurance claim, or
return thereof, or upon any Rent, receipts or earnings arising from the
operation thereof, or upon or with respect to this Lease unless, and to the
extent only that, any such Tax is being contested by LESSEE in good faith and
by appropriate proceedings duly instituted and diligently prosecuted with
adequate reserves having been provided on account thereof and only so long as
such proceedings do not involve any danger of the sale, forfeiture or loss of
the Aircraft. In case any report or return is required to be made with respect
to any obligation of LESSEE under or arising out of this Section 11, LESSEE
shall either make such report or return in such manner as will show the
ownership of the Aircraft in LESSOR and send a copy of such report or return to
LESSOR, or shall notify LESSOR of such requirement and make such report or
return in such manner as shall be satisfactory to LESSOR. If claim is made
against any Indemnitee for any Taxes arising during the term of this Lease,
such Indemnitee shall promptly notify LESSEE. Any such Indemnitee shall, at
LESSEE's expense, take such action as LESSEE may reasonably request in writing
with respect to such asserted liability, and if reasonably requested by LESSEE
and upon the prior payment to such Indemnitee by LESSEE of an amount equal to
such Tax, any payment by an Indemnitee of such Tax shall be made under protest.
If payment is made, the Indemnitee shall, at LESSEE's expense, take such action
as LESSEE may reasonably request to recover such payment and shall, if
requested, permit LESSEE in the Indemnitee's name to file a claim or prosecute
an action to recover such payment. All of the obligations of LESSEE in this
Section 11 with respect to Taxes imposed or accrued before the expiration or
other termination of this Lease shall continue in full force and effect
notwithstanding such expiration or other termination, and are expressly made
for the benefit of, and shall be enforceable by, each Indemnitee. LESSEE
further agrees that, with respect to any payment or indemnity hereunder, such
payment or indemnity shall include any amount necessary to hold the recipient
of the payment or indemnity harmless on an after-tax basis from all Taxes
required to be paid by such recipient with respect to such payment or indemnity
under the Laws of any Governmental Entity. Excluded from the tax
indemnification set forth above are any income taxes assessed or due on an
Indemnitee's net income or any state franchise or similar corporate taxes
payable by an Indemnitee.
In the event that during the Base Term a federal value added tax or
consumption tax is enacted and becomes effective which replaces the federal
income tax, LESSOR and LESSEE shall negotiate in good faith a restructuring of
the provisions of this Section ll(A), consistent with the principles for tax
indemnification reflected in this Section ll(A), so as to achieve substantially
the same degree of tax indemnification obligations of LESSEE as existed
34
prior to the enactment of such federal value added tax or consumption tax.
(B) SPECIAL TAX INDEMNITY. (i) TAX ASSUMPTIONS. In entering into the
Lease and the transactions contemplated hereby, LESSOR has made the following
tax assumptions for the Aircraft (the "Tax Assumptions"):
(1) LESSOR is entitled to the benefit of depreciation for Federal
income tax purposes under the Accelerated Cost Recovery System provided for in
Section 168 of the Code and depreciation deductions for Hawaii state income tax
purposes based upon one hundred percent (100%) of the Acquisition Cost of the
Aircraft, and on the basis that the Aircraft shall have seven year recovery
period and property classification, and that LESSOR shall be entitled to use
the method of depreciation and depreciation convention equal to 200% declining
balance method of depreciation, switching to the straight line method at the
point in time that maximizes the depreciation allowance for LESSOR (the
"Recovery Deduction");
(2) with respect to the Aircraft, Lessor will be entitled to the
benefit of deductions for Federal and State Of Hawaii income tax purposes for
interest payable with respect to any indebtedness incurred by LESSOR in
connection with any financing by LESSOR of any portion of the Acquisition Cost
of the Aircraft (the "Interest Deduction"); and
(3) for each year of the Base Term of the Lease, including any year
in which a Tax Loss (hereinafter defined) occurs, LESSOR will be subject to tax
as follows:
(x) for such year up to and including the year in which such
Tax Loss occurs, at a composite Federal and state income tax rate that is equal
to the highest marginal rate (provided that, in computing such highest marginal
rate, there shall be excluded any surcharges to normal Federal and state income
tax rates which are applicable to brackets of income which are limited as to
their upper level, such as but not limited to those described in the last two
sentences of Section 11(a)(1) of the Code, and, it is understood that
surcharges which are applicable to brackets of income which are not limited as
to their upper level shall be included in computing such highest marginal rate)
provided for under the Code and the laws of the State of Hawaii (the "Highest
Composite Marginal Tax Rate") and that is actually in effect for each such year
and assuming that any state tax used in the calculation of such marginal rate
shall be taken as a deduction for purposes of computing Federal tax so that the
Composite Rate is a lower rate than that obtained by merely adding the state
rate to the Federal rate (assuming LESSOR has received a tax benefit from such
deduction), and
(y) for such year following the year in which such Tax Loss
occurs, at a composite Federal and state income tax rate that is equal to the
Highest Composite Marginal Tax Rate actually in effect in the year in which
such Tax Loss occurs and
35
which, under the provisions of the Code and the laws of the State of Hawaii
then in effect, is to be applicable to each such following year.
(ii) LESSEE'S TAX REPRESENTATIONS AND WARRANTIES. LESSEE represents and
warrants to LESSOR that:
(1) at all times during the Base Term, with respect to the
Aircraft, such Aircraft will not, due to any act or failure to act on the part
of LESSEE, constitute property "used predominantly outside the United States"
or "tax-exempt use property" within the meaning of Sections 168(g)(1)(A),
168(g)(4)(a) and 168(h)(1)(A), respectively, of the Code and Proposed Code
Regulation Section 1.168-2(g)(5)(iii)(A).
(iii) INDEMNITY. If by reason of the breach or inaccuracy of any of
LESSEE's representations and warranties set forth in this Section, LESSOR shall
lose the benefit of, or shall not have or shall lose the right to claim, or
shall suffer a disallowance or recapture of, or delay in claiming, all or any
portion of the Recovery Deduction or, if LESSOR finances any portion of its
Acquisition Cost, the Interest Deduction, with respect to the Aircraft (any
such loss, failure to have or loss of the right to claim, disallowance,
recapture, delay in claiming, treatment, or inclusion referred to in any of the
foregoing clauses of this section being hereinafter called a "Tax Loss"), then
a Tax Loss shall be deemed to have occurred and LESSEE shall on the Rent Date
next following written notice by LESSOR to LESSEE that a Tax Loss has occurred
pay to LESSOR an amount sufficient to indemnify LESSOR for such Tax Loss and
penalties, if any thereon, on an after-tax basis.
(iv) IDENTIFICATION OF LESSOR. For purposes of this Section, the term
"LESSOR" shall include Lessor's successors and assigns.
(v) CONTESTS. If an Indemnitee should receive notice of any claim by a
taxing authority that may result in liability on the part of LESSEE under
Section 11 (B) (iii), such Indemnitee shall promptly notify LESSEE of such
claim and LESSEE and such Indemnitee shall have the same rights and privileges
with respect to such contest of such claim as are described above in Section
ll(A).
(C) EXCLUSIONS. Notwithstanding the foregoing provisions of this
Section 11, the LESSEE shall not be required to indemnify for any liability
which occurs directly and primarily as a result of any of the following events:
(1) a failure by an Indemnitee to timely or properly claim a
deduction or other tax benefit, the gross negligence of an Indemnitee or the
failure of an Indemnitee to timely notify LESSEE of a claim against such
Indemnitee by a taxing authority, provided such failure to timely notify LESSEE
has a material adverse affect on LESSEE's rights under this Section 11;
(2) the treatment of the Aircraft in 1996 or the year
36
in which the Base Term (or any extension thereof) expires as used predominantly
outside the United States for purposes of Code Section 168(g)(1)(A), if such
treatment would not have occurred but for such use of the Aircraft outside of
the United States prior to or subsequent to the term of the Lease;
(3) an event which occurs after the end of the Base Term with
respect to the Aircraft and the return thereof in accordance with the Lease; or
(4)(a) a material change in the Code, the Income Tax Regulations
promulgated by the United States Treasury Department or a change in the
administrative or judicial interpretations thereof (collectively, a "Change in
Law"), which is enacted, adopted or promulgated and becomes effective after the
Effective Date and during the Base Term; provided, however, that with respect
to such Change in Law, (i) there is no pending contest, appeal or review
process with respect thereto, and (ii) the Internal Revenue Service has
recognized and is enforcing such Change in Law.
(b) should a Change in Law occur and become effective during the
Base Term, LESSEE shall have the right to send a notice to LESSOR (a "LESSEE's
Change Notice") advising LESSOR of the Change in Law and LESSEE's intention not
to indemnify LESSOR for those matters which are the subject of the Change in
Law. LESSOR shall have ninety (90) days from the date of the giving of LESSEE's
Change Notice to send LESSEE a notice (the "LESSOR's Response") advising LESSEE
that it either (i) acknowledges and agrees that it will not be indemnified by
LESSEE for those matters which are the subject of the Change in Law, or (ii)
that it has elected to terminate the Lease ninety (90) days from the date of
the giving of the LESSOR's Response. In the event that LESSOR in the LESSOR's
Response has elected option (ii), LESSEE shall have thirty (30) days from the
date of the giving of LESSOR's Response to send a written notice to LESSOR
modifying LESSEE's Change Notice (a "LESSEE Modification Notice") and agreeing
to indemnify LESSOR for those matters which are the subject of the Change in
Law. In the event LESSEE does not give a LESSEE Modification Notice within said
thirty (30) day period, LESSOR shall have ten (10) days from the end of such
thirty (30) day period to send to LESSEE a notice modifying the LESSOR's
Response (a "LESSOR Modification Notice") and agreeing to option (i) above. In
the event that LESSEE has declined to indemnify LESSOR for those matters which
are the subject of the Change in Law, LESSEE would have no obligation to
indemnify for those matters for the period of time following the giving of
LESSEE's Change Notice.
(D) TAX SAVINGS OR REFUND. (i) If an Indemnitee shall receive a refund
on account of any Tax for which such Indemnitee was indemnified or which was
advanced by LESSEE, then such Indemnitee shall, and LESSOR shall use its
reasonable efforts to cause such Indemnitee to, promptly pay the amount of such
refund to LESSEE (together with the amount of any interest and attorneys fees
received by such Indemnitee in relation to such refund).
(ii) If an Indemnitee, as a result of a loss or expense
37
for which an indemnity payment has been made pursuant to this Section 11 or as
a result of deferred depreciation deductions or increased basis (i.e.,
depreciation deductions or basis in any tax year which are greater than they
would have been had the circumstances giving rise to LESSEE's liability for
indemnity not occurred), shall realize an aggregate net reduction in United
states federal income tax or state or local incomes taxes which such Indemnitee
would not have realized but for such loss, expense, deferred depreciation
deductions or increased basis, the Indemnitee shall pay, and the Lessor shall
cause the Indemnitee to pay, the LESSEE an amount equal to such aggregate net
reduction in United states federal income tax plus any other tax savings
realized by such Indemnitee on account of the same. Any payment due to the
LESSEE from an Indemnitee pursuant to this Section 11 shall be paid promptly
after the Indemnitee actually realizes any such aggregate net reduction in
United States federal income tax or state or local income taxes.
Notwithstanding anything set forth herein to the contrary, in no event shall
any Indemnitee be required to make any payment to LESSEE pursuant to the terms
of this subsection (ii) in excess of the amount of indemnification payments
made by LESSEE to such party pursuant to this Section 11.
(E) HAWAII CAPITAL GOODS EXCISE TAX CREDIT. Without limiting the generality of
the foregoing provisions of this Section 11, the LESSEE acknowledges that, as
between LESSOR and LESSEE, the LESSOR is and will continue to be entitled to
the Hawaii capital Goods Excise Tax Credit (the "Excise Tax Credit") with
respect to the Aircraft. LESSEE agrees that (i) it will not directly or
indirectly take any action or file any returns or other documents inconsistent
with or which interferes with LESSOR's right to take and have the benefit of
the Excise Tax Credit with respect to the Aircraft, and (ii) that it will file
such returns, take such action and execute such documents as may be reasonably
necessary to facilitate the accomplishment of the intent of this
Section 11 (E).
(F) PARTIES ENTITLED TO BENEFITS OF THIS SECTION. In determining the extent of
LESSOR's obligations under this Section 11, there shall be taken into account
the affiliated group of corporations of which LESSOR is presently or may become
a member and which file a consolidated return, the members thereof, and the
following attributes of such group, such members and each of them (which shall
in turn be attributed to LESSOR): (i) knowledge or notice of any Tax claim as
described in Section 11(A) or Section 11(B)(v), (ii) tax refund(s) as described
in Section 11(D)(i), and (iii) net reduction in income taxes as described in
Section 11(D)(ii).
SECTION 12
EVENT OF LOSS
(A) EVENT OF LOSS REGARDING THE AIRCRAFT. In the event that an Event
of Loss occurs with respect to the Aircraft, LESSEE shall forthwith (and, in
any event, not later than three (3) days after the occurrence of the Event of
Loss) give LESSOR written notice of such Event of Loss and, not later than
the earlier of: (a) the sixtieth day following the occurrence of such Event of
38
Loss; or (b) the day of receipt of insurance proceeds in respect of such Event
of Loss; pay to LESSOR or its assignees, in funds of the type specified in
Subsection 5(B) hereof, the sum of all unpaid Rent and all other amounts due
hereunder with respect to such Aircraft and which have accrued through and
including the date of payment of the Agreed Value, plus an amount equal to the
Agreed Value. In the event of payment in full of such Agreed Value, together
with all such amounts due or accrued hereunder on or prior to the date of such
payment, the obligation of LESSEE to pay Rent hereunder shall terminate. on the
date of payment of the Agreed Value, LESSOR shall credit or refund to LESSEE
all pre-paid Basic Rent, if any, and all accrued Reserves.
Upon payment of all Rent due and the Agreed Value, LESSOR shall
transfer to LESSEE (subject to the rights of the insurers) all of LESSOR's
right, title, and interest in and to: (i) the Aircraft which sustained such
Event of Loss, as well as all of LESSOR's right, title, and interest in and to
any Engines constituting part of such Aircraft; and (ii) all claims for damages
to such Aircraft and/or Engines, if any, against third Persons arising from
such Event of Loss (unless any insurance carrier requires that such claims be
assigned to it), without any representation, warranty, or recourse of any kind
whatsoever, express or implied, except a warranty that such Aircraft is free
and clear of any Liens, mortgages and encumbrances, other than Liens which
LESSEE is required to discharge hereunder or defects in title resulting from
acts by or claims against LESSEE.
In the event of an Event of Loss involving the Aircraft wherein one
or more of the Engines are not attached to the Airframe, the Aircraft, for
purposes of this Section 12(A), shall be deemed to include all Engines on lease
hereunder and LESSOR shall cooperate in transferring title to such non-attached
Engines, free and clear of all LESSOR Liens, to the owner of the engine
attached to the Airframe at the time of the Event of Loss.
In the event of an Event of Loss to an airframe involving an Engine
attached to an airframe owned by LESSEE or another party, such airframe shall
be deemed to include the Engine attached thereto and LESSEE shall promptly
transfer title to, or cause the party on whose airframe the Engine was attached
to promptly transfer title to, a Replacement Engine (as defined below) in
accordance with the terms and conditions set forth in Section 12(B).
(B) EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon any Event of Loss
with respect to an Engine not then installed on the Aircraft, or an Event of
Loss with respect to only an Engine installed on the Aircraft not involving an
Event of Loss to the Aircraft, LESSEE shall give LESSOR prompt written notice
thereof and LESSEE shall replace such Engine as soon as reasonably possible
after such Event of Loss by duly conveying to LESSOR, as a replacement for such
Engine, title to another engine owned by LESSEE (a "Replacement Engine"), which
Replacement Engine shall be free and clear of all Liens and shall have a value
and utility at least equal to, and be in as good operating condition as, the
39
Engine which sustained such Event of Loss (assuming the Engine which sustained
such event of loss was maintained in the condition in which LESSEE was required
to maintain such Engine pursuant to this Lease). Such Replacement Engine, after
approval and acceptance by LESSOR, shall be deemed an "Engine" as defined
herein. LESSEE agrees to take such action as LESSOR may reasonably request in
order that any such Replacement Engine shall be duly and properly leased
hereunder to the same extent as the Engine subject to the Event of Loss and
shall be titled in LESSOR. Upon request by LESSOR, LESSEE shall cause to be
delivered to LESSOR an opinion of FAA counsel (to be provided at LESSEE's
expense) as to the lien free status of such engine along with an opinion of FAA
counsel that such replacement engine has been made subject to this Lease.
LESSEE's obligation to pay Rent hereunder shall continue in full force and
effect regardless of the occurrence of an Event of Loss with respect to an
Engine, but LESSEE shall be entitled to be reimbursed by LESSOR the amount of
insurance or condemnation proceeds, if any, received by LESSOR with respect to
such Engine. Upon receipt of title by LESSOR to the Replacement Engine as
hereinabove provided, LESSOR shall convey to LESSEE, free and clear of all
Liens (except, subject to the rights of the insurers), title to the Engine
which sustained such Event of Loss.
(C) DAMAGE OR REQUISITION NOT CONSTITUTING AN EVENT OF LOSS. In the
event of material damage or requisition of the Aircraft or any Engine not
constituting an Event of Loss, LESSEE shall promptly notify LESSOR in writing
of such damage or requisition and shall remain obligated to make all payments
of Rent in respect of such Aircraft or Engine which may become due hereunder in
the same manner as if such damage or requisition had not occurred and to
perform all other obligations of LESSEE hereunder. All payments at any time
received by LESSEE, or by LESSOR from any Person other than LESSEE in excess of
$500,000 with respect to any such damage or requisition shall be paid over to,
or retained by, LESSOR, and shall be paid to LESSEE upon repair of the Aircraft
or Engine. To the extent that LESSEE has paid Rent and LESSOR receives a
requisition payment for the period of time for which LESSEE had paid Rent,
LESSOR agrees that it shall, as promptly as is reasonably practicable, pay to
LESSEE that amount of the requisition payment received by it equal to the Rent
for such period previously paid to LESSOR by LESSEE.
(D) RECEIPT AND APPLICATION OF COMPENSATION. Following an Event of Loss
or an occurrence not constituting an Event of Loss with respect to which
payments, including insurance proceeds, are made by or are due from any Person
(any such payments or proceeds being hereinafter referred to as
"Compensation"), LESSOR shall be entitled to receive, and shall receive, and
LESSEE hereby assigns to LESSOR any right or interest which LESSEE may have or
may hereafter acquire, in such Compensation, to be applied as follows:
(1) If such Compensation is received with respect to the
Aircraft, so much thereof as shall not exceed the Agreed Value and
other amounts due under Subsection 12(A) shall be retained by
LESSOR, in reduction of LESSEE's obligation to pay such Agreed
Value and other amounts due
40
as was not theretofore paid by LESSEE, or, if such Agreed Value and
other amounts have already been paid to LESSOR, such Compensation
shall be applied to reimburse LESSEE for its payment of such Agreed
Value, and may be paid to LESSEE.
(2) If such Compensation is received with respect to an Engine
under the circumstances described in Subsection 12(B), such
Compensation shall be held in an account established for LESSOR
with a bank or trust company as depository, as designated by
LESSOR, such sums to be held, invested and distributed as provided
below. All of LESSEE's interest in all moneys and investments
standing to the credit of such account are hereby pledged to LESSOR
and LESSOR is hereby granted a general lien upon and security
interest in all of LESSEE's interest, if any, in all such moneys
and investments as security for the performance and payment in full
of all of LESSEE's covenants contained in this Lease. The bank or
trust company holding such Compensation shall be deemed to be
LESSOR's agent for the purpose of perfecting LESSOR's security
interest in such sums and shall be notified of, and accept such
appointment as agent. If LESSEE shall replace such Engine in
accordance with the provisions of Subsection 12(B), LESSOR shall,
so long as no Default or Event of Default or event which, with the
giving of notice or the passage of time, or both, would constitute
a Default or an Event of Default shall have occurred and be
continuing, return, or cause to be returned, all moneys and
investments then held in such account to LESSEE.
(E) PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT. Any payment
referred to in Subsection 12(A),(B),(C) or (D) hereof which is payable to
LESSEE hereunder shall not be paid to LESSEE, or, if previously paid directly
to LESSEE, shall not be retained by LESSEE, if at the time of such payment a
Default or an Event of Default or an event which with the giving of notice or
the passage of time, or both, would constitute a Default or an Event of Default
hereunder shall have occurred and be continuing, but shall be paid to and
retained by LESSOR as security for the obligations of LESSEE under this Lease
until such time as such Default or Event of Default or event which with the
giving of notice or the passage of time, or both, would constitute a Default or
Event of Default shall have been remedied, whereupon such payment shall be made
to LESSEE.
SECTION 13
INSURANCE
(A) PUBLIC LIABILITY AND PROPERTY DAMAGE LIABILITY INSURANCE.
LESSEE will carry and maintain in effect, at its own expense, with Approved
Insurers, public liability insurance (including, but not limited to,
contractual liability, and passenger legal liability), and property damage
liability insurance with respect to the Aircraft, in amounts per occurrence
of not less than the Minimum Liability Coverage, or such greater amounts as
41
LESSEE may carry from time to time on other similar aircraft in its fleet.
LESSEE shall not discriminate against the Aircraft in providing such insurance
coverage. Each and any policy of insurance carried in accordance with this
Subsection (A), and each and any policy obtained in substitution or replacement
for ANY of such policies, (i) shall designate LESSOR, Jetz Ventures, Lufthansa
and the party who conveys title to the -9A's to Jetz Ventures or directly to
LESSOR (the "-9A Vendor") and their respective officers, directors,
shareholders, members, employees, agents and assigns (collectively, the
"Additional Insureds"), as additional insureds as their interests may appear
(but without imposing upon the Additional Insureds any obligation imposed upon
the insured, including, without limitation, the liability to pay any premiums
for any such policies, but LESSOR, Jetz Ventures, the -9A Vendor and/or
Lufthansa shall have the right to pay such premiums if it shall so elect), and
(ii) shall expressly provide that, in respect of the interests of the
Additional Insureds in such policies, the insurance will not be invalidated by
any action or inaction of the LESSEE, and shall insure the Additional Insureds,
regardless of any breach or violation by LESSEE of any warranty, declaration or
condition contained in such policies, (iii) shall provide that if such
insurance is canceled by insurers for any reason whatsoever, or is adversely
changed in any way by insurers with respect to the interests of the Additional
Insureds, or if such insurance is allowed to lapse for nonpayment of premiums,
such cancellation, change or lapse shall not be effective as to the Additional
Insureds for 30 days (seven (7) days or such shorter period as may be customary
in the case of any war risks and allied perils coverage), in each instance,
after the issuance to LESSOR, Jetz Ventures, the -9A Vendor and Lufthansa of
written notice by such insurer or insurers and/or brokers to LESSOR, Jetz
Ventures, the -9A Vendor and Lufthansa of such prospective cancellation,
change or lapse, (iv) shall provide coverage on a worldwide basis, subject to
such territorial exclusions as may be usual and customary in the worldwide
airline insurance industry for airlines similarly situated with LESSEE, (v)
shall provide that, as against the Additional Insureds, the insurer shall waive
any rights of set-off, counterclaim or any other deduction, whether by
attachment or otherwise, and waives any right of subrogation it may have
against the Additional Insureds but only to the same extent that LESSEE has
waived its right of recovery against the Additional Insureds under the Lease
Documents. Each liability policy shall be primary without right of contribution
from any other insurance which may be carried by LESSOR, Jetz Ventures, the -9A
Vendor, Lufthansa or their assigns, and shall expressly provide that all of the
provisions thereof shall operate in the same manner as if there were a separate
policy covering each insured, provided that such provisions shall not operate
to increase the insurer's limit of liability. No liability policy shall permit
any deductible or self-insurance provision except for baggage and cargo as is
customary in the London or U.S. aviation insurance industry and such other
deductibles only with the consent of the LESSOR, which consent shall not be
unreasonably withheld or delayed, which from time to time LESSEE can
demonstrate are standard in comprehensive liability insurance and, in
particular, public liability risks (including, INTER ALIA, contractual
liability and passenger
42
liability coverage) for major international passenger air carriers in the
then current London or U.S. aviation insurance market.
(B) HULL WAR RISKS INSURANCE. LESSEE will carry and maintain in effect
with Approved Insurers, at its own expense, hull war risks and allied perils
insurance on the Aircraft (which shall include, but not be limited to, a
disappearance clause and coverage for hijacking, declared or undeclared war and
insurrections, strikes, riots, commotion's or labor disturbances, malicious
acts or acts of sabotage and unlawful seizure or wrongful exercise of control
of the Aircraft in flight by a person on board such Aircraft acting without the
consent of LESSEE) in an amount not less than the Agreed Value or such greater
amounts as LESSOR may request from time to time (and for which LESSOR shall
reimburse LESSEE for its cost of increased premium, if any, for such greater
amounts of insurance) and covering those perils which, from time to time, are
customarily covered by similar insurance maintained by major international
passenger air carriers insuring in the London or U.S. Aviation insurance
market.
(C) ALL RISKS HULL INSURANCE. LESSEE, at its own expense, will maintain
in effect with Approved Insurers all risks ground and flight aircraft hull
insurance covering such Aircraft, and fire, transit, spares and extended all
risks coverage insurance with respect to Engines and Parts while not installed
on such Aircraft or an aircraft, which in each case is of the type maintained
by major international passenger air carriers similarly situated to LESSEE and
operating similar aircraft and engines which comprise LESSEE's fleet. At all
times while the Aircraft is subject to this Lease, such insurance shall be for
an amount not less than the Agreed Value or such greater amounts as LESSOR may
request from time to time (and for which LESSOR shall reimburse LESSEE, at its
own cost of increased premium, if any, for such greater amounts of insurance).
Notwithstanding anything above, each and every policy of insurance
obtained and maintained pursuant to Subsection (B) and this Subsection (C), and
each and every policy obtained in substitution or replacement for any such
policies, (i) shall designate LESSOR as owner of the Aircraft covered thereby,
and shall designate LESSOR, or its assigns, as loss payee, as their respective
interests may appear (but without imposing upon LESSOR or its assigns, any
obligation imposed upon the insured, including, without limitation, the
liability to pay any premiums for any such policies, but LESSOR and/or its
assigns shall have the right to pay such premiums if they shall so elect), (ii)
shall expressly provide that, in respect of the interests of LESSOR or its
assigns in such policies, the insurance shall not be invalidated by any action
or inaction of LESSEE and shall insure LESSOR or its assigns, regardless of any
breach or violation of any warranty, declaration or condition contained in such
policies by LESSEE, (iii) shall provide that if such insurance is canceled for
any reason whatsoever, or is adversely changed in any way with respect to the
interest of the LESSOR or its assigns, or if such insurance is allowed to lapse
for nonpayment of premium, such cancellation change or lapse shall not be
effective as to LESSOR or its assigns,
43
for thirty (30) days (seven (7) days or such shorter period as may be customary
in the case of any war risks or allied perils coverage) after issuance to
LESSOR of written notice by such insurer or insurers of such prospective
cancellation, change or lapse, (iv) shall provide coverage on a worldwide
basis, subject to such territorial exclusions as may be usual and customary in
the worldwide airline insurance industry for airlines similarly situated with
LESSEE, (v) shall provide that, as against the LESSOR or its assigns, the
insurer shall waive any rights of set-off, counterclaim or any other deduction,
whether by attachment or otherwise, and waives any right of subrogation it may
have against LESSOR or its assigns but only to the same extent that LESSEE has
waived its right of recovery against LESSOR or its assigns under the Lease
Documents, (vi) shall provide that in the event of any damage or loss which is
an Event of Loss hereunder and which results in a payment, such payment shall
be payable solely and directly to LESSOR, for the account of all interests,
(vii) shall provide that in the event of any damage or loss which is not an
Event of Loss hereunder and which results in a payment for any one occurrence
in excess of $500,000.00, such payment shall be payable directly to LESSOR,
(viii) shall provide that payments for any one occurrence not in excess of
$500,000.00 shall be payable directly to LESSEE provided there exists no
Default or Event of Default by LESSEE, and (ix) shall provide for a 50/50
claims funding arrangement between the all risks hull and war risks
underwriters.
LESSEE shall have the right to carry insurance in excess of the
amounts required hereunder and the proceeds of such excess insurance shall be
payable to LESSEE. Similarly, LESSOR shall have the right to carry additional
and separate insurance for its own benefit at its own expense, without,
however, thereby limiting LESSEE's obligations under this Section 13.
LESSEE shall at all times maintain a deductible amount in its all
risks hull and war risks insurance policies which is no more than Five Hundred
Thousand (US$500,000.00) Dollars.
(D) APPLICATION OF INSURANCE PROCEEDS NOT IN EXCESS OF $500,000.00.
LESSEE shall be entitled to receive any insurance proceeds not in excess of
Five Hundred Thousand ($500,000.00) Dollars as soon as such funds are paid by
the insurance company and shall promptly receive such additional insurance
proceeds, if any, upon presentation to LESSOR of a vendor's or LESSEE's
invoice, provided that repair work is in progress, replacement parts are
ordered, or such work is complete. All insurance proceeds received by LESSEE
pursuant to this Subsection 13(D) shall be used by the LESSEE exclusively for
the repair of any damage to the Aircraft or Engines on account of which the
insurance proceeds were paid. Any amount referred to in this Subsection 13(D)
which is payable to LESSEE shall not be paid to LESSEE if, at the time of
such payment, any Default or Event of Default shall have occurred and be
continuing or if the amount of the insurance proceeds payable is less than
the estimated total cost of the repairs and LESSEE does not deliver evidence
to LESSOR that such additional amount needed to pay the estimated total cost
of repairs has been paid, but shall be held by LESSOR as security for the
obligations of LESSEE under
44
this Lease and such amount shall be paid to LESSEE at such time as there shall
not be continuing any such Default or Event of Default.
(E) APPLICATION IN DEFAULT. Any insurance proceeds referred to in this
Lease which are otherwise payable to LESSEE, or if it has been previously paid
to LESSEE and not yet applied by LESSEE as permitted or required hereunder,
shall be delivered from LESSEE to LESSOR if, at the time of such payment, a
Default or an Event of Default shall have occurred and be continuing. In such
case, all such amounts shall be paid to and held by LESSOR as security for the
obligations of LESSEE hereunder.
(F) CERTIFICATES. Not less than three (3) Business Days prior to the
Effective Date, and thereafter on each renewal by the LESSEE of the insurance
required hereby, LESSEE will furnish to LESSOR a certificate executed and
delivered by an Approved Insurer, appointed by LESSEE, describing in reasonable
detail, and in accordance with customary practice, insurance carried on the
Aircraft and certifying that the insurance then maintained on the Aircraft
complies with the terms of this Lease. LESSEE will cause such Approved Insurer,
identified to and reasonably acceptable to LESSOR, to agree to hold all
insurance contracts and slips for the benefit of LESSOR and to advise LESSOR in
writing at least thirty (30) days (seven (7) days in the case of any war risk
and allied perils coverage) prior to the non-renewal, termination, or
cancellation for any reason (including, without limitation, failure to pay
premiums therefor) of any such insurance.
In the event LESSEE shall fail to maintain insurance as herein
provided, LESSOR may at its option provide such insurance and, in such event,
LESSEE shall, upon demand, reimburse LESSOR, as Supplemental Rent for the cost
thereof.
(G) CHANGES IN INDUSTRY PRACTICE. If there shall be a fundamental
change in the generally accepted industry-wide practice with respect to the
insurance of aircraft (whether relating to all or any of the types of insurance
required to be effected pursuant to the terms of this Section 13) and, as a
consequence thereof, LESSOR shall be of the reasonable opinion that the
insurance required pursuant to the provisions of this Section 13 shall be
insufficient to protect the interests of LESSOR, the insurance requirements set
forth in this Section 13 shall be varied as may be mutually agreed so as to
include such additional or varied requirements to be effected pursuant to the
terms of this Section 13, and as so varied, shall provide the same protection
to LESSOR as it would have done had such change in generally accepted
industry-wide practice not occurred. If any such change in generally accepted
industry-wide practice would enable LESSEE, but for the requirements in this
Section 13, to reduce its expenditures in relation to all or any of the types
of insurance required to be effected pursuant to the terms of this Section 13
without, in the reasonable opinion of LESSOR, prejudicing the interest of
LESSOR, the insurance requirements in this Section 13 shall be amended to take
account of such change in generally accepted industry-wide practice to the
extent required to enable LESSEE to reduce such expenditures, provided,
however, that in no event shall such public
45
liability insurance coverage set forth in Section 14 be less than Three Hundred
Fifty Million (US$350,000,000) Dollars.
SECTION 14
INDEMNIFICATION
(A) LESSEE agrees to indemnify, reimburse, defend, protect, save and
hold harmless the Indemnitees from and against any and all claims, damages,
losses, liabilities, demands, suits, judgments, causes of action, legal
proceedings, whether civil or criminal, penalties, fines, other sanctions, and
any costs and expenses in connection herewith, including, but not limited to,
attorney's fees and expenses (any and all of which are hereafter referred to as
"Claims") which in any way may result from, pertain to, or arise in any manner
out of, or are in any manner related to the Aircraft or this Lease, arising out
of events occurring on or subsequent to the Effective Date through and
including the date this Lease terminates and all obligations of LESSEE have
been fully and satisfactorily performed, or the breach of any representation,
warranty or covenant made by LESSEE hereunder, including, but not limited to,
(i) the condition, ownership, manufacture, delivery, non-delivery, lease,
acceptance, rejection, possession, return, disposition, use, or operation of
the Aircraft either in the air or on the ground; or (ii) any defect in the
Aircraft arising from the material or any articles used therein or from the
design, testing, or use thereof or from any maintenance, service, repair,
overhaul, or testing of such Aircraft, regardless of when such defect shall be
discovered (including, but not limited to, infringement of patent or other
right or latent and other defects whether or not discoverable by LESSEE or
LESSOR), whether or not such Aircraft is at the time in the possession of
LESSEE, and regardless of where such Aircraft may then be located; or (iii)
this Lease or any other transaction, approval, or document contemplated hereby
or given or entered into in connection herewith; provided, however, that LESSEE
shall be subrogated to all rights and remedies which LESSOR may have against
the Manufacturer or Engine Manufacturer.
LESSEE hereby waives and releases any claim now or hereafter
existing against any Indemnitee, on account of any Claims for or on account of
or arising or in any way connected with injury to or death of personnel of
LESSEE or loss or damage to property of LESSEE or the loss of use of any
property which may result from or arise in any manner out of or in relation to
the leasing, condition, use, or operation of the Aircraft, either in the air or
on the ground during the Base Term hereof, or which may be caused during such
Base Term by any defect in such Aircraft from any material or any article used
therein or from the design or testing thereof, or use thereof or from any
maintenance, service, repair, overhaul, or testing of such Aircraft regardless
of when such defect may be discovered, whether or not such Aircraft is at the
time in the possession of LESSEE, and regardless of the location of such
Aircraft at any such time.
Without limitation upon LESSEE's liability under this Section 14,
LESSEE hereby agrees to indemnify, reimburse, defend,
46
protect, save and hold each Indemnitee harmless from any Claims in any manner
imposed upon or accruing against each Indemnitee because of the manufacture of
the Aircraft, any originally manufactured design or design incorporated prior
to the operation of the Aircraft by LESSEE, any change or alteration of design
by LESSEE, or material therein or relating thereto, because of infringement of
patent or any other right. With respect to any claim for infringement of patent
or any other right which is alleged to have occurred prior to LESSEE leasing
the Aircraft, LESSEE's indemnification obligation with respect to such claims
shall be limited to claims that are asserted during the Base Term of this Lease
or any extension thereof. The foregoing limitation shall not apply to claims
for infringement of patent or any other right which is alleged to have occurred
at any time during the Base Term or any extension thereof regardless of when
such claims are asserted.
LESSEE hereby agrees, and shall have the right, to assume and conduct,
promptly and diligently, at its sole cost and expense, the entire defense of
any Indemnitee against any such Claims, and any claim, suit, or action for
which any Indemnitee is required to assume liability.
LESSOR agrees to give LESSEE prompt notice of any Claim hereunder
following LESSOR's actual knowledge of such Claim. The failure of LESSOR to
give the notice required by this Section 14 of any Claim shall not constitute a
release by LESSOR or the Indemnitees of any obligations of LESSEE to any
Indemnitees in respect of any such Claim, unless LESSEE is materially adversely
affected solely by such failure of LESSOR to give such notice. No settlement of
any Claim by an Indemnitee may be made without the consent of LESSEE, which
consent or withholding of consent shall be promptly noticed to LESSOR and the
Indemnitee seeking indemnification. LESSEE may only withhold consent to a
proposed settlement of a Claim if LESSEE posts a bond issued by a reputable
bonding or insurance company reasonably satisfactory to LESSOR, in an amount
not less than the full amount of the Claim together with interest and
penalties, if any, thereon.
The indemnifications contained in this Section 14 shall continue in
full force and effect notwithstanding any expiration or other termination of
this Lease and are expressly made for the benefit of and shall be enforceable
by each Indemnitee and their respective successors and assigns.
(B) EXCEPTIONS. In no event shall the indemnity provided for in Section
14(A) extend to any Claim or disbursement of any Indemnitee resulting from,
pertaining to or arising in any manner out of, or in any manner relating to,
the gross negligence or willful misconduct of any Indemnitee.
SECTION 15
LIENS
LESSEE shall not directly or indirectly create, incur, assume, or suffer
to exist any Lien on or with respect to the
47
Aircraft, title thereto, any interest therein, this Lease or any interest
therein, except Permitted Liens. LESSEE shall promptly, at its own expense,
take such action as may be necessary to duly discharge any Lien (except for
Permitted Liens) directly or indirectly created, incurred, assumed or suffered
to exist by LESSEE if the same shall arise at any time with respect to the
Aircraft, title thereto, any interest therein, this Lease or any interest
therein.
SECTION 16
PERFECTION OF TITLE AND FURTHER ASSURANCES
(A) Except through the action or inaction of LESSOR after due notice
and request having been made upon it, if, at any time, any filing or recording
is reasonably necessary to protect the interest of LESSOR, LESSEE shall, at its
own cost and expense, cause this Lease, any assignment of this Lease, any
security agreement with respect to the Aircraft, financing statements with
respect thereto, and any and all additional instruments which shall be executed
pursuant to the terms hereof, so far as permitted by applicable Law, to be
kept, filed and recorded and to be re-executed, re-filed and re-recorded at all
times in the appropriate office pursuant or in relation to any Laws of any
Governmental Entity, as LESSOR may request, to perfect, protect, and/or
preserve the rights and interests of LESSOR hereunder and in the Aircraft, and
LESSEE shall furnish to LESSOR evidence satisfactory to LESSOR of each such
filing, re-filing, recordation and re-recordation.
(B) Without limiting the foregoing, LESSEE shall do or cause to be
done, at LESSEE's cost and expense, any and all acts and things which may be
required under the terms of the Convention on the International Recognition of
Rights in Aircraft ("Mortgage convention") to perfect and preserve the title of
LESSOR to the Aircraft (assuming, that with respect to the U.S. registration of
the. Aircraft, LESSOR meets the citizenship requirements for such registration)
within the jurisdiction of any signatory which has ratified the Mortgage
Convention, as LESSOR may reasonably request. LESSEE shall also do or cause to
be done, at its own expense, any and all acts and things which may be required
under the terms of any other Law involving any jurisdictions in which LESSEE
will operate, or any and all acts and things which LESSOR may reasonably
request to perfect and preserve LESSOR's ownership rights regarding the
Aircraft within any such jurisdiction.
(C) LESSEE will not suffer any matter or thing whatsoever whereby the
LESSOR's title in and to the Aircraft may be impaired.
SECTION 17
RETURN OF AIRCRAFT AND RECORDS
(A) RETURN. On the Expiration Date, or pursuant to Section 19 hereof
(such date or event being hereinafter referred to as a "Return Occasion"),
LESSEE, at its own expense, on or prior to
48
the Return Occasion, shall return such Aircraft to LESSOR at the Return
Location or such other location as may be mutually agreed upon by LESSOR and
LESSEE, fully equipped as delivered or modified as provided hereunder with all
required Engines installed thereon.
(B) RECORDS. Upon a Return Occasion applicable to the Aircraft, LESSEE,
at its own expense, shall deliver to LESSOR all Aircraft Documents listed in
Exhibit "B", as updated, amended or supplemented along with such other records
and documents in such form as are necessary to qualify the Aircraft for the
issuance, at LESSOR's election, of an Export Certificate of Airworthiness
issued by the Air Authority or the issuance by the FAA of an FAA Standard
Airworthiness Certificate so as to permit operation of the Aircraft under the
Act and FAR Part 121. Such records and manuals shall be current and shall
constitute an accurate representation of the condition of the Aircraft.
(C) CONDITION OF AIRCRAFT. Upon a Return Occasion applicable to the
Aircraft, LESSEE shall return the Aircraft to LESSOR in such condition so that
the Aircraft shall: (1) comply with each and every return condition requirement
set forth in Exhibit "H" hereto; (2) have accomplished all work necessary to
obtain a valid Certificate of Airworthiness for Export or Standard
Airworthiness Certificate (other than (i) having TCAS and windshear detection
systems installed, (ii) complying with Stage III noise requirements, subject to
the provisions of Section 8(C) of this Lease, and (iii) a fresh C check
(however, the Aircraft shall be returned to LESSOR with a fresh B check)) as
LESSOR shall elect, in each case issued by the FAA; and (3) shall be free and
clear of all Liens, except LESSOR's Liens and Liens which may have existed
prior to the Effective Date and were not created by or consented to by LESSEE.
(D) FINAL INSPECTION. Upon or next preceding a Return Occasion with
respect to the Aircraft hereunder, LESSEE shall make such Aircraft available to
LESSOR not less than ten (10) days prior to the date of the Return Occasion for
detailed inspection in order to verify that the condition of such Aircraft
complies with the requirements set forth above (such inspection being
hereinafter referred to as the "Final Inspection"). Such Final Inspection may
be scheduled at an appropriate maintenance facility of the Authorized
Maintenance Performer then performing maintenance of such Aircraft, pursuant to
Subsection 7(D) hereof, and LESSEE shall give LESSOR not less than ten (10)
days' prior written notice of the location and commencement date of such Final
Inspection. The period allowed for the Final Inspection shall, if necessary, be
extended so as to have such duration as to permit the performance of all of the
following, each of which must occur during such period:
(1) a B check performed in accordance with LESSEE's Maintenance
Program;
(2) the opening, in order to verify any aspect of the condition of
any area of the Aircraft which would normally be accessible during the
maintenance check being
49
performed, or at LESSOR's request, the opening of any areas of the
Aircraft if LESSOR reasonably believes, based on prior inspections
or other evidence, that opening of such areas would reveal that the
Aircraft does not completely comply with the requirements of this
Section 17 and Exhibit "H"; and
(3) No less than three (3) of LESSOR's representatives shall be
permitted to attend each phase of activity required to be conducted
during the Final Inspection. A Final Inspection shall commence on
or before the date of a Return Occasion with respect to the
Aircraft and shall continue on consecutive days until all activity
required pursuant to the terms of Exhibit "H" and the above
provisions have been concluded. To the extent that any portion of
the Final Inspection extends beyond the date of a Return Occasion,
the Base Term with respect to the Aircraft undergoing the Final
Inspection shall be deemed to be automatically extended (but LESSEE
shall have no right to operate the Aircraft during such time except
in connection with any required re-delivery test flights), and the
LESSEE shall be obligated to continue to insure the Aircraft, in
accordance with the provisions of this Lease, and to pay Rent
hereunder on a daily basis, calculated at a daily rate equal to
1/15 of the Basic Rent, until the Final Inspection shall have been
concluded (provided, however, that LESSEE's shall have no
obligation to pay Basic Rent beyond the originally scheduled
Expiration Date if the Final Inspection is not completed on or
before the Expiration Date due to LESSOR's failure to timely appear
for such inspection unless such failure is caused by LESSEE denying
access to the Aircraft and/or Aircraft documents at a time when
same were to be made available to LESSOR or if LESSEE unreasonably
interferes with such Final Inspection by LESSOR). All storage
expenses attributable to any extension of the Base Term pursuant to
the preceding sentence shall be payable by LESSEE.
(E) AIRCRAFT DOCUMENTATION. In order to enable LESSOR to prepare for
its Final Inspection of the Aircraft pursuant to Subsection 17(D) above, LESSEE
agrees to make available at LESSEE's maintenance base to LESSOR, not later than
ten (10) days prior to the commencement of such Final Inspection, the Aircraft
Documents listed in Exhibit "B" hereto, together with such other documentation
regarding the condition, use, maintenance, operation and history of the
Aircraft as LESSOR may reasonably request.
(F) LESSEE'S CORRECTION AND SUBSEQUENT CORRECTIONS. To the extent that
the Aircraft, any Engine or any of the Aircraft Documents fails upon a Return
Occasion to conform to any requirement imposed by Section 17 hereof and Exhibit
"H", LESSOR may, at its option:
(1) continue the Lease in effect in the manner provided for in
Subsection 17(D)(3) above with regard to
50
automatic extension with respect to such Aircraft until such time as
the nonconforming items are corrected; or
(2) request LESSEE to pay, and LESSEE shall pay to LESSOR, an
amount equal to the amount required (labor and materials) by the
then current Authorized Maintenance Performer or any other Person
designated by LESSOR, as the case may be, to correct such
nonconforming items. Any such amount payable by LESSEE to LESSOR
for such correction shall become Supplemental Rent, payable by
LESSEE within five (5) days following the submission of a written
statement by LESSOR to LESSEE identifying the items corrected or to
be corrected and setting forth the expense of such correction.
LESSEE's obligation to pay such Supplemental Rent shall survive the
passage of the early termination of the Base Term or other
termination of this Lease. In addition to the foregoing, but
subject to Sections A(ix) and (xi) of Exhibit "H", and under the
same payment terms, LESSEE, with regard to any time-limited
component installed on such Aircraft which does not satisfy the
return condition requirements of this Section 17 and Exhibit "H"
upon a Return Occasion, shall pay LESSOR, at the time of a Return
Occasion, an amount equal to the amount which would be required to
be paid to the Person selected by LESSOR for putting such item in
such condition.
(G) DISPUTE AS TO COMPLIANCE WITH RETURN CONDITIONS. Should there be
any dispute as to whether the Aircraft meets the return conditions, the matter
shall be resolved by an independent knowledgeable aviation maintenance expert
reasonably acceptable to LESSOR and LESSEE.
SECTION 18
EVENTS OF DEFAULT
Each of the following events shall constitute a Default and after the
applicable grace, notice or cure period, if any, an Event of Default:
(A) LESSEE shall fail to make any payment of Rent when due under this
Lease and such payment shall remain unpaid for a period of three (3) days from
the due date;
(B) LESSEE shall fail to carry and maintain insurance on or with
respect to the Aircraft in accordance with the provisions of Section 13
hereof or shall operate the Aircraft or permit the Aircraft to be operated in
violation of any insurance policy required to be provided pursuant to Section
13 hereof;
(C) Except as otherwise expressly provided in this Section 18 and
Subsection 18(B) above, for which no notice is required, LESSEE shall fail to
perform or observe any covenant, condition or agreement to be performed or
observed by LESSEE under
51
the Lease and such failure shall continue for a period of thirty (30) days after
written notice thereof from LESSOR to LESSEE;
(D) Any representation or warranty made by LESSEE herein, or in any
notice, certificate or other document furnished by or on behalf of LESSEE
herein to LESSOR or its assigns, shall prove to have been incorrect in any
material respect when made;
(E) LESSEE or Airgroup shall consent to the appointment of a receiver,
trustee or liquidator for itself or for a substantial part of its property, or
LESSEE or Airgroup shall admit in writing its inability to pay its debts
generally as they become due, or shall make a general assignment for the
benefit of creditors, or LESSEE or Airgroup shall file a voluntary petition in
bankruptcy or a voluntary petition or answer seeking reorganization in a
proceeding under any Laws dealing with bankruptcy, insolvency, moratorium or
creditors' rights generally (any or all of which are hereinafter referred to as
"Bankruptcy Laws"), or an answer admitting the material allegations of a
petition filed against LESSEE or Airgroup, in any such proceeding, or LESSEE or
Airgroup, shall by voluntary petition, answer or consent to or seek relief
under the provisions of any Bankruptcy Laws;
(F) An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of LESSEE or Airgroup,
as the case may be, a receiver, trustee or liquidator for LESSEE or Airgroup or
any substantial part of its property, or any substantial part of the property
of LESSEE or Airgroup shall be sequestered, and any such order, judgment,
decree or appointment, or sequestration, shall remain in force undismissed,
unstayed or unvacated for a period of sixty (60) days after the date of entry
thereof;
(G) A petition against LESSEE or Airgroup in a proceeding under the
Bankruptcy Laws of any Governmental Entity shall be filed and shall not be
withdrawn or dismissed within sixty (60) days thereafter, or if, under the
provisions of any Bankruptcy Laws which may apply to LESSEE or Airgroup, any
court of competent jurisdiction shall assume jurisdiction, custody or Control
of LESSEE or Airgroup, or of any substantial part of its property, and such
jurisdiction, custody or control shall remain in force unrelinquished, unstayed
or unterminated for a period of ninety (90) days;
(H) LESSEE or Airgroup shall be dissolved or liquidated, terminate its
existence or suspend its operations, shall lose any right, privilege or
franchise necessary to maintain its corporate existence, or shall dispose of
all or substantially all of its properties to any Person;
(I) LESSEE shall make or permit any assignment or transfer of this
Lease or of possession of the Aircraft other than as permitted hereunder;
(J) Any license, permit, certificate, authorization, consent, approval,
notification, registration or filing now or hereafter necessary to enable
LESSEE to perform or comply with its
52
obligations under the Lease shall fail to be timely issued, granted or made, or
shall expire or lapse and shall not be forthwith renewed or extended or shall be
revoked, withdrawn, withheld or adversely modified, or shall cease to be in full
force and effect;
(K) All or a substantial part of the properties of LESSEE or Airgroup
shall be condemned, seized or otherwise appropriated for custody or control, or
such property shall be assumed by any Governmental Entity or any court or other
Person purporting to act under the authority of any Governmental Entity, or
LESSEE or Airgroup shall be prevented from exercising normal control over all
or a substantial part of its properties and the events as set forth in this
Subsection 18(K) are not remedied within sixty (60) days after they occur;
(L) LESSEE shall fail to pay when due any obligation for the payment of
money in excess of Four Hundred Thousand (US$400,000) Dollars under any
agreement to which LESSEE is a party where such failure would constitute an
event of default thereunder or permit the party to whom such payment was owed
(hereinafter referred to as a "Creditor") to exercise remedies under such
agreement as a result of such non-payment; provided, however, that the
foregoing shall only constitute a Default and not an Event of Default hereunder
for the period of time that the Creditor states in a letter, addressed to and
delivered to LESSOR, that it irrevocably agrees for such period of time to
forebear from the exercise of remedies or the taking of other action against
LESSEE (the "Forbearance Period") as a result of such non-payment of money.
Upon the expiration of the Forbearance Period, unless such period has been
extended by the Creditor(but in no event may the Forbearance Period, in the
aggregate, be greater than sixty (60) days from the original due date for such
payment), unless LESSEE has delivered to LESSOR written confirmation from the
Creditor that it has been paid in full or has otherwise waived its claim
against LESSEE or has otherwise settled with LESSEE, the Default set forth in
this subsection (L) shall automatically and without any further action on the
part of LESSOR be deemed to constitute an Event of Default hereunder;
(M) LESSEE shall voluntarily suspend all or substantially all of its
commercial revenue passenger operations, or the franchises, concessions,
permits, licenses, rights or privileges required for the conduct of the
commercial revenue passenger operations of LESSEE shall be revoked, canceled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented, and as a result the principal business activity of
LESSEE shall cease to be that of commercial revenue passenger airline;
(N) If for any reason or at any time Airgroup owns less than seventy
percent (70%) of the outstanding voting stock of LESSEE; or
(O) An "Event of Default" shall occur and be continuing under any other
lease agreement entered into between LESSOR (or any affiliated or related
entity to LESSOR) and LESSEE.
53
SECTION 19
REMEDIES
Upon the occurrence of any Event of Default, and at any time thereafter
so long as the same shall be continuing, LESSOR may, at its option, declare
this Lease to be in default, and at any time thereafter, so long as LESSEE
shall not have remedied any outstanding Event of Default, LESSOR may exercise
one or more of the following remedies with respect to the Aircraft as LESSOR,
in its sole discretion, shall elect, to the extent available and permitted by,
and subject to compliance with, any mandatory requirements of applicable Law
then in effect; PROVIDED, HOWEVER, that upon the occurrence of any Event of
Default specified in paragraphs (E),(F),(G) or (H) of Section 18, LESSOR shall
be entitled automatically, as of the day prior to such occurrence, to exercise
any of the following remedies without declaring this Lease to be in default or
making demand or giving notice or the taking of any other action:
(A) Demand that LESSEE, and LESSEE shall, upon the written demand of
LESSOR, at LESSEE's expense, return the Aircraft and Aircraft Documents
promptly to LESSOR in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Section 17 and Exhibit "H" hereof; or
LESSOR, at its option and to the extent permitted by applicable Law, may enter
upon the premises where all or any part of the Aircraft and Aircraft Documents
are located and take immediate possession of and remove the same, by summary
proceedings or otherwise, all without liability accruing to LESSOR for or by
reason of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise;
(B) Sell the Aircraft at public or private sale, as LESSOR may
determine, or otherwise dispose of, hold, use, operate, lease to others, or
keep idle the Aircraft, as LESSOR, in its sole discretion, may determine, all
free and clear of any rights of LESSEE and without any duty to account to
LESSEE with respect to such action or inaction, or for any proceeds with
respect thereto;
(C) Demand (whether or not LESSOR, pursuant to Subsection 19(B) hereof,
may have sold the Aircraft) that LESSEE pay LESSOR, and LESSEE shall upon such
demand pay to LESSOR, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Rent for such Aircraft due after such payment occurs),
any accrued and unpaid Rent for such Aircraft due up to the time LESSOR demands
such payment, plus the amount by which the fair market value of such Aircraft
(assuming the condition of the Aircraft and the Aircraft Documents fully and
satisfactorily meets all of the return conditions set forth herein and on
Exhibit "H") exceeds the net cash proceeds of any sale of such Aircraft,
together with interest at the Overdue Rate on such fair market value or portion
thereof and such unpaid Rent from the date of LESSOR's demand to the date
such payment is made;
54
(D) Proceed by appropriate court action or actions, either at Law or in
equity, to enforce performance by LESSEE of the applicable obligations and
covenants of LESSEE under this Lease and to recover damages for the breach
thereof, or to rescind this Lease as to the Aircraft;
(E) Terminate this Lease or any of LESSEE's rights hereunder by written
notice, and repossess the Aircraft and Aircraft Documents, provided such
termination shall not release LESSEE from its financial obligations hereunder
or any other obligations hereunder which can be satisfied by the payment of
money (including the payment of money for the performance of services); or
(F) Exercise any and all other rights and remedies provided for under
applicable law whether or not such rights and remedies are specifically
enumerated herein.
Further, should the LESSEE fail to return the Aircraft and Aircraft
Documents upon termination of the Lease for any reason whatsoever except due to
an Event of Loss and as set forth in Subsection 17(F), without prejudice to
LESSOR's rights hereunder to demand return of the Aircraft in the condition
required by this Section, LESSEE shall continue to pay Rent to LESSOR for each
day the Aircraft remains in LESSEE's possession at the rate of 1/15 of the
monthly Basic Rent then in effect.
In addition, LESSEE shall be liable for any and all unpaid Rent due
hereunder before or during the exercise of any of the foregoing remedies, and
for all attorneys' fees, legal expenses and other costs and expenses incurred
by LESSOR, or its respective agents by reason of the occurrence of any Event of
Default or the exercise of LESSOR's remedies with respect thereto, including
all costs and expenses incurred in connection with the return of the Aircraft,
in accordance with the terms of Section 17 and Exhibit "H" hereof, or with
placing such Aircraft in such condition.
Except as otherwise expressly provided above, no remedy referred to
in this Section 19 is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to above or otherwise available to
LESSOR under any applicable Law, and the exercise or commencement of exercising
by LESSOR of any one or more of such remedies shall not preclude the
simultaneous or later exercise by LESSOR of any or all such other remedies. No
express or implied waiver by LESSOR of any Default or Event of Default shall in
any way be, or be construed to be, a waiver of any future or subsequent Default
or Event of Default. LESSEE hereby agrees that, except as provided in this
Section 19, any financing profit or savings accruing to LESSOR by virtue of
LESSEE's default and LESSOR's subsequent sale, re-letting, or award shall in no
way reduce, offset or mitigate the damages for which LESSEE is liable
hereunder.
To facilitate LESSOR in the termination of this Lease and the
exercise of its remedies upon the occurrence and continuation of an Event of
Default, LESSEE hereby appoints LESSOR as LESSEE's irrevocable agent and
attorney-in-fact, pursuant to
55
the Power of Attorney attached hereto as Exhibit "E", to execute all documents
deemed necessary to release, terminate and void LESSEE's interest in the
Aircraft leased hereunder and to otherwise enable and/or assist LESSOR in the
exercise of its remedies hereunder, and to file said documents for recordation
with the FAA and any other appropriate Governmental Entity following the
occurrence of an Event of Default, where LESSOR, at its sole discretion, may
deem use of such Power of Attorney necessary to effect any remedy which LESSOR
chooses to exercise.
SECTION 20
ALIENATION
(A) There shall be no restriction upon LESSOR's right to assign, sell,
transfer, pledge, hypothecate or encumber any interest of LESSOR (hereinafter
referred to generally as "Alienation") to any other Person in the Aircraft,
this Lease and/or the proceeds thereof and hereof, subject to rights of the
LESSEE under the provisions of this Lease and provided that any such
assignment, sale, transfer, pledge, hypothecation or encumbrance does not have
a material adverse affect on LESSEE's obligations hereunder or adversely affect
the registration of the Aircraft or the quiet enjoyment of the LESSEE therein
pursuant to this Lease. To effect or facilitate any such assignment, sale,
transfer, pledge, hypothecation or encumbrance, LESSEE agrees to provide LESSOR
or LESSOR's designee or assignee with such agreements, consents, conveyances or
documents as may be reasonably requested by LESSOR. The agreements,
representations, warranties, covenants, obligations and liabilities contained
herein, including, but not limited to, all obligations to pay Rent and
indemnify LESSOR, are made for the benefit of LESSOR, any security assignee of
LESSOR and their respective successors and assigns, notwithstanding the
possibility that any such Person was not originally a party to this Lease or
may, at the time such enforcement is sought, not be a party to this Lease.
(B) In the case of any Alienation or assignment by LESSOR pursuant to
the provisions of Section 20, LESSEE shall execute and deliver to LESSOR
promptly upon request of LESSOR, any consents or agreements required for the
perfection of such assignment provided that such consent or other documents
does not affect LESSEE's rights under Subsection 21(G) below.
SECTION 21
MISCELLANEOUS
(A) SEVERABILITY, AMENDMENT AND CONSTRUCTION. Any provision of this
Lease which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render
56
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged, or terminated orally, but only
by an instrument in writing expressed to be a supplement to this Lease, signed
by an officer of the party against which the enforcement of the change, waiver,
discharge or termination is sought. This Lease shall constitute an agreement of
lease for the Base Term of the Lease, and nothing herein shall be construed as
conveying to LESSEE any right, title or interest in the Aircraft, the Airframe,
any Engine or Part except as a LESSEE only, for such Base Term. The headings in
this Lease are for convenience of reference only and shall not define or limit
any of the terms or provisions hereof. Unless the context otherwise requires,
all references in this Lease to designated Sections or other subdivisions
hereof are to such designated Sections or subdivisions; and the words "herein",
"hereof", "hereto", "hereunder", and other words of similar import refer to
this instrument as a whole and not to any particular Section or subdivision. In
construing any provision of this Lease, no account shall be taken as to the
party who drafted same and no presumption shall arise or result therefrom.
(B) GOVERNING LAW. This Lease shall in all respects be governed by, and
construed in accordance with, the Laws of the State of Hawaii with respect to
contracts made and to be entirely performed in such State by residents thereof.
(C) ARBITRATION. Any controversy or claim between LESSOR and LESSEE,
arising out of or relating to this Lease shall, at the request of either LESSOR
or LESSEE, be decided by binding arbitration conducted in the State of Hawaii
without a judge or jury, under the auspices of the American Arbitration
Association or Dispute Prevention and Resolution, Inc. in accordance with
Chapter 658 of the Hawaii Revised Statutes and the respective and applicable
rules of the aforementioned organizations. The arbitrator will apply any
applicable statute of limitations and will determine any controversy concerning
whether an issue is arbitrable. Judgments upon the arbitration award may be
entered in any court having jurisdiction. The prevailing (winning) party will
be entitled to recover its reasonable attorney's fees and costs as determined
by the arbitrator. This agreement to arbitrate shall not limit or restrict the
right, if any, of any party to exercise before, during or following any
arbitration proceeding, with respect to any claim or controversy, self help
remedies such as setoff, to foreclose a mortgage or lien or other security
interest in any real or personal property collateral judicially or by power of
sale, or to obtain provisional or ancillary remedies such as injunctive relief
from a court having jurisdiction. Either party may seek those remedies without
waiving the right to submit the controversy or claim in question to
arbitration.
(D) NOTICE. Except as otherwise specified herein, all notices,
requests, demands, consents or other communications to, upon or by the
respective parties hereto shall be in the English language and in writing, sent
by international recognized express courier or telefax, and shall be deemed to
have been duly given or made when received by the party if sent by telefax or
when received
57
by the party, if sent by express courier, addressed to the party to which such
notice, request, demand or other communication is required or permitted to be
given or made hereunder, at the LESSEE'S Address or LESSOR'S Address, as the
case may be, or at such other address of which such Person shall have notified
in writing the party giving such notice.
(E) LESSOR'S RIGHT TO PERFORM FOR LESSEE. If LESSEE fails to make any
payment of Supplemental Rent or fails to perform or comply with any covenant,
agreement or obligation contained herein, LESSOR shall have the right, but not
the obligation, to make such payment or perform or comply with such agreement,
covenant or obligation, and the amount of such payment and the amount of the
reasonable expenses of LESSOR incurred in connection with such payment or the
performance thereof or compliance therewith, together with interest thereon at
the Overdue Rate, shall be deemed Supplemental Rent, payable by LESSEE upon
demand. The taking of any such action by LESSOR pursuant to this Subsection
21(E) shall not constitute a waiver or release of any obligation of LESSEE
under the Lease, nor a waiver of any Default or Event of Default which may
arise out of LESSEE's nonperformance of such obligation, nor an election or
waiver by LESSOR of any remedy or right available to LESSOR under or in
relation to this Lease.
(F) COUNTERPARTS. This Lease may be executed simultaneously in one or
more counterparts, all of which together shall constitute one and the same
Lease. To the extent that this Lease constitutes chattel paper in any
jurisdiction, no security interest herein may be created through the transfer
of possession of any counterpart other than the counterpart marked "Original."
Other than the counterpart of this Lease marked "Original," all other original
executed counterparts of this Lease shall be marked "Duplicate Original."
(G) QUIET ENJOYMENT. LESSOR covenants that if, and as long as, no Event
of Default hereunder has occurred and is continuing, LESSEE shall quietly enjoy
the Aircraft without interference by LESSOR or by any Person claiming by,
through or under LESSOR, or by any assignee of LESSOR, and neither LESSOR nor
any Person claiming by, through or under LESSOR, or any assignee of LESSOR
will, as long as no Event of Default hereunder has occurred and is continuing,
take any action which adversely affects the registration of the Aircraft.
(H) BROKERS. LESSOR and LESSEE each agree that there has been no third
party as broker or finder involved in the introduction of LESSOR and LESSEE
with respect to this Lease or the subject matter or negotiation hereof and each
party hereby indemnifies and agrees to hold harmless the other party from
liability for fees, commissions or other claims made upon such other party due
to such claims arising through it.
(I) STORAGE OF AIRCRAFT. Upon the expiration or termination of this
Lease, provided that the final maintenance check prior to return is
accomplished at LESSEE's Honolulu maintenance base or the return location is
Honolulu, LESSEE shall
58
provide storage facilities for the Aircraft at a location where LESSEE has
storage facilities for a period not to exceed sixty (60) days (the "Storage
Period"). During the Storage Period, LESSOR shall bear the risk of loss of the
Aircraft and shall pay maintenance, insurance and other costs (except for the
cost of the storage facilities provided by LESSEE) with respect to the
Aircraft. Upon the expiration of the Storage Period, LESSEE shall cooperate
with LESSOR by flying the Aircraft to the Return Location.
(J) EXPENSES. Unless otherwise specifically provided for to the
contrary, LESSOR and LESSEE shall each bear their own expenses in connection
with this transaction, including, but not limited to the fees and expenses of
counsel. Notwithstanding the foregoing, LESSOR and LESSEE shall each be
responsible for one-half of the fees and expenses of FAA counsel.
SECTION 22
SUBLEASE; ASSIGNMENT
(A) LESSEE may sublease the Aircraft to any Air Carrier provided that
(i) such Air Carrier at the time of such subleasing is solvent and is not in
receivership or subject to the jurisdiction of any bankruptcy court, (ii) that
LESSOR has consented to such subleasing, such consent not to be unreasonably
withheld, and (iii) that LESSOR's title in and to the Aircraft and this Lease
remain fully perfected and protected and LESSOR receives satisfactory legal
opinions with respect thereto. LESSEE shall be responsible for all reasonable
costs and expenses incurred by LESSOR in connection with any subleasing of the
Aircraft, including, but not limited to, the reasonable fees and expenses of
counsel to LESSOR.
(B) Any sublease consented to by LESSOR shall contain, among other
things, the following terms and conditions:
(1) That such sublease is subject to and subordinate to this Lease;
(2) The sublease shall not relieve the LESSEE of its obligations
under this Lease and the LESSEE shall continue to be primarily liable
hereunder;
(3) The terms of such sublease shall be no less favorable to the
lessor thereunder than the terms of this Lease; and
(4) The rights of the lessor in any Sublease (including, but not
limited to security deposits and maintenance reserves payable thereunder) shall
be assigned to LESSOR.
(C) All of LESSEE's obligations hereunder may be performed by any
approved sublessee, provided however that the LESSEE shall not be released from
its obligations hereunder.
59
(D) Nothing set forth in this Section 22 shall constitute, or be deemed
to constitute, a consent by LESSOR to the assignment by LESSEE, in whole or in
part, of this Lease or the rights and obligations of LESSEE thereunder. Any
assignment or purported assignment, in whole or in part of this Lease or the
rights and obligations of LESSEE hereunder shall be null and void and of no
force and effect unless the prior written consent of LESSOR to such assignment
had been obtained.
SECTION 23
EXCUSABLE DELAY
LESSOR or LESSEE shall not be responsible for, nor be deemed to be in
default under this Lease on account of any delay in delivery of the Aircraft
or commencement of this Lease due to any of the following causes:
(a) acts of God; war, war-like operations, insurrections or riots;
fires, floods, explosions, earthquakes or serious accidents; epidemics or
quarantine restrictions; any act of government, governmental priorities,
allocation regulations or orders affecting materials, facilities or completed
aircraft; strikes or labor troubles causing cessation, slowdown or interruption
of work; or inability after due and timely diligence to procure materials,
accessories or equipment prior to delivery (including, without limitation, the
Aircraft);
(b) damage to the Aircraft which can reasonably be repaired,
provided Lufthansa or its agent will promptly perform such repair work;
(c) Lufthansa's delay in delivery of the Aircraft to LESSOR for
whatever reason, including, but not limited to, delay caused by an aircraft
manufacturer's failure to deliver a replacement aircraft on time; or
(d) correction of discrepancies evidenced during the Delivery
Check, ground inspection or demonstration flight of the Aircraft, provided
Lufthansa is promptly and diligently correcting same.
Should an excusable delay continue beyond November 26, 1996, LESSOR and
LESSEE shall each have the right to terminate this Lease, without liability or
further obligation to the other; provided, however, that any time after the
sixtieth day if a rescheduled Delivery Date has been established and the Lease
has not theretofore been terminated, neither LESSOR nor LESSEE shall have any
right to terminate the Lease during the fifteen (15) day period preceding the
rescheduled Delivery Date.
60
SECTION 24
ENTIRE AGREEMENT
This Lease (including all Exhibits hereto) embodies the entire
agreement and understanding between LESSOR and LESSEE relating to the subject
matter hereof and supersedes all prior agreements and understandings relating
hereto and neither of the parties hereto shall be bound by or charged with any
oral or written agreements, representations, warranties, statements, promises
or understandings not specifically set forth herein. This Lease may not be
changed and no right granted or obligation imposed hereunder may be waived
orally, but only by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
61
IN WITNESS WHEREOF, LESSOR and LESSEE, each pursuant to due corporate
authority, have caused this lease to be executed by their duly authorized
officers as of the day and year first above written.
LESSOR: LESSEE:
BANK OF HAWAII ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇ By:
------------------------------- ---------------------------------
▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇
Title: Vice President Title:
---------------------------- ------------------------------
By:
--------------------------------
Title:
-----------------------------
61
IN WITNESS WHEREOF, LESSOR and LESSEE, each pursuant to due corporate
authority, have caused this lease to be executed by their duly authorized
officers as of the day and year first above written.
LESSOR: LESSEE:
BANK OF HAWAII ALOHA AIRLINES, INC.
By: By: /s/ [Illegible]
-------------------------------- ---------------------------------
VICE PRESIDENT
Title: Title: PLANNING & DEVELOPMENT
----------------------------- ------------------------------
By: /s/ [Illegible]
---------------------------------
STAFF VICE PRESIDENT - FINANCE
Title: & CONTROLLER
------------------------------
62
EXHIBIT "A" (Page 1 of 2)
AIRCRAFT SPECIFICATIONS
Model: Boeing 737-230 Max. Taxi Wt. 120,000 lbs.
Serial No. 23155 Max. Gross T.O. Wt. 119,500 lbs.
Line No. Max. Landing Wt. 103,000 lbs.
Reg. No. N821AL Max. Zero Fuel Wt. 95,000 lbs.
Date of Mfgr. December, 1984
Optrs. Empty Wt. 68,000 lbs.
Payload 27,000 lbs.
AIRFRAME STATUS
Time as of Maintenance Program
Total Hours
Total Cycles
Time Since Overhaul
Time Since Last C Ck "D" Check -
Time to Next Overhaul "C" Check -
ENGINE STATUS
Model # Serial # REMAINING Limiter
------- -------- --------- -------
#1. ▇▇▇▇▇ & ▇▇▇▇▇▇▇ 687334 hrs/cyc
JT8D-15
#2. ▇▇▇▇▇ & Whitney 708328 hrs/cyc
JT8D-15
APU
LANDING GEAR - TIME REMAINING
R/H MLG hrs Nose Gear hrs
L/H MLG hrs L/G TBO hrs
GENERAL DATA AND COMMENTS
Fuel Capacity/lbs 34,469 lbs FAR Part ▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇
Interior Configuration 103YC
4 Galleys
3 Lavs
1 Closet
63
EXHIBIT "A" (Page 2 of 2)
AVIONICS INVENTORY
64
EXHIBIT "B" (Page 1 of 2)
AIRCRAFT DOCUMENTATION
On the Effective Date, LESSOR shall deliver to LESSEE the Aircraft
Documentation listed below. All reports and computer documentation produced by
Lufthansa shall be certified by Lufthansa or Lufthansa Technik.
A. The following manuals shall be delivered with the Aircraft. Each manual
shall be current and include all temporary revisions. Each manual shall be in
the English language.
1. FAA-Approved Airplane Flight Manual.
2. Weight and Balance Control and Cargo Loading Manual and Supplements
(load and trim sheet). Include last weigh paperwork and delivery equipment list
with previous operator running W & B computation sheets.
3. Operations Manual and Quick Reference Handbook. Including Cabin
Safety/F/A Manual (PAX A/C).
4. Structural Repair Manual.
5. Aircraft/Engine/APU Maintenance Manual.
6. Boeing Component Overhaul Manuals, including Galley Manuals
(CMM, IPC, OHM).
7. Aircraft/Engine/APU Illustrated Parts Catalog (I.P.C.) (Operator
Customized)
8. Wiring Diagram Manual including the following:
a. Equipment List.
b. Standard Practices (Chapter 20).
c. Charts and Graphs (Chapter 91).
d. Hook Up Charts.
e. Splice List.
f. Ground List.
g. Terminal List.
9. Engine and APU Overhaul Manuals.
10. Current and revised Lufthansa Maintenance Schedule and (COSL)
component, operating and storage limits manual.
65
B. Airworthiness Directives Documentation: The following data will be
provided on the Effective Date. LESSOR shall provide to LESSEE all records
associated with A.D. compliance.
1. A single, complete and current A.D. status list of the airframe,
appliances, Engine and APU Airworthiness Directive applicable to the Aircraft,
appliances, Engine and APU. This list shall be consistent with the preliminary
AD status reports received during the initial inspection. The list shall be in
English, typed, certified and signed by authorized quality assurance
representative of Lufthansa.
2. LESSOR will provide legible copies of the completion documentation
that accomplish each AD, such documents shall be in English and in reasonably
sufficient detail to show the method of compliance. If the AD is a repetitive
inspection documentation, the last accomplishment is sufficient. If the
original completion documents are not available, LESSOR shall provide at a
minimum a copy of the job card or engineering order that accomplished the AD
plus a certification letter signed by Lufthansa's airworthiness department
stating that the AD in question was accomplished at a certain time and cycles,
date and reference all pertinent support documentation (ie. engineering order,
alternate means of compliance, etc.).
However, any AD that was complied with by an alternate means of
compliance must have all original documentation and necessary air authority
approvals.
3. Exemptions or deviations granted by the FAA (or equivalent) to
Lufthansa on A.D. compliance, including copy of exemption request.
C. Engineering Documentation
1. LESSOR shall provide a single, current list, in the English
language (including the ADA list referenced in b. below) of engineering
documentation covering the aircraft as listed below:
a. Service Bulletin status based on the Boeing provided
summary of all Boeing service bulletins to the aircraft and consistent with the
"reference only" status report provided during the initial inspection.
b. List of all Lufthansa initiated on-aircraft modifications
consistent with the ADA list covering all Spec 100 ATA chapters. A current
copy, in English, of all engineering orders listed on the ADA list shall be
provided with appropriate certification stamp on the ADA list.
c. Major repairs list.
d. Supplemental Type Certificate list.
66
2. Data package covering all non-manufacturer/non-FAA-approved
repairs or alterations, including the submittal to the LBA for an approval,
if applicable.
D. Additional Documentation
1. Daily airframe time and cycle utilization report.
2. Master Minimum Equipment List and Configuration Deviation List.
3. Set of cockpit drawings (full scale preferably).
4. Quarterly Reliability Reports for one (1) year.
5. Location map of emergency equipment, with description.
6. Interior configuration drawings.
7. LBA Export Certificate of Airworthiness.
8. Evidence of de-registration.
9. Passenger/Cargo Equipment List (seats, galleys, lavs,
entertainment, etc.).
10. Complete paperwork for last "D" check overhaul and last "A", "B",
and/or "C" check inspections.
11. Compass card and F.D.R. calibration documentation.
12. Copies of Aircraft registration and Certificate of Airworthiness.
13. All Life records (Lufthansa - Lebenslaufkarte) for the assemblies
and rotable parts installed during the last overhaul for each nose, left hand
and right hand main landing gears.
E. Individual Aircraft and Engine Records:
1. Letter of Declaration for each major aircraft/engine accident or
major incident which shall include complete documentation reports, if any.
2. Major structural damage reports, if any.
3. Engine trend monitoring data (1 year minimum provided the engine
was operated with Lufthansa) for each engine installed on the aircraft.
4. Copies of logbook entries for the last twelve (12) months of
operation (at delivery).
5. List of open items, watch items, deferred items.
67
6. Serviceable/Overhaul tags for all life limited parts, hard time
components listed in the rotable components list. The LESSOR and LESSEE agree
that all serviceable overhaul tags for OC (on condition)/CM (condition
monitored) parts listed in the rotable components list for the last 12 months
as at delivery shall be provided to LESSEE by LESSOR on a case by case basis
(up to a maximum of one (1) year after aircraft delivery).
7. Listing of Aircraft, Engine and APU components status by P/N -
S/N - Description Position TBO - TSI - TSO - TSN, Total Time, next Due Time,
including interpretation keys. (Rotable Component List).
8. Engine and APU Logbooks or equivalent reports or documentation.
9. Aircraft and Engine time status at delivery with Serial No. - total
time/total cycles - and times of the last letter check inspection.
10. Engine time report and engine on log which shall include ASB 6038
status for each engine.
11. All Engine and APU records, for the last heavy maintenance shop
visit including back to birth history for each engine life limited part.
Exceptions will be acceptable for parts introduced to Lufthansa before 1993
when back to birth history records was not mandatory; however, LESSOR shall use
its reasonable efforts to assist LESSEE in obtaining full traceability on these
parts, if any.
12. Manufacturer's delivery documents for Engines.
13. Boeing Electrical Load Analysis documents and data.
14. Last power plant test cell run documents for Engines and APU.
15. Documents for boroscope inspection prior to delivery for current
installation for engines (as stated in the Agreement).
16. Letter certifying that at the time of delivery of the aircraft the
aircraft is a non-SSID candidate aircraft.
17. Operator's Corrosion Control Program. (see
Maintenance Schedule)
18. Aircraft Readiness Log (manufacturer's).
19. Copies of all applicable Master Changes
(M.C.) performed on each aircraft.
20. LBA approvals, Lufthansa certification reports for major
modifications, alterations and repairs which are not covered by manufacturers
service bulletins. For minor modifications not covered by manufacturers service
bulletins, Lufthansa shall provide
68
the requested substantiation work. (i.e. certification reports to the extent
required by the LBA).
21. Fire blocking status for all seats, interior fabrics/materials,
including burn test documentation and certification. In accordance with the LBA
for all items introduced by Lufthansa.
22. Current Aging Aircraft and CPCP Status Report.
23. Current list outlining all waiver items/components not approvable
by the FAA.
24. Any historical records applicable to the aircraft, engines or APU
that may be available at reasonable effort and within reasonable time.
25. List detailing Lufthansa component shop history for all components
on the rotable components list on a case by case basis (up to a maximum of one
(1) year after aircraft delivery).
69
EXHIBIT "C" (Page 1 of 2)
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered on and as of the date set
forth below by ALOHA AIRLINES, INC. (hereinafter referred to as "LESSEE") to
BANK OF HAWAII, (hereinafter REFERRED to as "LESSOR") pursuant to that Aircraft
Lease Agreement dated as of September _, 1996 between LESSOR and LESSEE
(hereinafter referred to as the "Agreement"):
A. DETAILS OF ACCEPTANCE
LESSEE hereby indicates and confirms to LESSOR, its successors
and assigns, that the LESSEE has at o'clock _.M., on this day of
________, 1996, at __________, accepted the following in accordance with the
provisions of the Agreement:
1. (a) Boeing Model: 737-230
(b) Manufacturer's Serial No.: 23155
(c) U.S. Registration Number: N821AL
Manufacturer and Manufacturer's Hours Cycles
Engine No. Model Number Serial Number Remaining Remaining
--------- ---------------- -------------- --------- ---------
(1) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ 687334
JT8D-15
(2) ▇▇▇▇▇ & Whitney 708328
JT8D-15
Each of the above-described Engines having 750 or more rated takeoff horsepower
or the equivalent thereof.
AIRFRAME
Total Time: hrs.
Total Cycles: Cycles
Time Remaining to "C" Check: hrs.
Time Remaining to "D" Check: hrs.
70
EXHIBIT "C" (Page 2 of 2)
B. CONFIRMATION OF UNDERTAKINGS
LESSEE confirms that the above described Aircraft and Engines have
been examined by its duly appointed and authorized representative(s), that such
Aircraft and Engines conform to the information set forth above, that there
have been fixed to the Aircraft the markings required by the Agreement (or that
such markings shall be affixed to the Aircraft within fifteen (15) days of the
date hereof). LESSEE confirms and acknowledges that the date set forth above
constitutes the Effective Date, as such term is defined in the Agreement, and
that LESSEE's execution and delivery of this Certificate represents LESSEE's
acceptance of the above described Aircraft and Engines for all purposes of the
Agreement.
IN WITNESS WHEREOF, LESSEE has caused this Certificate of Acceptance to
be executed in its name, by its duly authorized officer(s) or
representative(s), pursuant to due corporate authority, all as of the date
written in Section A above.
LESSEE: ALOHA AIRLINES, INC.
By: ___________________________________
Title: ________________________________
Date: _________________________________
71
EXHIBIT "D"
LEASE SUPPLEMENT NO.
LEASE SUPPLEMENT NO.__, dated _______________, 1996, between ALOHA AIRLINES,
INC., a Hawaiian corporation ("LESSEE") and BANK OF HAWAII ("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain Aircraft
Lease Agreement dated as of September ____ , 1996 (herein called the "Lease
Agreement" and the defined terms therein being hereinafter used with the same
meaning). The Lease Agreement provides for the execution and delivery from time
to time of Lease Supplements, each substantially in the form hereof, for the
purpose of leasing the Aircraft under the Lease Agreement as and when delivered
to the LESSEE in accordance with the terms thereof.
*The Lease Agreement relates to the aircraft and engines described
below, and a counterpart of the Lease Agreement is attached hereto and made a
part hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the FAA as one document.
**The Lease Agreement relates to the Aircraft and engines described
below, and a counterpart of the Lease Agreement, attached to and made a part
of Lease Supplement No. 1 dated _______________ to the Lease Agreement, has
been recorded by the FAA on _______________, 199_ as one document and
assigned Conveyance No. __________.
NOW THEREFORE, in consideration of the premises and other good,
valuable and sufficient consideration, LESSOR and LESSEE hereby agree as
follows:
---------------
*This language for Lease Supplement No. 1
**This language for other Lease Supplements.
72
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230ADV aircraft (the "Delivered
Aircraft"), which Delivered Aircraft as of the date hereof consists of the
following:
(i) One Boeing Model 737-230 Airframe, bearing U.S. registration
number N_____; Manufacturer's serial no._____; and
(ii) Two ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model JT8D-9A engines, bearing
manufacturer's serial nos. _____ and _____, respectively, (each of which
engines has 750 or more rated takeoff horsepower or the equivalent thereof).
2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
3. The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on _______________, 2004.
4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.
5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each Engine
installed thereon have been accepted by LESSEE for all purposes hereof and of
the Lease Agreement, as being in the condition that such Delivered Aircraft and
Engines are required to be in pursuant to the terms of the Lease Agreement.
6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
73
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.
LESSOR
BANK OF HAWAII
By: ___________________________________
Title: ________________________________
By: ___________________________________
Title: ________________________________
LESSEE
ALOHA AIRLINES, INC.
By: ___________________________________
Title: ________________________________
By: ___________________________________
Title: ________________________________
74
EXHIBIT "E"
APPOINTMENT AS ATTORNEY-IN-FACT
Pursuant to the terms of Subsection 19 of the Lease (as hereinafter
defined), ALOHA AIRLINES, INC. ("LESSEE") hereby irrevocably appoints BANK OF
HAWAII ("LESSOR") as its true and lawful attorney-in-fact, to act in all
respects, do such acts and take such actions as LESSEE could do or authorize
itself under the Lease with respect to the use, operation, maintenance,
possession, registration, de-registration and lease termination of the Boeing
737-230ADV Aircraft, Serial Number _____, U.S. Registration No. N_____ (the
"Aircraft"), which LESSOR has leased to LESSEE by Aircraft Lease Agreement
dated as of September __, 1996 (the "Lease"). The appointment is made as part
of and in consideration of the leasing of the Aircraft to LESSEE by LESSOR
and shall remain in full force and effect until the earlier to occur of (i)
the date on which all obligations of LESSEE under the Lease shall be fully
discharged or satisfied, or (ii) __________, 2007.
Executed this _____ day of September, 1996.
ALOHA AIRLINES, INC.
By: ___________________________________
Title: ________________________________
By: ___________________________________
Title: ________________________________
Attested by:
_______________________________________
(PLACE CORPORATE Secretary
SEAL HERE)
75
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of _______________, 199__, before me personally came
____________________, to me known, who, being by me duly sworn, did depose
and say that he resides at _______________; that he is the
____________________ of ________________, the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
_______________________________________
Notary Public
[Seal]
76
EXHIBIT "F"
On the Effective Date for the Aircraft, LESSOR shall deliver and LESSEE shall
accept the Aircraft in an "as is, where is and with all faults" condition
other than the following conditions to which the Aircraft shall conform:
(i) be clean to the standards of Lufthansa;
(ii) be in a condition permitting commercial revenue service under
the applicable operating regulations of the German Airworthiness Authority
("LBA");
(iii) comply with all airworthiness directives issued by the LBA
and FAA prior to the Effective Date of the Aircraft which requires compliance
on or before the Effective Date;
(iv) have a valid airworthiness certificate for export, certifying
compliance with the airworthiness requirements of the Federal Republic of
Germany, issued by the LBA prior to the delivery of the Aircraft;
(v) be in a normal operating condition with all the Aircraft
equipment, components and systems functioning in accordance with their intended
use;
(vi) be in a configuration as normally flown by Lufthansa in
scheduled airline revenue service with regard to the fixed installed equipment;
(vii) except for minor items such as emergency equipment, loose
equipment, electrical and electronic equipment, LESSOR will use its reasonable
efforts to deliver the Aircraft equipment without Lufthansa's special markings;
(viii) have accomplished all maintenance items except items
permitted to be deferred in accordance with Lufthansa's procedure for deferred
items until the next IL2 or D2 check;
(ix) neutral livery with all of Lufthansa's special exterior
markings removed or painted over;
(x) have installed two ▇▇▇▇▇ & Whitney JT8D-15 engines. LESSOR
shall deliver each engine with not less than 2,500 engine cycles of remaining
life until the next scheduled engine removal. Each Engine to be delivered
hereunder shall be subject to LESSEE's reasonable approval;
(xi) have undergone a borescope inspection on the engines (at
LESSEE's sole cost and expense). In the event the borescope inspection
indicates a discrepancy that is outside the limits set under the manufacturer's
maintenance manual for the engine, same shall be corrected at LESSOR's cost and
expense or
77
LESSOR may provide a substitute engine which shall meet the delivery conditions
for an engine set forth herein;
(xii) have undergone a power assurance run with LESSEE's
representatives present to ensure performance of the engines based on the ▇▇▇▇▇
& ▇▇▇▇▇▇▇ maintenance manual;
(xiii) have one (1) shipset of Nordam high gross weight hushkits
installed;
(xiv) have performed a demonstration flight of the airframe in
accordance with Lufthansa's procedures with up to two representatives of LESSEE
on board the Aircraft during such flight. Any discrepancies in the airframe
found during such demonstration flight which are outside the limits set forth
in Lufthansa's maintenance program found during such demonstration flight shall
be corrected accordingly;
(xv) be certified for a maximum taxi gross weight of
120,000lbs.;
(xvi) have reconfigured the cockpit switches into the
Boeing standard;
(xvii) have installed an APU in serviceable condition;
(xviii) have all gauges converted from the metric system to
the imperial system; and
(xix) except with respect to the engines, landing gear and APU,
have installed hard time components with an average of fifty percent (50%)
minimum time of remaining life as defined under Lufthansa's LBA approved
maintenance program with no single component having less than three months of
remaining life as defined under such program.
78
EXHIBIT "G"
LEASE IDENTIFICATION
OWNER: BANK OF HAWAII
LESSEE: ALOHA AIRLINES, INC.
79
EXHIBIT "H"
RETURN CONDITIONS
A. The Aircraft will be redelivered in accordance with Section 17 of
the Lease and shall be in the following condition:
(i) be clean to the standards of major
international airlines;
(ii) be in a condition permitting commercial revenue service under
the applicable operating regulations of the Federal Aviation Administration
("FAA");
(iii) comply with all airworthiness directives issued by the FAA
prior to the Return Occasion of the Aircraft which requires compliance on or
before the originally scheduled Return Occasion;
(iv) have a valid U.S. Standard Airworthiness Certificate or a
valid Airworthiness Certificate for Export, as LESSOR shall elect, certifying
compliance with the airworthiness requirements of the United States, issued by
the FAA prior to the return of the Aircraft;
(v) be in a normal operating condition with all the Aircraft
equipment, components and systems functioning in accordance with their
intended use;
(vi) be in the same configuration as at delivery with
regard to the fixed installed equipment;
(vii) except for minor items such as emergency equipment, loose
equipment, electrical and electronic equipment, LESSEE will use its
reasonable efforts to deliver the Aircraft equipment without LESSEE's special
markings;
(viii) have accomplished all maintenance items (including, but not
limited to having fully accomplished all required corrosion prevention
controls, treatments, repairs and inspections in accordance with LESSEE's FAA
approved CPCP program) except items permitted to be deferred in accordance with
LESSEE's procedure for deferred items until the next D check;
(ix) The Airframe shall be returned fresh from a B check performed
in accordance with LESSEE's Maintenance Program. Further, the Airframe shall
have an equal or greater amount of time remaining as when delivered to the next
scheduled D check, but with respect to the D check shall in all events have not
less than 3,000 flight hours remaining (as determined under LESSEE's
maintenance program) to the next scheduled D check. In the event that the
Aircraft has more or less time remaining to the next D check than it had
remaining on the Effective Date, D Check Compensation shall be paid in
accordance with the following formula and paid by the
80
relevant party in relation to any difference. If the D Check Compensation, as
calculated below, is a positive number, then, so long as no Default or Event of
Default has occurred and is continuing, LESSOR will pay to LESSEE such D Check
Compensation. If the D Check Compensation, as calculated below is a negative
number, then LESSEE will pay to LESSOR such D Check Compensation.
(a) D CHECK COMPENSATION. The "D Check Compensation" shall
be calculated as follows:
[Al-A2/B] x C
"A1" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) remaining on the
Aircraft until the next scheduled D check in accordance with LESSEE's FAA
approved maintenance program as of the Return Occasion.
"A2" is the total number of Flight
Hours/Cycles (whichever is applicable and the more limiting factor) remaining
on the Aircraft until the next scheduled D check in accordance with LESSEE's
FAA approved maintenance program as of the Effective Date.
"B" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) between scheduled D
checks in accordance with LESSEE's FAA approved maintenance program.
"C" is the cost for the next D check of the
Aircraft in accordance with LESSEE's FAA approved maintenance program as
mutually agreed to by LESSOR and LESSEE (in the event that after a reasonable
period of time LESSOR and LESSEE cannot reach a mutual agreement on the cost
for the next D check, such cost will be established by taking the average of
the price quotes submitted by two (2) reputable FAA approved Airframe
overhaul facilities, one selected by LESSEE and the other selected by LESSOR).
Notwithstanding the foregoing, for the purposes of the calculation of D Check
compensation, "A1" shall not exceed 15,000 Flight Hours.
(x) neutral livery with all of LESSEE's special exterior markings
removed or painted over;
(xi) have installed two ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-9A engines. LESSEE
shall use its reasonable efforts to deliver each engine with not less than
5,000 engine cycles of remaining life until the next scheduled engine removal,
but in no event shall any engine be delivered with less than 3,000 cycles
remaining. In the event that any Engine has more or less time remaining to the
next scheduled overhaul or hot section inspection (as determined in accordance
with LESSEE's FAA approved maintenance program) than 5,000 cycles, Engine
Adjustment Compensation for each such Engine shall be paid in accordance with
the following formula and paid by the relevant party in relation to any
difference. If any Engine is
81
returned with greater than 5,000 Cycles to the next scheduled overhaul or hot
section inspection, then LESSOR shall pay Engine Adjustment Compensation to
LESSEE on account of such Engine. if any Engine is returned with less than
5,000 Cycles to the next scheduled overhaul or hot section inspection, then
LESSEE shall pay Engine Adjustment Compensation to LESSOR on account of such
Engine.
[A/B] x C
"A" is the average cost for an engine overhaul or
hot section inspection, as mutually agreed to by LESSOR and LESSEE (in the
event that after a reasonable period of time LESSOR and LESSEE cannot reach a
mutual agreement on the cost for the engine overhaul or hot section
inspection, such cost will be established by taking the average of the price
quotes submitted by two (2) reputable FAA approved engine overhaul
facilities, one selected by LESSEE and the other selected by LESSOR).
"B" is 7,000
"C" is the difference between the number of Cycles
remaining to the next overhaul or hot section inspection (whichever is the
most limiting factor) on the Engine as of the Effective Date as determined
under the Engine Manufacturer's maintenance manual and the number of Cycles
remaining to the next overhaul or hot section inspection (whichever is most
limiting factor) on the Engine as of the Return Occasion as determined under
LESSEE's FAA approved maintenance program.
Notwithstanding the foregoing, LESSOR shall have no obligation to compensate
LESSEE for any time to the next scheduled engine overhaul or hot section
inspection in excess of 7,000 Cycles.
(xii) have undergone a borescope inspection on the engines (at
LESSOR's sole cost and expense). In the event the borescope inspection
indicates a discrepancy that is outside the limits set under the manufacturer's
maintenance manual for the engine, same shall be corrected at LESSEE's cost and
expense or LESSEE may provide a substitute engine which shall meet the return
conditions for an engine set forth herein;
(xiii) have undergone a power assurance run with LESSOR's
representatives present to ensure performance of the engines based on the ▇▇▇▇▇
& Whitney maintenance manual;
(xiv) have performed a demonstration flight of the Aircraft in
accordance with LESSEE's procedures with up to two representatives of LESSOR on
board the Aircraft during such flight. Any discrepancies in the Aircraft found
during such demonstration flight which are outside the limits set forth in
LESSEE's maintenance program found during such demonstration flight shall be
corrected accordingly;
(xv) be certified for a maximum taxi gross weight of 120,000lbs.;
(xvi) have installed an APU in serviceable
82
condition;
(xvii) have all gauges converted from the imperial system to the
metric system upon LESSOR's request;
(xviii) except with respect to the engines, landing gear and APU,
have installed hard time components with an average of fifty percent (50%)
minimum time of remaining life as defined under LESSEE's FAA approved
maintenance program with no single component having less than three months of
remaining life as defined under such program; and
(xix) in the event that during the Base Term the Aircraft was
hushkitted to meet Stage III noise regulations (subsequent to the removal of
the Hushkits and return of same to LESSOR as contemplated by Section 8 (D) of
the Lease), LESSEE shall return the Aircraft with such hushkits so installed so
as to be compliance with such regulations (except in the case where the
hushkitting of the Aircraft was accomplished in the last twelve months of the
Base Term and LESSEE has elected not to extend the term of the Lease but has
instead elected to retain title to the hushkits).
DUPLICATE ORIGINAL
LEASE SUPPLEMENT NO. 1
dated as of
September 27, 1996
between
BANK OF HAWAII,
LESSOR
and
ALOHA AIRLINES, INC.,
LESSEE
LEASE SUPPLEMENT NO. 1
LEASE SUPPLEMENT NO. 1, dated September 27 1996, between ALOHA
AIRLINES, INC., a Hawaii corporation ("LESSEE") and BANK OF HAWAII, a Hawaii
banking corporation ("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain Aircraft
Lease Agreement dated as of September 27, 1996 (herein called the "Lease
Agreement" and the defined terms therein being hereinafter used with the same
meaning). The Lease Agreement provides for the execution and delivery from
time to time of Lease Supplements, each substantially in the form hereof, for
the purpose of leasing the Aircraft under the Lease Agreement as and when
delivered to the LESSEE in accordance with the terms thereof.
The Lease Agreement relates to the aircraft and engines described below,
and a counterpart of the Lease Agreement is attached hereto and made a part
hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the FAA as one document.
NOW THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230. aircraft (the "Delivered Aircraft"),
which Delivered Aircraft as of the date hereof consists of the following:
(i) One Boeing Model 737-230 Airframe, bearing U.S. registration
number N821AL; Manufacturer's serial no. 23155; and
(ii) Two ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model JT8D-15 engines, bearing manufacturer's
serial nos. 687334 and 708328, respectively, (each of which engines has 750 or
more rated takeoff horsepower or the equivalent thereof).
2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
3. The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on Sept. 26, 2004.
4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.
5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each
Engine installed thereon have been accepted by LESSEE for all purposes hereof
and of the Lease Agreement, as being in the condition that such Delivered
Aircraft and Engines are required to be in pursuant to the terms of the Lease
Agreement.
6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.
LESSOR
BANK OF HAWAII
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇
Title: Vice President
--------------------------------------
LESSEE
ALOHA AIRLINES, INC.
By: ________________________________________
Title: _____________________________________
By: ________________________________________
Title: _____________________________________
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement
to be duly executed as of the day and year first above written.
LESSOR
BANK OF HAWAII
By: ________________________________________
Title: _____________________________________
LESSEE
ALOHA AIRLINES, INC.
By: /s/ [ILLEGIBLE]
----------------------------------------
Title: VICE PRESIDENT PLANNING & DEVELOPMENT
-------------------------------------
By: /s/ [ILLEGIBLE]
----------------------------------------
Title: STAFF VICE PRESIDENT - FINANCE
& CONTROLLER
-------------------------------------
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered on and as of the date set
forth below by ALOHA AIRLINES, INC. (hereinafter referred to as "LESSEE,) to
BANK OF HAWAII, (hereinafter referred to as "LESSOR") pursuant to that
Aircraft Lease Agreement dated as of September 27, 1996 between LESSOR and
LESSEE (hereinafter referred to as the "Agreement"):
A. DETAILS OF ACCEPTANCE
LESSEE hereby indicates and confirms to LESSOR, its successors and
assigns, that the LESSEE has at 9:28 o'clock A.M., CDT on this 27th day of
Sept., 1996, at Berlin, Germany, accepted the following in accordance with the
provisions of the Agreement:
1. (a) Boeing Model: 737-230
(b) Manufacturer's Serial No.: 23155
(c) U.S. Registration Number: N821AL
Manufacturer and Manufacturer's Hours Cycles
Engine No. Model Number Serial Number Remaining Remaining
---------- ---------------- -------------- --------- ---------
(1) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ 687334 9430.49 6461
JT8D-15
(2) ▇▇▇▇▇ & Whitney 708328 2707.49 3316
JT8D-15
Each of the above-described Engines having 750 or more rated take-off
horsepower or the equivalent thereof.
Airframe
--------
Total Time: hrs. 26,494.21
Total Cycles: Cycles 24,373
Time Remaining to "C" Check: April 25, 1997
Time Remaining to "D" Check: Sept. 30, 2001
B. CONFIRMATION OF UNDERTAKINGS
LESSEE confirms that the above described Aircraft and Engines have been
examined by its duly appointed and authorized representative(s), that
such Aircraft and Engines conform to the information set forth above,
that there have been fixed to the Aircraft the markings required by the
Agreement (or that such markings shall be affixed to the Aircraft within
fifteen (15) days of the date hereof). LESSEE confirms and acknowledges
that the date set forth above constitutes the Effective Date, as such
term is defined in the Agreement, and that LESSEE's execution and
delivery of this Certificate represents LESSEE's acceptance of the above
described Aircraft and Engines for all purposes of the Agreement.
IN WITNESS WHEREOF, LESSEE has caused this Certificate of Acceptance to be
executed in its name, by its duly authorized officer(s), or
representative(s), pursuant to due corporate authority, all as of the date
written in Section A above.
LESSEE: ALOHA AIRLINES, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
Its VICE PRESIDENT PLANNING & DEVELOPMENT
By /s/ [ILLEGIBLE]
------------------------------------------
Its STAFF VICE PRESIDENT - FINANCE
& CONTROLLER
2
ORIGINAL
LEASE SUPPLEMENT NO. 1
dated as of
September 27, 1996
between
BANK OF HAWAII,
LESSOR
and
ALOHA AIRLINES, INC.,
LESSEE
LEASE SUPPLEMENT NO. 1
----------------------
LEASE SUPPLEMENT NO. 1, dated September 27, 1996, between ALOHA AIRLINES,
INC., a Hawaii corporation ("LESSEE") and BANK OF HAWAII, a Hawaii banking
corporation ("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain
Aircraft Lease
Agreement dated as of September 27, 1996 (herein called the "Lease Agreement"
and the defined terms therein being hereinafter used with the same meaning). The
Lease Agreement provides for the execution and delivery from time to time of
Lease Supplements, each substantially in the form hereof, for the purpose of
leasing the Aircraft under the Lease Agreement as and when delivered to the
LESSEE in accordance with the terms thereof.
The Lease Agreement relates to the aircraft and engines described below,
and a counterpart of the Lease Agreement is attached hereto and made a part
hereof and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document.
NOW THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230ADV aircraft (the "Delivered Aircraft"),
which Delivered Aircraft as of the date hereof consists of the following:
(i) One Boeing Model 737-230ADV Airframe, bearing U.S. registration number
N821AL; Manufacturer's serial no.23155; and
(ii) Two ▇▇▇▇▇ & Whitney Model JT8D-15 engines, bearing manufacturer's
serial nos.687334 and 708328, respectively, (each of which engines has 750 or
more rated takeoff horsepower or the equivalent thereof).
2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
3. The Base Term for the Delivered Aircraft shall commence on the Effective Date
and shall end on September 27, 2004.
4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft throughout
the Base Term (and any extension thereof as provided in the Lease Agreement) in
accordance with the terms of the Lease Agreement.
5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each Engine
installed thereon have been accepted by LESSEE for all purposes hereof and of
the Lease Agreement, as being in the condition that such Delivered Aircraft and
Engines are required to be in pursuant to the terms of the Lease Agreement.
6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement to
be duly executed as of the day and year first above written.
LESSOR
BANK OF HAWAII
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇
-------------------------------
Title: VICE PRESIDENT
-------------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Title: AUTHORIZED SIGNATURE
-------------------------------
LESSEE
ALOHA AIRLINES, INC.
By:
-------------------------------
Title:
-------------------------------
By:
-------------------------------
Title:
-------------------------------
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement to
be duly executed as of the day and year first above written.
LESSOR
BANK OF HAWAII
By:
-------------------------------
Title:
-------------------------------
By:
-------------------------------
Title:
-------------------------------
LESSEE
ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Title: VICE PRESIDENT PLANNING &
-------------------------------
DEVELOPMENT
-------------------------------
By: /s/ [ILLEGIBLE]
-------------------------------
Title: STAFF VICE PRESIDENT - FINANCE
-------------------------------
& CONTROLLER
-------------------------------
ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT
---------------------------------------------
THIS ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT ("Assignment"), dated
as of December 26, 1996 is between BANK OF HAWAII ("Lessor"), ALOHA AIRLINES,
INC., a Hawaii Corporation ("Assignor") and ALOHA AIRLINES, INC., a Delaware
corporation ("Assignee").
RECITALS
--------
WHEREAS, Lessor and Assignor entered into that certain Aircraft Lease
Agreement dated as of September 27, 1996, as it may be supplemented or amended
from time to time (the "Lease"), pursuant to which Assignor leased from Lessor
one (1) Boeing model 737-230ADV aircraft bearing manufacturer's serial number
23155 and registration ▇▇▇▇ N821AL (the "Aircraft");
WHEREAS, effective December 26, 1996, Assignor merged with Assignee, and
Assignee emerged as the surviving entity and the successor in interest to
Lessee.
AGREEMENT
---------
NOW, THEREFORE, in consideration of these presents and for other valuable
consideration, the parties agree as follows.
1. CERTAIN DEFINED TERMS. Unless otherwise defined herein or the context
otherwise requires, all capitalized terms used in this Assignment shall have the
respective meanings assigned to them in the Lease.
2. ASSIGNMENT. As of December 26, 1996 (the "Effective Date"), the Assignor
hereby sells, assigns, transfers and conveys to Assignee all of the Assignor's
right, title and interest in and to the Lease, as if Assignee were the original
party to the Lease.
3. ASSUMPTION BY ASSIGNEE. Assignee hereby accepts the foregoing sale,
assignment, transfer and conveyance of all of the Assignor's right, title,
interest, obligations and liabilities in, to and under the Lease to the Assignee
and, as of the Effective Date, agrees to assume and to be bound by all the terms
of, and to undertake all of the obligations of the Assignor contained in, the
Lease, including without limitation, all such obligations existing at or prior
to, or attributable to acts or events occurring prior to the Effective Date.
4. LESSOR AND LENDER CONSENT.
(a) Pursuant to Section 22(D) of the Lease, Lessor acknowledges and
consents to the foregoing sale,
assignment, transfer and conveyance of all of the Assignor's right, title,
interest, obligations and liabilities in, to and under the Lease to the Assignee
under this Assignment, and acknowledge the rights and obligations of the
Assignee described in this Assignment.
(b) Lessor further acknowledges and agrees that from and after the
Effective Date Assignee shall be deemed the "Lessee" for all purposes of the
Lease and each reference in the Lease to the Assignor as "Lessee" shall be
deemed after the Effective Date for all purposes to refer to the Assignee and
that, from and after the Effective Date Lessor will perform its obligations
under the Lease, in all respects as if Assignee were the original party to the
Lease as "Lessee" thereunder.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNEE. Assignee
represents and warrants as follows:
(a) Assignee is a corporation duly organized in existing in good
standing under the laws of the state of Delaware and has the corporate power and
authority to carry on its business as presently conducted and to perform its
obligations under this Assignment.
(b) Assignee is not a Governmental Entity or government owned or
controlled and neither Assignee or its properties is immune from the
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) nor does it have the defense of sovereign immunity or similar
defense available to it in any legal action or proceeding.
(c) Assignee is a citizen of the United States (as defined in 40102 of
Title 49 of the United States Code) holding an air carrier operating certificate
issued by the Secretary of Transportation of the United States pursuant to
chapter 447 of Title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo.
(d) This Assignment has been duly authorized by all necessary corporate
action on the part of Assignee, does not require any approval of the
stockholders of Assignee (or if such approval is required, such approval has
been obtained), and neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby nor compliance by Assignee
with any of the terms and provisions hereof will contravene any Law applicable
to Assignee or result in any breach of, or constitute any default under, or
result in the creation of, any lien, charge or encumbrance upon any property of
Assignee under any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, corporate charter or
by-law, or other agreement or instrument to which Assignee is a party or by
which Assignee or its properties or assets may be bound or affected.
(e) Assignee has received or has complied with every necessary consent,
approval, order, or authorization of, or registration with, or the giving of
prior notice to, any Governmental Entity having jurisdiction with respect to the
use and operation of the Aircraft and the execution and delivery of this
Assignment of the validity and enforceability hereof.
(f) This Assignment has been duly entered into and delivered by Assignee
and constitutes a valid, legal and binding obligation of Assignee, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, reorganization, moratorium or other similar Laws and by general
principles of equity, whether considered in a proceeding at Law or in equity.
6. GOVERNING LAW. This Assignment shall governed by the Laws of the State
of Hawaii.
IN WITNESS WHEREOF, the undersigned parties have caused this Assignment,
Assumption, Amendment and Consent to be duly executed and delivered by their
duly authorized officers as of the date first written above.
ASSIGNOR: ALOHA AIRLINES, INC., a Hawaii
Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Title: SR. VICE PRESIDENT FINANCE
---------------------------
& PLANNING AND CFO
---------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Title: VICE PRESIDENT PLANNING &
---------------------------
DEVELOPMENT
---------------------------
ASSIGNEE: ALOHA AIRLINES, INC., a
Delaware Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Title: SR. VICE PRESIDENT FINANCE
---------------------------
& PLANNING AND CFO
---------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Title: VICE PRESIDENT PLANNING &
---------------------------
DEVELOPMENT
---------------------------
LESSOR: BANK OF HAWAII
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Title: VICE PRESIDENT
---------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Title: AUTHORIZED SIGNATURE
---------------------------
RECORDED
Federal Aviation Administration
Date 4-28-97 Time 4:05
--------- ------
Conveyance Number T054014
------------
LEASE SUPPLEMENT NO. 2
----------------------
LEASE SUPPLEMENT NO. 2, dated 4-25, 1997, between ALOHA AIRLINES, INC., a
Delaware corporation ("LESSEE") and BANK OF HAWAII, a banking corporation formed
under the laws of the State of Hawaii ("LESSOR").
LESSOR and LESSEE have heretofore entered into that certain Aircraft Lease
Agreement dated as of September 27, 1996 (herein called the "Lease Agreement").
The defined terms in the Lease Agreement will hereinafter used with the same
meaning. The Lease Agreement provides for the execution and delivery from time
to time of Lease Supplements.
The Lease Agreement relates to the aircraft and engines described therein,
and a counterpart of the Lease Agreement, attached to and made a part of Lease
Supplement No. 1 dated September 27, 1996 to the Lease Agreement, has been
recorded by the FAA on October 1, 1996 as one document and assigned Conveyance
No. 2A270153.
NOW, THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:
1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, as
of the date hereof, the following described engines (the "Replacement
Engines"), which consist of the following:
Two ▇▇▇▇▇ & Whitney Model JT8D-9A engines, bearing manufacturer's
serial numbers 666775 and 649358, respectively, (each of which engine
has 750 or more rated takeoff horsepower or the equivalent thereof).
2. LESSEE hereby confirms to LESSOR that the Replacement Engines have been
accepted by LESSEE for all purposes hereof and of the Lease Agreement, as
being in the condition that such Replacement Engines are required to be in
pursuant to the terms of the Lease Agreement. Each of the Replacement
Engines shall for all purposes hereof and of the Lease Agreement be deemed
to be an "Engine" as defined in the Lease Agreement.
3. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
4. This Lease Supplement No. 2 shall be effective as of the date hereof.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement No.
2 to be duly executed as of the day and year first above written.
LESSOR:
BANK OF HAWAII
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Senior Vice President
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its Vice President
LESSEE:
ALOHA AIRLINES, INC.
By
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Senior Vice President
Finance & Planning and CFO
By
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its Vice President Planning &
Development
2
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement No.
2 to be duly executed as of the day and year first above written.
LESSOR:
BANK OF HAWAII
By
--------------------------------
Its
By
--------------------------------
Its
LESSEE:
ALOHA AIRLINES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Senior Vice President
Finance & Planning and CFO
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its Vice President Planning &
Development
2
ENGINE CHANGE AGREEMENT
ENGINE CHANGE AGREEMENT, dated April 25, 1997 (the "Agreement"), between
Aloha Airlines, Inc. (the "Lessee") and Bank of Hawaii (the "Lessor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Lessee and Lessor are parties to that certain Aircraft Lease
Agreement, dated as of September 27, 1996 (the "Lease");
WHEREAS, Section 8(D) of the Lease provides that the two ▇▇▇▇▇ & ▇▇▇▇▇▇▇
model JT8D-15 engines (the "Original Engines") described in Exhibit "A" to the
Lease and installed on the Aircraft (capitalized terms used herein and not
described herein shall have the meanings ascribed thereto in the Lease) on the
Effective Date will be removed from the Aircraft and replaced by two ▇▇▇▇▇ &
Whitney model JT8D-9A engines within six (6) months of the Effective Date;
WHEREAS, Jetz Ventures Inc. (the "Seller"), has heretofore made available
to the Lessee two ▇▇▇▇▇ & ▇▇▇▇▇▇▇ model JT8D-9A engines bearing manufacturer's
serial numbers 666775 and 649358 (the "Swapped Engines") which are owned by
Aerothrust Corporation; and
WHEREAS, the Original Engines have been removed from the Aircraft by or
with the consent and cooperation of the Lessee and the Swapped Engines are now
installed on the Aircraft;
NOW, THEREFORE, in consideration of these premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lessee and the Lessor agree as follows:
SECTION 1. CONDITION OF ENGINES. The Lessee hereby represents, warrants and
agrees with the Lessor that
(a) prior to the date of this Agreement, the Lessee has had continuous
actual or constructive possession of the Swapped Engines, has inspected and
approved each of the Swapped Engines for acceptance pursuant to the Lease,
and has caused the Swapped Engines to be installed on the Aircraft at its
cost and expense,
(b) the Swapped Engines satisfy in full the requirements of Section 8(D) of
the Lease for the -9A's,
(c) the Lessee unconditionally waives all delays in the delivery of the
Swapped Engines and that the replacement of the Original Engines by the
Swapped Engines constitutes
the satisfaction in full of all of the Lessor's obligations under Section
8(D) of the Lease regarding such replacement,
(d) from and after the date of this Agreement, each of the Swapped Engines
shall constitute an Engine for all purposes of the Lease,
(e) notwithstanding that on the date of this Agreement any of the Swapped
Engines is not operable, is unavailable to the Lessee for use or is under
maintenance, the Lessee waives, release and discharges any and all claims
that any of the Swapped Engines does not satisfy the requirements of
Section 8(D) of the Lease and is not an Engine which is subject in all
respects to the Lease,
(f) the Lessee will promptly on the date of this Agreement pay, remove, and
discharge any and all Liens from each Swapped Engine (other than Permitted
Liens),
(g) in the event that, on the date of this Agreement, any Swapped Engine is
in a condition that would constitute an Event of Loss if such Swapped
Engine were heretofore subject to the Lease, such Swapped Engine shall
constitute an Engine for which an Event of Loss has occurred and which was
not then installed on the Aircraft, and the Lessee shall comply with the
provisions of Section 12(B) of the Lease,
(h) the Lease remains and will continue in full force and effect, and
(i) the Lessor's sale of the Original Engines and the purchase of the
Swapped Engines shall each constitute transactions arising out of the
Lease, and the Lessor shall be entitled to the benefits of Section 11(A) of
the Lease.
SECTION 2. AMENDMENTS. No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by the Lessor and the
Lessee, and no waiver of any provision of this Agreement, nor consent to any
departure by the Lessee therefrom, shall be effective unless it is in writing
and signed by the Lessor, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
SECTION 4. DESCRIPTIVE HEADINGS. The descriptive headings of the various
provisions of this Agreement are inserted
for convenience of reference only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.
SECTION 5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Hawaii.
SECTION 6. TIME OF THE ESSENCE. Time is of the essence in the observance
and performance by Lessee of its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: SR. VICE PRESIDENT FINANCE &
-------------------------------
PLANNING AND CFO
-------------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Title: VICE PRESIDENT PLANNING &
-------------------------------
DEVELOPMENT
-------------------------------
BANK OF HAWAII
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Title: Senior Vice President
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Vice President
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
FAA AIRCRAFT REGISTRY
CAMERA NO. 1N DATE: 5-30-96
0 0 0 0 0 0 0 0 9 5 6
0 6 0 0 7 6 9 1
CERTIFIED COPY
TO BE RECORDED BY FAA [Illegible stamp]
'96 MAY 21 AM 8 18
[Illegible]
PARTIAL RELEASE
OF
AIRCRAFT LEASE AGREEMENT
AND
ASSIGNMENT OF LEASE
THIS PARTIAL RELEASE OF AIRCRAFT LEASE AGREEMENT AND ASSIGNMENT OF LEASE
("Release"), dated as of March 13, 1996 by and among BJET, INC., a Delaware
corporation ("Lessor"), ALOHA AIRLINES, INC., an Hawaiian corporation
("Lessee") and FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender").
W I T N E S S E T H :
WHEREAS, Lessee and Lessor are parties to a certain Aircraft Lease
Agreement dated as of October 23, 1995 (the "Lease") pursuant to which Lessee
has leased from Lessor, among other things, two (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ model
number JT8D-17A jet aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, identified by
manufacturer's serial numbers P7094618 and 709418, respectively
(collectively, the "Engines"); and
WHEREAS, the rights of Lessor under the Lease have been collaterally
assigned to Lender pursuant to an Assignment of Lease dated as of October 23,
1995 between Lessor and Lender (the "Assignment"); and
WHEREAS, the Lease and the Assignment have been recorded as one
instrument in the civil aircraft registry maintained by the Federal Aviation
Administration of the United States of America (the "FAA") on December 4,
1995 as Conveyance Number YY013352; and
WHEREAS, Lessor and Lessee wish to release the Engines from the
provisions of the Lease, and Lessor and Lender wish to release the Engines
from the provisions of the Assignment,
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessee, Lessor and Lender hereby agree as follows:
SEE RECORDED
CONVEYANCE
NUMBER YY013352
------------
FICHE # 8 PAGE # 24-249
--- --------
FAA AIRCRAFT REGISTRY
CAMERA NO. 1N DATE: 5-30-96
0 0 0 0 0 0 0 0 9 5 7
1. RELEASE OF ENGINES FROM TERMS OF LEASE. Lessor and Lessee hereby
release the Engines from the terms of the Lease.
2. RELEASE OF ENGINES FROM TERMS OF ASSIGNMENT. Lessor and Lessee
hereby release the Engines from the terms of the Assignment.
3. EFFECTIVENESS. This Release shall be effective upon, and not
before, its due execution by Lessor, Lessee and Lender and its presentation
to and filing with the FAA for recordation in the civil aircraft registry
maintained by the FAA.
-2-
FAA AIRCRAFT REGISTRY
CAMERA NO. 1N DATE: 5-30-96
0 0 0 0 0 0 0 0 9 5 8
IN WITNESS WHEREOF, Lessor, Lessee and Lender have executed this Release
as of the date first above written.
"Lessor"
BJET, INC., a Delaware corporation
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
ITS: PRESIDENT
-------------------------------
"Lessee"
ALOHA AIRLINES, INC., a Hawaiian corporation
BY:
-------------------------------
ITS:
-------------------------------
BY:
-------------------------------
ITS:
-------------------------------
"Lender"
FINOVA CAPITAL CORPORATION, a Delaware
corporation
BY:
-------------------------------
ITS:
-------------------------------
-3-
FAA AIRCRAFT REGISTRY
CAMERA NO. 1N DATE: 5-30-96
0 0 0 0 0 0 0 0 9 5 9
IN WITNESS WHEREOF, Lessor, Lessee and Lender have executed this Release
as of the date first above written.
"Lessor"
BJET, INC., a Delaware corporation
BY:
-------------------------------
ITS:
-------------------------------
"Lessee"
ALOHA AIRLINES, INC., a Hawaiian corporation
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
ITS: SR. VICE PRESIDENT FINANCE &
PLANNING AND CFO
-------------------------------
BY: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
ITS: STAFF VICE PRESIDENT - FINANCE
& CONTROLLER
-------------------------------
"Lender"
FINOVA CAPITAL CORPORATION, a Delaware
corporation
BY:
-------------------------------
ITS:
-------------------------------
-3-
FAA AIRCRAFT REGISTRY
CAMERA NO. 1N DATE: 5-30-96
0 0 0 0 0 0 0 0 9 6 0
IN WITNESS WHEREOF, Lessor, Lessee and Lender have executed this Release
as of the date first above written.
"Lessor"
BJET, INC., a Delaware corporation
BY:
-------------------------------
ITS:
-------------------------------
"Lessee"
ALOHA AIRLINES, INC., a Hawaiian corporation
BY:
-------------------------------
ITS:
-------------------------------
BY:
-------------------------------
ITS:
-------------------------------
"Lender"
FINOVA CAPITAL CORPORATION, a Delaware
corporation
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
ITS: Vice-President
-------------------------------
-3-
RECORDED
Federal Aviation Administration
Date 4-28-97 Time 4:03
-------------- ----------
Conveyance Number TO54013
-----------------
PARTIAL TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement
described in the attached Appendix has terminated with respect to the ▇▇▇▇▇ &
Whitney model JT8D-15 aircraft engines with manufacturer's serial numbers
687334 and 708328, respectively, and further certify that said aircraft
engines are no longer subject to the terms thereof.
Dated this 25th day of April , 1997.
------ -------
LESSOR: LESSEE:
BANK OF HAWAII ALOHA AIRLINES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By
-------------------------- --------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Senior Vice President Its Senior Vice President
Finance & Planning and CFO
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By
-------------------------- --------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇
Its Vice President Its Vice President Planning
& Development
PARTIAL TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement
described in the attached Appendix has terminated with respect to the ▇▇▇▇▇ &
▇▇▇▇▇▇▇ model JT8D-15 aircraft engines with manufacturer's serial numbers
687334 and 708328, respectively, and further certify that said aircraft
engines are no longer subject to the terms thereof.
Dated this 25th day of April , 1997.
------ -------
LESSOR: LESSEE:
BANK OF HAWAII ALOHA AIRLINES, INC.
By By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------- --------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Its Senior Vice President
Finance & Planning and CFO
By By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------- --------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its Its Vice President Planning
& Development
APPENDIX
Aircraft Lease Agreement dated as of September 27, 1996, by and between Bank
of Hawaii, as lessor, and Aloha Airlines, Inc., as lessee, as supplemented
by and to which was attached Lease Supplement No. 1 dated September 27,
1996, as recorded by the Federal Aviation Administration on October 1,
1996, as Conveyance No. 2A270153.
[ALOHA AIRLINES LOGO]
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
April 25 , 1997
-----------------
Bank of Hawaii
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Re: Aircraft Lease Agreement dated as of September 27,
1996, as supplemented ("Lease"), between Bank of
Hawaii ("Lessor") and Aloha Airlines, Inc. ("Lessee")
relating to that certain Boeing 737-230ADV aircraft,
bearing manufacturer's serial number 23155 and Federal
Aviation Administration registration number N821AL.
Gentlemen:
This confirms our agreement that notwithstanding the execution,
delivery and filing of that certain Partial Lease Termination
dated as of April 25, 1997, between Aloha Airlines, Inc., as
Lessee, and Bank of Hawaii, as Lessor, the hushkits relating to
the two (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-15 Model Engines, bearing
manufacturer's serial numbers 687334 and 708328, respectively,
have not been redelivered to Lessor and remain subject to the
Lease.
Very truly yours,
ALOHA AIRLINES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Senior Vice President Finance
& Planning and CFO
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its Vice President Planning &
Development
AGREED:
BANK OF HAWAII
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Senior Vice President
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its Vice President
RECEIVED
Federal Aviation Administration
Date 9-4-98 Time 12:27 am
-------------- ----------
Conveyance Number JJ27940
-----------------
By [ILLEGIBLE]
---------------------
FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT
THIS FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT dated as of July 1, 1998,
between ALOHA AIRLINES, INC., a corporation formed under the laws of the State
of Delaware ("LESSEE") and BANK OF HAWAII, a banking corporation formed under
the laws of the State of Hawaii ("LESSOR").
RECITALS
WHEREAS, LESSOR AND LESSEE have heretofore entered into that certain
Aircraft Lease Agreement dated as of September 27, 1996, to which were attached
Lease Supplement No. 1 dated as of September 27, 1996 and Certificate of
Acceptance dated as of September 27, 1996, filed together and recorded by the
Federal Aviation Administration (the "FAA") on October 1, 1996 as Conveyance
Number 2A270153, and further supplemented by Lease Supplement No. 2 dated as of
April 25, 1997 recorded by the FAA on April 28, 1997 as Conveyance Number
T054014 (herein collectively called the "Lease Agreement" and the defined terms
therein being hereinafter used with the same meaning); and
WHEREAS, the Lease Agreement relates to one (1) The Boeing Company 737-230
model airframe, manufacturer's serial number 23155, bearing U.S. Registration
Number N821AL, together with two (2) ▇▇▇▇▇ & Whitney JT8D-9A model engines,
manufacturer's serial numbers 666775 and 649358; and
WHEREAS, LESSOR AND LESSEE desire to amend the Lease Agreement in the
respects, and only in the respects, hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:
1. The definition of "Cash Flow" as set forth in Section 1 of the Lease
Agreement shall be amended and restated in its entirety as follows:
""CASH FLOW" shall mean, with respect to Airgroup, the sum of (a) the net
income of the Consolidated Group (excluding non-recurring gains and
losses), PLUS (b) the sum of the following, to the extent deducted in
determining net income: (i) depreciation and amortization allowances, (ii)
interest expense (including Payments in Kind and imputed interest on
Capital Leases), and (iii) deferred taxes, LESS (c) the change in the
excess of non-cash current assets over current liabilities (other than
those pertaining to unearned transportation revenue and payment of
principal, interest or taxes) calculated on a rolling four quarters basis
and computed at the end of each Quarter."
2. Section 1 shall be amended by the addition of the following definition of
"Consolidated Group":
""CONSOLIDATED GROUP" shall mean Airgroup, Lessee and Aloha IslandAir,
Inc., a Delaware corporation."
3. The definition of "Debt Service" as set forth in Section 1 of the Lease
Agreement shall be amended and restated in its entirety as follows:
""DEBT SERVICE" shall mean, with respect to Airgroup, the sum of regularly
scheduled principal payments, interest payments and payments under Capital
Leases made by the Consolidated Group, and dividends declared and payable
by Airgroup, all calculated on a rolling four quarters basis and computed
at the end of each Quarter."
4. Section 1 shall be amended by the addition of the following definition of
"Payments in Kind":
""PAYMENTS IN KIND" shall mean the issuance of additional subordinated
debentures by Airgroup in lieu of interest."
5. Section 1 shall be amended by the addition of the following definition of
"Quarter":
""QUARTER" shall mean any one of the following three calendar month periods
in any calendar year: April 1 to and including June 30; July 1 to and
including September 30; October 1 to and including December 31; and January
1 to and including March 31."
6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this First Amendment to Lease Agreement to the
same extent as if fully set forth herein.
7. This First Amendment to Lease Agreement may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and
all such counterparts together shall constitute but one and the same
instrument.
8. This First Amendment to Lease Agreement shall be effective as of July 1,
1998.
2
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this First Amendment to
Lease Agreement to be duly executed as of the day and year first above written.
LESSOR:
BANK OF HAWAII
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Title: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Title: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
LESSEE:
ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
Title: Sr. Vice President
Finance & Planning
and CFO
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------
Title: Vice President
Planning & Development
3
[ ALOHA AIRLINES LOGO ]
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
April 25, 1997
-------------
Bank of Hawaii
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Re: Aircraft Lease Agreement dated as of September 27,
1996, as supplemented ("Lease"), between Bank of
Hawaii ("Lessor") and Aloha Airlines, Inc. ("Lessee")
relating to that certain Boeing 737-230ADV aircraft,
bearing manufacturer's serial number 23155 and Federal
Aviation Administration registration number N821AL.
Gentlemen:
This confirms our agreement that notwithstanding the execution,
delivery and filing of that certain Partial Lease Termination
dated as of April 25, 1997, between Aloha Airlines, Inc., as
Lessee, and Bank of Hawaii, as Lessor, the hushkits relating to
the two (2) ▇▇▇▇▇ & Whitney JT8D-15 Model Engines, bearing
manufacturer's serial numbers 687334 and 708328, respectively,
have not been redelivered to Lessor and remain subject to the
Lease.
Very truly yours,
ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Senior Vice President Finance
& Planning and CFO
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its Vice President Planning &
Development
AGREED:
BANK OF HAWAII
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Senior Vice President
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its Vice President
RECEIVED
Federal Aviation Administration
Date 4-28-97 Time 4:03
-------------- ----------
Conveyance Number T054013
-----------------
PARTIAL TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement described
in the attached Appendix has terminated with respect to the ▇▇▇▇▇ & ▇▇▇▇▇▇▇
model JT8D-15 aircraft engines with manufacturer's serial numbers 687334 and
708328, respectively, and further certify that said aircraft engines are no
longer subject to the terms thereof.
Dated this 25th day of April , 1997.
------ -------
LESSOR: LESSEE:
BANK OF HAWAII ALOHA AIRLINES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By
----------------------- -----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Senior Vice President Its Senior Vice President
Finance & Planning and CFO
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By
----------------------- -----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇
Its Vice President Its Vice President Planning
& Development
PARTIAL TERMINATION
The undersigned hereby certify that the Aircraft Lease Agreement described
in the attached Appendix has terminated with respect to the ▇▇▇▇▇ & Whitney
model JT8D-15 aircraft engines with manufacturer's serial numbers 687334 and
708328, respectively, and further certify that said aircraft engines are no
longer subject to the terms thereof.
Dated this 25th day of April , 1997.
------ -------
LESSOR: LESSEE:
BANK OF HAWAII ALOHA AIRLINES, INC.
By By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------- -----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Its Senior Vice President
Finance & Planning and CFO
By By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------- -----------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its Its Vice President Planning
& Development
APPENDIX
Aircraft Lease Agreement dated as of September 27, 1996, by and between Bank of
Hawaii, as lessor, and Aloha Airlines, Inc., as lessee, as supplemented by and
to which was attached Lease Supplement No. 1 dated September 27, 1996, as
recorded by the Federal Aviation Administration on October 1, 1996, as
Conveyance No. 2A270153.
ASSIGNMENT, ASSUMPTION AND AMENDMENT OF LEASE
[N821AL]
This ASSIGNMENT, ASSUMPTION AND AMENDMENT OF LEASE (the "Amendment"), dated
August 23, 2001, among Bank of Hawaii, a Hawaiian corporation ("Assignor"),
▇▇▇▇▇ Fargo Bank Northwest, National Association, a national banking association
organized and existing under the laws of the United States of America, not in
its individual capacity but solely as owner trustee under the Trust Agreement
("Assignee") and Aloha Airlines, Inc., a Delaware corporation ("Lessee"), amends
the Lease Agreements between the Assignor as lessor and Lessee described in
ATTACHMENT 2 hereto (the "Leases"). Capitalized terms used in this document and
not defined herein will have the meanings ascribed in the Leases.
1. RECITALS.
A. Assignor and Lessee are parties to the Leases whereby Assignor leases to
Lessee one Boeing 737-230 airframe, together with the ▇▇▇▇▇ & Whitney aircraft
engines installed thereon, all as described on ATTACHMENT 1 hereto and together
with the components, parts and equipment installed thereon (the "Aircraft").
B. The Leases are described and have been filed with the Federal Aviation
Administration ("FAN") as set forth on ATTACHMENT 2 hereto.
C. Assignor desires to assign all of its rights, titles and interests in
and to the Leases to Assignee and to have the Assignee assume Assignor's
obligations under each Lease. Assignee desires to accept such assignment and
assume such obligations.
D. The parties hereto wish to amend the Leases to reflect such assignment
to Assignee.
NOW THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
2. ASSIGNMENT AND ASSUMPTION.
Effective from and after the date hereof, Assignor hereby assigns,
transfers and sets over unto Assignee, all of Assignor's rights, titles and
interests in and to, and delegates to Assignee all of Assignor's obligations
under, the Leases, and Assignee hereby accepts such assignment and assumes such
obligations so delegated relating to the period existing after the date hereof.
EXCEPT AS IS SPECIFICALLY SET FORTH HEREIN, AND IN ANY OTHER WRITING EXECUTED BY
THE ASSIGNOR AND THE ASSIGNEE, ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER CONCERNING THE AIRCRAFT,
INCLUDING, WITHOUT LIMITATION, THE SELECTION, QUALITY OR CONDITION OF THE
AIRCRAFT, OR ITS MERCHANTABILITY, ITS SUITABILITY, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE OPERATION OR
Page 1
PERFORMANCE OF THE AIRCRAFT OR PATENT INFRINGEMENT OR THE LIKE. THE AIRCRAFT AND
ANY INTERESTS THEREIN ARE BEING TRANSFERRED ON A STRICT "AS IS, WHERE IS, WITH
ALL FAULTS" BASIS.
3. AMENDMENTS TO LEASES.
Effective from and after the date hereof, each Lease is hereby amended as
follows:
(a) The term "Lessor" shall mean Assignee.
(b) All rent payable by Lessee to Lessor under the Leases shall be paid to the
following account which is designated by the Assignee as the account for
payment of rent as provided in the Leases
Bank of Hawaii
ABA No. ▇▇▇▇▇▇▇▇▇
For further credit to: Bank of Hawaii
Equipment Leasing Division #248
GL#9248-540626 (Deferred Payment Order
Account)
Advise ▇▇▇▇▇ ▇▇▇▇▇ at (▇▇▇) ▇▇▇-▇▇▇▇
ref: Sale of Aloha Aircraft
or as Lessor may otherwise direct in writing, by wire transfer of immediately
available funds with sufficient information to identify the sources and
application of such funds no later than 2:00 p.m. Central Time on the due date
for such payment.
(c) Section 8(C) of the Lease as to the Aircraft described on ATTACHMENT 2
is amended to delete the entitlement of the Lessee to remove the avionics black
boxes installed by the Lessee with respect to the TCAS and windshear detection
systems.
4. LEASE PROVISIONS NOT MODIFIED HEREIN.
Except as specifically set forth in this Amendment, all terms and
provisions of the Lease remain unamended and unmodified and in full force and
effect except that all references in the Leases to "this Lease," "hereof,"
"hereby" and the like shall mean the Leases as amended hereby.
5. OBLIGATIONS OF LESSOR AND ASSIGNEE.
Assignee shall not have any obligation or liability under the Leases by
reason of, or arising out of, Assignor's performance of, or failure to perform,
any of its obligations under the Leases arising, or relating to the period,
prior to the date and time of Closing, i.e., August 23, 2001 at 1:11 p.m.
Central Time, and Assignor shall not have any obligation or liability under the
Leases by reason of, or arising out of, Assignee's performance of, or failure to
perform, any of its obligations under the Leases arising, or relating to the
period, from and after the Closing.
6. ACKNOWLEDGMENTS.
Page 2
(a) Lessee acknowledges and consents to the assignment of the Leases to the
Assignee.
(b) For the benefit of the Assignee and any lender to whom the Assignee
grants a security interest in the lessor's interest in the Leases, Lessee
represents and warrants as follows:
(i) The Lessee is the current lessee under the Leases and there are no
sublessees or assignees of the Lessee's rights under the Lease.
(ii) Rent under the Leases is payable monthly, in advance or arrears,
on the rent payment dates all as specified in ATTACHMENT 3. NO installment of
rent due under the Leases has been paid in advance of its specified due date;
(iii) no event of default under any of the Leases has occurred and is
continuing and no loss nor event of loss nor event which, with the giving of
notice or passage of time or both would constitute an event of loss has occurred
and is continuing under any of the Leases;
(iv) the agreements described on ATTACHMENT 2 constitute the entire
lease agreement among Lessor and Lessee with respect to the Aircraft and, except
as described on ▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇ of such agreements has been amended,
supplemented or modified nor has any provision of any thereof been waived by any
party thereto and each is in full force and effect;
(v) The Lessee's "Airgroup" currently meets the "Credit Standards" as
those terms are defined in Section 5(D) of the Lease as to the Aircraft
described on ATTACHMENT 2;
(vi) Lessee has not placed or permitted to be placed any lien on the
Aircraft other than Lessor's liens permitted to be placed by the Lessor upon the
Aircraft or the Leases by the terms the Leases; and
(vii) The Lessee has no knowledge of any adverse claim to the Rents (as
defined in the Lease) or the Aircraft, other than the rights of the Lessee or
Assignee or any lender granted a security interest in the Leases by the
Assignee.
7. GOVERNING LAW.
The parties intend that this Amendment shall be governed by and construed
in accordance with the laws of the State of Hawaii, without reference to rules
governing conflicts of laws.
8. COUNTERPARTS.
This Amendment may be executed in multiple counterparts, which when any,
but not necessarily the same, counterpart is executed by all of the parties will
constitute the binding agreement of each.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
Page 3
IN WITNESS WHEREOF, each of the parties hereto have caused this ASSIGNMENT,
ASSUMPTION AND AMENDMENT OF LEASE to be executed by its duly authorized officer
as of the date first above written.
BANK OF HAWAII, a Hawaii corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Printed Name: ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Title: VICE PRESIDENT
----------------------------------------
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Printed Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Title: VICE PRESIDENT
----------------------------------------
▇▇▇▇▇ FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity
but solely in its capacity as trustee
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
ALOHA AIRLINES, INC., a Delaware corporation
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
Page 5
IN WITNESS WHEREOF, each of the parties hereto have caused this ASSIGNMENT,
ASSUMPTION AND AMENDMENT OF LEASE to be executed by its duly authorized officer
as of the date first above written.
BANK OF HAWAII, a Hawaii corporation
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
▇▇▇▇▇ FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity
but solely in its capacity as trustee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Printed Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: ASSISTANT VICE PRESIDENT
----------------------------------------
ALOHA AIRLINES, INC., a Delaware corporation
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
Page 5
IN WITNESS WHEREOF, each of the parties hereto have caused this ASSIGNMENT,
ASSUMPTION AND AMENDMENT OF LEASE to be executed by its duly authorized officer
as of the date first above written.
BANK OF HAWAII, a Hawaii corporation
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
▇▇▇▇▇ FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity
but solely in its capacity as trustee
By:
-------------------------------------------
Printed Name:
---------------------------------
Title:
----------------------------------------
ALOHA AIRLINES, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Title: Executive Vice President & CFO
----------------------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Title: Sr. Vice President Planning &
----------------------------------------
Business Development
Page 4
ATTACHMENT 1 TO
ASSIGNMENT, ASSUMPTION AND AMENDMENT OF LEASE
DESCRIPTION OF AIRCRAFT
[N821AL]
AIRCRAFT TYPE: Boeing 737-230
AIRCRAFT REGISTRATION ▇▇▇▇: N821AL
MODEL NUMBER: Boeing 737-230
SERIAL NUMBER: 23155
TOGETHER WITH THE FOLLOWING ▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ENGINES:
Engine Engine
Model No. Serial No.
-------- ----------
JT8D-9A 666775
JT8D-9A 649358
Page 5
ATTACHMENT 2 TO
ASSIGNMENT, ASSUMPTION AND AMENDMENT OF
LEASE
DESCRIPTION OF AIRCRAFT LEASES
[N821AL]
LEASE AS TO THE AIRCRAFT
- Aircraft Lease Agreement dated as of September 27, 1996, between Aloha
Airlines, Inc., as lessee (the "Lessee") and Bank of Hawaii, as lessor (the
"Lessor"), as supplemented by Lease Supplement No. 1 dated as of September
27, 1996 and Certificate of Acceptance dated as of September 27, 1996,
covering, INTER ALIA, one Boeing model 737-230 airframe, manufacturer's
serial number 23155, FAA registration number N821AL, together with two (2)
▇▇▇▇▇ & Whitney model JTBD-15 aircraft engines, manufacturer's serial
numbers 687334 and 708328, filed together and recorded by the Federal
Aviation Administration (the "FAA") on October 1, 1996 as Conveyance No.
2A270153.
- Partially terminated by Partial Termination dated as of April 25, 1997
covering, INTER ALIA, two (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ model JT8D-15 aircraft
engines, manufacturer's serial numbers 687334 and 708328.
- Supplemented by Lease Supplement No. 2 dated as of April 25, 1997 and
Certificate of Acceptance dated as of April 25, 1997, and Certificate of
Acceptance dated as of April 25, 1997, covering, INTER ALIA, one Boeing
model 737-230 airframe, manufacturers serial number 23155, FAA registration
number N821AL, together with two (2) ▇▇▇▇▇ & Whitney model JT8D-9A aircraft
engines, manufacturer's serial numbers 666775 and 649358, filed together
and recorded by the Federal Aviation Administration (the "FAA") on April
28, 1997 as Conveyance No. T054014.
- Amended by First Amendment to Aircraft Lease Agreement dated as of July 1,
1998.
Page 6
ATTACHMENT 3 TO
ASSIGNMENT, ASSUMPTION AND AMENDMENT OF
LEASE
SCHEDULE OF RENTS
N821AL
Aircraft Lease
(N821AL)
------------------------
08/27/01 132,000.00
09/27/01 132,000.00
10/27/01 132,000.00
11/27/01 132,000.00
12/27/01 132,000.00
01/27/02 132,000.00
02/27/02 132,000.00
03/27/02 132,000.00
04/27/02 132,000.00
05/27/02 132,000.00
06/27/02 132,000.00
07/27/02 132,000.00
08/27/02 132,000.00
09/27/02 132,000.00
10/27/02 132,000.00
11/27/02 132,000.00
12/27/02 132,000.00
01127/03 132,000.00
02/27/03 132,000.00
03/27/03 132,000.00
04/27/03 132,000.00
05/27/03 132,000.00
06/27/03 132,000.00
07/27/03 132,000.00
08/27/03 132,000.00
09/27/03 132,000.00
10/27/03 132,000.00
11/27/03 132,000.00
12/27/03 132,000.00
01/27/04 132,000.00
02/27/04 132,000.00
03/27/04 132,000.00
04/27/04 132,000.00
05/27/04 132,000.00
06/27/04 132,000.00
07/27/04 132,000.00
08/27/04 132,000.00
Page 7
Page 8
AMENDMENT TO AIRCRAFT LEASE AGREEMENT
[N821AL]
This Amendment to the Aircraft Lease Agreement dated as of September
27, 1996 between Bank of Hawaii ("B of H") as lessor and Aloha Airlines, Inc.
("Aloha") as lessee is executed among ▇▇▇▇▇ Fargo Bank Northwest National
Association, not in its individual capacity but solely as owner trustee (the
"Trustee") under an Equipment Trust Agreement dated as of August 23, 2001,
for the benefit of BCI 2001-4, LLC, a Delaware limited liability company
("BCI"), B of H and Aloha as of this 31st day of October, 2001.
1. RECITALS
1.1 On or about September 27, 1996, B of H as lessor and Aloha as
lessee entered into an Aircraft Lease Agreement and Lease Supplement No. 1 to
such Lease Agreement regarding a Boeing model 737-230 aircraft having Federal
Aviation Administration No. N821AL and manufacturer's serial number 23155.
That Aircraft Lease Agreement, as amended and supplemented to date, is
described in EXHIBIT A attached hereto, and is referred to as the "Lease" in
this Amendment. All capitalized terms not otherwise defined in this Amendment
will have the meanings ascribed in the Lease.
1.2 The rights of B of H as lessor under the Lease have been assigned
to the Trustee for the benefit of BCI.
1.3 The parties to the Lease wish to amend the Lease as set forth
herein.
Accordingly, the parties to this Amendment agree as follows:
2. AMENDMENT TO LEASE
The Agreed Value of the Aircraft for insurance purposes set forth in
Section 1 to the Lease is amended by the Trust and the Lessee from $12,000,000
to $7,500,000.00.
3. CONSENT
B of H, as lender, and BCI consent to amendment of the Lease as
specified herein.
4. EFFECT OF AMENDMENT
As amended heretofore and hereby, the Lease will remain in full force
and effect. In the case of any conflict between this Amendment and the Lease,
the terms of this Amendment will control.
5. FILING WITH THE FAA
Because this Amendment affects financial terms of the Lease only,
this Amendment is not to be filed with the Federal Aviation Administration.
Page 1
5. FILING WITH THE FAA
Because this Amendment affects financial terms of the Lease only,
this Amendment is not to be filed with the Federal Aviation Administration.
Executed as of this 31st day of October, 2001.
BANK OF HAWAII, a Hawaii corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Printed Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
▇▇▇▇▇ FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, not in its individual
capacity but solely as Owner Trustee under
that certain Equipment Trust Agreement
[N821AL & N823AL] dated as of August 23,2001
By: __________________________________
Printed Name: ________________________
Title: _______________________________
BCI 2001-4, LLC, a Delaware limited liability
company
By: BCI Aircraft Leasing, Inc, an Illinois
corporation, its manager
By: __________________________________
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
Page 2
Executed as of this 31st day of October, 2001.
BANK OF HAWAII, a Hawaii corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
By: __________________________________
Printed Name: ________________________
Title: _______________________________
▇▇▇▇▇ FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity
but solely as Owner Trustee under that
certain Equipment Trust Agreement [N821AL &
N823AL] dated as of August ___, 2001
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Printed Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title: Assistant Vice President
-------------------------------
BCI 2001-4, LLC, a Delaware limited
liability company
By: BCI Aircraft Leasing, Inc., an Illinois
corporation, its manager
By: __________________________________
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
Page 2
Executed as of this 31st day of October, 2001.
BANK OF HAWAII, a Hawaii corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
By: __________________________________
Printed Name: ________________________
Title: _______________________________
▇▇▇▇▇ FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity
but solely as Owner Trustee under that
certain Equipment Trust Agreement [N821AL &
N823AL] dated as of August ___, 2001
By: __________________________________
Printed Name: ________________________
Title: _______________________________
BC1 2001-4, LLC, a Delaware limited liability
company
By: BCI Aircraft Leasing, Inc., an Illinois
corporation, its manager
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
Page 2
ALOHA AIRLINES, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
Title: EXECUTIVE VICE PRESIDENT & CFO
-------------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------
Title: SENIOR VICE PRESIDENT PLANNING
AND BUSINESS DEVELOPMENT
-------------------------------
Page 3
EXHIBIT A
Description of N821AL Lease
LEASE AS TO THE AIRCRAFT
- Aircraft Lease Agreement dated as of September 27, 1996, between Aloha
Airlines, Inc., as lessee (the "Lessee") and Bank of Hawaii, as
borrower (the "Borrower"), as supplemented by Lease Supplement No. 1
dated as of September 27, 1996 and Certificate of Acceptance dated as
of September 27, 1996, covering, INTER ALIA, one Boeing model 737-230
airframe, manufacturer's serial number 23155, FAA registration number
N821AL, together with two (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ model JT8D-15 aircraft
engines, manufacturer's serial numbers 687334 and 708328
- Partially terminated by Partial Termination dated as of April 25, 1997
covering, INTER ALIA, two (2) ▇▇▇▇▇ & Whitney model JT8D-15 aircraft
engines, manufacturer's serial numbers 687334 and 708328.
- Supplemented by Lease Supplement No. 2 dated as of April 25, 1997 and
Certificate of Acceptance dated as of April 25, 1997, covering, INTER
ALIA, one Boeing model 737-230 airframe, manufacturer's serial number
23155, FAA registration number N821AL, together with two (2) ▇▇▇▇▇ &
Whitney model JT8D-9A aircraft engines, manufacturer's serial numbers
666775 and 649358
- Amended by First Amendment to Aircraft Lease Agreement dated as of
July 1, 1998
- Amended by Assignment, Assumption and Amendment of Lease dated as of
August 23, 2001
Page 1