Exhibit 10.73
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THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT,
IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT EXECUTED BY LESSOR OR, IF LESSOR HAS
ASSIGNED ITS RIGHTS TO A THIRD PARTY IN ACCORDANCE WITH THIS LEASE AGREEMENT,
SUCH THIRD PARTY ON THE SIGNATURE PAGE OF THIS LEASE AGREEMENT.
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DATED: MAY 21, 1997
ACG ACQUISITION XII LLC
(Lessor)
- and -
ALOHA AIRLINES, INC.
(Lessee)
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LEASE AGREEMENT 809
- relating to -
Boeing 737-2Q9 Aircraft
Manufacturers Serial No: 21720
U.S. Registration ▇▇▇▇ N809AL
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FELTMAN, KARESH, MAJOR & ▇▇▇▇▇▇▇,
Limited Liability Partnership
Carnegie Hall Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
TABLE OF CONTENTS
CLAUSE PAGE
1. DEFINITIONS and INTERPRETATION ......................................................1
1.1 Definitions .....................................................................1
1.2 Interpretation .................................................................15
2. REPRESENTATIONS and WARRANTIES .....................................................15
2.1 Lessee's Representations and Warranties ......................................15
2.2 Lessee's Further Representations and Warranties ..............................17
2.3 Repetition ...................................................................18
2.4 Lessor's Representations and Warranties ......................................18
2.5 Repetition ...................................................................19
3. CONDITIONS PRECEDENT ...............................................................19
3.1 Lessor's Documentary Conditions Precedent ....................................19
3.2 Lessor's Other Conditions Precedent ..........................................20
3.3 Lessor's Waiver ..............................................................21
3.4 Lessee's Conditions Precedent ................................................21
3.5 Lessee's Waiver ..............................................................22
4. COMMENCEMENT; OPTIONS ..............................................................22
4.1 Leasing ......................................................................22
4.2 Delivery .....................................................................22
4.3 Acceptance and Risk ..........................................................23
4.4 Extension Option . ...........................................................23
4.5 Early Termination Option .....................................................23
5. PAYMENTS ...........................................................................23
5.1 Security Deposit; Letter of Credit ...........................................23
5.2 Rental Periods ...............................................................26
5.3 Basic Rent ...................................................................26
5.4 Payments .....................................................................26
5.5 Gross-up .....................................................................26
5.6 Taxation .....................................................................27
5.7 Information ..................................................................28
5.8 Taxation of Indemnity Payments ...............................................28
5.9 Default Interest .............................................................29
5.10 Contest ......................................................................29
5.11 Absolute .....................................................................30
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TABLE OF CONTENTS
continued
CLAUSE PAGE
6. MANUFACTURER'S WARRANTIES ..........................................................31
6.1 Assignment .....................................................................31
6.2 Proceeds .......................................................................31
6.3 Parts ..........................................................................32
6.4 Agreement ......................................................................32
7. LESSOR'S COVENANTS and DISCLAIMERS .................................................32
7.1 Quiet Enjoyment ..............................................................32
7.2 Registration and Filings .....................................................33
7.3 Agreed Maintenance Performers ................................................33
7.4 Exclusion ....................................................................33
7.5 Lessee's Waiver ..............................................................34
7.6 Lessee's Confirmation ........................................................34
8. LESSEE'S COVENANTS .................................................................34
8.1 Duration .....................................................................34
8.2 Information ..................................................................34
8.3 Lawful and Safe Operation ....................................................37
8.4 Taxes and Other Charges ......................................................38
8.5 Sub-Leasing ..................................................................38
8.6 Inspection ...................................................................39
8.7 Protection of Title ..........................................................39
8.8 General ......................................................................41
8.9 Records ......................................................................42
8.10 Registration and Filings .....................................................42
8.11 Maintenance and Repair .......................................................42
8.12 Removal of Engines and Parts .................................................44
8.13 Installation of Engines and Parts ............................................44
8.14 Non-Installed Engines and Parts ..............................................46
8.15 Pooling of Engines and Parts .................................................47
8.16 Equipment Changes ............................................................48
8.17 Title to Engines and Parts ...................................................48
8.18 Third Parties ................................................................49
9. INSURANCE ..........................................................................49
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TABLE OF CONTENTS
continued
CLAUSE PAGE
9.1 Insurances ....................................................................49
9.2 Requirements ..................................................................49
9.3 Insurance Covenants ...........................................................50
9.4 Failure to Insure .............................................................51
9.5 Continuing Indemnity ..........................................................52
9.6 Application of Insurance Proceeds .............................................52
10. INDEMNITY ...........................................................................53
10.1 General ........................................................................53
10.2 Mitigation .....................................................................54
10.3 Duration .......................................................................55
11. EVENTS OF LOSS ......................................................................55
11.1 Total Loss .....................................................................55
11.2 Requisition ....................................................................57
12. RETURN OF AIRCRAFT ..................................................................57
12.1 Redelivery .....................................................................57
12.2 Final Checks ...................................................................58
12.3 Final Inspection ...............................................................59
12.4 Non-Compliance .................................................................59
12.5 Export Documentation ...........................................................60
12.6 Acknowledgment .................................................................60
12.7 Maintenance Program ............................................................60
12.8 Storage ........................................................................61
13. DEFAULT .............................................................................61
13.1 Events .........................................................................61
13.2 Rights .........................................................................66
13.3 Export .........................................................................66
13.4 Default Payments ...............................................................67
14. ASSIGNMENT and TRANSFER .............................................................68
14.1 No assignment by Lessee ........................................................68
14.2 Lessor Assignment ..............................................................68
14.3 Grants of Security Interests ...................................................70
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TABLE OF CONTENTS
continued
CLAUSE PAGE
14.4 Sale and Leaseback by Lessor ..................................................72
14.5 Further Acknowledgments .......................................................72
14.6 Certain Protections for Lessee's Benefit ......................................73
15. MISCELLANEOUS ......................................................................73
15.1 Waivers, Remedies Cumulative .................................................73
15.2 Delegation ...................................................................73
15.3 Appropriation ................................................................73
15.4 Currency Indemnity ...........................................................74
15.5 Payment by the Lessor ........................................................74
15.6 Severability . ...............................................................74
15.7 Remedy .......................................................................75
15.8 Expenses .....................................................................75
15.9 Time of Essence ..............................................................75
15.10 Notices ......................................................................75
15.11 Law and Jurisdiction .........................................................77
15.12 Sole and Entire Agreement ....................................................78
15.13 Indemnities ..................................................................78
15.14 Counterparts .................................................................78
SCHEDULES
1. Aircraft Specification 80
2. Certificate of Acceptance 809 83
3. Operating Condition at Redelivery 87
4. Insurance Requirements 94
5. Form of Legal Opinion 99
6. Form of Letter of Credit 100
7. Form of Semi-Annual Status Report 101
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RECORDED
Federal Aviation Administration
Date 8-28-97 Time 7:53 am
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Conveyance Number HK010357
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By ▇▇▇▇▇▇▇ Deepler
---------------------
Conveyances Examiner
THIS
LEASE AGREEMENT is made the 21st day of May, 1997
BETWEEN:
(1) ACG ACQUISITION XII LLC, a Delaware limited liability company, having its
principal place of business at Three Stamford Landing, ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇. (the "LESSOR"), and
(2) ALOHA AIRLINES, INC., a Delaware corporation having its principal place
of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (the "LESSEE").
WHEREAS:
(A) The Aircraft has previously been operated by the Lessee.
(B) Pursuant to an Aircraft Purchase Agreement, dated as of May 21, 1997,
between First Security Bank, National Association, not in its individual
capacity but solely as owner trustee, as seller ("Seller"), and Lessor,
as buyer (the "Purchase Agreement"), Lessor has purchased the Aircraft
from Seller, and Lessor has agreed to lease the Aircraft to the Lessee
with effect from the purchase of the Aircraft upon and subject to the
covenants, terms and conditions set out in this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following expressions shall, unless the context
otherwise requires, have the following respective meanings:
ACTUAL COST as it applies to any maintenance
work on the Aircraft means 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 or other similar
amounts.
AFFILIATE in relation to any person, any other
person controlled directly or
indirectly by that person, any other
person that controls directly or
indirectly that person or any other
person under common control with
that person.
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For this purpose "control" of any
entity or person means ownership of
a majority of the voting power of
the entity or person.
AGREED MAINTENANCE PERFORMER the Lessee or any other reputable
maintenance organization that is (i)
experienced in maintaining aircraft
and/or engines of the same type as
the Aircraft and the Engines, (ii)
duly certificated by the FAA under
FAR Part 145, and (iii) not objected
to by Lessor pursuant to Clause 7.3.
AGREED MAINTENANCE PROGRAM the Lessee's current Maintenance
Program, as the same may be amended
from time to time in accordance with
this Agreement.
AGREED VALUE $6,000,000.
AIRCRAFT the aircraft described in Part 1 of
Schedule 1 (which term includes,
where the context admits, a separate
reference to all Engines, Parts and
Aircraft Documents).
AIRCRAFT DOCUMENTS the documents, data and records
identified in Part 2 of Schedule 1
and all additions, renewals,
revisions and replacements from time
to time made in accordance with this
Agreement.
AIRFRAME the Aircraft, excluding the Engines
and the Aircraft Documents.
APU (i) the auxiliary power unit listed
in Schedule 1, (ii) any and all
Parts, so long as such Parts are
incorporated in, installed on or
attached to such auxiliary power
unit or so long as title to such
Parts is vested in the Lessor in
accordance with the terms of Clause
8.17(b) after removal from such
auxiliary power unit, and (iii)
insofar as the same belong to
Lessor, all substitutions,
replacements or renewals from time
to time made in or to such auxiliary
power unit or to any of the Parts
referred to in clause (ii) above, as
required or permitted under this
Agreement.
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APPRAISAL PROCEDURE shall mean, with respect to any
amount to be determined, the amount
mutually agreed by Lessor and Lessee
or, if Lessor and Lessee are unable
to agree upon any such amount to be
determined, the average of the
amounts determined by three
FAA-approved service centers in the
continental United States, one such
service center appointed by Lessor,
one by Lessee and one by their
appointed service centers, except
that if any party fails to appoint a
service center the Manufacturer or
the Engine Manufacturer (whichever
is appropriate) shall be deemed
appointed.
AVIATION AUTHORITY the FAA or (if the State of
Registration ceases to be the United
States of America) the authority
and/or Government Entity and/or
agency which, under the laws of the
State of Registration, from time to
time (a) has control or supervision
of civil aviation; or (b) has
jurisdiction over registration,
airworthiness or operation of the
Aircraft.
BASIC RENT all amounts payable pursuant to
Clause 5.3.
BUSINESS DAY a day (other than a Saturday or
Sunday) on which business of the
nature required by this Agreement is
carried out in Stamford, Connecticut
and Honolulu, Hawaii or, where used
in relation to payments, a day other
than a Saturday or Sunday or a day
on which banks in Chicago,
Illinois,
New York, New York or Honolulu,
Hawaii are required or authorized to
be closed.
CERTIFICATE OF ACCEPTANCE a certificate in the form of
Schedule 2 to be completed and
executed by the Lessee on Delivery.
CYCLE one take-off and landing of an
airframe.
DAMAGE NOTIFICATION THRESHOLD $500,000.
DEFAULT any Event of Default and any event
which with the giving of notice,
lapse of time, determination of
materiality or fulfilment of other
condition or any
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combination of the foregoing would
constitute an Event of Default.
DELIVERY the deemed delivery of the Aircraft
to the Lessee in accordance with the
terms of this Agreement.
DELIVERY DATE the date on which Delivery takes
place.
DELIVERY LOCATION a location selected by Lessee and
reasonably acceptable to Lessor.
DOLLARS AND $ the lawful currency of the United
States of America.
EARLY TERMINATION OPTION shall have the meaning assigned
thereto in Section 4.5 hereof.
ENGINE whether or not installed on the
Aircraft:
(a) each engine of the
manufacture, model and
serial number specified
in Part 1 of Schedule 1
and having 750 or more
rated take-off
horsepower, title to
which shall belong to the
Lessor; or
(b) any engine which replaces
that engine, title to
which passes to the
Lessor in accordance with
Clause 8.17(a);
and in each case includes all
modules and Parts from time to time
belonging to, installed in or
appurtenant to that engine but
excludes any engine replaced in
accordance with Clause 8.17(a) title
to which has, or should have, passed
to the Lessee in accordance with
Clause 8.17(b) pursuant to this
Agreement.
ENGINE LOSS the circumstances set forth in
the definition of "Total Loss" as
if that definition applied to an
Engine.
ENGINE LOSS DATE the relevant date determined in
accordance with the definition of
"Total Loss Date" as if that
definition applied to an Engine
Loss.
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ENGINE MANUFACTURER the ▇▇▇▇▇ & Whitney Division of
United Technologies Corporation.
EVENT OF DEFAULT an event specified in Clause 13.1.
EXPIRY DATE the day preceding the fourth
anniversary of the Delivery Date, or
the day this Agreement is terminated
earlier pursuant to Section 4.5, or
if this Agreement is extended
pursuant to Section 4.4 the day
preceding the fifth anniversary of
the Delivery Date, or any other date
on which:
(a) the Aircraft has been
redelivered in accordance
with this Agreement and
all obligations of Lessee
have been satisfied; or
(b) the Lessor receives the
Agreed Value following a
Total Loss and all other
amounts then due and
owing in accordance with
this Agreement.
EXTENSION OPTION shall have the meaning assigned
thereto in Section 4.4 hereof.
FAA the United States Federal Aviation
Administration, the Department of
Transportation, the Administrator of
the Federal Aviation Administration
or any person or Government Entity
succeeding to the functions thereof.
FAR the Federal Aviation Regulations for
the time being in force, issued by
the FAA pursuant to the Federal
Aviation Law and published in Title
14 of the Code of Federal
Regulations.
FEDERAL AVIATION LAW Title 49 of the United States
Code, as amended, or any
successor statutory provisions
and the regulations promulgated
under such provisions.
FINANCIAL INDEBTEDNESS any indebtedness in respect of:
(a) moneys borrowed;
-5-
(b) any liability under any
debenture, bond, note,
loan stock, acceptance
credit, documentary
credit or other security;
(c) the acquisition cost of
any asset to the extent
payable before or after
the time of acquisition
or possession; or
(d) the capitalized value
(determined in accordance
with accounting practices
generally accepted in the
State of Incorporation)
of obligations under
finance leases; or
(e) any guarantee, indemnity
or similar assurance
against financial loss of
any person in respect of
the above.
FLIGHT HOUR each hour or part thereof (rounded
up to one decimal place) elapsing
from the moment the wheels of an
airframe leave the ground on take
off until the moment the wheels of
such airframe next touch the ground.
GAAP generally accepted accounting
principles as in effect from time to
time and, subject to changes in such
principles from time to time,
consistently applied in accordance
with the past practices of a person.
GOVERNMENT ENTITY (a) any national government,
political subdivision
thereof or local
jurisdiction therein;
(b) any instrumentality,
board, commission, court,
or agency of any thereof,
however constituted; and
(c) any association,
organization, or
institution of which any
of the above is a member
or to whose jurisdiction
any thereof is subject or
in whose activities any
of the above is a
participant.
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HABITUAL BASE the State of Hawaii or, subject to
the prior written consent of the
Lessor and Lender, any other state,
province or country in which the
Aircraft is for the time being
habitually based.
INDEMNITEES the Lessor Indemnitees and the
Lender Indemnitees.
IRS the Internal Revenue Service of the
Department of the Treasury of the
United States of America.
LANDING GEAR the landing gear assembly of the
Aircraft excluding the wheels and
brake units.
LENDER SBCC, any other person or persons
that may from time to time refinance
the Aircraft for the Lessor and/or
for whose benefit a security
interest in respect of the Aircraft
and/or this Agreement is granted by
the Lessor, and any successor and
permitted assign of any such person
under the relevant loan
documentation.
LENDER INDEMNITEES for each Lender, such Lender, any of
its successors and assigns and their
respective shareholders, members,
Affiliates, partners, contractors,
directors, managers, officers,
servants, agents and employees.
LESSEE INSTALLED PART means passenger seats, overhead bins
and galleys title to which is held
by Lessee subject to a Security
Interest in favor of an unrelated
third party or title to which is
held by an unrelated third party and
such Part is leased or conditionally
sold to Lessee.
LESSOR INDEMNITEES each of the Lessor, any of its
successors and assigns and their
respective shareholders, members,
Affiliates, partners, contractors,
directors, managers, officers,
servants, agents and employees.
LESSOR LIEN (a) the Mortgage and any
other security interest
whatever from time to
time created by or
arising through the
Lessor and/or the Lender
in connection with the
financing or refinancing
of the Aircraft;
-7-
(b) any other security
interest in respect of
the Aircraft that results
from acts or omissions
of, or claims against,
the Lessor and/or the
Lender not related to the
operation of the Aircraft
or the transactions
contemplated by or
permitted under this
Agreement; and
(c) liens in respect of the
Aircraft for Lessor
Taxes.
LESSOR TAXES (a) Taxes imposed as a direct
result of activities of
the Lessor and/or the
Lender in the
jurisdictions imposing
the liability unrelated
to the Lessor's and/or
the Lender's dealings
with the Lessee pursuant
to this Agreement or to
the transactions
contemplated by this
Agreement or the
operation of the Aircraft
by the Lessee;
(b) Taxes imposed on the
net income, profits or
gains of the Lessor
and/or the Lender by
any Federal Government
Entity in the United
States of America or
by any Government
Entity of the States
where the Lessor
and/or the Lender are
incorporated or have
their principal place
of business, or by any
Government Entity in
any other jurisdiction
where the Lessor
and/or the Lender is
liable for such Taxes
but only to the extent
that such liability
has or would have
arisen in the absence
of the transactions
contemplated by this
Agreement;
(c) Taxes imposed with
respect to any period
commencing or event
occurring before the date
of this Agreement or
after the Expiry Date and
unrelated to the Lessor's
and/or the Lender's
dealings with the Lessee
pursuant to this
Agreement or to the
transactions contemplated
by this Agreement;
(d) Taxes imposed as a direct
result of the sale or
other disposition of the
Aircraft, unless such
-8-
sale or disposition
occurs as a consequence
of an Event of Default;
(e) Taxes imposed by a taxing
jurisdiction for a
particular tax period in
which none of the
following is true for
that tax period (i) the
operation, registration,
location, presence or use
of the Aircraft, the
Airframe, any Engine or
any Part thereof in such
jurisdiction, (ii) the
place of incorporation,
commercial domicile or
other presence in such
jurisdiction of the
Lessee, any sublessee or
any user of or person in
possession of the
Aircraft, the Airframe,
any Engine or any Part
thereof in such
jurisdiction, or (iii)
any payments made under
this Agreement and
related documents being
made from such
jurisdiction;
(f) Taxes to the extent
caused by the gross
negligence or intentional
or willful misconduct of
Lessor or Lender;
(g) Taxes to the extent
caused by a failure by
Lessor or Lender to
furnish in a timely
manner notice or
information which it is
required to furnish to
Lessee by the terms of
this Agreement; and
(h) Taxes based on or
measured by the value or
principal amount of
indebtedness incurred by
Lessor with respect to or
secured by a Security
Interest on the Aircraft,
the Airframe, any Engine
or any interest therein.
LETTER OF CREDIT an irrevocable standby letter of
credit, in the form set out in
Schedule 6 or otherwise in form and
substance reasonably satisfactory to
the Lessor and the Lender, to be
issued (at the Lessee's option) in
favor of the Lessor (or, so long as
the Security Interest of the
Mortgage remains in effect, the
Lender) by a reputable bank in the
United States of America reasonably
acceptable to the Lessor and the
Lender for the payment of the
Security Deposit.
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MAINTENANCE PROGRAM an Aviation Authority approved
maintenance program for the Aircraft
encompassing scheduled maintenance,
condition monitored maintenance
and/or on-condition maintenance of
Airframe, Engines and Parts,
including servicing, testing,
preventative maintenance, repairs,
structural inspections, system
checks, overhauls, approved
modifications, service bulletins,
engineering orders, airworthiness
directives, corrosion control,
inspections and treatments.
MAJOR CHECKS any C-Check, multiple C-Check,
D-Check, annual heavy maintenance
visit or any segment of any of these
checks suggested for commercial
aircraft of the same model as the
Aircraft by its manufacturer
(however denominated) as set out in
the Agreed Maintenance Program.
MANUFACTURER The Boeing Company, a Delaware
corporation with a place of business
in Seattle, Washington.
MINIMUM LIABILITY COVERAGE $500,000,000 on each occurrence.
MORTGAGE the aircraft security agreement to
be granted by the Lessor as debtor
to the Lender as secured party,
whereby the Lessor will grant to the
Lender a first priority security
interest in the Aircraft and its
right, title and interest in this
Agreement.
PARENT Aloha Airgroup, Inc., a Hawaii
corporation and the sole stockholder
of Lessee.
PART whether or not installed on the
Aircraft:
(a) any component, furnishing
or equipment (other than
a complete Engine)
furnished with, installed
on or appurtenant to the
Airframe and Engines on
Delivery; and
(b) any other component,
furnishing or equipment
(other than a complete
Engine) title to which
has, or should have,
passed to the Lessor
pursuant to the Purchase
Agreement or Clause
8.17(a),
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but excludes any such items title to
which has, or should have, passed to
the Lessee pursuant to Clause
8.17(b) and any Lessee Installed
Part.
PERMITTED LIEN (a) any lien for Taxes not
assessed or, if assessed,
not yet due and payable,
or being contested in
good faith by appropriate
proceedings;
(b) any lien of a repairer,
mechanic, carrier, hangar
keeper, unpaid seller or
other similar lien
arising in the ordinary
course of business or by
operation of law in
respect of obligations
which are not overdue in
accordance with
applicable law (or, if
applicable, generally
accepted accounting
principles and practices
in the relevant
jurisdiction) or are
being contested in good
faith by appropriate
proceedings; and
(c) any Lessor Lien;
but only if, in the case of (a) and
(b): (i) adequate reserves have been
provided by the Lessee for the
payment of the Taxes or obligations
in accordance with generally
accounting principles and practices
in the relevant jurisdiction; and
(ii) such proceedings, or the
continued existence of the Security
Interest, do not give rise to any
reasonable likelihood of the sale,
forfeiture or other loss of the
Aircraft or any interest therein or
of criminal liability on the Lessor
or any Lender.
REDELIVERY LOCATION Honolulu, Hawaii or an airport in
one of the States on the West Coast
of the United States of America, as
agreed by Lessor and Lessee before
the Expiry Date.
RENT collectively, all Basic Rent and all
Supplemental Rent.
RENTAL PERIOD each period ascertained in
accordance with Clause 5.2.
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RENT DATE the Delivery Date and the
corresponding day of each calendar
month during the Term or, for any
calendar month that does not have a
corresponding day, the last day of
such calendar month.
SBCC Sanwa Business Credit Corporation, a
Delaware corporation, the initial
"Lender" under this Agreement.
SECURITY DEPOSIT the amount of $228,000.
SECURITY INTEREST any mortgage, charge, pledge, lien,
assignment, hypothecation, right of
set-off, or any agreement or
arrangement having the effect of
creating a security interest, other
than a Permitted Lien.
SELLER ENTITIES collectively, 1980 Aircraft
Investors, a California limited
partnership (the "Partnership"),
First Security Bank, National
Association, as owner trustee f/b/o
the Partnership, each limited
partner of the Partnership, Polaris
Investment Management Corporation,
Polaris Aircraft Leasing Corporation
and GE Capital Aviation Services,
Inc.
STATE OF INCORPORATION State of Delaware.
STATE OF REGISTRATION United States of America.
SUBSIDIARY (a) in relation to any
reference to accounts,
any company wholly or
partially owned by
Parent, including the
Lessee, whose accounts
are consolidated with the
accounts of the Parent in
accordance with GAAP; and
(b) for any other purpose, an
entity from time to time:
(i) of which another has
direct or indirect
control or owns
directly or
indirectly more than
50% of the voting
share capital; or
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(ii) which is a direct
or indirect
subsidiary of
another under the
laws of the
jurisdiction of
its incorporation.
SUPPLEMENTAL RENT all amounts, liabilities and
obligations (other than Basic Rent)
which Lessee assumes or agrees to
pay under this Agreement to Lessor
or any other person, including
payment of the Security Deposit,
other deposits, indemnities and the
Agreed Value.
TAXES all present and future taxes,
levies, imposts, duties or charges
in the nature of taxes, whatever and
wherever imposed, including customs
duties, value added taxes or similar
taxes and any franchise, transfer,
sales, use, business, occupation,
excise, personal property, stamp or
other tax or duty imposed by any
national or local taxing or fiscal
authority or agency, together with
any withholding, penalties,
additions to tax, fines or interest
thereon or with respect thereto.
TERM the period commencing on the
Delivery Date and ending on the
Expiry Date.
TOTAL LOSS with respect to the Airframe:
(a) the actual, arranged or
constructive total loss
of the Airframe
(including any damage to
the Airframe which
results in an insurance
settlement on the basis
of a total loss, or
requisition for use or
hire which results in an
insurance settlement on
the basis of a total
loss);
(b) the Airframe being
destroyed, damaged beyond
repair or permanently
rendered unfit for normal
use for any reason
whatsoever;
(c) the requisition of title,
or other compulsory
acquisition, capture,
seizure, deprivation,
confiscation or detention
for any reason of the
Airframe (whether DE JURE
or DE FACTO), but
excluding requisition for
use or hire not involving
requisition of title; or
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(d) the hi-jacking, theft,
condemnation,
confiscation, seizure or
requisition for use or
hire of the Airframe
which deprives any person
permitted by this
Agreement to have
possession and/or use of
the Airframe of its
possession and/or use for
more than 60 consecutive
days.
TOTAL LOSS DATE (a) in the case of an actual
total loss, the actual
date on which the loss
occurs or, if such date
is unknown, the day on
which the Aircraft was
last heard of;
(b) in the case of any of the
events described in
sub-paragraph (a) of the
definition of "Total
Loss" (other than an
actual total loss), the
earlier of (i) 30 days
after the date on which
notice claiming such
total loss is given to
the relevant insurers,
and (ii) the date on
which such loss is
admitted or compromised
by the insurers;
(c) in the case of any of the
events described in
sub-paragraph (b) of the
definition of "Total
Loss", the date on which
such destruction, damage
or rendering unfit
occurs;
(d) in the case of any of the
events described in
sub-paragraph (c) of the
definition of "Total
Loss", the date on which
the relevant requisition
of title or other
compulsory acquisition,
capture, seizure,
deprivation, confiscation
or detention occurs;
(e) in the case of any of the
events described in
sub-paragraph (d) of the
definition of "Total
Loss", the expiry of the
period of 60 days
referred to in such
sub-paragraph (d);
and, in each case, the Total Loss
shall be deemed to have occurred at
noon Greenwich Mean Time on such
date.
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1.2 INTERPRETATION
(a) In this Agreement, unless the contrary intention is stated, a
reference to:
(i) each of "THE LESSOR", "THE LESSEE", "THE LENDER" or any
other person includes without prejudice to the provisions
of this Agreement any successor in title to it and any
permitted assignee;
(ii) words importing the plural shall include the singular and
vice versa;
(iii) the term "including", when used in this Agreement, means
"including without limitation" and "including but not
limited to".
(iv) any document shall include that document as amended,
novated or supplemented;
(v) a law (1) includes any statute, decree, constitution,
regulation, order, judgment or directive of any Government
Entity; (2) includes any treaty, pact, compact or other
agreement to which any Government Entity is a signatory or
party; (3) includes any judicial or administrative
interpretation or application thereof; and (4) is a
reference to that provision as amended, substituted or
re-enacted; and
(vi) a Clause or a Schedule is a reference to a clause of or a
schedule to this Agreement.
(b) The headings in this Agreement are to be ignored in construing
this Agreement.
2. REPRESENTATIONS AND WARRANTIES
2.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
The Lessee represents and warrants to the Lessor as follows:
(a) STATUS: The Lessee is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Incorporation, has the corporate power to own its assets and carry
on its business as it is being conducted and is (or will at the
relevant time be) the holder of all necessary air transportation
licences required in connection therewith and with the use and
operation of the Aircraft.
(b) POWER AND AUTHORITY: The Lessee has the corporate power to enter
into and perform, and has taken all necessary corporate action to
authorize the entry into,
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performance and delivery of, this Agreement and the transactions
contemplated by this Agreement.
(c) LEGAL VALIDITY: This Agreement constitutes the Lessee's legal,
valid and binding obligation, enforceable against Lessee in
accordance with its terms.
(d) NON-CONFLICT: The entry into and performance by the Lessee of, and
the transactions contemplated by, this Agreement do not and will
not:
(i) conflict with any laws binding on the Lessee;
(ii) conflict with the constitutional documents of the Lessee;
or
(iii) conflict with or result in default under any document which
is binding upon the Lessee or any of its assets, or result
in the creation of any Security Interest over any of its
assets.
(e) AUTHORIZATION: All authorizations, consents and registrations
required by, and all notifications to be given by, the Lessee in
connection with the entry into, performance, validity and
enforceability of, this Agreement and the transactions
contemplated by this Agreement have been (or will on or before
Delivery have been) obtained, effected or given (as appropriate)
and are (or will on their being obtained or effected be) in full
force and effect.
(f) NO IMMUNITY:
(i) The Lessee is subject to civil commercial law with respect
to its obligations under this Agreement.
(ii) Neither the Lessee nor any of its assets is entitled to any
right of immunity and the entry into and performance of
this Agreement by the Lessee constitute private and
commercial acts.
(g) FINANCIAL STATEMENTS: the audited consolidated financial
statements of the Parent and its Subsidiaries most recently
delivered to the Lessor:
(i) have been prepared in accordance with GAAP; and
(ii) fairly present the consolidated financial condition of
the Parent and its Subsidiaries as at the date to which
they were drawn up and the consolidated results of
operations of the Parent and its Subsidiaries for the
periods covered by such statements.
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(h) AIR CARRIER STATUS: the Lessee is a "citizen of the United States"
as defined in Section 40102 of the Federal Aviation Law, an air
carrier certified by the FAA under Chapter 447 of the Federal
Aviation Law and a Person "holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of title 49 for aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo" as that phrase
is used in 11 U.S.C. ss.1110, as amended ("Section 1110").
(i) SECTION 1110: the Lessor and, by virtue of the assignment for
collateral purposes of Lessor's right, title and interest in
the Aircraft and this Agreement, the Lender are entitled to the
benefits of Section 1110 with respect to any bankruptcy
proceedings involving Lessee.
2.2 LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES
The Lessee further represents and warrants to the Lessor that:
(a) NO DEFAULT: No Event of Default has occurred and is continuing or
might reasonably be expected to result from the entry into or
performance of this Agreement.
(b) REGISTRATION:
(i) It is not necessary or advisable under the laws of the
State of Incorporation, the State of Registration or the
Habitual Base in order to ensure the validity,
effectiveness and enforceability of this Agreement or the
Mortgage or to establish, perfect or protect the property
rights of the Lessor or the Lender in the Aircraft, any
Engine or Part that this Agreement or any other instrument
relating thereto be filed, registered or recorded or that
any other action be taken or, if any such filings,
registrations, recordings or other actions are necessary,
the same have been effected or will have been effected on
or before Delivery.
(ii) Under the laws of the State of Incorporation, the State of
Registration and the Habitual Base the property rights of
the Lessor and the Lender (pursuant to the Mortgage) in the
Aircraft have been fully established, perfected and
protected and this Agreement will have priority in all
respects over the claims of all creditors of the Lessee,
with the exception of such claims as are mandatorily
preferred by law and not by virtue of any contract.
(c) LITIGATION: No litigation, arbitration or administrative
proceedings are pending or, to the Lessee's knowledge, threatened
against the Lessee which, if adversely determined, would have a
material adverse effect upon its financial condition or business
or its ability to perform its obligations under this Agreement.
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(d) PARI PASSU: The obligations of the Lessee under this Agreement
rank at least PARI PASSU with all other present and future
unsecured and unsubordinated obligations (including contingent
obligations) of the Lessee, with the exception of such obligations
as are mandatorily preferred by law and not by virtue of any
contract.
(e) TAXES: The Lessee has delivered all necessary returns and payments
due to the tax authorities in the State of Incorporation, the
State of Registration, the jurisdiction of the Delivery Location
and the Habitual Base and is not required by law to deduct or
withhold any Taxes from any payments under this Agreement.
2.3 REPETITION
The representations and warranties in Clause 2.1 and Clause 2.2 will
survive the execution of this Agreement. The representations and
warranties contained in Clause 2.1 and Clause 2.2 (other than Clause
2.2(c) above) will be deemed to be repeated by the Lessee on Delivery
with reference to the facts and circumstances then existing. The
representations and warranties contained in Clause 2.1 will be deemed to
be repeated by the Lessee on each Rent Date as if made with reference to
the facts and circumstances then existing.
2.4 LESSOR'S REPRESENTATIONS AND WARRANTIES
The Lessor represents and warrants to the Lessee that:
(a) STATUS: The Lessor is a limited liability company duly formed and
validly existing under the laws of Delaware and has the power to
own its assets and carry on its business as it is now being
conducted.
(b) POWER AND AUTHORITY: The Lessor has the power to enter into and
perform, and has taken all necessary action to authorize the entry
into, performance and delivery of, this Agreement and the
transactions contemplated by this Agreement.
(e) LEGAL VALIDITY: This Agreement constitutes the Lessor's legal,
valid and binding obligation, enforceable against Lessor in
accordance with its terms.
(d) NON-CONFLICT: The entry into and performance by the Lessor of, and
the transactions contemplated by, this Agreement do not and will
not:
(i) conflict with any laws binding on the Lessor;
(ii) conflict with the constitutional documents of the Lessor;
or
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(iii) conflict with any document which is binding upon the Lessor
or any of its assets.
(e) AUTHORIZATION: So far as concerns the obligations of the Lessor,
all authorizations, consents, registrations and notifications
required under the laws of the States of Delaware and New York in
connection with the entry into, performance, validity and
enforceability of, and the transactions contemplated by, this
Agreement by the Lessor have been (or will on or before Delivery
have been) obtained or effected (as appropriate) and are (or will
on their being obtained or effected be) in full force and effect.
(f) NO IMMUNITY:
(i) The Lessor is subject to civil commercial law with respect
to its obligations under this Agreement.
(ii) Neither the Lessor nor any of its assets is entitled to any
right of immunity and the entry into and performance of
this Agreement by the Lessor constitute private and
commercial acts.
(g) RIGHT TO LEASE: On the Delivery Date, the Lessor shall have the
right to lease the Aircraft to the Lessee under this Agreement.
2.5 REPETITION
The representations and warranties in Clause 2.4 will survive the
execution of this Agreement. The representations and warranties contained
in Clause 2.4 will be deemed to be repeated by the Lessor on Delivery and
on each subsequent Rent Date as if made with reference to the facts and
circumstances then existing.
3. CONDITIONS PRECEDENT
3.1 LESSOR'S DOCUMENTARY CONDITIONS PRECEDENT
The Lessor's obligation to lease the Aircraft to the Lessee under this
Agreement is subject to the receipt of the following by the Lessor from
the Lessee on or before Delivery in form and substance satisfactory to
the Lessor, PROVIDED THAT it shall not be a condition precedent to the
obligations of the Lessor that any document be produced, or action taken,
which is to be produced or taken by it or any person within its control:
(a) CONSTITUTIONAL DOCUMENTS: a copy of the constitutional documents
of the Lessee;
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(b) RESOLUTIONS: a copy of a resolution of the board of directors of
the Lessee approving the terms of, and the transactions
contemplated by, this Agreement, resolving that it enter into this
Agreement, and authorizing a specified person or persons to
execute this Agreement and accept delivery of the Aircraft on its
behalf;
(c) OPINIONS: opinions, in the form set out in Schedule 5, in respect
of the Lessee's obligations under this Agreement issued by
independent legal counsel acceptable to the Lessor and the Lender;
(d) APPROVALS: evidence of the issue of each approval, licence and
consent which may be required in relation to, or in connection
with, the performance by Lessee of any of its obligations
hereunder;
(e) LICENCES: copies of the Lessee's air transport license, air
operator's certificate and all other licenses, certificates and
permits required by the Lessee in relation to, or in connection
with, the operation of the Aircraft;
(f) CERTIFICATE: a certificate of a duly authorized officer of the
Lessee:
(i) setting out a specimen of each signature referred to in
Clause 3.1(b); and
(ii) certifying that each copy of a document specified in this
Clause 3.1 is correct, complete and in full force and
effect;
(g) INSURANCES: certificates of insurance, brokers' undertakings and
other evidence satisfactory to the Lessor that the Lessee is
taking the required steps to ensure due compliance with the
provisions of this Agreement as to insurances with effect on and
after Delivery;
(h) REGISTRATION: evidence that the Aircraft has been validly
registered under the laws of the State of Registration and that
all filings, registrations, recordings and other actions have been
or will be taken which are necessary to ensure the validity,
effectiveness and enforceability of this Agreement and the
Mortgage and to protect the respective rights of the Lessor and
the Lender in the Aircraft or any Part; and
(i) GENERAL: such other documents as the Lessor may reasonably
request.
3.2 LESSOR'S OTHER CONDITIONS PRECEDENT
The obligation of the Lessor to deliver and lease the Aircraft under this
Agreement is also subject to the following additional conditions
precedent:
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(a) that the representations and warranties of the Lessee under
Clauses 2.1 and 2.2 are correct and would be correct if
repeated on Delivery;
(b) that all payments due to the Lessor under this Agreement on or
before Delivery, including the first payment of Basic Rent and
the Security Deposit (unless a Letter of Credit has been
delivered), shall have been received by the Lessor;
(c) all conditions precedent to the purchase of the Aircraft and
the Aircraft Documents by the Lessor under the Purchase
Agreement shall have been satisfied (or waived by the Lessor),
the Lessor shall have drawn down under its financing facility
with the Lender the amount required to pay the "Purchase Price"
(as defined in the Purchase Agreement) due to the Seller and
the Seller has conveyed good and marketable title to the
Aircraft and Aircraft Documents to Lessor pursuant to the
Purchase Agreement, free and clear of all Security Interests;
and
(d) the Mortgage shall be in full force and effect.
3.3 LESSOR'S WAIVER
The conditions specified in Clauses 3.1 and 3.2(a) and (b) are for the
sole benefit of the Lessor and the Lender and may be waived or deferred
in whole or in part and with or without conditions by the Lessor. If any
of those conditions are not satisfied on or before Delivery and the
Lessor (in its absolute discretion) nonetheless agrees to deliver the
Aircraft to the Lessee, the Lessee will ensure that those conditions
(other than the representation set forth in Clause 2.2(c) being correct
on the Delivery Date) are fulfilled within one month after the Delivery
Date and the Lessor may treat as an Event of Default the failure of the
Lessee to do so.
3.4 LESSEE'S CONDITIONS PRECEDENT
The Lessee's obligation to accept the Aircraft on lease from the Lessor
under this Agreement is subject to the satisfaction by the Lessor of the
following conditions precedent:
(a) RESOLUTIONS: the receipt by the Lessee of a copy of resolutions
of the board of directors of the Lessor approving the terms of,
and the transactions contemplated by, this Agreement, resolving
that it enter into this Agreement, and authorizing a specified
person or persons to execute this Agreement and deliver the
Aircraft on its behalf;
(b) CERTIFICATE: the receipt by the Lessee of a certificate of a
duly authorized officer of the Lessor:
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(i) setting out a specimen of each signature referred to in
sub-clause (a) above; and
(ii) certifying that the copy of the resolutions referred to
in sub-clause (a) above is correct, complete and in
full force and effect;
(c) REPRESENTATIONS AND WARRANTIES: that the representations and
warranties of the Lessor under Clause 2.4 are correct and
would be correct if repeated on Delivery; and
(d) LENDER'S COVENANT OF QUIET ENJOYMENT: the receipt by the
Lessee of the Lender's Letter of Quiet Enjoyment, duly signed
by the Lender.
3.5 LESSEE'S WAIVER
The conditions specified in Clause 3.4 are for the sole benefit of the
Lessee and may be waived or deferred in whole or in part and with or
without conditions by the Lessee. If any of those conditions are not
satisfied on or before Delivery and the Lessee (in its absolute
discretion) nonetheless agrees to lease the Aircraft from the Lessor, the
Lessor will ensure that those conditions are fulfilled within one month
after the Delivery Date.
4. COMMENCEMENT; OPTIONS
4.1 LEASING
(a) The Lessor will lease the Aircraft to the Lessee and the Lessee
will take the Aircraft on lease in accordance with this Agreement
for the duration of the Term.
(b) The Lessor and the Lessee intend that this Agreement constitute a
"true lease" and a lease for all United States federal income tax
purposes. The Lessor and the Lessee further intend and agree that
the Lessor (and, by virtue of the Mortgage, the Lender) shall be
entitled to the full benefits afforded lessors of aircraft under
11 U.S.C. Section 1110, as amended.
4.2 DELIVERY
The Aircraft will be deemed to have been delivered to, and will be
accepted by, the Lessee at the Delivery Location, or such other location
as may be agreed, on the Delivery Date immediately following satisfaction
of the conditions precedent specified in Clauses 3.1, 3.2 and 3.4 (or
their waiver or deferral by the party entitled to grant such waiver or
deferral).
-22-
4.3 ACCEPTANCE AND RISK
(a) Immediately following satisfaction of the conditions
precedent specified in Clauses 3.1, 3.2 and 3.4 (or their
waiver or deferral by the party entitled to grant such waiver
or deferral), the Lessee and the Lessor shall forthwith
complete Annex 1 to the Certificate of Acceptance (specifying
the maintenance status of the Airframe, Engines, APU and
Landing Gear) and the Lessee shall sign and deliver to the
Lessor the Certificate of Acceptance. Delivery of the signed
Certificate of Acceptance to the Lessor shall constitute
deemed delivery of the Aircraft to the Lessee.
(b) On and from Delivery, the Aircraft and every Part will be in
every respect at the sole risk of the Lessee, which will bear
all risk of loss, theft, damage or destruction to the
Aircraft from any cause whatsoever.
(c) Immediately following Delivery, the Lessor shall file for
recordation this Lease at the FAA Aircraft Registry together
with the Mortgage.
4.4 EXTENSION OPTION.
Lessor shall have the right, in its sole discretion and with the
consent of the Lender, to elect to extend the Term of this Agreement
until the fifth anniversary of the Delivery Date (the "Extension
Option"). Lessor shall exercise the Extension Option by giving Lessee
written notice of such exercise at least six months before the fourth
anniversary of the Delivery Date. During the extended Term, all of the
terms and provisions of this Agreement shall remain in full force and
effect, including the amount and payment of Basic Rent.
4.5 EARLY TERMINATION OPTION.
Lessor shall have the right, in its sole discretion and with the
consent of the Lender, to terminate this Agreement on any date on or
after April 1, 1998, upon giving 60 days prior written notice to Lessee
(the "Early Termination Option"). Such written notice shall specify the
date of return for the Aircraft. Lessee shall thereupon take all action
necessary to redeliver the Aircraft in accordance with this Agreement.
5. PAYMENTS
5.1 SECURITY DEPOSIT; LETTER OF CREDIT
(a) SECURITY DEPOSIT: On the date of this Agreement, Lessee shall
pay the Security Deposit to Lender. The Security Deposit shall
constitute additional security for performance by Lessee of its
obligations under this Agreement, and the following provisions
shall apply:
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(i) If an Event of Default occurs and for as long as it
continues, the Lessor (or, if the Security Interest of
the Mortgage shall be in effect, the Lender) may (but
shall not be obligated to) apply all or any portion of
the Security Deposit in or towards satisfaction of any
sums due and payable to the Lessor under this
Agreement or to compensate the Lessor or, if
applicable, the Lender for any sums which it may, in
its discretion, advance or expend as a result of any
such Event of Default. Notwithstanding any such use or
application by the Lessor or the Lender, the Lessee
shall remain in default under this Agreement until the
full amount owed by the Lessee, including interest
accrued thereon pursuant to Clause 5.9, shall have
been paid to the Lessor. If the Lessor or, if
applicable, the Lender so uses or applies all or any
portion of the Security Deposit, the Lessee shall
immediately, on demand of the Lessor or Lender,
replenish the Security Deposit in an amount equal to
the amount so used or applied within five Business
Days after Lessor's or Lender's demand therefor.
(ii) Lessor or, if applicable, Lender may commingle the
Security Deposit with its general funds, and any
interest earned on the Security Deposit will be for
Lessor's or Lender's account.
(iii) The Security Deposit shall be returned to the Lessee
within five Business Days of (1) redelivery of the
Aircraft to the Lessor in the condition required by
Clause 12 of, and Schedule 3 to, this Agreement,
(2) receipt by the Lessor of the Agreed Value
following a Total Loss and all other amounts due
under Clause 11.1(b), or (3) at such later time as
the Lessor is satisfied that the Lessee has
irrevocably paid to the Lessor all amounts which
are at that time outstanding under this Agreement;
provided always that the Lessor shall not be obliged
to return the Security Deposit if, at the relevant
time, a Default shall have occurred and be continuing.
(iv) To the fullest extent permitted by law and by way of
continuing security the Lessee grants a security
interest in the Security Deposit and all rights of
the Lessee to payment thereof, the debt represented
thereby and all interest thereon and/or any and all
interest of the Lessee therein to the Lessor by way
of first priority security interest as security for
the Lessee's obligations and liability under this
Agreement (the "Lessee's Liabilities"). Except as
expressly permitted under this Agreement, the Lessee
will not be entitled to repayment of the Security
Deposit, and the Lessee agrees that it will enter
into any additional documents and instruments
necessary or reasonably requested by Lessor or the
Lender to evidence, create or perfect the Lessor's
rights to and security interest in the Security
Deposit.
(b) LETTER OF CREDIT: the Lessee shall be entitled, instead of
paying the Security Deposit in cash in accordance with
sub-clause (a) above, to provide the Lessor with the Letter
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of Credit. In the event that the Lessee elects to provide the
Letter of Credit, the following provisions shall apply:
(i) Lessee shall cause the Letter of Credit to be renewed
or replaced by the issuing bank not later than 10
Business Days before the expiration of such Letter of
Credit, and shall cause the Letter of Credit to remain
in effect, as renewed, until 90 days after the
scheduled Expiry Date.
(ii) If an Event of Default occurs and for as long as it
continues, the Lessor (or, so long as the Security
Interest of the Mortgage shall remain in effect, the
Lender) may (but shall not be obliged to) call on the
Letter of Credit and use or apply the proceeds in or
towards satisfaction of any sums due and payable to the
Lessor under this Agreement or to compensate the Lessor
or Lender for any sums which it may, in its discretion,
advance or expend as a result of any such Event of
Default. Notwithstanding any such use or application by
the Lessor or the Lender, the Lessee shall remain in
default under this Agreement until the full amount owed
by the Lessee, including interest accrued thereon
pursuant to Clause 5.9, shall have been paid to the
Lessor and the Lender. If the Lessor or, if applicable,
the Lender so uses or applies all or any portion of the
amount available under the Letter of Credit, the Lessee
shall immediately, on demand of the Lessor or the
Lender, procure the issue of a new Letter of Credit
acceptable to the Lessor and the Lender for an amount
equal to the amount so used or applied, or shall pay to
the Lessor an amount in cash equal to the amount so
used or applied to be held pursuant to Clause 5.1(a).
(iii) The Letter of Credit shall be returned to the Lessee
within five Business Days of.
(1) redelivery of the Aircraft to the Lessor in the
condition required by Clause 12 of, and Schedule
3 to, this Agreement; or
(2) receipt by the Lessor of the Agreed Value
following a Total Loss and all other amounts due
under Clause 11.1(b); or
in either case, at such later time as the Lessor is
satisfied that the Lessee has irrevocably paid to the
Lessor all amounts which are at that time outstanding
under this Agreement; provided always that the Lessor
shall not be obliged to return the Letter of Credit if,
at the relevant time, a Default shall have occurred and
be continuing.
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5.2 RENTAL PERIODS
The first Rental Period will commence on the Delivery Date and each
subsequent Rental Period will commence on the date succeeding the last
day of the previous Rental Period. Each Rental Period will end on the
date immediately preceding the next succeeding Rent Date except that if
a Rental Period would otherwise overrun the Expiry Date, it will end on
the Expiry Date.
5.3 BASIC RENT
(a) TIME OF PAYMENT: the Lessee will pay to the Lessor or its
order Basic Rent in advance on each Rent Date. Payment must be
initiated adequately in advance of the Rent Date to ensure
that the Lessor receives credit for the payment on the Rent
Date.
(b) AMOUNT: The Basic Rent payable in respect of each Rental
Period will be the amount of $114,000.
5.4 PAYMENTS
(a) All payments of Rent by the Lessee to the Lessor under this
Agreement will be made for value on the due date, for the full
amount due, in Dollars and in immediately available funds,
settled through the New York Clearing House System or such
other funds as may for the time being be customary for the
settlement in New York City of payments in Dollars by
telegraphic transfer to the account of the Lender at ▇▇▇▇▇▇
Trust and Savings Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Account No. ▇▇▇-▇▇▇-▇, ABA No. ▇▇▇-▇▇▇-▇▇▇,
Ref.: "ACG Acquisition XII LLC", Attention: ▇▇▇ ▇▇▇▇▇▇.
(b) If any Rent or other payment would otherwise become due on a
day which is not a Business Day, it shall be due on the
immediately succeeding Business Day.
5.5 GROSS-UP
(a) All payments by the Lessee under or in connection with this
Agreement will be made without offset or counterclaim, free
and clear of and without deduction or withholding for or on
account of any Taxes (other than amounts that Lessee is
compelled by law to deduct or withhold).
(b) All Taxes in respect of payments under this Agreement shall be
for the account of the Lessee.
(c) If the Lessee is compelled by law to make payment to the
Lessor under or in connection with this Agreement subject to
any Tax and the Lessor does not actually
-26-
receive for its own benefit on the due date a net amount equal
to the full amount provided for under this Agreement, the
Lessee will pay all necessary additional amounts to ensure
receipt by the Lessor of the full amount (other than Lessor
Taxes that Lessee is compelled by law to deduct or withhold)
so provided for.
5.6 TAXATION
(a) The Lessee will on demand pay and indemnify the Lessor and the
Lender against all Taxes (other than Lessor Taxes) levied or
imposed against or upon the Lessor, the Lender or the Lessee
and relating to or attributable to the Lessee, this Agreement
or the Aircraft directly or indirectly in connection with the
importation, exportation, registration, ownership, leasing,
sub-leasing, purchase, financing, refinancing, pledging,
delivery, possession, use, operation, repair, maintenance,
overhaul, transportation, landing, storage, presence or
redelivery of the Aircraft or any part thereof or any rent,
receipts, insurance proceeds, income or other amounts arising
therefrom.
(b) If the Lessor or the Lender shall, based upon its own
reasonable interpretation of any relevant laws or regulations,
realize any Tax savings (by way of refund, deduction, credit
or otherwise) in respect of any amount with respect to which
the Lessee shall have made a payment (or increased payment)
pursuant to Clause 5.5 or 5.8 or shall have indemnified the
Lessor or the Lender pursuant to sub-clause (a) above, or in
respect of the occurrence or transaction which gave rise to
such payment or indemnification, and such Tax savings shall
not have been taken into account previously in calculating any
indemnity payment made by the Lessee, then the Lessor or the
Lender (as the case may be) shall, to the extent. that it can
do so without prejudice to the retention of the relevant
savings and subject to the Lessee's obligations to repay such
amount to the Lessor or the Lender (as applicable) if the
relevant savings are subsequently disallowed or canceled, pay
to the Lessee such amount as the Lessor or the Lender (as the
case may be) shall in its opinion have concluded to be the
amount of such Tax savings (together with, in the case of a
refund, any interest received thereon); provided however that
neither the Lessor nor the Lender shall be obliged to make any
payment to the Lessee pursuant to this sub clause (b) to the
extent that the amount of any Tax savings in respect of which
such payment is to be made would exceed the aggregate amount
of all prior payments made by the Lessee to, on behalf of or
as indemnification of the Lessor or the Lender under this
Agreement for Taxes less the amount of all prior payments made
pursuant to this sub-clause (b) in respect of such Tax
savings. The Lessee acknowledges that nothing contained in
this sub-clause (b) shall interfere with the right of the
Lessor or the Lender to arrange its tax affairs in whatsoever
proper manner it thinks fit (or give the Lessee any right to
investigate, or impose any obligation on the Lessor or the
Lender to disclose, the same) and, in particular, neither the
Lessor nor the Lender shall be under any obligation to claim
any Tax savings in priority to any other
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savings available to it; provided, that subject to the
foregoing Lessor shall use reasonable good faith diligence to
realize Tax savings as described above.
5.7 INFORMATION
If the Lessee is required by any applicable law, or by any third
party, to deliver any report or return in connection with any Taxes,
the Lessee will duly complete the same and, in particular, will state
therein that the Lessee is exclusively responsible for the use and
operation of the Aircraft and for the Taxes (other than Lessor Taxes)
arising therefrom, and the Lessee will, on request, supply a copy of
the report or return to the Lessor or the Lender, as the case may be.
If Lessee requires any information or cooperation from Lessor or
Lender in order to satisfy its obligations as set forth above, Lessor
and Lender shall promptly furnish such information or cooperation as
Lessee may reasonably request upon written request by Lessee. If
actual notice is given by any taxing authority to Lessor that a report
or return is required to be filed with respect to any Taxes (other
than Lessor Taxes), the Lessor shall promptly notify Lessee of such
required report or return.
5.8 TAXATION OF INDEMNITY PAYMENTS
(a) If and to the extent that any sums payable to the Lessor or the
Lender by the Lessee under this Agreement by way of indemnity
are insufficient, by reason of any Taxes payable in respect of
those sums, for the Lessor or the Lender to discharge the
corresponding liability to the relevant third party (including
any taxation authority), or to reimburse the Lessor or the
Lender for the cost incurred by it to a third party (including
any taxation authority) the Lessee will pay to the Lessor or
the Lender (as the case may be) such sum as will, after the tax
liability has been fully satisfied, leave the Lessor or the
Lender (as the case may be) with the same amount as it would
have been entitled to receive in the absence of that liability,
together with interest on the amount of the deficit at the
Default Rate in respect of the period commencing on the date on
which the payment of taxation is finally due until payment by
the Lessee (both before and after judgment).
(b) If and to the extent that any sums constituting (directly or
indirectly) an indemnity to the Lessor or the Lender but paid
by the Lessee to any person other than the Lessor or the Lender
are treated as taxable in the hands of the Lessor or the
Lender, the Lessee will pay to the Lessor or the Lender such
sum as will, after the tax liability has been fully satisfied,
indemnify the Lessor or the Lender to the same extent as it
would have been indemnified in the absence of such liability,
together with interest on the amount payable by lessee under
this sub-clause at the Default Rate in respect of the period
commencing on the date on which the payment of taxation is
finally due until payment by the Lessee (both before and after
judgment).
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5.9 DEFAULT INTEREST
If the Lessee fails to pay any amount payable under this Agreement on
the due date, the Lessee will pay on demand from time to time to the
Lessor or the Lender (as the case may be) interest (both before and
after judgment) on the amount, from the due date to the day of payment
in full by the Lessee to the Lessor or the Lender, at the prime rate
for the time being charged by Citibank, N.A. plus 3.0% (the "DEFAULT
RATE"). All such interest will be compounded monthly and calculated on
the basis of the actual number of days elapsed and on a 360 day year.
5.10 CONTEST
If written claim is made against Lessor or Lender for or with respect
to any Taxes, Lessor shall, and shall cause Lender to, promptly notify
the Lessee. If reasonably requested by the Lessee in writing within 30
days after such notification, Lessor shall, upon receipt of indemnity
satisfactory to Lessor or Lender, as the case may be, and at the
expense of the Lessee (including all costs, expenses, losses, legal and
accountants' fees and disbursements, penalties and interest), in good
faith contest or to the extent permissible by law allow Lessee to
contest in Lessee's, the Lessor's or the Lender's name, the validity,
applicability or amount of such Taxes by either (i) resisting payment
thereof if practicable and permitted by applicable law, or (ii) if
payment is made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, and in the contest
of any such claim by Lessor or Lender, Lessor or Lender (as the case
may be) shall apprise the Lessee of all material developments with
respect to such contest, shall forward copies of all material
submissions made in such contest and shall materially comply in good
faith with any reasonable request concerning the conduct of any such
contest; provided, however, the Lessor or the Lender (as the case may
be) will not be obliged to take any such action:
(a) which the Lessor or the Lender (as the case may be)
considers, in its reasonable discretion, may prejudice it; or
(b) which the Lessor or the Lender (as the case may be)
reasonably considers does not have a reasonable prospect of
success; or
(c) for which the Lessee has not made adequate provision to the
reasonable satisfaction of the Lessor or the Lender (as the
case may be) in respect of the expense concerned; or
(d) if such action gives rise to any material likelihood of the
Aircraft or any interest therein being sold, forfeited or
otherwise lost or of criminal liability on the part of the
Lessor or the Lender.
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If Lessor or Lender, in accordance with the foregoing, determines to
pay such Taxes and seek a refund, Lessee will either pay such Taxes on
Lessor's or Lender's behalf and pay Lessor or Lender, as the case may
be, any amount due with respect to such payment or will promptly
reimburse Lessor or Lender for such Taxes. If Lessor or Lender shall
obtain a refund of all or any part of such Taxes paid by the Lessee,
Lessor shall or shall cause Lender to pay the Lessee the amount of
such refund; provided that such amount shall not be payable before
such time as the Lessee shall have made all payments or indemnities to
Lessor or Lender then due with respect to Taxes and so long as no
Default has occurred and is continuing. If in addition to such refund
Lessor or Lender shall receive an amount representing interest,
attorneys fees or any other amount on the amount of such refund, the
Lessee shall be paid that proportion of such interest, attorneys fees
or any other amount which is fairly attributable to the Taxes paid by
the Lessee prior to the receipt of such refund. Lessor and/or Lender
shall not enter into a settlement or other compromise with respect to,
or otherwise concede, any claim by a taxing authority on account of
Taxes being contested by Lessee pursuant to this Clause 5.10 without
the written consent of Lessee, which consent shall not be unreasonably
withheld, unless Lessor waives its right and the right of Lender to be
indemnified by Lessee with respect to such claim (but not with respect
to any future claims).
5.11 ABSOLUTE
The Lessee's obligations under this Agreement are absolute and
unconditional irrespective of any contingency whatever including (but
not limited to):
(a) any right of offset, counterclaim, recoupment, defense or other
right which either party to this Agreement may have against the
other;
(b) any unavailability of the Aircraft for any reason, including a
requisition of the Aircraft or any prohibition or interruption
of, interference with or other restriction against the Lessee's
use, operation or possession of the Aircraft;
(c) any lack or invalidity of title or any other defect in title,
airworthiness, merchantability, fitness for any purpose,
condition, design or operation of any kind or nature of the
Aircraft for any particular use or trade, or for registration
or documentation under the laws of any relevant jurisdiction,
or any Total Loss in respect of or any damage to the Aircraft;
(d) any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar
proceedings by or against the Lessor or the Lessee;
(e) any invalidity, unenforceability or lack of due authorization
of, or other defect in, this Agreement; or
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(f) any other cause which, but for this provision, would or might
otherwise have the effect of terminating or in any way
affecting any obligation of the Lessee under this Agreement;
provided always, however, that this Clause 5.11 shall be without
prejudice to the Lessee's right to claim damages and other relief from
the courts in the event of any breach by the Lessor of its obligations
under this Agreement, or in the event that, as a result of any lack or
invalidity of title to the Aircraft on the part of the Lessor, the
Lessee is deprived of its possession of the Aircraft.
6. MANUFACTURER'S WARRANTIES
6.1 ASSIGNMENT
Notwithstanding this Agreement and subject to the rights of the Lender
pursuant to the Mortgage, the Lessor will remain entitled to the
benefit of each warranty, express or implied, and any unexpired
customer and/or product support given or provided in respect of the
Aircraft, any Engine or Part by any manufacturer, vendor, maintenance
performer, subcontractor or supplier. Unless an Event of Default shall
have occurred and be continuing, the Lessor hereby authorizes the
Lessee to pursue any claim thereunder in relation to defects affecting
the Aircraft, any Engine or Part and the Lessee agrees diligently to
pursue any such claim which arises at its own cost. The Lessee will
notify the Lessor promptly upon becoming aware of any such claim. The
Lessor will provide such assistance to the Lessee in making a claim
under any such warranties or customer and/or product support as the
Lessee may reasonably request, and, if requested by the Lessee and at
the Lessee's expense, will pursue a claim in its own name where the
relevant manufacturer, vendor, maintenance performer, subcontractor or
supplier has refused to acknowledge the Lessee's right to pursue that
claim.
6.2 PROCEEDS
Unless an Event of Default shall have occurred and be continuing, all
proceeds of any such claim as is referred to in Clause 6.1 and which
exceed $100,000 will be paid to the Lessor (or, so long as the
Security Interest of the Mortgage remains in effect, the Lender), but
if and to the extent that such claim relates:
(a) to defects affecting the Aircraft which the Lessee has rectified;
or
(b) to compensation for loss of use of the Aircraft, an Engine or any
Part during the Term; or
(c) to costs incurred by the Lessee in pursuing such claim (whether or
not proceeds of such claim are payable to the Lessee);
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and provided no Default shall have occurred and be continuing, the
proceeds will be promptly paid to the Lessee by the Lessor or, if
applicable, the Lender but, in the case of (a), only on receipt of
evidence reasonably satisfactory to the Lessor and the Lender that
the Lessee has rectified the relevant defect.
6.3 PARTS
Except to the extent the Lessor otherwise agrees in a particular case,
the Lessee will procure that all engines, components, furnishings or
equipment provided by the manufacturer, vendor, maintenance performer,
subcontractor or supplier as a replacement for a defective Engine or
Part pursuant to the terms of any warranty or customer and/or product
support arrangement comply with Clause 8.13(a), are installed on the
Aircraft promptly and that title thereto vests in the Lessor in
accordance with Clause 8.17(a). On installation those items will be
deemed to be an Engine or Part, as applicable.
6.4 AGREEMENT
To the extent any warranties or customer and/or product support
relating to the Aircraft are made available under an agreement between
any manufacturer, vendor, maintenance performer, subcontractor or
supplier and the Lessee, this Clause 6 is subject to that agreement.
However the Lessee will:
(a) pay the proceeds of any claim thereunder that exceed $100,000
to the Lessor (or, so long as the Security Interest of the
Mortgage remains in effect, the Lender) to be applied pursuant
to Clause 6.2 and, pending such payment, will hold the claim
and the proceeds as security for Lessee's obligations under
this Agreement; and
(b) take all such steps as are necessary and requested by the
Lessor at the end of the Term to ensure the benefit of any of
those warranties or customer and/or product support which have
not expired are vested in the Lessor (but subject to the rights
of the Lender under the Mortgage).
7. LESSOR'S COVENANTS AND DISCLAIMERS
7.1 QUIET ENJOYMENT
Provided no Event of Default shall have occurred and be continuing, none
of the Lessor, its successors and assigns, the Lender or any Person
claiming by, through or on account of any of such parties will interfere
with the quiet use, possession and enjoyment of the Aircraft by the
Lessee.
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7.2 REGISTRATION AND FILINGS
The Lessor shall, at the Lessor's cost:
(a) maintain the registration of the Aircraft with the Aviation
Authority reflecting (so far as permitted by applicable law)
the respective interests of the Lessor and the Lender and not
do or suffer to be done anything which might reasonably be
expected to adversely affect that registration; and
(b) do all acts and things (including making any filing or
registration with the Aviation Authority or any other
Government Entity) as may be required following any change in
the ownership or financing of the Aircraft.
7.3 AGREED MAINTENANCE PERFORMERS
The Lessor or the Lender may object to and may exclude any maintenance
organization (other than Lessee) being included as an "Agreed Maintenance
Performer" for a valid business reason. The Lessor shall furnish to
Lessee in writing from time to time a list of all maintenance
organizations excluded from the definition of "Agreed Maintenance
Performer" pursuant to the preceding sentence, which list may be amended
by Lessor from time to time. The Lessor and the Lessee shall consult in
good faith regarding any organizations on such list from time to time at
the request of either party.
7.4 EXCLUSION
THE AIRCRAFT IS ACCEPTED BY THE LESSEE "AS IS, WHERE IS WITH ALL FAULTS"
AND LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS IS EXPRESSLY STATED IN
THIS AGREEMENT, NEITHER LESSOR NOR LENDER WILL HAVE ANY LIABILITY IN
RELATION TO, AND NEITHER LESSOR NOR LENDER HAS OR WILL BE DEEMED TO HAVE
MADE OR GIVEN, ANY CONDITIONS, WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO:
(a) THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS
FOR ANY USE OR PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE
AIRCRAFT OR ANY PART; OR
(b) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
WHETHER OR NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR
IMPUTED (BUT EXCLUDING ANY SUCH OBLIGATION, LIABILITY, RIGHT,
CLAIM OR REMEDY IN TORT WHICH ARISES FROM LESSOR'S OR LENDER'S
GROSS NEGLIGENCE OR WILFUL MISCONDUCT); OR
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(c) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD
PARTY, OR FOR ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES.
7.5 LESSEE'S WAIVER
LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR AND LENDER, ALL
ITS RIGHTS IN RESPECT OF ANY CONDITION, WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, ON THE PART OF LESSOR OR LENDER AND ALL CLAIMS
AGAINST LESSOR AND LENDER HOWSOEVER AND WHENEVER ARISING AT ANY TIME IN
RESPECT OF OR OUT OF THE OPERATION OR PERFORMANCE OF THE AIRCRAFT OR THIS
AGREEMENT EXCEPT AS IS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT.
7.6 LESSEE'S CONFIRMATION
LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF CLAUSES 7.4
AND 7.5 AND ACKNOWLEDGES THAT BASIC RENT AND OTHER AMOUNTS HAVE BEEN
CALCULATED NOTWITHSTANDING ITS PROVISIONS.
8. LESSEE'S COVENANTS
8.1 DURATION
The undertakings in this Clause 8 and in Clause 12 will:
(a) except as otherwise stated, be performed at the expense of the
Lessee; and
(b) remain in force until redelivery of the Aircraft to the Lessor
in accordance with this Agreement and thereafter to the extent
of any accrued rights of the Lessor in relation to those
undertakings.
8.2 INFORMATION
The Lessee shall:
(a) furnish to the Lessor and the Lender:
(i) within 60 days after the last day of the first three
fiscal quarters of each fiscal year of the Parent,
unaudited consolidated quarterly financial statements of
the Parent prepared for such quarter, including a
consolidated balance sheet of the Parent and its
Subsidiaries as of the last day of such quarter and
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consolidated statements of income and retained earnings
for such fiscal quarter and on a comparative basis
figures for the corresponding period of the immediately
preceding fiscal year, all in reasonable detail, each
such statement to be certified in a certificate of
Lessee's chief financial officer or chief accounting
officer as fairly presenting the financial position and
the results of operations of the Parent as at its date
and for such quarter (subject to year-end audit
adjustments) and as having been prepared in accordance
with GAAP;
(ii) as soon as available but not in any event later than 120
days after the last day of each fiscal year of the Parent,
audited consolidated financial statements of the Parent
prepared for such year, including a consolidated balance
sheet of the Parent and its Subsidiaries as of the last day
of such year, consolidated statements of income and
retained earnings of the Parent and its Subsidiaries for
such fiscal year, a consolidating balance sheet of the
Lessee and its Subsidiaries as of the last day of such year
and consolidating statements of income and retained
earnings of the Lessee and its Subsidiaries for such fiscal
year and in all cases on a comparative basis figures for
the immediately preceding fiscal year, all in reasonable
detail, each prepared in accordance with GAAP and certified
without qualification by Coopers & ▇▇▇▇▇▇▇ or another of
the largest national firms of independent certified public
accountants as fairly presenting the financial position and
the results of operations of Lessee and its Subsidiaries at
the end of and for such fiscal year and as having been
prepared in accordance with GAAP;
(iii) in lieu of the financial statements referred to in
sub-clauses (i) and (ii) above, any Quarterly Reports on
Form 10-Q and Annual Report on Form 10-K for the
respective periods filed by the Parent pursuant to and
in accordance with the Securities Exchange Act of 1934,
as amended;
(iv) concurrently with the financial statements furnished
pursuant to Clauses 8.2(a)(i) and (ii) above, an
officer's certificate signed by the chief financial
officer or chief accounting officer of Lessee
certifying to the best knowledge after due inquiry of
such officer that no Default occurred during the period
covered by such financial statements and no Default
exists on the date of such officer's certificate or,
if a Default occurred or exists, stating that fact
and specifying the nature and period of existence of
such Default and the actions Lessee took or proposes
to take with respect to such Default;
(v) at the same time as it is issued to the creditors of the
Lessee, a copy of each notice or circular issued to the
Lessee's creditors as a group; and
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(vi) on request from time to time such other information
regarding the Lessee and its business and affairs as the
Lessor or the Lender may reasonably request;
(b) on request, inform the Lessor and the Lender as to the
current serial numbers of the Engines and any engine
installed on the Airframe;
(c) promptly furnish to the Lessor and the Lender all information
which the Lessor or the Lender from time to time reasonably
requests regarding the Aircraft, any Engine or any Part and
its use, location and condition, including the hours
available on the Aircraft and any Engine until the next
scheduled check, inspection, overhaul or shop visit, as the
case may be;
(d) on request, furnish to the Lessor and the Lender evidence
reasonably satisfactory to the Lessor or the Lender that all
Taxes and charges incurred by the Lessee with respect to the
Aircraft have been paid and discharged in full;
(e) provide to the Lessor and the Lender, within 15 days
following the end of June and December of each calendar year
during the Term, or upon reasonable request by Lessor or
Lender, a monthly report on the Aircraft in the form set out
in Schedule 7 or such other form as the Lessee may select
providing substantially the same information;
(f) promptly notify the Lessor and the Lender of
(i) any Total Loss, any loss of an Engine, any theft of
the Airframe or any Engine, any damage to the Aircraft
if the potential cost of repair may reasonably be
expected to exceed the Damage Notification Threshold,
or any modification to the Aircraft if the potential
cost may reasonably be expected to exceed the Damage
Notification Threshold;
(ii) any claim or other occurrence likely to give rise to a
claim under the Insurances (but, in the case of hull
claims only, in excess of the Damage Notification
Threshold) and details of any negotiations with the
insurance brokers over any such claim; and
(iii) any litigation, arbitration or administrative
proceedings that are pending or, to the Lessee's
knowledge, threatened against the Lessee which, if
adversely determined, would have a material adverse
effect upon its financial condition or business or its
ability to perform its obligations under this
Agreement.
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8.3 LAWFUL AND SAFE OPERATION
The Lessee shall:
(a) comply with the law for the time being in force in any
country or jurisdiction in which the Aircraft is being
operated which is applicable to the Aircraft or the use and
operation of the Aircraft;
(b) not use the Aircraft in any manner contrary to any
recommendation of the Aviation Authority or the manufacturers
of the Aircraft, any Engine or any Part or any rule or
regulation of the Aviation Authority or for any purpose for
which the Aircraft is not designed or reasonably suitable;
(c) ensure that the crew and engineers employed by it in
connection with the operation and maintenance of the Aircraft
have the qualifications and hold the licences required by the
Aviation Authority and applicable law;
(d) use the Aircraft solely in commercial or other operations for
which the Lessee is duly authorized by the Aviation Authority
and applicable law;
(e) not knowingly use the Aircraft (or use it when the Lessee
ought reasonably to have known that it was being so used) for
the carriage of.
(i) whole animals, living or dead, except in the cargo
compartments according to I.A.T.A. regulations, and
except domestic pet animals carried in a suitable
container to prevent the escape of any liquid and to
ensure the welfare of the animal;
(ii) acids, toxic chemicals, other corrosive materials,
explosives, nuclear fuels, nuclear wastes or any
nuclear assemblies or components, except as permitted
for cargo aircraft under the "Restriction of Goods"
schedule issued by I.A.T.A. from time to time and
provided that all the requirements for packaging or
otherwise contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which
could reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by
the Insurances; or
(iv) any illegal item or substance;
(f) not utilize the Aircraft for purposes of training, qualifying
or re-confirming the status of cockpit personnel except for
the benefit of the Lessee's cockpit personnel, and then
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only if the use of the Aircraft for such purpose is not
disproportionate to the use for such purpose of other
aircraft of the same type operated by the Lessee;
(g) not (other than for bona fide safety reasons) cause or permit
the Aircraft to proceed to, or remain at, any location which
is for the time being the subject of a prohibition order (or
any similar order or directive) by:
(i) any Government Entity of the State of Registration or
the Habitual Base; or
(ii) any Government Entity of the country in which such
location is situated; or
(iii) any Government Entity having jurisdiction over the
Lessor, the Lender or the Aircraft;
(h) obtain and maintain in full force all certificates, licences,
permits and authorizations required for the use and operation
of the Aircraft for the time being, and for the making of
payments required by, and the compliance by the Lessee with its
other obligations under, this Agreement.
8.4 TAXES AND OTHER CHARGES
The Lessee will promptly pay:
(a) all licence and registration fees, Taxes (other than Lessor
Taxes) and other amounts of any nature imposed by any
Government Entity that are imposed on the Lessee or for which
the Lessee is responsible under this Agreement with respect to
the Aircraft, including the purchase, ownership, delivery,
leasing, possession, use, operation, return, sale or other
disposition of the Aircraft; and
(b) all rent, fees, charges, Taxes (other than Lessor Taxes)
imposed on the Lessee and other amounts in respect of any
premises where the Aircraft or any Part thereof is located from
time to time during the Term;
except to the extent that such payment is being contested in good faith
by appropriate proceedings in accordance with Clause 5.10 (but subject
to the proviso contained in Clause 5.10).
8.5 SUB-LEASING
(a) Subject to sub-clause (b) below, the Lessee will not, without the
prior written consent of the Lessor and the Lender (such consent
to be in the sole discretion of the Lessor and the Lender),
sub-lease, "wet lease" or otherwise part with possession of the
Aircraft, the Engines or any Part except that the Lessee may part
with possession:
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(i) so long as no Default or Event of Default has occurred
and is continuing, with respect to the Aircraft, the
Engines or any Part to the relevant manufacturers for
testing or similar purposes or to an Agreed Maintenance
Performer for service, repair, maintenance or overhaul
work or for alterations, modifications or additions to
the extent required or permitted by this Agreement; and
(ii) with respect to an Engine or Part, as expressly
permitted by this Agreement.
(b) The Lessor's consent shall not be required in relation to a
"wet lease" or charter of the Aircraft in which operational
control of the Aircraft remains with the Lessee at all times,
provided the Aircraft remains registered with the Aviation
Authority.
8.6 INSPECTION
(a) The Lessor, the Lender and any person designated by the Lessor
or the Lender may at any time visit, inspect and survey the
Aircraft, any Engine or any Part and for such purpose may,
subject to any applicable Aviation Authority regulation, travel
on the flight deck as observer.
(b) The Lessor and the Lender shall bear its own costs and expenses
in connection with any such visit, inspection or survey unless
the visit, inspection or survey discloses that the Lessee is in
breach of its material obligations under this Agreement, in
which case such costs and expenses shall be paid by the Lessee
on demand.
(c) Neither Lessor nor Lender shall:
(i) have any duty to make, or liability arising out of, any
such visit, inspection or survey; and
(ii) unless a Default has occurred and is continuing,
exercise such right other than on reasonable notice and
so as not to disrupt unreasonably the maintenance or
operation of the Aircraft.
8.7 PROTECTION OF TITLE
The Lessee shall:
(a) not do or knowingly permit to be done or omit or knowingly permit
to be omitted to be done any act or thing which might reasonably
be expected to jeopardize the respective rights, title and
interest of the Lender as mortgagee of the Aircraft and
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assignee of this Agreement or the Lessor as owner of the Aircraft
and lessor under this Agreement or the validity, enforceability or
priority of the Mortgage;
(b) on all occasions when the ownership of the Aircraft, any Engine
or any Part is relevant, make clear to third parties that title
is held by the Lessor and is subject to the Mortgage;
(c) not at any time:
(i) represent or hold out the Lessor or the Lender as carrying
goods or passengers on the Aircraft or as being in any way
connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which may be
undertaken by the Lessee; or
(ii) pledge the credit of the Lessor or the Lender;
(d) ensure that there is always affixed, and not removed or in any
way obscured, a fireproof plate (having dimensions of not less
than 6 in. x 4 in.) in a reasonably prominent position on the
Aircraft and on each Engine stating:
"This Aircraft/Engine is owned by ACG Acquisition XII
LLC, is leased to Aloha Airlines, Inc. and is subject to
a mortgage and security agreement in favor of Sanwa
Business Credit Corporation. It may not be operated by
any other person without the prior written consent of
ACG Acquisition XII LLC and Sanwa Business Credit
Corporation.";
(e) not create or permit to exist any Security Interest upon the
Aircraft, any Engine or any Part;
(f) not do or permit to be done anything which may reasonably be
expected to expose the Aircraft, any Engine or any Part to
penalty, forfeiture, impounding, detention, appropriation,
damage or destruction and, without prejudice to the foregoing,
if any such penalty, forfeiture, impounding, detention,
appropriation, damage or destruction occurs, give the Lessor
and the Lender notice and use its best efforts to procure the
immediate release of the Aircraft, such Engine or such Part, as
the case may be;
(g) not abandon the Aircraft, the Engine or any Part;
(h) pay and discharge or cause to be paid and discharged when due
and payable or make adequate provision by way of security or
otherwise for all debts, damages, claims and liabilities which
have given or might reasonably be expected to give rise to a
Security Interest over or affecting the Aircraft, any Engine or
any Part; and
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(i) not attempt, or hold itself out as having any power, to sell,
lease or otherwise dispose of the Aircraft, any Engine or any
Part other than as expressly permitted by this Agreement.
8.8 GENERAL
The Lessee will:
(a) not make any substantial change in the nature of the business
in which it is engaged if such change, in the reasonable opinion
of the Lessor or Lender, might reasonably be expected to have a
material adverse effect on the Lessee's performance of its
obligations under this Agreement;
(b) preserve its corporate existence, and will not merge or
consolidate with any person unless the successor person
resulting from such merger or consolidation (the "SUCCESSOR"):
(i) is the Lessee or an Affiliate incorporated in the State of
Incorporation or another State of the United States of America;
(ii) shall have a net worth immediately after such merger or
consolidation of not less than the Lessee's net worth
immediately prior thereto;
(iii) shall be authorized under applicable law to perform the
Lessee's obligations under this Agreement to the same
extent as the Lessee;
(iv) shall deliver to the Lessor an agreement in form and substance
reasonably satisfactory to the Lessor containing an assumption
by the Successor of the Lessee's representations and warranties
under this Agreement, together with the due and punctual
performance of all the Lessee's obligations under this
Agreement; and
(v) shall deliver to the Lessor an opinion of counsel reasonably
satisfactory in form and substance to the Lessor to the effect
that the agreement referred to in sub-clause (iii) above
constitutes the Successor's legal, valid, binding and
enforceable obligations; and
(c) ensure that no change will occur in the Habitual Base of the
Aircraft without the prior written consent of the Lessor and
Lender.
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8.9 RECORDS
The Lessee shall procure that accurate, complete and current records of
all flights made by, and all maintenance carried out on, the Aircraft
(including, in relation to each Engine and Part subsequently installed,
before the installation) are kept in English, and shall keep the records
in such manner as the Aviation Authority may from time to time require.
The records will form part of the Aircraft Documents.
8.10 REGISTRATION AND FILINGS
The Lessee shall:
(a) not do anything that might reasonably be expected to adversely affect
the registration of the Aircraft with the Aviation Authority
reflecting (so far as permitted by applicable law) the respective
interests of the Lessor and the Lender;
(b) do all acts and things (including making any filing or registration
with the Aviation Authority or any other Government Entity) and
executing and delivering all documents (including any amendment of
this Agreement) as may be required by the Lessor following any
modification of the Aircraft, any Engine or any Part or the
permanent replacement of any Engine or Part in accordance with
this Agreement, so as to ensure that the respective rights of the
Lessor and the Lender under this Agreement apply with the same
effect as before.
8.11 MAINTENANCE AND REPAIR
The Lessee shall:
(a) keep the Aircraft airworthy in all respects and in good repair and
condition;
(b) advise the Lessor and Lender in writing of all material changes to
the Agreed Maintenance Program;
(c) maintain the Aircraft in accordance with the Agreed Maintenance
Program through Agreed Maintenance Performers and perform (at the
respective intervals provided in the Agreed Maintenance Program) all
Major Checks;
(d) maintain the Aircraft in accordance with FAR Part 121 and any other
rules and regulations of the Aviation Authority as are applicable to
aircraft of the same type as the Aircraft operated by United
States of America air carriers, subject to the special exemptions
permitted Lessee regarding compliance with the Airport Noise and
Capacity Act of 1990, as amended, and the regulations promulgated
by the FAA thereunder;
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(e) comply with all mandatory inspection and modification requirements,
airworthiness directives and similar requirements applicable to the
Aircraft, any Engine or Part having a compliance date during the
Term and that are required by the Aviation Authority;
(f) comply with all alert service bulletins issued by any manufacturer
of the Aircraft, Engines or Parts, and comply (including scheduling
complying work and then performing such work on schedule) with all
other service bulletins issued by any such manufacturer if and to the
extent that the Lessee brings, or schedules to bring in compliance
at least one-half of the applicable aircraft it operates (excluding
for purposes of such calculation aircraft acquired from unrelated
third parties that already comply with such other service bulletins);
(g) comply with all applicable laws and the regulations of the Aviation
Authority and any other aviation authorities with jurisdiction over
the Lessee or the Aircraft, any Engine or Part that relate to
the maintenance, condition, use or operation of the Aircraft or
require any modification or alteration to the Aircraft, any Engine or
Part;
(h) maintain in good standing a current U.S. Standard Transport Category
Certificate of Airworthiness for the Aircraft issued by the Aviation
Authority in accordance with FAR Part 21 except when the Aircraft is
undergoing maintenance, modification or repair required or permitted
by this Agreement and shall from time to time provide to the Lessor
a copy on request;
(i) if required by the Aviation Authority, maintain a current
certification as to maintenance issued by or on behalf of the
Aviation Authority in respect of the Aircraft and shall from time to
time provide to the Lessor and the Lender a copy on request;
(j) maintain the Engines with respect to overhaul build standards
and disc replacements at a level which is consistent with the level
applied by the Lessee in relation to other engines of the same type
as the Engines in its fleet, provided, however, Lessee may maintain
the Engines with respect to overhaul build standards and disc
replacements in such manner as to achieve minimal compliance with
return conditions;
(k) maintain the Engines and the APU in a "on condition"
program as set forth in the respective manufacturer's maintenance
planning document; and
(l) subject to Clause 11.1(c), procure promptly the replacement of any
Engine or Part which has become time, cycle or calendar expired,
lost, stolen, seized, confiscated, destroyed, damaged beyond
repair, unserviceable or permanently rendered unfit for use, with an
engine or part complying with the conditions set out in
Clause 8.13(a).
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8.12 REMOVAL OF ENGINES AND PARTS
The Lessee will ensure that no Engine or Part installed on the Aircraft
is at any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance with the
Agreed Maintenance Program; or
(c) pursuant to, and in accordance with, Clause 8.15; or
(d) (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or the Aircraft, as the
case may be; or
(ii) as part of a normal engine or part rotation program; or
(iii) for the purpose of making such modifications to the Engine
or the Aircraft, as the case may be, as are permitted under
this Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Clause 8.13(a) as soon as
practicable and in any event no later than, in the case of an
Engine, 90 days after removal of such Engine and, in the case of a
Part, 45 days after removal of such Part.
8.13 INSTALLATION OF ENGINES AND PARTS
(a) The Lessee will ensure that, except as permitted by this Agreement,
no engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same model as,
or an improved or advanced version of the Engine it replaces
(provided, in the case of an improved or advanced version,
it can be installed and operated on the Airframe without
modification of the Airframe or the engine, whether or not
the other installed Engine is also such an improved or advanced
version), which has attached to it a current "serviceable
tag" issued by the manufacturer or supplier indicating that
the engine is new, serviceable or overhauled, and the
Lessee shall retain all such tags;
(ii) in the case of a part, it is in as good operating condition,
is of the same interchangeable modification status as the
replaced Part and has attached to it a current "serviceable
tag" issued by the manufacturer or supplier indicating
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that the part is new, serviceable or overhauled, and the Lessee
shall retain all such tags;
(iii) in the case of a part, it has become and remains the
property of the Lessor free from Security Interests and on
installation on the Aircraft will, without further act, be
subject to this Agreement and to the security interest
created by the Mortgage, in which case title to the removed
part shall automatically become vested in Lessee without
farther action or warranty on the part of Lessor except
that such Part shall be free of Lessor Liens; and
(iv) in each case, the Lessee has full details as to its source and
maintenance records.
(b) If no Default has occurred which is continuing, the Lessee
will be entitled to install any engine or part on the Aircraft
notwithstanding Clause 8.13(a) if:
(i) there is not available to the Lessee at the time and in the
place that engine or part is required to be installed on the
Aircraft a replacement engine or part complying with the
requirements of Clause 8.13(a);
(ii) it would result in an unreasonable disruption of the
operation of the Aircraft or the business of the Lessee to
ground the Aircraft until an engine or part complying with
Clause 8.13(a) becomes available for installation on the
Aircraft; and
(iii) as soon as practicable after installation of any such engine
or part on the Aircraft but, in any event, no later than the
earlier of (1) 90 days after installation of such an engine
or 45 days after installation of such a part, and (2) the
Expiry Date, the Lessee removes any such engine or part and
replaces it with the Engine or Part previously removed or by an
engine or part complying with Clause 8.13(a).
(c) If no Default has occurred which is continuing, the Lessee will be
entitled to install Lessee Installed Parts on the Airframe
notwithstanding Clause 8.13(a)(iii) so long as:
(i) the terms of any lease, conditional sale agreement or
security agreement, as the case may be, covering such Lessee
Installed Part will not have the effect of prejudicing the
title and interest of the Lessor in and to the Aircraft
(including its Engines and Parts) or the interest of the
Lender in respect thereof under the Mortgage;
(ii) the secured party, lessor or conditional vendor, as the case
may be, of such Lessee Installed Part has confirmed and
acknowledged in writing (which such
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confirmation and acknowledgment may be contained in the
lease, conditional sale agreement or security agreement) to
the Lessor and the Lender, in form and substance
satisfactory to the Lessor, that it will recognize the
respective rights, title and interest of the Lessor and the
Lender in and to the Aircraft (including its Engines and
Parts) and that it will not seek to exercise any rights
whatever in relation thereto; and
(iii) before the Expiry Date the Lessee removes any such Lessee
Installed Part and replaces it with the Part replaced by it
or by another part, in either case complying with Clause
8.13(a).
(d) The Lessor agrees, for the benefit of the Lessee and any mortgagee
or holder of anyother Security Interest in any engine (other than
an Engine) or Lessee Installed Part owned by the Lessee, any lessor
of any engine (other than an Engine leased to the Lessee) or Lessee
Installed Part and any conditional vendor of any engine (other
than an Engine purchased by the Lessee subject to a conditional
sale agreement or any other security agreement) or Lessee
Installed Part, that no right, title to or interest in any such
engine or Lessee Installed Part shall be exercised or asserted by
the Lessor and the Lessor acknowledges and confirms that it will
not acquire any right, title or interest to or in any such engine
or Lessee Installed Part as a result of its installation on the
Airframe.
8.14 NON-INSTALLED ENGINES AND PARTS
(a) The Lessee shall ensure that any Engine or Part which is not
installed on the Airframe (or any other airframe as permitted by
this Agreement) is, except as expressly permitted by this Agreement,
properly and safely stored and kept free from Security Interests,
with insurance thereon complying with the requirements of this
Agreement.
(b) Notwithstanding sub-clause (a), the Lessee shall be permitted, if
no Default has occurred and is continuing, to install any Engine
on an airframe and any Part on an airframe or engine:
(i) owned and operated by the Lessee free from Security Interests;
(ii) leased or hired to the Lessee pursuant to a lease or
conditional sale agreement on a long-term basis and on terms
whereby the Lessee has full operational control of that
aircraft or engine; or
(iii) acquired or financed by the Lessee and operated by the
Lessee on terms that ownership of that aircraft or engine,
as the case may be, pursuant to a lease,
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conditional sale agreement or Security Interest is vested in
or held by any other person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
title and interest of the Lessor in and to that Engine or Part
or the interest of the Lender in respect thereof under the
Mortgage; and
(2) the lessor under such lease, the seller ▇▇▇▇▇▇ such conditional
sale agreement or the secured party of such Security Interest,
as the case may be, has confirmed and acknowledged in writing
(which such confirmation and acknowledgment may be contained
in, the lease, conditional sale agreement or document creating
the Security Interest) to the Lessor and the Lender, in form
and substance satisfactory to the Lessor, that it will
recognize the respective rights, title and interest of the
Lessor and the Lender to and in that Engine or Part and that
it will not seek to exercise any rights whatever in relation
thereto.
8.15 POOLING OF ENGINES AND PARTS
The Lessee will not enter into nor permit any pooling agreement
or arrangement in respect of an Engine or Part without the prior written
consent of the Lessor and the Lender, such consent not to be unreasonably
withheld in any case where an Engine or Part is leased, let on hire or
otherwise made available by the Lessee (on terms conferring no more than
a contractual right IN PERSONAM against the Lessee and not a right
IN REM against such Engine or Part) pursuant to a normal pooling agreement
customary in the airline industry and entered into in the ordinary course
of the Lessee's business to which the Lessee is a party and:
(a) the other parties to which are reputable, solvent U.S. commercial
air carriers (or, if the Aircraft has been subleased to a foreign air
carrier in accordance with Clause 8.5, reputable, solvent U.S. or
foreign commercial air carriers) or the manufacturers or suppliers
of the Engine or Part(or other reputable, solvent organizations
whose business includes the administration of and participation in
such pooling agreements or arrangements); and
(b) which does not contemplate the transfer of title to the pooled
Engine or Part; and
(c) either provides that the Lessor (or the Lender, as the case may be)
will be sole loss payee in respect of any loss or damage to the
Engine or Pan, or provides for Lessor to acquire title to a
substitute engine or part satisfying the conditions set out in
Clause 8.13(a) if the engine or Part is destroyed.
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8.16 EQUIPMENT CHANGES
(a) The Lessee will not make any modification or addition to the
Aircraft (each an "EQUIPMENT CHANGE"), except for an Equipment Change
that:
(i) is required by Lessor or Lender pursuant to Clause 12.3(d),
(ii) is expressly permitted by any other provision of this
Agreement, or
(iii) has the prior written approval of the Lessor and the Lender
(which approval shall not be unreasonably withheld provided
the proposed Equipment Change will not, in the reasonable
opinion of the Lessor and the Lender, diminish the value,
utility, condition or airworthiness of the Aircraft), except
for painting or minor cabin interior modifications not
affecting the structure of the Airframe, any or all of which
may be made without such prior approval.
(b) So long as no Event of Default has occurred and is continuing,
the Lessee may remove any Equipment Change if it can be removed
from the Aircraft without diminishing or impairing the value,
utility, condition or airworthiness of the Aircraft.
8.17 TITLE TO ENGINES AND PARTS
(a) Title to all engines and parts installed on the Aircraft, whether
by way of replacement as the result of an Equipment Change or
otherwise (except those installed pursuant to Clause 8.13(b) or
8.13(c) above) will on installation, without further act, vest in
the Lessor subject to this Agreement free and clear of all
Security Interests. The Lessee will at its own expense take all
such steps and execute, and procure the execution of, all such
instruments that are necessary to ensure that title so passes to
the Lessor and is subject to the Security Interest created by the
Mortgage according to all applicable laws. At any time when
requested by the Lessor, the Lessee will provide evidence to the
Lessor's reasonable satisfaction (including the provision, if
required, to the Lessor of one of more legal opinions) that title
has so passed to the Lessor and is subject to the Security
Interest created by the Mortgage.
(b) Except as referred to in Clause 8.16(b), any Engine or Part at any
time removed from the Aircraft will remain the property of the Lessor
until a replacement has been made in accordance with this Agreement
and until title to that replacement has passed, according to
applicable laws, to the Lessor subject to this Agreement and the
Mortgage free of all Security Interests, whereupon title to the
Engine or Part will, provided no Default has occurred and is
continuing, pass to the Lessee free of Lessor Liens.
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8.18 THIRD PARTIES
The Lessee shall procure that no person having possession of the
Aircraft during the Term (other than the Lessor or the Lender) will act
in any manner inconsistent with the Lessee's obligations under this
Agreement and that all such persons shall comply with those obligations
as if references to "Lessee" included a separate reference to those
persons.
9. INSURANCE
9.1 INSURANCES
The Lessee will maintain in full force and effect during the Term
insurances in respect of the Aircraft in form and substance reasonably
satisfactory to the Lessor (the "INSURANCES") through such brokers and
with such insurers and having such deductibles and being subject to such
exclusions as are usual and customary in the worldwide aviation
insurance marketplace for U.S. air carriers operating similar equipment
who are similarly situated with Lessee. The Insurances will be effected
either on a direct basis with insurers of recognized standing who
normally participate in aviation insurances in the leading international
insurance markets and led by reputable underwriters approved by the Lessor
and the Lender, such approval not to be unreasonably withheld. The Lessor
acknowledges and confirms that the current deductibles and exclusions,
together with the existing brokers and insurers, in respect of the
insurances maintained by Lessee on the date of the Purchase Agreement
are acceptable to it and the Lender.
9.2 REQUIREMENTS
The Lessor's current requirements as to required Insurances are as
specified in this Clause and in Part 1 of Schedule 4. Except for the
amount of the Agreed Value, the Minimum Liability Coverage and the
deductible under Lessee's hull and war risk insurance policies, the
Lessor or the Lender may from time to time stipulate such other
requirements for the Insurances as the Lessor or the Lender reasonably
considers necessary to ensure that the scope and level of cover is
maintained in accordance with the then prevailing industry practice in
relation to aircraft of the same type as the Aircraft and in relation to
operators of similar standing to the Lessee. In the event that the
Lessor or the Lender proposes any such stipulation, Lessor or Lender
shall notify the Lessee accordingly and the Lessor and/or its brokers
will then consult in good faith with the Lessee and the Lessee's brokers
(as for the time being approved by the Lessor and the Lender) with
regard to such proposed stipulation. If, following the consultation, the
Lessor and the Lender are satisfied that the stipulation should be made,
the Lessee shall then comply with the stipulated requirements.
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9.3 INSURANCE COVENANTS
The Lessee shall:
(a) ensure that all legal requirements as to insurance of the Aircraft,
any Engine or any Part that may from time to time be imposed by the
laws of the State of Registration or any jurisdiction to, from or
over which the Aircraft may be flown, in so far as they affect or
concern the operation of the Aircraft, are complied with and, in
particular, those requirements compliance with which is necessary to
ensure that:
(i) the Aircraft does not become subject to detention or
forfeiture;
(ii) the Insurances remain valid and in fall force and effect;
and
(iii) the interests of the Indemnitees in the Insurances and the
Aircraft or any Part are not thereby prejudiced;
(b) not use, cause or permit the Aircraft, any Engine or any Part to be
used for any purpose or in any manner not covered by the Insurances
or outside any geographical limit imposed by the Insurances;
(c) comply with the terms and conditions of each policy of the Insurances
and not do, consent or agree to any act or omission that:
(i) invalidates or may reasonably be expected to invalidate the
Insurances;
(ii) renders or may reasonably be expected to render void or
voidable the whole or any part of any of the Insurances; or
(iii) brings any particular liability within the scope of an
exclusion or exception to the Insurances;
(d) not take out without the prior written approval of the Lessor and
the Lender any insurance in respect of the Aircraft other than those
of the type required under this Agreement unless relating solely to
hull total loss, business interruption, engine break-down, profit
commission and deductible risk;
(e) commence renewal procedures at least 30 days prior to the expiration
of any of the Insurances and provide to the Lessor and the Lender:
(i) if requested by the Lessor or the Lender, a written status
report of renewal negotiations 14 days prior to each
expiration date;
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(ii) telefaxed confirmation of completion of renewal prior to
each expiration date;
(iii) a certificate of insurance and broker's letter of
undertaking substantially in the form set out in Parts 2 and
3 of Schedule 4, detailing the coverage and confirming the
insurers' agreement to the specified insurance requirements
of this Agreement within seven days after each renewal date;
(f) provide to the Lessor and the Lender copies of those documents
evidencing the Insurances which the Lessor and the Lender may
reasonably request;
(g) on request, provide to the Lessor and the Lender evidence that the
Insurance premiums have been paid;
(h) not make any modification or alteration to the Insurances material
and adverse to the interests of any of the Indemnitees;
(i) be responsible for any deductible under the Insurances; and
(j) provide any other insurance related information, or assistance, in
respect of the Insurances as the Lessor may reasonably request.
9.4 FAILURE TO INSURE
If the Lessee fails to maintain the Insurances in compliance with this
Agreement, each of the Indemnitees will be entitled but not obligated
(without prejudice to any other rights of the Lessor under this
Agreement):
(a) to pay the premiums due or to effect and maintain insurances
satisfactory to it or otherwise remedy the Lessee's failure in
such manner (including to effect and maintain an "owner's
interest" policy) as it considers appropriate. Any sums so
expended by it will become immediately due and payable by the
Lessee to such Indemnitee on demand (such demand being made as
soon as reasonably practicable following the incurring of such
expenditure), together with interest thereon at the Default Rate
from the date of expenditure by it up to the date of
reimbursement by the Lessee (before and after any judgment); and
(b) at any time while such failure is continuing to require the
Aircraft to remain at any airport or to proceed to and remain at
any airport designated by it until the failure is remedied to its
reasonable satisfaction.
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9.5 CONTINUING INDEMNITY
The Lessor or the Lender may require the Lessee to effect and to maintain
insurance after the Expiry Date with respect to its liability under the
indemnities in Clause 10 for such period as the Lessor or the Lender may
reasonably require (but in any event not more than three years) providing
for each Indemnitee to be named as additional insured. The Lessee's
obligation under this Clause 9.5 shall not be affected by the Lessee
ceasing to be lessee of the Aircraft or any of the Indemnitees ceasing to
have any interest in respect of the Aircraft.
9.6 APPLICATION OF INSURANCE PROCEEDS
As between the Lessor and the Lessee:
(a) All insurance payments, up to the Agreed Value, received as the
result of a Total Loss occurring during the Term will be paid to
the Lender, so long as the Security Interest of the Mortgage
remains in effect, and thereafter to the Lessor.
(b) All insurance proceeds in respect of any damage or loss to the
Aircraft, any Engine or any Part occurring during the Term not
constituting a Total Loss and involving insurance proceeds in
excess of the Damage Notification Threshold will be paid to the
Lender, so long as the Security Interest of the Mortgage remains
in effect, and thereafter to the Lessor and applied in payment (or
to reimburse the Lessee) for repairs or replacement property upon
the Lessor and the Lender being reasonably satisfied that the
repairs or replacement have been effected in accordance with this
Agreement. Insurance proceeds in amounts below the Damage
Notification Threshold may be paid by the insurer directly to the
Lessee. Any balance remaining may be retained by the Lessee.
(c) All insurance proceeds in respect of third party liability will be
paid to the relevant third party.
(d) Notwithstanding Clauses 9.6(a) and (b), if at the time of the
payment of any such insurance proceeds a Default has occurred
and is continuing all such proceeds will be paid to or
retained by the Lender, so long as the Security Interest of the
Mortgage remains in effect, and thereafter by the Lessor to be
applied toward payment of any amounts that may be or become
payable by the Lessee in such order as the Lessor and the
Lender see fit or as the Lessor and the Lender may elect. In the
event that the Lessee remedies any such Default to the
reasonable satisfaction of the Lessor and the Lender, the
Lessor shall procure that all such insurance proceeds then held
by the Lender in excess of the amounts (if any) applied in
accordance with this sub-clause (d) shall be paid promptly to the
Lessee.
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10. INDEMNITY
10.1 GENERAL
The Lessee shall defend, indemnify and hold harmless the Indemnitees, on
an after-tax basis as set forth in Clause 5.5, from and against any and
all claims, proceedings, losses, liabilities, suits, judgments, costs,
expenses, penalties or fines (each a "CLAIM") regardless of when the same
is made or incurred, whether during or after the Term (but not before):
(a) that may at any time be suffered or incurred directly or indirectly
as a result of or connected with possession, delivery,
performance, management, registration, control, maintenance,
condition, service, repair, overhaul, leasing, sub-leasing, use,
operation or return of the Aircraft, any Engine or Part (either in
the air or on the ground) whether or not the Claim may be
attributable to any defect in the Aircraft, any Engine or any Part
or to its design, testing, use or otherwise, and regardless of
when the same arises or whether it arises out of or is
attributable to any act or omission, negligent or otherwise, of
any Indemnitee;
(b) that arise out of any act or omission that invalidates or that
renders voidable any of the Insurances;
(c) that may at any time be suffered or incurred as a consequence of any
design, article or material in the Aircraft, any Engine or any art
or its operation or use constituting an infringement of patent,
opyright, trademark, design or other proprietary right or a reach
of any obligation of confidentiality owed to any person,
but excluding as to any Lessor Indemnitee or Lender Indemnitee, as the
case may be, any Claim to the extent that:
(1) with respect to a Lessor Indemnitee, it arises directly as
a result of the wilful misconduct or gross negligence of a
Lessor Indemnitee;
(2) with respect to a Lender Indemnitee, it arises directly as
a result of the wilful misconduct or gross negligence of a
Lender Indemnitee associated with the same Lender;
(3) with respect to a Lessor Indemnitee, it arises directly as
a result of a breach by a Lessor Indemnitee of its express
obligations under this Agreement or as a result of a
representation or warranty given by a Lessor Indemnitee in
this Agreement not being true and correct at the date when,
or when deemed to have been, given or made;
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(4) with respect to a Lender Indemnitee, it arises directly as
a result of a breach by a Lender Indemnitee associated with the
same Lender of its express obligations under this Agreement
or as a result of a representation or warranty given by a
Lender Indemnitee associated with the same Lender in this
Agreement not being true and correct at the date when,
or when deemed to have been, given or made;
(5) it constitutes a Lessor Tax or Lessor Lien;
(6) it represents a Tax or loss of tax benefits (the Lessee's
liabilities for which, to the extent thereof, are set out in
Clauses 5.5, 5.6 and 5.8); provided, however, that this
exclusion shall not apply to gross-up or make-whole payments as
contemplated in Clause 5.8;
(7) it constitutes a cost or expense that is required to be borne
by the Lessor in accordance with any other provision of this
Agreement;
(8) it results from any disposition not caused by Lessee of all
or any part of Lessor's rights, title or interest in or to the
Aircraft or under this Agreement, unless such disposition
occurs as a consequence of an Event of Default;
(9) it is attributable to an event occurring after the Term
unless the Claim results from or arises out of an act or
omission by the Lessee, or any circumstance existing, during
the Term; or
(10) it is brought after the Term and relates to a claimed
patent infringement by the Manufacturer.
10.2 MITIGATION
(a) The Lessor agrees that it shall, as soon as reasonably practicable
after it becomes aware of any circumstances that would, or would
reasonably be expected to, become the subject of a claim for
indemnification pursuant to Clause 10.1, notify the Lessee in
writing accordingly. The Lessor (and any other Indemnitee seeking
indemnification, as the case may be) and the Lessee shall then
consult with one another in good faith in order to determine what
action (if any) may reasonably be taken to avoid or mitigate such
Claim. The Lessee shall have the right to take all reasonable
action (on behalf and, if necessary, in the name of the Lessor or
such other Indemnitee) in order to resist, defend or settle
(provided such settlement is accompanied by payment) any claims by
third parties giving rise to such Claim, provided always that the
Lessee shall not be entitled to take any such action unless
adequate provision, reasonably satisfactory to the Lessor and such
other Indemnitee, shall have been made in respect of the third
party claim and the costs thereof. The
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Lessee or, if the Claim is covered by Lessee's Insurances, the
Lessee's insurers shall be entitled to select any counsel to
represent it or them, the Lessor and such other Indemnitee in
connection with any such action, subject in the case of Lessee to
the approval of the Lessor and such other Indemnitee (such
approval not to be unreasonably withheld) and any action taken by
the Lessee shall be on a full indemnity basis in respect of the
Lessor and such other Indemnitee.
(b) Any sums paid by the Lessee to the Lessor or any Indemnitee in
respect of any Claim pursuant to Clause 10. 1 shall be paid
subject to the condition that, in the event that the Lessor or such
Indemnitee is subsequently reimbursed in respect of that Claim by
any other person, the Lessor or such Indemnitee shall, provided no
Default shall have occurred and be continuing, promptly pay to the
Lessee an amount equal to the sum paid to it by the Lessee,
including any interest on such amount to the extent attributable
thereto and received by the Lessor or such Indemnitee, less any
Tax payable by the Lessor or such Indemnitee in respect of such
reimbursement.
10.3 DURATION
The indemnities contained in this Agreement will survive and continue in
fall force after the Expiry Date.
11. EVENTS OF LOSS
11.1 TOTAL LOSS
(a) PRE-DELIVERY: If a Total Loss occurs prior to Delivery, this
Agreement will immediately terminate and, except as expressly
stated in this Agreement, neither party will have any further
obligation or liability under this Agreement except that the
Lessor will rebate to the Lessee the Security Deposit (if
theretofore paid pursuant to Clause 5.1) or, as the case may be,
return the Letter of Credit to the Lessee.
(b) POST-DELIVERY: If a Total Loss occurs after Delivery, the Lessee
will pay the Agreed Value to the Lender no later than 60 days
after the Total Loss Date (the "SETTLEMENT DATE") unless the
Aircraft is restored to the Lessor or the Lessee within that
period (or, in the case of a Total Loss coming within paragraph
(c) of the definition of Total Loss and involving the loss of the
Lessor's title to the Aircraft, if both the Aircraft and the
Lessor's title thereto are restored to the Lessor or, in the case
of the Aircraft, to the Lessee and the Lender's rights under the
Mortgage are fully restored). The receipt by the Lender, so long
as the Security Interest of the Mortgage remains in effect, and
thereafter by the Lessor of the insurance proceeds in respect of
the Total Loss on or prior to the Settlement Date shall discharge
the Lessee from its obligation to pay the Agreed Value to the
Lessor pursuant to this sub-clause (b), provided such proceeds are
not less than the Agreed Value. In the event that the insurance
proceeds
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are paid initially to the Lessee and not to the Lender, they may
be retained by the Lessee if the Lessee shall have paid the Agreed
Value to the Lender, otherwise the Lessee shall pay the Agreed
Value to the Lender not later than the next Business Day following
receipt by the Lessee of such proceeds. In the event that the
Lessee pays the Agreed Value to the Lessor in accordance with this
sub-clause (b), the Lessor shall promptly assign to the Lessee its
rights under the Insurances to receive the insurance proceeds in
respect of the Total Loss to the extent that such proceeds shall
not have been paid to the Lessee. Subject to the rights of any
insurers or other third parties, upon irrevocable payment in full
to the Lessor of that amount and all other amounts that may be or
become payable to the Lessor or any other Person under this
Agreement, the Lessor shall:
(i) without recourse or warranty (except as to the absence of
Lessor Liens), and without further act, be deemed to have
transferred to the Lessee all of the Lessor's rights to any
Engines or Parts not installed when the Total Loss occurred,
all on an "as-is where is" basis, and shall, at the Lessee's
expense, execute and deliver such bills of sale and other
documents and instruments as the Lessee may reasonably
request to evidence (on the public record or otherwise)
the transfer and the vesting of the Lessor's rights in
such Engines and Parts in the Lessee, free and clear of
all rights of the Lessor and any Lessor Liens; and
(ii) pay to Lessee, as a rebate of prepaid Basic Rent, and amount
equal to the product of (1) one month's Basic Rent multiplied
by (2) a fraction the numerator of which is the number of days
remaining in the then current Rental Period and the
denominator of which is the number of days in the then
current Rental Period.
(c) ENGINE LOSS: Upon the occurrence of an Engine Loss (including, for
the avoidance of doubt, at a time when the Engine is not installed
on the Airframe) in circumstances in which there has not also
occurred a Total Loss, the Lessee shall give the Lessor and the
Lender written notice promptly upon becoming aware of the same and
shall (unless the Lessor has received the insurance proceeds
relating to such Engine Loss), within 60 days after the Engine
Loss Date, convey or cause to be conveyed to the Lessor, as
replacement for such Engine, title to a replacement engine that is
in the same or better operating condition, has the same or greater
value and utility as the lost Engine and that complies with the
conditions set out in Clause 8.13(a). The Lessee shall, at the
time of such conveyance, comply in all respects with Clause
8.17(a) so that the replacement engine becomes an Engine,
whereupon the leasing of the replaced Engine the subject of the
Engine Loss shall cease and title to such replaced Engine shall
(subject to any salvage rights of insurers) vest in the Lessee
pursuant to Clause 8.17(b), free of Lessor Liens. If the Lessor or
the Lender subsequently receives any insurance proceeds relating
to such Engine Loss, the
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Lessor shall promptly remit such proceeds or cause such
proceeds to be remitted to the Lessee. No Engine Loss with
respect to any Engine that is replaced in accordance with
the provisions of this Clause 11.1(c) shall result in any
increase or decrease in Basic Rent or the Agreed Value.
11.2 REQUISITION
DURING ANY requisition for use or hire of the Aircraft, any Engine or
Part that does not constitute a Total Loss:
(a) the Basic Rent and Supplemental Rent payable under this Agreement
will not be suspended or abated either in whole or in part, and
the Lessee will not be released from any of its other obligations
under this Agreement (other than operational obligations with
which the Lessee is unable to comply solely by virtue of the
requisition); and
(b) so long as no Default has occurred and is continuing, the Lessee
will be entitled to any compensation payable by the
requisitioning authority in respect of the Term. The Lessee will,
as soon as practicable after the end of any such requisition (with
the Term being extended if and to the extent that the period of
requisition continues beyond the scheduled Expiry Date), cause the
Aircraft to be put into the condition required by this Agreement.
The Lessor will be entitled to all compensation payable by the
requisitioning authority in respect of any change in the
structure, state or condition of the Aircraft arising during the
period of requisition, and the Lessor will apply such compensation
in reimbursing the Lessee for the cost of complying with its
obligations under this Agreement in respect of any such change,
but so that, if any Default has occurred and is continuing, the
Lessor may apply the compensation in or towards settlement of any
amounts owing by the Lessee under this Agreement. All such sums
shall be held by the Lender, so long as the Security Interest of
the Mortgage remains in effect, and thereafter by the Lessor.
12. RETURN OF AIRCRAFT
12.1 REDELIVERY
On the Expiry Date or termination of the leasing of the Aircraft under
this Agreement, the Lessee shall, unless a Total Loss has occurred, at
its expense, redeliver the Aircraft and Aircraft Documents to the Lessor
at the Redelivery Location or such other airport as is mutually
acceptable to Lessor and Lessee in a condition complying with this Clause
12 and Schedule 3, free and clear of all Security Interests and Permitted
Liens (other than the Lessor Liens).
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12.2 FINAL CHECKS
Immediately prior to return of the Aircraft, Lessee shall perform the
following at its sole cost and expense unless otherwise stated:
(a) Lessee shall perform (or have performed by an Agreed Maintenance
Performer) a full and complete zonal, systems and structural check
("C" or its equivalent), including the corresponding lower checks
("A" and "B" or equivalent) and any other maintenance and
inspections tasks that are a part thereof, all in accordance with
the Agreed Maintenance Program. At return, the Airframe will have
zero Flight Hours since such "C" check, except for the acceptance
flights and the ferry flight to the Redelivery Location. Lessee
will also weigh the Aircraft. Any discrepancies revealed during
such inspection will be corrected in accordance with
Manufacturer's maintenance and repair manuals or FAA-approved
data. Lessee shall also perform during such check, to the extent
it is able, any other work reasonably required by Lessor (and not
otherwise required under this Agreement) so long as such work does
not prevent Lessee from returning the Aircraft on the Expiry Date,
and Lessor shall reimburse Lessee for such work at Lessee's
preferred customer rates.
(b) Lessee shall perform (or have performed by an Agreed Maintenance
Performer) an internal and external corrosion inspection in
accordance with the manufacturer's corrosion prevention and
control program ("CPCP") specified for the model type and correct
any discrepancies in accordance with the recommendations of the
manufacturer and the manufacturer's structural repair manual
("SRM"). In addition, all inspected areas will be properly treated
with corrosion inhibitor as recommended by manufacturer.
(c) If Lessee performed any structural inspections or tasks on a
sampling basis but did not perform such inspections on the
Aircraft, such work shall also be performed on the Aircraft.
(d) Lessee shall perform a videotape borescope inspection of the low
pressure and high pressure compressors and the turbine area of the
Engines. All items beyond the applicable Engine manufacturer's
maintenance manual limits will be rectified at Lessee's sole cost
and expense. No Engine will be "on watch," for any reason
requiring special or out of sequence inspection.
(e) In accordance with the applicable maintenance manual, Lessee shall
perform a maximum power assurance run and condition, acceleration
and bleed valve scheduling checks on the Engines. Lessee will
record and evaluate the Engine performance, with Lessor, Lender
and/or their respective representatives entitled to be present.
The performance and all operating parameters of each Engine will
be within the limits specified in the Engine manufacturer's
maintenance manual.
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(f) Lessee shall have removed and blended all external and interior
markings.
(g) If the Engine historical and technical records and the condition
trend monitoring data of any Engine or the APU indicate an abnormal
acceleration in the rate of deterioration in the performance of
such Engine or APU, Lessee shall correct such conditions causing the
accelerated rate of deterioration.
12.3 FINAL INSPECTION
(a) During the 15 days prior to redelivery of the Aircraft, the Lessee
will make the Aircraft available to the Lessor and the Lender for
inspection ("FINAL INSPECTION") in order to verify that the
condition of the Aircraft complies with this Agreement. The Final
Inspection will be long enough to permit the Lessor and the Lender
to inspect, at their own cost, the Aircraft Documents, the
Aircraft and uninstalled Parts and the Engines. The Lessor and the
Lender shall attend and conduct the Final Inspection diligently
and, without limiting their right to conduct the full Final
Inspection permitted by this Agreement, will cooperate with the
Lessee in order to complete the Final Inspection as soon as
reasonably practical.
(b) The Lessor and the Lender shall also be entitled, as part of the
Final Inspection, to require the Lessee to perform an acceptance
flight of up to three hours at the Lessee's cost (with the
Lessor's and the Lender's representatives as on-board observers)
and such further acceptance flights as may be necessary in the
event that the first or subsequent flights do not confirm that the
Aircraft complies with the requirements of this Agreement.
(c) At the request of Lessor, Lessee shall perform "bridging"
maintenance procedures for the purpose of standardizing the
Aircraft to the maintenance program of any subsequent operator of
the Aircraft; provided, however, that Lessor shall pay to Lessee
the Actual Cost of all "bridging" procedures that are in excess of
or not in lieu of the "C" Check to be performed pursuant to Clause
12.2 and Schedule 3.
(d) Upon request by the Lessor or (so long as the Security Interest of
the Mortgage is in effect) the Lender, the Lessee shall remove any
Equipment Change and restore the Aircraft to its condition prior to
that Equipment Change.
12.4 NON-COMPLIANCE
To the extent that, at the time of Final Inspection, the condition of
the Aircraft does not comply with this Agreement, the Lessee shall at
the option of the Lessor and the Lender:
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(a) immediately rectify the non-compliance and, to the extent the
non-compliance extends beyond the Expiry Date, the Term will be
automatically extended until the non-compliance has been rectified;
or
(b) redeliver the Aircraft to the Lessor and indemnify the Lessor and
the Lender, and provide security reasonably acceptable to the Lessor
and the Lender for that indemnity, against the cost of putting the
Aircraft into the condition required by this Agreement.
During any extension of the Term pursuant to sub-clause (a), this
Agreement will remain in full force and effect and the Lessee shall pay
a rental on a PER DIEM them basis weekly in advance at a rate equal to
125% of the Basic Rent in effect immediately before the Expiry Date;
provided, however, that (i) Lessee shall not operate, or permit others
to operate, the Aircraft after the Expiry Date except for acceptance
flights pursuant to Clause 12.2 and a ferry flight to the Redelivery
Location; and (ii) if the Expiry Date has occurred as a result of the
exercise by Lessor of its Early Termination Option, during the first 60
days of any extension of the Term pursuant to sub-clause (a), the
Lessee shall pay a rental equal to 100% of the Basic Rent in effect
immediately before the Expiry Date.
12.5 EXPORT DOCUMENTATION
Upon redelivery and upon request by the Lessor or the Lender, the Lessee
shall (a) provide to the Lessor all documents necessary to export the
Aircraft from the State of Registration (including a valid and subsisting
export licence for the Aircraft), and (b) provide any documents requested
by the Lessor or the Lender in connection with, and otherwise cooperate
with, the deregistration of the Aircraft by the Aviation Authority,
including causing the Aviation Authority to issue an Export Certificate of
Airworthiness to a country specified by the Lessor or the Lender.
12.6 ACKNOWLEDGEMENT
Provided the Lessee has complied with its obligations under this
Agreement, following redelivery of the Aircraft by the Lessee to the
Lessor at the Redelivery Location, the Lessor will deliver to the Lessee
an acknowledgment confirming that the Lessor is satisfied that the
Aircraft is in the condition required by this Agreement and has been
redelivered to the Lessor in accordance with this Agreement.
12.7 MAINTENANCE PROGRAM
(a) During the 60 day period preceding the scheduled Expiry Date and
upon the Lessor's or the Lender's request, the Lessee will provide
the Lessor and the Lender or their respective agents reasonable
access to the Agreed Maintenance Program and the Aircraft
Documents in order to facilitate the Aircraft's integration into any
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subsequent operator's fleet. The Lessor agrees that it will not
disclose the contents of the Agreed Maintenance Program to any
person or entity except to the extent necessary to monitor the
Lessee's compliance with this Agreement and/or to bridge the
maintenance program for the Aircraft from the Agreed Maintenance
Program to another program after the Expiry Date.
(b) Concurrent with providing the Aircraft Documents for Lessor's and
Lender's review, Lessee shall provide to Lessor and Lender a
written summary of all sampling programs involving or affecting
the Aircraft.
12.8 STORAGE
If the Lessor or the Lender so requests, and subject to the
availability of the requisite space, the Lessee shall park and store
the Aircraft at a secure storage area, which may be at the Redelivery
Location or at any other suitable facility of the Lessee selected by
the Lessee, wherever located (the "STORAGE LOCATION"), on behalf of the
Lessor for a period not exceeding 30 days from the Expiry Date. During
that period the Aircraft shall be at the Lessee's risk (save as to any
loss or damage caused by the Lessor's wilful misconduct or gross
negligence), and the Lessee shall maintain and store the Aircraft in
accordance with the respective manufacturer's maintenance planning
document and shall insure the Aircraft in accordance with a "ground
risk only" policy usual and customary in the worldwide aviation
insurance marketplace. All storage, maintenance and insurance costs
shall be borne by the Lessee. If the Lessor or the Lender so requests,
and subject to the availability of the requisite space, the Lessee
shall continue to park and store the Aircraft at the Storage Location
on behalf of the Lessor for a further period not exceeding 60 days.
During that further period the Aircraft shall be at the Lessor's risk
(save as to any loss or damage caused by the Lessee's wilful misconduct
or gross negligence), but the Lessee shall continue to maintain, store
and insure the Aircraft in accordance with this Clause 12.8 (with
Lessor obligated to reimburse Lessee for any hull insurance deductibles
for which Lessee becomes responsible relating to the Aircraft during
such further 60 days period). All reasonable storage, maintenance and
insurance costs incurred by the Lessee (excluding any profit element
accruing to the Lessee) during such further period shall be reimbursed
by the Lessor promptly upon presentation of supporting invoices and/or
receipts.
13. DEFAULT
13.1 EVENTS
Each of the following events will constitute an Event of Default and a
repudiation of this Agreement by the Lessee:
(a) NON-PAYMENT: the Lessee fails to pay any amount payable by it under
this Agreement within 3 Business Days of the due date for payment; or
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(b) INSURANCE: the Lessee fails to comply with any provision of clause 9
or any insurance required to be maintained under this Agreement is
canceled or terminated; or
(c) BREACH: the Lessee fails to comply with any other provision of this
Agreement and, if such failure is, in the reasonable opinion of
the Lessor and the Lender, capable of remedy, the failure
continuer, for 30 days after notice from the Lessor or the Lender
to the Lessee, PROVIDED HOWEVER, that, if such failure cannot
reasonably be remedied within such 30 day period and the Lessee is
diligently undertaking all necessary remedial action, the 30 day
period shall be extended for a further 15 days; or
(d) REPRESENTATION: any representation or warranty made (or deemed to be
repeated) by the Lessee in this Agreement or hi any document or
certificate furnished to the Lessor pursuant to or in connection
with this Agreement is or proves to have been incorrect in any
material respect when made or deemed to be repeated and the
Lessee's ability to comply with its obligations under this
Agreement, and/or the Lessor's or The Lender's rights, title and
interest to and in the Aircraft and/or under this Agreement, are
thereby materially and adversely affected; or
(e) CROSS DEFAULT:
(i) any Financial Indebtedness of the Lessee or any of its
Affiliates that exceeds $500,000 is not paid when
due and any applicable grace period shall have expired;
(ii) the security for any such Financial Indebtedness is
enforced; or
(iii) any lease, conditional sale, installment sale or forward
purchase agreement of the Lessee or any of its Affiliates
in respect of an aircraft is terminated as a consequence of an
event of default or termination event (however described);
provided always, in any such case, it shall not constitute an
Event of Default under this Agreement if, in connection with
Lessee"s one OR two principal working lines of credit/letters of
credit facilities:
(1) the non-payment, acceleration, termination or event in
question is being contested by the Lessee in good faith and
on reasonable grounds and any declaration of default,
Termination of agreement or enforcement of security has been
stayed by a court of competent jurisdiction; or
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(2) the non-payment, termination or event in question is being
discussed by the Lessee with the creditors of such facilities
in good faith and on reasonable grounds and there has been no
declaration of default, acceleration, termination of
agreement or enforcement of security;
(f) APPROVALS: any consent, authorization, licence, certificate or
approval of or registration with or declaration to any Government
Entity in connection with this Agreement, including:
(i) any authorization required by the Lessee of, or in connection
with, the execution, delivery, validity, enforceability or
admissibility in evidence of this Agreement or the
performance by the Lessee of its obligations under this
Agreement; or
(ii) any airline licence, air transport licence, franchise,
concession, permit, certificate, right or privilege required
by the Lessee for the conduct of its business,
is modified, withheld, revoked, suspended, canceled, withdrawn,
terminated or not renewed, or otherwise ceases to be in fall force
and is not reissued, reinstated or renewed within 30 days,
PROVIDED HOWEVER that any such modification, withholding,
revocation, suspension, cancellation, withdrawal, termination or
non-renewal shall only constitute an Event of Default if it has a
material adverse effect on the Lessee's ability to perform its
obligations under this Agreement or the Lessor's or the Lender's
rights, title and interest to and in the Aircraft or under this
Agreement; or
(g) INSOLVENCY:
(i) the Lessee or any of its Affiliates is, or is deemed for the
purposes of any relevant law to be, unable to pay its debts
as they fall due or to be insolvent, or admits inability to
pay its debts as they fall due; or
(ii) the Lessee or any of its Affiliates suspends making payments
on all or any class of its debts or announces an intention to
do so, or a moratorium is declared in respect of any of its
indebtedness; or
(h) BANKRUPTCY AND SIMILAR PROCEEDINGS
(i) Lessee shall consent to the appointment of a receiver,
trustee or liquidator for itself or for a substantial part
of its property; or
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(ii) Lessee shall admit in writing its inability to pay its debts
generally as they become due, or Lessee shall make a general
assignment for the benefit of creditors; or
(iii) Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or answer seeking reorganization in a
proceeding under the 11 U. S.C. ss. ss. 101 ET seq
or under any other 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 in any
such proceeding, or Lessee shall by voluntary petition,
answer or consent to or seek relief under the provisions
of any Bankruptcy Laws; or
(iv) any order, judgment or decree is entered by a court of
competent jurisdiction appointing a receiver, trustee or
liquidator of Lessee or a substantial part of its
property, or ordering a substantial part of Lessee's
property is to be sequestered, and instituted or done
with the consent of Lessee or, if instituted by another
person, the order, judgment or decree is not dismissed,
remedied or relinquished within 60 days; or
(v) a petition against Lessee in a proceeding under any
Bankruptcy Laws shall be filed and shall not be withdrawn
or dismissed within 60 days thereafter, or if, under the
provisions of any Bankruptcy Laws that may apply to Lessee,
any court of competent jurisdiction shall assume
jurisdiction, custody or control of Lessee or of any
substantial part of its property; or
(vi) any step (including petition, proposal or convening a
meeting) is taken with a view to a composition,
assignment or arrangement with any creditors of, or the
reorganization, rehabilitation, administration,
liquidation, or dissolution of, the Lessee or any of its
Affiliates or any other insolvency proceedings involving
the Lessee or any of its Affiliates; or
(i) OTHER JURISDICTION: there occurs in relation to the Lessee or any of
its Affiliates any event anywhere which, in the reasonable opinion
of the Lessor, corresponds with any of those mentioned in Clause
13.1 (h); or
(j) UNLAWFUL: it becomes unlawful for the Lessee to perform any of
its material obligations under this Agreement or this Agreement
becomes wholly or partly invalid or unenforceable, provided that
any such partial invalidity or unenforceability shall only
constitute an Event of Default if it has a material adverse effect
on the Lessee's ability to perform its obligations under this
Agreement or the Lessor's or the Lender's rights, title and
interest in and to the Aircraft or under this Agreement; or
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(k) SUSPENSION OF BUSINESS: the Lessee or any of its Affiliates suspends
or ceases to carry on all or a substantial part of its business; or
(l) DISPOSAL: the Lessee or any of its Affiliates disposes or threatens
to dispose of all or a material part of its assets, whether by one
or a series of transactions, related or not, other than pursuant
to a merger or consolidation as referred to in, and subject to,
Clause 8.8(b) or for the purpose of any other reorganization or
amalgamation the terms of which have received the previous consent
in writing of the Lessor; or
(m) RIGHTS: the existence, validity, enforceability or priority of the
rights of the Lessor as owner and lessor in respect of the
Aircraft or the rights of the Lender as mortgagee of the Aircraft
and assignee of this Agreement are challenged by the Lessee or any
other person claiming by or through the Lessee; or
(n) CHANGE OF OWNERSHIP: any single person or group of persons acquire
control, directly or indirectly, of the Lessee without the
previous consent in writing of the Lessor and Lender (which
consent shall not be withheld unless the Lessor or the Lender is
of the reasonable opinion that such acquisition of control will
have a materially adverse effect on the Lessee's ability to
perform its obligations under this Agreement or the Lessor's or
the Lender's rights, title and interest in and to the Aircraft or
under this Agreement), not including (i) persons that are
currently in control of Lessee, (ii) spouses of such persons,
(iii) any lineal ancestor or descendant of such persons, (iii) any
spouse of any person covered by clause (iii), or (v) a partnership
or trust set up for the benefit of persons identified in clauses
(i) through (iv); or
(o) DELIVERY: the Lessee fails to accept delivery of the Aircraft when
validly tendered pursuant to this Agreement by the Lessor
(provided that the Lessor shall have satisfied the conditions
precedent set out in Clause 3.4); or
(p) ADVERSE CHANGE: any event or series of events occurs which, in the
reasonable opinion of the Lessor or the Lender, could be expected
to have a material adverse effect on the financial condition or
operations of the Lessee and its Affiliates or on the ability of
the Lessee to comply with its obligations under this Agreement; or
(q) LETTER OF CREDIT: if the Lessee has elected to deliver the Letter
of Credit in lieu of the Security Deposit pursuant to Clause
5.1(b), the Letter of Credit ceases for any reason to be in full
force and effect or is not renewed or replaced before its
expiration in accordance with Clause 5.1 (b) and the Lessee does
not immediately provide the Lessor with cash in an amount equal to
the Security Deposit.
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13.2 RIGHTS
If an Event of Default occurs, and for as long as it shall continue, the
Lessor may at its option (and without prejudice to any of its other
rights under this Agreement), at any time thereafter:
(a) treat such event as a repudiation by the Lessee of its obligations
under this Agreement and by notice to the Lessee with immediate
effect terminate the leasing of the Aircraft (but without
prejudice to the continuing obligations of the Lessee under this
Agreement), whereupon all rights of the Lessee under this
Agreement shall cease; and/or
(b) proceed by appropriate court action or actions to enforce
performance of this Agreement or to recover damages for the breach
of this Agreement; and/or
(c) either:
(i) take possession of the Aircraft, for which purpose the
Lessor may enter any premises belonging to, occupied by or
under the control of the Lessee (for which purpose the
Lessee hereby grants to the Lessor an irrevocable licence
to the extent permitted by applicable law) where the
Aircraft may be located, or cause the Aircraft to be
redelivered to the Lessor at the Redelivery Location (or
such other location as the Lessor may require), and the
Lessor is hereby irrevocably authorized and empowered, to
the extent permitted by applicable law, to direct pilots of
the Lessee or other pilots to fly the Aircraft to that
airport and will have all the powers and authorizations
necessary for taking such action; or
(ii) by serving notice, require the Lessee to redeliver the
Aircraft to the Lessor at the Redelivery Location (or such
other location as the Lessor may require).
13.3 EXPORT
If an Event of Default occurs, and for as long as it shall continue, the
Lessor may sell or otherwise deal with the Aircraft as if this Agreement
had never been made and the Lessee will, at the request of the Lessor,
take all steps necessary to export the Aircraft from the country where
the Aircraft is for the time being situated and any other steps necessary
to enable the Aircraft to be redelivered to the Lessor in accordance with
this Agreement. The Lessee hereby irrevocably and by way of security for
its obligations under this Agreement authorizes and empowers the Lessor
as its attorney to execute and deliver any documentation and to do any
act or thing required in connection with the foregoing.
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13.4 DEFAULT PAYMENTS
If a Default occurs, the Lessee will indemnify the Lessor on demand
against any loss, damage, expense, cost or liability which the Lessor may
sustain or incur directly or indirectly as a result, including:
(a) any loss of profit (calculated on an after-tax basis) suffered by
the Lessor because of the Lessor's inability to place the Aircraft
on lease with another Lessee on terms as favorable to the Lessor
as this Agreement or because whatever use, if any, to which the
Lessor is able to put the Aircraft upon its return to the Lessor,
is not as profitable (calculated on an after-tax basis) to the
Lessor as this Agreement would have been but for such Default or
non-delivery;
(b) in the event that the Aircraft is sold as a consequence of the
Lessor's inability to enter into a satisfactory lease within a
reasonable period, the amount (if any) by which (i) the aggregate
of (1) the net sale proceeds (calculated by deducting the costs of
sale together with the cost of preparing the Aircraft for sale and
the repayment of any outstanding indebtedness in relation to the
financing of the Aircraft) plus (2) the present value of the
anticipated after-tax net income to be derived from such net sale
proceeds up to the scheduled Expiry Date, discounted on a monthly
basis using 9.5% PER ANNUM as the discount rate, are less than
(ii) the aggregate of (1) the anticipated net sale proceeds
(computed on the same basis as the net sale proceeds referred to
in (i)(1) above), assuming that the Aircraft would have been sold
as soon as reasonably practicable following the scheduled Expiry
Date plus (2) the present value of the income that would have been
derived from the future Basic Rent payable until the scheduled
Expiry Date, discounted on a monthly basis using 9.5% PER ANNUM as
the discount rate;
(c) any amount of principal, interest, fees or other sums whatsoever
paid or payable on account of funds borrowed in order to carry any
amount unpaid by the Lessee;
(d) any loss, premium, penalty or expense that may be incurred in
repaying funds raised to finance the Aircraft or in unwinding any
swap, forward interest rate agreement or other financial
instrument relating in whole or in part to the Lessor's financing
of the Aircraft; and
(e) any loss, cost, expense or liability sustained or incurred by the
Lessor owing to the Lessee's failure to redeliver the Aircraft on
the date, at the place and in the condition required by this
Agreement.
For the avoidance of doubt, the provisions of Clause 5.8(a) will apply to
any sums payable by the Lessee pursuant to this Clause 13.4.
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14. ASSIGNMENT AND TRANSFER
14.1 NO ASSIGNMENT BY LESSEE
The Lessee will not assign or create or permit to exist any Security
Interest over any of its rights under this Agreement.
14.2 LESSOR ASSIGNMENT
The Lessor may sell, assign or transfer all or any of its rights under
this Agreement and in the Aircraft (a "Transfer") and the Lessor will,
other than in the case of an assignment for security purposes, have no
further obligation under this Agreement following a Transfer but,
notwithstanding any Transfer, will remain entitled to the benefit of each
indemnity under this Agreement.
(a) In connection with any Transfer, the following conditions shall
apply:
(i) Lessor shall give Lessee written notice of such Transfer at
least 10 Business Days before the date of such Transfer,
specifying the name and address of the proposed purchaser,
assignee or transferee (the "Transferee");
(ii) the Transferee will be a person reasonably experienced in
aircraft leasing (or the Transferee's rights and powers
under this Agreement shall be exercised on its behalf
pursuant to an appropriate management agreement by a person
having such experience);
(iii) the Transfer will not adversely affect the Lessee's rights
and interests in the Aircraft and/or this Agreement, nor
subject the Lessee, on the date of such transfer, to any Tax
or Claim or any other obligation or liability to which it
would not have been subject had such assignment or transfer
not taken place.
(iv) the Transferee will be a "citizen of the United States"
within the meaning of Section 40102(a)(15) of the Federal
Aviation Law and have full corporate power and authority to
enter into and perform the transactions contemplated by this
Agreement on the part of "Lessor";
(v) on the Transfer date the Lessor and the Transferee shall enter
into an agreement or agreements in which the Transferee
confirms that it shall be deemed a party to this Agreement
and agrees to be bound by all the terms of, and to undertake
all of the obligations of, the Lessor contained in this
Agreement;
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(vi) such Transfer shall not violate any applicable law
including the Federal Aviation Law, the Federal Aviation
Regulations and the Securities Act of 1933, as amended; and
(vii) the Transferee shall provide to Lessee an opinion of its
regular independent counsel as to the matters set forth in
sub-clause (iv), as to the legality, validity, binding
effect and enforceability of the agreement or agreements
between Lessor and Transferee referred to in sub-clause (v)
and as to such other matters as were contained in the
opinion of Lessor's counsel delivered on the Delivery Date.
(b) Upon any Transfer, the Transferee shall be deemed Lessor for all
purposes of this Agreement, each reference in this Agreement to
the "Lessor" shall thereafter be deemed for all purposes to refer
to the Transferee, and the transferor shall be relieved of all
obligations of the "Lessor" under this Agreement arising after the
time of such Transfer except to the extent attributable to acts or
events occurring prior to the time of such Transfer.
(c) Upon compliance by Lessor and a Transferee with the terms and
conditions of Clause 14.2(a), Lessee shall at the time of
Transfer, at the specific written request of Lessor and with
Lessor paying all of Lessee's out-of-pocket costs and expenses:
(i) execute and deliver to Lessor and to such Transferee an
agreement, in form and substance satisfactory to Lessor,
Lessee and such Transferee, dated the date of such transfer,
consenting to such transfer, agreeing to pay all or such
portion of the Basic Rent and other payments under this
Agreement to such Transferee or its designee as such
Transferee shall direct, and agreeing that such Transferee
shall be entitled to rely on all representations and
warranties made by Lessee in this Agreement or in any
certificate or document furnished by Lessee in connection
with this Agreement as though such Transferee was the
original "Lessor";
(ii) execute and deliver to Lessor or such Transferee, as the case
may be, precautionary Uniform Commercial Code financing
statements or amendments reflecting the interests of such
Transferee in the, Aircraft and this Agreement;
(iii) deliver to Lessor and to such Transferee a certificate,
signed by a duly authorized officer or Lessee, dated the
date of such transfer, to the effect that no Event of
Default has occurred and is continuing or, if one is then
continuing, describing such Event of Default;
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(iv) cause to be delivered to Lessor and such Transferee
certificates of insurance and broker's letter of undertaking
substantially in the form set out in Parts 2 and 3 of
Schedule 4, detailing the coverage and confirming the
insurers' agreement to the specified insurance requirements
of this Agreement and listing the Lessor and Transferee as
additional insureds and the Transferee as sole loss payee
(subject to other direction by the Lender);
(v) deliver to Lessor and to such Transferee an opinion of
Lessee's counsel (which may be Lessee's General Counsel),
addressed to Lessor and such Transferee to the effect that
the agreement referred to in sub-clause (i) has been duly
authorized and executed by Lessee and constitutes the legal,
valid and binding obligation of Lessee, enforceable against
Lessee in accordance with its terms (subject to customary
exceptions), and to the effect that such Transferee may rely
on the opinion delivered by such counsel or its predecessor
counsel in connection with this Agreement on the Delivery
Date with the same force and effect as if such Transferee
was an original addressee of such opinion when given;
(vi) deliver to Lessor and such Transferee information on the
location of the Airframe and Engines at all times requested
by Lessor in order to permit the Transfer to take place at a
time and on a date so as to eliminate or minimize any Taxes
applicable to the Transfer; and
(vii) such other documents as Lessor or such Transferee may
reasonable request, so long as such documents do not
adversely affect the rights or obligations of Lessee under
this Lease or otherwise adversely effect Lessee.
14.3 GRANTS OF SECURITY INTERESTS
(a) The Lessee hereby consents to the Lessor's assignment of and grant
of a security interest in the Lessor's right, title and interest
in the Aircraft and this Agreement to SBCC contained in the
Mortgage, and agrees that SBCC as "Lender" shall be entitled to
rely on all representations and warranties made by Lessee in this
Agreement or in any certificate or document furnished by Lessee in
connection with this Agreement.
(b) The Lessor shall be entitled at any time after Delivery to grant a
security interest in the Aircraft or its right, title and interest
in this Agreement (each, an "ADDITIONAL MORTGAGE") in favor of any
person (each, an "ADDITIONAL MORTGAGEE"). Any Additional Mortgage
may be a successor mortgage to the Security Interest granted to
the Lender, or may be in addition to the Lender's Security
Interest and previous Additional Mortgages and with a priority
senior, equal or subordinate to the Lender's Security Interest and
previous Additional Mortgages as the Lender and previous
Additional Mortgagees may permit. In the case of any such grant by
Lessor of an
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Additional Mortgage to an Additional Mortgagee in all or any
portion of Lessor's rights, title and interest in and to the
Aircraft and this Agreement, Lessee shall promptly, at the
specific written request of Lessor and with Lessor paying all of
Lessee's out-of-pocket costs and expenses:
(i) execute and delivery to Lessor and to such Additional
Mortgagee an agreement, in form and substance satisfactory
to Lessor, such Additional Mortgagee and Lessee, dated the
date of the grant of such Additional Mortgage, (i)
consenting to such Additional Mortgage and to any assignment
of Lessor's rights, title and interest in and to this
Agreement to such Additional Mortgagee for security
purposes, (ii) if requested by Lessor and consented to by
the previous payee, agreeing that Lessee will pay the Basic
Rent and other payments under this Agreement to such
Additional Mortgagee, and (iii) agreeing that such
Additional Mortgagee shall be entitled to rely on all
representations and warranties made by Lessee in this
Agreement or in any certificate or document furnished by
Lessee in connection with this Agreement as though such
Additional Mortgagee was originally the "Lessor" or "Lender";
(ii) execute and deliver to Lessor and such Additional Mortgagee
such agreements as the Lessor may reasonably require for the
purposes of effecting all necessary amendments to this
Agreement (including Clauses 8, 9 and 10 and Schedule 4);
(iii) execute and deliver to Lessor or such Additional Mortgagee,
as the case may be, precautionary Uniform Commercial Code
financing statements or amendments reflecting the assignment
of Lessor's interests to such Additional Mortgagee;
(iv) deliver to Lessor and such Additional Mortgagee a certificate,
signed by a duly authorized officer of Lessee, dated the
date of the grant of the Additional Mortgage, to the effect
that no Event of Default has occurred and is continuing or,
if one is then continuing, describing such Event of Default;
(v) cause to be delivered to Lessor and such Additional Mortgagee
certificates of insurance and broker's letter of undertaking
substantially in the form set out in Parts 2 and 3 of
Schedule 4, detailing the coverage and confirming the
insurers' agreement to the specified insurance requirements
of this Agreement, adding such Additional Mortgagee as an
additional insured and, if requested by Lessor and consented
to by the previous loss payee, listing such Additional
Mortgagee as sole loss payee;
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(vi) deliver to Lessor and such Additional Mortgagee an opinion of
Lessee's counsel (which may be Lessee's General Counsel),
addressed to Lessor and such Additional Mortgagee (i) to
the effect that the agreements referred to in sub-clauses
(a) and (b) have been duly authorized and executed by
Lessee and constitute the legal, valid and binding
obligations of Lessee, enforceable against Lessee in
accordance with their terms (subject to customary
exceptions), and (ii) to the effect that such
Additional Mortgagee may rely on the opinion delivered by
such counsel or its predecessor counsel in connection
with this Agreement on the Delivery Date with the same
force and effect as if such Additional Mortgagee was an
original addressee of such opinion when given; and
(vii) such other documents as Lessor or such Additional Mortgagee
may reasonably request so long as such documents do not
adversely affect the rights or obligations of Lessee under
this Lease or otherwise adversely affect Lessee.
14.4 SALE AND LEASEBACK BY LESSOR
In addition to the Transfers and grants of security interests permitted
by Clauses 14.2 and 14.3, Lessor shall be entitled to transfer its right,
title and interests in and to the Aircraft to any person and lease the
Aircraft from such person (a "HEAD LESSOR"), and in such event Lessor
shall retain its rights and obligations as the "Lessor" under this
Agreement. In the event of such a sale and lease-back by Lessor, (a) the
Head Lessor shall meet the requirements for a "Transferee" as defined in
Clause 14.2(a)(ii) above, (b) the Lessor shall be entitled to assign its
rights in this Agreement to such Head Lessor as security for its
obligations under the head lease, (c) the Head Lessor shall be entitled
to grant to one or more purchase money lenders, or to an indenture
trustee on behalf of such lenders, an Additional Mortgage covering the
Aircraft and this Agreement, (d) Lessee shall execute and deliver to
Lessor, such Head Lessor, such Additional Mortgagee and any trustees on
their behalf, as appropriate, the documents specified in Clauses
14.2(c)(i) through (vii) and Clauses 14.3(b)(i) through (vii) above, and
Lessee shall cooperate with Lessor to make such other changes to this
Lease, such as including such Head Lessor, such Additional Mortgagee and
the trustees on their behalf as additional insureds and "Indemnitees", as
Lessor may reasonably request so long as such changes do not adversely
affect the rights or obligations of Lessee under this Lease or otherwise
adversely affect Lessee and with Lessor paying all of Lessee's
out-of-pocket costs and expenses.
14.5 FURTHER ACKNOWLEDGMENTS
Lessee further acknowledges that any Transferee or Additional Mortgagee
shall in turn have the rights of, and be subject to the conditions to,
transfer and grants of security interests set forth above in this Clause
14.
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14.6 CERTAIN PROTECTIONS FOR LESSEE'S BENEFIT
The rights of Lessee under this Agreement shall be superior to the rights
of any Additional Mortgagee or Head Lessor, and the Lessor shall require
each Additional Mortgagee and Head Lessor to agree in writing with the
Lessee that such Additional Mortgagee's and Head Lessor's rights in and to
the Aircraft shall be subject to the terms of this Agreement, including to
the Lessee's rights to the quiet use, possession and enjoyment provisions
contained in this Agreement. Except as expressly set forth in this
Agreement, no Additional Mortgage or Head Lease shall increase the
responsibilities, obligations or liabilities of the Lessee or deprive the
Lessee of any of its rights or privileges under this Agreement. The
Lessor's obligations to perform the terms and conditions of this Lease
shall remain in full force and effect notwithstanding the creation of any
Additional Mortgage or Head Lease. Lessor shall not create any Additional
Mortgage or enter into any Head Lease that violates the terms of this
Clause 14.6.
15. MISCELLANEOUS
15.1 WAIVERS, REMEDIES CUMULATIVE
The rights of either party under this Agreement:
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of that party's rights under
any law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver of
that right.
15.2 DELEGATION
The Lessor or the. Lender may delegate to any person or persons all or any
of the trusts, powers or discretions vested in it by this Agreement and
any such delegation may be made upon such terms and conditions and subject
to such regulations (including power to sub-delegate) as the Lessor or the
Lender, respectively, in its absolute discretion thinks fit.
15.3 APPROPRIATION
If any sum paid or recovered in respect of the liabilities of the Lessee
under this Agreement is less than the amount then due, the Lessor may
apply that sum to amounts due under this Agreement in such proportions and
order and generally in such manner as the Lessor may determine.
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15.4 CURRENCY INDEMNITY
(a) If the Lessor or the Lender receives an amount in respect of the
Lessee's liability under this Agreement or if such liability is
converted into a claim, proof, judgment or order in a currency
other than the currency (the "CONTRACTUAL CURRENCY") in which the
amount is expressed to be payable under this Agreement:
(i) the Lessee will indemnify the Lessor, as an independent
obligation, against any loss arising out of or as a result of
such conversion;
(ii) if the amount received by the Lessor or the Lender, when
converted into the contractual currency (at the market rate at
which the Lessor is able on the relevant date to purchase the
contractual currency in New York City with that other
currency) is less than the amount owed in the contractual
currency, the Lessee will, forthwith on demand, pay to the
Lessor an amount in the contractual currency equal to the
deficit; and
(iii) the Lessee will pay to the Lessor on demand any exchange
costs and Taxes payable in connection with the conversion.
(b) The Lessee waives, to the extent permitted by applicable law, any
right it may have in any jurisdiction to pay any amount under this
Agreement in a currency other than that in which it is expressed
to be payable.
15.5 PAYMENT BY THE LESSOR
The Lessor will not be obliged to pay any amounts to the Lessee under this
Agreement so long as any sums which are then due from the Lessee under
this Agreement remain unpaid or a Default has occurred and is continuing,
and any such amounts which would otherwise be due will fall due only if
and when the Lessee has paid all such sums and no Default is continuing.
15.6 SEVERABILITY
If a provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, that will not affect:
(a) the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
(b) the legality, validity or enforceability in any other jurisdiction
of that or any other provision of this Agreement.
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15.7 REMEDY
If the Lessee fails to comply with any provision of this Agreement, the
Lessor or the Lender may, without being in any way obliged to do so or
responsible for so doing and without prejudice to the ability of the
Lessor to treat the non-compliance as a Default, effect compliance on
behalf of the Lessee, whereupon the Lessee shall become liable to pay
immediately any sums expended by the Lessor or the Lender together with
all costs and expenses (including reasonable legal costs) necessarily
incurred in connection therewith.
15.8 EXPENSES
(a) The Lessor and the Lessee shall each bear their respective expenses
(including legal, professional and out-of-pocket expenses)
incurred or payable in connection with the negotiation,
preparation and execution of this Agreement, and shall share
equally the fees and expenses of special FAA counsel in connection
with the transactions contemplated by this Agreement.
(b) The Lessee shall pay to the Lessor and the Lender on demand all
expenses (including legal, professional and out-of-pocket
expenses) incurred or payable by the Lessor or the Lender in
connection with the granting of any waiver or consent under this
Agreement.
(c) The Lessee will pay to the Lessor on demand all expenses (including
legal, survey and other costs) payable or incurred by the Lessor
in contemplation of, or otherwise in connection with, the
enforcement of or preservation of any of the Lessor's rights under
this Agreement, or in respect of the repossession of the Aircraft.
(d) The Lessor will pay to the Lessee on demand all expenses (including
legal costs) payable or incurred by the Lessee in contemplation
of, or otherwise in connection with, the enforcement of or
preservation of any of the Lessee's rights under this Agreement.
15.9 TIME OF ESSENCE
The time stipulated in this Agreement for all payments payable by the
Lessee to the Lessor and for the performance of the Lessee's other
obligations under this Agreement will be of the essence of this
Agreement (subject always to any applicable grace period).
15.10 NOTICES
(a) All notices and other communications given under or in connection
with this Agreement shall be in writing (including telefax) and
shall be deemed to have been received as follows:
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(i) If sent by telefax, at the time of receipt by the sender of a
transmission report indicating that all pages of the telefax
transmission were properly transmitted (unless the recipient
notifies the sender promptly, or if received after 5:30 p.m.
local time, by no later than 10:00 a.m. local time the
following Business Day, that the transmission was incomplete
or illegible, in which case the telefax shall be deemed to
have been received at the time of receipt by the sender of a
further clear transmission report on retransmitting the
telefax), provided the relevant telefax transmission (or
retransmission, as the case may be) was transmitted to the
receiver between 9:00 a.m. and 5:30 p.m. local time. If it
was transmitted later, then it shall be deemed to have been
received at 9:00 a.m. local time on the succeeding Business
Day.
(ii) In any other case, when delivered to the address specified
in clause 15.10(b).
(b) All such notices, requests, demands and other communications shall
be sent:
(i) if to the Lessor, to it at: c/o Aviation Capital Group Corp.
Three Stamford Landing
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Managing Director
Telefax No.: ▇▇▇-▇▇▇-▇▇▇▇
with copies to: Sanwa Business Credit Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President,
Transportation Finance
Telefax No.: ▇▇▇-▇▇▇-▇▇▇▇
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telefax No.: ▇▇▇-▇▇▇-▇▇▇▇
(ii) if to the Lessee, to it at: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President,
Finance and Planning,
and Chief Financial
Officer
Telefax No.: ▇-▇▇▇-▇▇▇-▇▇▇▇
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or to such other address or telefax number as shall have been
notified by one party to the other in the manner set out in
this Clause 15.10.
15.11 LAW AND JURISDICTION
(a) THIS AGREEMENT SHALL, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS ENTERED INTO IN THE STATE OF NEW YORK BY
RESIDENTS OF SUCH STATE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
(b) The Lessor and the Lessee hereby irrevocably agree to submit to the
non-exclusive jurisdiction of the United States District Court for
the Southern District of New York and the Supreme Court of the
State of New York located in the Borough of Manhattan, County of
New York (the "AGREED COURTS") in the event of any claims or
disputes arising under this Agreement. Such submission to
jurisdiction shall not be construed so as to limit the right of
either party to take proceedings against the other in whatsoever
jurisdiction shall to it seem fit nor shall the taking of
proceedings in any one or more jurisdictions preclude the taking
of proceedings in any other jurisdiction, whether concurrently or
not. Final judgment against Lessor or Lessee in any such suit
shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment or as otherwise permitted by applicable
law, a certified or true copy of which shall be conclusive
evidence of the facts and of the amount of any indebtedness or
liability of Lessor or Lessee. Each of Lessor and Lessee hereby
irrevocably waives any objection which it may now or hereafter
have to the laying of venue in any suit, action or proceeding
brought in any Agreed Court, and irrevocably waives any claim that
any such suit, action or proceeding brought in any Agreed Court
has been brought in an inconvenient forum.
(c) THE LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
(d) Without prejudice to any other mode of service, each of the Lessor
and the Lessee consents to the service of process relating to any
proceedings involving, directly or indirectly, any matter arising
out of or relating to this Agreement by U.S. Postal Service
registered mail (prepaid, return receipt requested) of a copy of
the process to the Lessee's address identified in Clause 15.10(b).
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15.12 SOLE AND ENTIRE AGREEMENT
This Agreement is the sole and entire agreement between the Lessor and the
Lessee in relation to the leasing of the Aircraft, and supersedes all
previous agreements in relation to that leasing. The terms and conditions
of this Agreement can only be varied by an instrument in writing executed
by both parties or by their duly authorized representatives.
15.13 INDEMNITIES
All rights expressed to be granted to any successors, assigns,
shareholders, members, Affiliates, partners, contractors, directors,
managers, officers, servants, agents and employees of the Lessor are given
to the Lessor as agent for and on behalf of such Lessor Indemnitee, and
all rights expressed to be granted to any successors, assigns,
shareholders, Affiliates, partners, contractors, directors, officers,
servants, agents and employees of the Lender are given to the Lender as
agent for and on behalf of such Lender Indemnitee.
15.14 COUNTERPARTS
This Agreement may be executed in counterparts each of which will
constitute one and the same document.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF Lessor and Lessee have executed this
Lease Agreement 809 on
the date shown at the beginning of this Agreement.
SIGNED on behalf of
ACG ACQUISITION XII LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Manager
SIGNED on behalf of
ALOHA AIRLINES, INC.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
IN WITNESS WHEREOF Lessor and Lessee have executed this
Lease Agreement 809 on
the date shown at the beginning of this Agreement.
SIGNED on behalf of
ACG ACQUISITION XII LLC
By:_________________________
Name:
Title:
SIGNED on behalf of
ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: SR. VICE PRESIDENT
FINANCE & PLANNING
AND CFO
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: VICE PRESIDENT
PLANNING & DEVELOPMENT
SCHEDULE 1
PART 1
AIRCRAFT SPECIFICATION
IDENTIFICATION:
Aircraft Type Boeing B737-2Q9
Registration N809AL
Serial Number 21720
Date of Manufacture January 1979
WEIGHT DATA:
Maximum Taxi Weight 120,000 lbs.
Maximum Takeoff Weight 119,500 lbs.
Maximum Landing Weight 105,000 lbs.
Maximum Zero Fuel Weight 95,000 lbs.
Fuel Capacity 34,592 U.S. Gals.
AIRFRAME AND INTERIOR EQUIPMENT:
Galleys 1 Locations: G-1 forward
Lavatories 3 Locations: 1 (deactivated) forward; 2 (1 deactivated) aft
Air Stairs 1 Locations: 1 forward
Passenger Seats 116 Types: Seats manufactured by PTC (formerly known
as UOP), model nos. 860 and/or 861
Overhead bins Carry All bins
Cargo Door
ENGINES:
Position ▇▇. ▇ ▇▇. ▇
▇▇▇▇ ▇▇▇▇-▇▇ ▇▇▇▇-▇▇
Serial No. P688676 P688677
APU:
Model: Garret GTCP ▇▇-▇▇▇
▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇
-80-
LANDING GEAR:
Position Nose Left Main Right Main
Type
Serial No. R9156-901 1249P663 0736P406
MAJOR AVIONICS EQUIPMENT:
Description Manufacturer Part No.
----------- ------------ --------
Flight Director ▇▇▇▇▇▇ ▇▇ 109
Air Data Computer Honeywell HG480B20
VHF ▇▇▇▇▇▇▇ 618M-3
Selcal Motorola NA134D2
CVR ▇▇▇▇▇▇▇▇▇ A-100A
DFDR AlliedSignal 980-4100-()
ADF ▇▇▇▇▇▇▇ 51Y-()
VHF Nav ▇▇▇▇▇▇▇ 51RV-4B
DME Bendix/▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇/▇▇▇▇-▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇-▇
Marker Beacon ▇▇▇▇▇▇▇ 61Z-4
Weather Radar Sperry P-90
GPWS Sundstrand ▇▇▇▇ VII
ATC Transponder ▇▇▇▇▇▇▇ 621A3
Mode S Transponder Bendix TRA-67
TCAS Bendix TPA 81A
-81-
PART 2
AIRCRAFT DOCUMENTS
MANUALS
Description Quantity Media
----------- -------- -----
Maintenance Manual 3 Microfilm
Wiring Diagrams 1 Microfilm
Illustrated Parts Catalog 1 Microfilm
Weight & Balance Manual 1 Hard Copy
Rigging Document 1 Hard Copy
TECHNICAL RECORDS
Certificate of Airworthiness
Weight & Balance Report
Maintenance Time Control Report
Major Incident/Accident Statement
Summary of AD Status for the engines, components and the airframe Summary
of Service Bulletin Status for the engine, components and the airframe
Component Listing including life status
Service Tags
Airframe log books
Flight Logs
Readiness Log
Full records for previous "A", "B", "C" and "D" Checks
Engine Shop Visit history including disk sheets
Emergency Equipment Listing including location
Cabin Layout Drawing
RECORDS FOR:
Last Compass Swing
Last Altimeters Calibration
Last ATC Transponder Calibration
-82-
SCHEDULE 2
CERTIFICATE OF ACCEPTANCE 809
This Certificate of Acceptance 809 is delivered on the date
set forth in paragraph 1 below by Aloha Airlines, Inc. (the
"LESSEE") to ACG Acquisition XII LLC (the "LESSOR") pursuant
to
Lease Agreement 809, dated May 21, 1997, between the Lessor
and the Lessee (the "AGREEMENT"). Capitalized terms used but
not defined in this Certificate of Acceptance 809 shall have
the meaning given to such terms in the Agreement.
1. DETAILS OF ACCEPTANCE
The Lessee hereby confirms to the Lessor that the Lessee has
at __:__ _m. H.S.T. on this ______ day of May, 1997, over
international waters, accepted the following, in accordance
with the provisions of the Agreement and the Annex:
(a) Airframe: Boeing 737-2Q9 airframe, Manufacturer's Serial No. 21720
and FAA Registration No. N809AL;
(b) Engines: two ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-15 Engines, bearing Manufacturer's
Serial Nos. P688676 and P688677, each having 750 or more
rated take-off horsepower;
(c) All Parts installed on, attached to or appurtenant to the Airframe
and Engines; and
(d) Aircraft Documents as specified in Schedule 1 - Part 2 of
the Agreement.
2. LESSEE'S CONFIRMATION The Lessee confirms to the Lessor that as at
the time indicated above, being the time of Delivery:
(a) the Lessee's representations and warranties contained in
Clauses 2.1 and 2.2 of the Agreement are hereby repeated and
are true and accurate as of the date hereof;
(b) the Aircraft is insured as required by the Agreement; and
(c) the lessee confirms that there have been affixed to the Aircraft
and the Engines the fireproof notices required by the Agreement.
3. LESSOR'S CONFIRMATION The Lessor confirms to the Lessee that, as at
the time indicated above, being the time of Delivery, the Lessor's
representations and warranties contained in Clause 2.4 of the
Agreement are hereby repeated and are true and accurate as of
the date hereof.
-83-
IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 809 on the date shown at the beginning of this Certificate.
SIGNED on behalf of
ACG ACQUISITION XII LLC
By:
---------------------------------
Name:
Title:
SIGNED on behalf of
ALOHA AIRLINES, INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
-▇▇-
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ AT DELIVERY
DATE: MAY __, 1997
AIRFRAME TIME:
Total Flight Hours
Total Cycles
AIRFRAME LIMITS:
Type of Check: C Check
Check Interval:
Time Since Last Check:
ENGINE DATA:
Position ▇▇. ▇ ▇▇. ▇
▇▇▇▇ ▇▇▇▇-▇▇ ▇▇▇▇-▇▇
Serial Number P688676 P688677
Total Flight Hours:
Total Cycles:
Flight Hours Since Last Shop Visit:
Cycles Since Last Shop Visit:
Flight Hours to Next Hard Limit:
Cycles to Next Hard Limit:
APU:
Type: 129H
Serial Number: P35548
Total Flight Hours:
Total Cycles:
Flight Hours Since Last HSI Inspection:
Cycles Since Last HSI Inspection:
Flight Hours Remaining on Turbine and Compressor LLPs:
Cycles Remaining on Turbine and Compressor LLPs:
-85-
LANDING GEAR LIMITS:
Position: Nose Left Right
Overhaul Interval:
Time Since Overhaul:
Time to Next Overhaul:
-86-
SCHEDULE 3
OPERATING CONDITION AT REDELIVERY
On the Expiry Date the Aircraft, subject to fair wear and tear generally, will
be in the condition set out below.
1. GENERAL CONDITION
The Aircraft will:
(a) be clean by United States airline standards;
(b) have installed the full complement of engines and other equipment,
parts and accessories and loose equipment required under the Agreed
Maintenance Program and usually installed in the other Boeing
737-200 aircraft operated by Lessee (together with any additions
and improvements thereto, or replacements thereof, effected
pursuant to and in accordance with this Agreement) and be in a
condition suitable for immediate operation in commercial service;
(c) be airworthy, conform to type design and be in a condition for safe
operation with all equipment, components and systems operating in
accordance with their intended use and within limits established by
the manufacturer and approved by the Aviation Authority, and all
pilot discrepancies and deferred maintenance items cleared on a
terminating action basis;
(d) have a U.S. Standard Transport Category Certificate of
Airworthiness issued by the FAA in accordance with FAR Part 21
(or if required by the Lessor, a valid export certificate of
airworthiness with respect to the Aircraft issued by the Aviation
Authority) and unconditionally meet all FAA requirements for
immediate operations under FAR Part 121, subject to the special
exemptions permitted Lessee regarding compliance with the Airport
Noise and Capacity Act of 1990, as amended, and the regulations
promulgated by the FAA thereunder;
(e) comply with the manufacturer's original specification to the
extent that it so complied on the date of this Agreement and
subject to any alterations made pursuant to and in accordance with
this Agreement after such date;
(f) have undergone, immediately prior to redelivery, a "C" Check in
accordance with the Agreed Maintenance Program so that all
Airframe inspections falling due within the
-87-
next following 3,000 Flight Hours of operation in accordance with
the Agreed Maintenance Program have been accomplished;
(g) the Airframe shall have at least 75% of the Flight Hours, Cycles
and calendar time (whichever is applicable and, if more than one
are applicable, most limiting) remaining until the next block "D"
check (or equivalent heavy maintenance check) under the Agreed
Maintenance Program, and if the Flight Hours, Cycles or calendar
time of the Airframe are less than 75% of the interval between "D"
checks then the Lessee shall pay to the Lessor an amount equal to
the product of (i) the number of Flight Hours, Cycles or calendar
days (whichever is applicable and most limiting) by which the
Airframe is less than 75% of the interval between "D" checks,
multiplied by (ii) a fraction (1) the numerator of which is the
average cost of a "D" check (including routine and non-routine
items) for an airframe similar to the Airframe determined in
accordance with the Appraisal Procedure and (2) the denominator of
which is the number of Flight Hours, Cycles or calendar days
(whichever is applicable and most limiting) between "D" checks;
(h) have had accomplished all outstanding airworthiness directives and
mandatory orders affecting that model of Aircraft issued by the
FAA that are due during the Term on a terminating action basis;
airworthiness directives and mandatory orders that do not have a
terminating action will be accomplished at the highest level of
inspection or modification permitted;
(i) no special or unique manufacturer inspection or check requirements
specific to the Aircraft will exist unless there is no terminating
action available from any source;
(j) have installed all applicable vendor's and manufacturer's service
bulletin kits received free of charge by the Lessee that are
appropriate for the Aircraft and, to the extent not installed,
those kits retained by Lessee will be furnished free of charge to
the Lessor;
(k) be free of any system-related leaks;
(l) all fluid reservoirs (including fuel, oil, oxygen, hydraulic and
water) will be full, and the waste tank serviced in accordance
with the manufacturer's instructions;
(m) all fuel tanks will have recently undergone an
anti-fungus/biological growth contamination laboratory evaluation,
and any excessive levels of contamination corrected;
(n) have an FAA-approved aging aircraft program in operation and
up-to-date; and
(o) have all signs and decals clean, secure and legible.
-88-
2. PARTS
(a) Each life limited or hard time controlled Part, excluding
Engine Parts, shall have not less than 50% of the number of
Flight Hours or Cycles (whichever is the more limiting factor)
remaining to the next scheduled removal in accordance with the
Agreed Maintenance Program;
(b) Each calendar limited Part (including hard time controlled
Parts with calendar limits) will have 50% of its life or time
between removals, as the case may be (but not less than 12
months), remaining to its next scheduled removal in accordance
with the Agreed Maintenance Program; and
(c) Each "on-condition" and "condition monitored" Part will be
serviceable in accordance with the Aviation Authority
prescribed parameters.
3. ENGINES
Each engine installed on the Aircraft shall be an Engine and (if not
the engine installed at Delivery) shall, to the extent not previously
provided to the Lessor, be accompanied by all documentation the Lessor
may require to evidence that title thereto is properly vested in the
Lessor in accordance with Clause 8.17(a) and will:
(a) have a minimum of 4,000 Flight Hours and Cycles remaining to the
next life limited part replacement and a minimum of 2,500 Flight
Hours or Cycles remaining until the next scheduled hot section
inspection under the Agreed Maintenance Program; provided,
however, that in the event the Lessor exercises its Early
Termination Option and pursuant thereto the Expiry Date occurs
before the second anniversary of the Delivery Date, one Engine
(the "Non-Conforming Engine") may have a minimum of 2,000 Flight
Hours and Cycles remaining to the next life limited part
replacement and a minimum of 2,000 Flight Hours and Cycles
remaining to the next scheduled hot section inspection under the
Agreed Maintenance Program;
(b) be subject to the following financial adjustment: in the event
that Lessor exercises its Early Termination Option and pursuant
thereto the Expiry Date occurs before the second anniversary of
the Delivery Date, to the extent that the number of Flight Hours
or Cycles (whichever is more limiting) until the next life limited
part replacement of any Engine on the Expiry Date is less than
4,000, Lessee shall pay Lessor an amount (the "Engine Return
Payment") computed as follows:
Engine Return Payment = [A minus B] x C
where:
-89-
(i) A = 4,000 minus the number of Flight Hours or
Cycles (whichever is more limiting) remaining
to the next life limited part replacement on
the Non-Conforming Engine;
(ii) B = the number of Flight Hours or Cycles
(whichever is more limiting) until the next life
limited part replacement on the other Engine
(i.e., not the Non-Conforming Engine) minus 4,000;
provided however, if the difference is a negative
number, B shall be deemed to be zero, and further
provided that if the difference between A and B
(i.e., A - B) is a negative number, that difference
shall be deemed to be zero; and
(iii) C = a fraction in which the numerator is the
average cost of the removal and overhaul
(including routine and non-routine items) for an
engine similar to such Engine determined in
accordance with the Appraisal Procedure and the
denominator is the number of Flight Hours or
Cycles, as the case may be, between scheduled
removals under the Agreed Maintenance Program;
(c) have no defect that reduces the Flight Hours of remaining life
pursuant to manufacturer's or airworthiness requirements until
overhaul to less than 3,000; and
(d) be in a condition that can operate at maximum rated take-off power
at sea level at a temperature of 28 DEG C.
4. FUSELAGE, WINDOWS AND DOORS
(a) the fuselage will not contain any dents, corrosion or abrasions
that exceed the prescribed parameters under the SRM and shall be
free of scab patches (except such scab patches as were present on
the Aircraft on the Delivery Date) and loose, pulled or missing
rivets;
(b) the windows will not contain any delamination, blemishes or
crazing that exceed the prescribed parameters under the
Manufacturer's maintenance manual and will be properly sealed; and
(c) the doors will be free moving, correctly rigged and fitted with
serviceable seals;
5. WINGS AND EMPENNAGE
(a) Leading edges will not contain any damage that exceeds the
prescribed parameters under the SRM;
-90-
(b) unpainted cowlings and fairings will be polished; and
(c) wings will be free of fuel leaks.
6. INTERIOR
(a) The interior will be fully serviceable and in the configuration as
at the date of this Agreement;
(b) emergency equipment having a calendar life will have a minimum of
1 year or 100% of its total approved life remaining, whichever is
less; and
(c) curtains, carpets, seat covers and seat cushions will be clean and
free from stains and worn out (threadbare) areas and will conform
to FAR fire resistance regulations as applicable to an FAR Part
121 operator.
7. COCKPIT
(a) Fairing panels shall be free of stains and cracks, clean, secure
and repainted as necessary;
(b) floor coverings will be clean and effectively sealed;
(c) seat covers will be in good condition, clean and free of stains
and will conform to FAR fire resistance regulations as applicable
to an FAR Part 121 operator; and
(d) seats will be serviceable, in good condition and repainted as
necessary.
8. CARGO COMPARTMENTS
(a) Panels will be in good condition and effectively sealed;
(b) nets will be in good condition; and
(c) the compartments will comply with FAR fire resistance and
containment regulations as applicable to an FAR Part 121 operator.
9. LANDING GEAR
(a) The installed main and nose landing gear components and their
associated actuators and parts will be cleared of all inspections
for not less than 12 months.
-91-
(b) The installed main and nose landing gear will have no more than
7,500 Flight Hours since the last removal for inspection or
overhaul under the Agreed Maintenance Program.
(c) To the extent that the number of Flight Hours of any of the
Landing Gear since its last removal for inspection or overhaul on
the Expiry Date is more than the number of Flight Hours of such
Landing Gear since its last removal for inspection or overhaul on
the Delivery Date, then Lessee shall pay to Lessor an amount equal
to the product of (i) the difference between the number of Flight
Hours for such Landing Gear on the Delivery Date and on the Expiry
Date, multiplied by (ii) $4.50 in the case of either of the main
Landing Gear and $2.50 in the case of the nose Landing Gear.
(d) The tires and brakes will have 50% of the wear, as specified by
the manufacturer as serviceable limits, remaining until next
removal.
(e) The landing gear and wheel ▇▇▇▇▇ will be clean, free of leaks and
repaired as necessary.
10. APU
(a) The APU shall be serviceable in accordance with the Approved
Maintenance Program parameters.
(b) The APU shall have not more than 1,500 Flight Hours of operation
since its last hot section inspection.
(c) To the extent that the Flight Hours since last removal for
overhaul of the APU on the Expiry Date is more than the Flight
Hours since last removal for overhaul of the APU on the Delivery
Date, then Lessee shall pay to Lessor an amount equal to the
product of (i) the difference between the number of Flight Hours
for the APU on the Delivery Date and on the Expiry Date,
multiplied by (ii) a fraction (1) the numerator of which is the
average cost of a removal and overhaul of an auxiliary power unit
similar to the APU determined in accordance with the Appraisal
Procedure and (2) the denominator of which is the number of Flight
Hours between such scheduled removals under the Agreed Maintenance
Program.
11. CORROSION
(a) The Aircraft will be in compliance with the CPCP and will have
been inspected and treated with respect to corrosion as required
by the CPCP; and
-92-
(b) Fuel tanks will be free from contamination and corrosion and a
tank treatment program will be in operation and up-to-date.
-93-
SCHEDULE 4
PART I
(INSURANCE REQUIREMENTS)
1. The Insurances required to be maintained are as follows:
(a) HULL "ALL RISKS" of Loss or Damage while flying and on the ground
with respect to the Aircraft for the Agreed Value and with a
deductible not exceeding $500,000.
(b) HULL WAR AND ALLIED PERILS, covering those war risks excluded from
the Hull "All Risks" Policy to the extent such coverage is
available from the leading international insurance markets,
including confiscation and requisition by the State of
Registration, for the Agreed Value;
(c) "ALL RISKS" PROPERTY INSURANCE (INCLUDING WAR AND ALLIED RISK
except when on the ground or in transit other than by air or sea)
on all Engines and Parts when not installed on the Aircraft (to
the extent not covered under the Aircraft hull insurances
described in paragraphs (a) and (b) above), including Engine test
and running risks, in an amount equal to replacement value in the
case of the Engines;
(d) AIRCRAFT THIRD PARTY, BODILY INJURY/PROPERTY DAMAGE, PASSENGER,
BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY
(INCLUDING PRODUCTS) LEGAL LIABILITY for a combined single limit
(Bodily Injury/Property Damage) of an amount not less than the
Minimum Liability Coverage for the time being in respect of any
one occurrence (but, in respect of products liability, this
limit may be an aggregate limit for any and all losses
occurring during the currency of the policy, and in respect of
liability arising out of certain offences, the limit (within the
said combined single limit) may be $25,000,000 in respect of
any one offence and in the aggregate, and cargo and mail legal
liability may be subject to a limit of $1,000,000 any one
occurrence); War and Allied Risks are also to be covered under
the Policy to the extent available from the leading
international insurance markets. The Minimum Liability Coverage
may be adjusted upwards from time to time to such an amount as
the Lessor may be advised by its insurance brokers
constitutes the standard Minimum Liability Coverage
applicable to Boeing 737-200 series aircraft operating in
North America by an airline similarly situated as Lessee. If the
Lessee disputes any such adjustment, the matter shall be referred
to a reputable independent insurance broker in the United States
of America appointed by the Lessor, whose decision, acting
as expert, shall be conclusive and binding on the Lessee.
-94-
2. All required hull and spares insurance (specified in (1)(a), (b) and (c)
above), so far as it relates to the Aircraft, will:
(a) provide that any loss will be settled with the Lessee (who
undertakes to consult with the Lessor and the Lender in regard
thereto), and any claim that becomes payable on the basis of a
Total Loss shall be paid in Dollars to the Lender so long as the
Security Interest of the Mortgage remains in effect and thereafter
to the Lessor as sole loss payee up to the Agreed Value, and loss
proceeds in excess of the Agreed Value shall be payable to Lessee,
with any other claim being payable as may be necessary for the
repair of the damage to which it relates;
(b) if separate Hull "All Risks" and "War Risks" insurances are
arranged, include a 50/50 provision in the terms of Lloyd's
endorsement AVS 103 or its equivalent; and
(c) confirm that the Insurers are not entitled to replace the Aircraft
in the event of a Total Loss.
3. All required liability insurances (specified in (1)(d) above) will:
(a) include the Lessor, the Lender, their respective successors and
assigns, their respective shareholders, Affiliates, subsidiaries,
directors, officers, agents, employees and indemnitees and the
Seller Entities as additional assureds for their respective rights
and interests, warranted (each as to itself only) no operational
interest; but the coverage provided will not include claims
arising out of their legal liability as manufacturer, repairer or
servicing agent of the aircraft or any part thereof;
(b) include a severability of interest clause;
(c) contain a provision confirming that the policy is primary without
right of contribution and that the liability of the insurers will
not be affected by any other insurance of which the Lessor, the
Lender or the Lessee have the benefit; and
(d) accept and insure the indemnity provisions of this Agreement to
the extent of the risks covered by the relevant policy or policies.
4. All Insurances will:
(a) be in accordance with normal industry practice of persons
operating similar aircraft in similar circumstances;
(b) provide coverage on a worldwide basis subject to those territorial
exclusions which are usual and customary for U.S. carriers
similarly situated with Lessee in the case
-95-
of War Risks and Allied Perils coverage which are advised to and
approved by Lessor and Lender, such approval not to be
unreasonably withheld;
(c) acknowledge that the insurers are aware that the Aircraft is owned
by the Lessor and is subject to this Agreement and the Mortgage;
(d) provide that, in relation to the interests of each of the
additional assureds, the Insurances will not be invalidated by any
act or omission of the Insured which results in a breach of any
terms, conditions or warranty of the policies;
(e) provide that the Insurers will waive any rights of recourse and/or
subrogation against each additional assured to the same extent
that Lessee has waived or has no rights of recovery against such
additional assured in the Lease;
(f) provide that the additional assureds will have no obligation or
responsibility for the payment of any premiums (but reserve the
right to pay the same should any of them elect to do so) and that
the Insurers will waive any right of offset or counterclaim
against the respective additional assureds;
(g) provide that, except in the case of any provision for cancellation
or automatic termination specified in the policies or endorsements
thereof, the Insurance can only be canceled or materially altered
in a manner adverse to the additional assureds by giving at least
30 days' written notice to the Lessor and the Lender, except in
the case of war risks (or radioactive contamination), for which
seven days' written notice (or such lesser period as is or may be
customarily available in respect thereof) will be given; and
(h) include a services of suit clause.
-96-
PART 2
(FORM OF BROKER'S UNDERTAKING)
-97-
[LOGO]
THIS BROKER'S REPORT CANCELS AND REPLACES BROKER'S REPORT No. AQ-96-11-L(R)
DATED DECEMBER 27, 1996
NO. AQ-96-11-L(R-2)
DATE: May 21,1997
TO; ACG Acquisition XII LLC ("Owner"/"Lessor")
c/o Aviation Capital Group Corp.
Three Stamford Landing
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇. Managing Director
Sanwa Business Credit Corporation ("Leader")
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Broker's Report
Low Agreement 809 dated as of May 21, 1997 between ACG
Acquisition XII LLC ("Owner"/"Lessor"), Sanwa Business
Credit Corporation ("Lender") and Aloha Airlines, Inc.
("Lessee") (the "Lose) regarding One (1) B737-2Q9
Aircraft, Registration Number N809AL, Serial Number
21720 including two (2) ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇▇▇-▇▇
engines, Serial Numbers 698676 and 689677 (the
"Engines") (hereinafter the "Aircraft")
To Whom It May Concern:
We hereby certify that as the independent aviation insurance brokers duly
appointed by Lessee, and acting on their behalf that, as of this date, the
insurance described In the attached Certificate of Insurance (No.
AQ-96-11(R-2)) complies with the requirements of the Lease as far as said
requirements relate to Coverages A, B and C described the said Certificate of
Insurance and that said insurance is in full force and affect on the Aircraft
and that all premiums due as of this date (per the accounting procedures
arranged between Lessee and ourselves) have been paid.
We also confirm that, as of this date, all such policies of insurance as
described in said Certificate as am carried by Lessee am in such amounts ad
cover such perils and are placed with insurers of recognized reputation and
responsibility in the worldwide aviation insurance marketplace so that the
protection afforded thereby is not less than that which would customarily be
maintained for aircraft of a similar character by corporations engaged in the
same or similar business, similarly situated with Lessee.
The perils, limits of liability, and insurers relating to the above mentioned
insurance, policies are more fully described in the attached Certificate of
Insurance, No. AQ-96-11(R-2).
[LOGO]
We undertake to advise you
1. promptly of any cancellation or adverse material changes
notified to us which are proposed to be made in the terms of the
insurance;
2. upon written application form you not later thin thirty (30)
days prior to the expiration due of said insurance to notify you
within seven (7) days of the receipt of said application if we
have not received renewal instructions from Lessee and in the event
of our receiving instructions to renew, to advise you promptly
thereof,
3. promptly if premiums are not paid to us by the due date as per
the accounting procedures between Lessee and ourselves;
4. promptly if our appointment as Insurance Broker by Lessee is
terminated or not timely renewed.
The Above is given subject to:
1. our continuing appointment for the time being as Insurance
Brokers to Aloha Airlines, Inc.
2. Insurers, Right of cancellation all default in payment of
premiums
3. all hull claims proceeds and all premiums are to be collected
through ourselves as the Insurance Broker for Aloha Airlines,
Inc.
This letter shall be governed and construed in all respect in accordance with
the laws of United States of America.
Sincerely
/s/ [ILLEGIBLE]
▇▇▇▇ ▇. Yelavick
Director
PART 3
[FORM OF INSURANCE CERTIFICATE]
-98-
[LOGO]
THIS CERTIFICATE OF INSURANCE CANCELS AND REPLACES CERTIFICATE OF INSURANCE NO.
AO-96-11(R) DATED DECEMBER 27, 1996
CERTIFICATE OF INSURANCE
No. AQ-96-11(R2)
This is to certify to: ACG Acquisition XI LLC ("Owner"/"Lessor")
c/o Aviation Capital Group Corp.
Three Stamford Landing
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Managing Director
Sanwa Business Credit Corporation ("Lender")
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
that the insurers/underwriters/companies listed below, each for their own part
AND NOT ONE FOR THE OTHER, are providing the following insurance:
NAMED INSURED: Aloha Airlines, Inc.
NAMED INSURED'S ADDRESS: Honolulu International Airport
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INSURANCE COVERAGES: A) AD Risks (Ground and Flight) Aircraft Hull
Insurance (including All Risks Aircraft
Spare Parts Insurance)
B) War Risks Aircraft Hull Insurance
(including War Risks spare Parts insurance)
(Coverage amended to including coverage for
confiscation by government of registry)
C) Comprehensive Airline Liability Insurance
(including, but not limited to; Comprehensive
General Liability, Public Lability,
Passenger Liability, Personal Injury
Liability, Contractual Liability,
Passengers' Checked and Unchecked Baggage
Liability, Premises, Products, and Completed
Operations Liabilities, Ground Hangarkeepers
Liability, Cargo Legal including Mail Legal
Liability) and the AAU equivalent of AV.52C
(War Risks Liability Clause.)
[LOGO]
POLICY PERIOD: November 1, 1996 to November 1, 1997 on both dates at
12:01 A.M. Local Standard Time at the address of the
Named Insured.
GEOGRAPHICAL LIMITS: Worldwide*
* As respects Coverage B - War Risks Aircraft Hull Insurance, the
Geographical Limits of the policy are: Worldwide but excluding Africa,
Columbia, Peru, Iraq, Afghanistan, Former Republics of U.S.S.R. and Former
Republics of Yugoslavia.
* As respects Coverage C - AV.52C (War Risk Liability Clause), the
Geographical Limits of the policy are: Worldwide excluding Iraq.
[LOGO]
LIMITS OF LIABILITY: A) As respects Aircraft Hulls: Agreed Value as
stated below, subject to a deductible of
US$500,000.00 each and every loss
(Deductibles not applicable in the event of
Total Loss/Constructive Total Loss/Arranged
Total Loss.)
NOTE: AGGREGATE As respects Aircraft Spare Parts:
LIMITS MAY BE US$60,000,000.00 any one loss/any one
REDUCED DUE TO location, US$25,000,000.00 any one transit,
PAID CLAIMS subject to a deductible of US$10,000.00 any
one loss but the applicable aircraft hull
deductible stated above shall apply in
respect of spare engine running or testing
losses.
B) As respects Aircraft Hulls: Agreed Value as
stated below. As respects Aircraft Spares
Parts: US$60,000,000.00 any one loss/any one
location, US$25,000,000.00 any one transit.
Subject to an annual aggregate of
US$150,000,000.00. Subject to all deductibles.
C) Combined Single Limit Bodily Injury
(including passengers), Property Damage and
Personal Injury (Passengers only):
US$300,000,000.00 any one occurrence/offense,
in the aggregate annually as respects
Products, Completed Operations and Personal
Injury Liabilities. However, the following
sublimits apply as part of and not in
addition to the limit stated above:
As respects Personal Injury to third parties
other than passengers: US$25,000,000.00 any
one occurrence, any one offense, in the
aggregate annually. As respects Cargo Legal
Liability: US$1,000,000.00 each occurrence.
AIRCRAFT INSURED: One (1) B737-2Q9 aircraft, Registration
Number: N809AL, Manufacturer's Serial Number:
21720, Agreed Value: US$7,400,000.00
inclusive of two (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-15
Engines, Manufacturers Serial Numbers 688576
and 688677 and any engine which becomes an
"Engine" as defined in the Lease (the
"Engines") while attached to the Aircraft or
removed from the Aircraft, but not replaced
(hereinafter, the "Aircraft").
[LOGO]
SECURITY
AS RESPECTS COVERAGES A & C
QUOTA SHARE
PARTICIPATION
INSURERS POLICY NUMBER (PART OF 100%)
-------- ------------- --------------
One or More Member Companies of
Associated Aviation Underwriters SP46-6093 30.00%
Certain Underwriters at Lloyds, London
and Various Insurance Company through
Sedgwick Aviation Limited V61175 28.00%
La Reunion Aerienne through La Concorde 96/23987 14.00%
Insurance Company ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ 10.00%
Assurance France Aviation 96.0969 8.00%
American Home Assurance Company
through AIG Aviation HL0532584-02 4.00%
Mutual Marine Office MM0-16017AV596 3.50%
Navigators Insurance Company through
Somerset Aviation A0070/01/96 2.50%
--------------
TOTAL 100.00%
SEVERAL LIABILITY NOTICE
The subscribing insurers' obligations under contracts of insurance to which
they subscribe are several and not joint and are limited solely to the extent
of their individual subscriptions. The subscribing insurers are not
responsible for the subscription of any co-subscribing insurer who for any
reason does not satisfy all or part of its obligations.
LSW 1001 (INSURANCE)
[LOGO]
SECURITY
AS RESPECTS COVERAGE B
QUOTA SHARE
PARTICIPATION
INSURERS POLICY NUMBER (PART OF 100%)
-------- ------------- --------------
Certain Underwriters at Lloyds, London
and Various Insurance Company through
Sedgwick Aviation Limited V61176 44.50%
Navigators Insurance Company
through Somerset Aviation W0070/01/96 25.00%
La Reunion Aerienne through
La Concorde 96/23987 14.00%
Mutual Marine Office MM0-16018AW596 8.50%
Assurance France Aviation 96.0991 8.00%
--------------
TOTAL 100%
SEVERAL LIABILITY NOTICE
The subscribing insurers' obligations under contracts of insurance to which
they subscribe are several and not joint and are limited solely to the extent
of their individual subscriptions. The subscribing insurers are not
responsible for the subscription of any co-subscribing insurer who for any
reason does not satisfy all or part of its obligations.
LSW 1001 (INSURANCE)
[LOGO]
SPECIAL PROVISIONS
Solely as respects coverages A, B and C and solely as respects the Lease
Agreement 809 dated as of May 21, 1997 between ACG Acquisition XII LLC
("Owner"/"Lessor"). Sanwa Business Credit Corporation ("Lender") and Aloha
Airlines, Inc. ("Lessee") (the "Lease) regarding the Aircraft, subject to
policy terms, conditions, limitations, deductibles, warranties and exclusions
the following provisions apply:
I. SOLELY AS RESPECTS COVERAGES A AND B:
1. All losses will be adjusted with Lessee. In the event of a
Total Loss of the Aircraft, Lender (so long as the Security
interest of the Mortgage (as defined in the Lease) remains in
effect, and thereafter the Lessor) is named as Sole Loss Payee
for all insurance proceeds up to the Agreed Value (as defined
in the Lease). With respect to damage or loss not constituting
a Total Loss of the Aircraft, Lender (so long as the Security
interest of the Mortgage (as defined in the Lease) remains in
effect, and thereafter the Lessor) is named as Sole Loss Payee
in respect of all insurance proceeds where such insurance
proceeds exceed US$500,000.00. Such insurance proceeds which
are not in excess of US$500,000.00 shall be payable solely to
Lessee; provided that upon receipt by Insurers and the
Insurance Broker of written notice from Owner/Lessor that a
Default or an Event of Default an the part of Lessee has
occurred and is continuing, all payments up to this Agreed Value
will be made to Lender (so long as the Security interest of the
Mortgage (as defined in the Lease) remains in effect, and
thereafter the Lessor). In all cases, any insurance proceeds in
excess of the Agreed Value will be payable solely to Lessee.
2. Hull All Risks insurers and ▇▇▇▇ War Risks and Allied Perils
insurers agree to a 50/50 claims settlement provision per the
terms of AVS 103 (or its equivalent).
3. Underwriters am not entitled to replace the Aircraft in the
event of a Total Lost of the Aircraft.
II. SOLELY AS RESPECT COVERAGE C:
1. Lender, Owner/Lessor and their respective successors and
assigns and their respective shareholders, affiliates,
susidiaries, directors, officers, employees, members, managers,
agents and indemnitees, and 1980 Aircraft Investors, a
California Limited Partnership (Flit "Partnership"). First
Security Bank, National Association. as owner trustee f/b/o the
Partnership, each United partner of the Partnership, Polaris
Investment Management Corporation, Polaris Aircraft Leasing
Corporation and GE Capital Aviation Services, Inc.
(collectively, the "Seller Entities") are included as
Additional Insureds ("the Additional Insureds") as their
respective interests my appear, warranted no operational
interest. However, no
[LOGO]
party shall be included as an Additional Insured as respects
its legal liability as; manufacturer, repairer, supplier or
servicing agent of the Aircraft or any part thereof.
2. This insurance is primary without fight of contribution from
any other insurance may be carried by an Additional Insured.
3. Such insurance a is afforded Lessee under the policy applies to
liability assumed by Lessee under the Lease, specifically
Article 10-INDEMNITY of the Lease, but only to the went, of
the coverage otherwise afforded under the policy.
4. Each of the Additional Insureds shall have the same protection
as would have been available had this policy been issued
individually to each of them except that this fact shall not in
any event increase the Insurers, total liability beyond the
limits act forth in the policy.
III. SOLELY AS RESPECTS COVERAGES A, B AND C:
1. Insurers waive their rights to any set-off or counter claim or
any other deduction, whether by attachment or otherwise, in
respect of my liability to the Additional Insureds.
2. The Additional Insured have no responsibility for premiums,
commissions, assessments or calls.
3. Insurers waive their rights of subrogation against the
Additional Insureds but only to the mu wont that Lessee, has
waived its rights of recovery against the Additional Insureds
in the Lease.
4. In respect of the interests of each Additional Insured, the
Insurance shall not be invalidated by any act or omission by
Lessee or any other insured. The Additional Insureds, are held
covered for their respective interests notwithstanding any
breach or violation of any warranty, condition or declaration
of the policy by Lessee or any other insured. However, such
protection as is afforded an Additional Insured under this
clause will not apply in the event such Additional Insured
breaches or violates any warranty, condition or declaration of
the policy, nor does this clause apply in the event of
exhaustion of policy limits or to losses/claims &rising from
perils specifically excluded from coverage under the policies.
[LOGO]
5. In the event of cancellation or material change of the policies
by Insurers, which would adversely affect the interests of the
Additional Insureds, Insurers agree that such cancellation or
change shall not be effective as to the Additional Insureds
until thirty (30) days (seven (7) days or such shorter period
as may be customary in the cast of War Risks insurance) after
issurance of notice thereof to Lender and Owner/Lessor.
6. Insurers note the existence of the Lease and acknowledge ACG
Acquisition XII LLC as Owner of the Aircraft and that the
Aircraft is subject to the Lease and the Mortgage (as defined
in the Lease).
The undersigned has been authorized by the above insurers to issue this
certificate on their behalf. The undersigned is not an insurer and has no
liability of any sort under the above policies nor as a result of this
certification. This certificate does not alter, extend or amend any policy
terms, conditions, limitations, deductibles, warranties or exclusions.
DATE OF ISSUE SEDGWICK AVIATION, NORTH AMERICA
[ILLEGIBLE]
-------------------------------------
MAY 21, 1997 AUTHORIZED REPRESENTATIVE
SCHEDULE 5
FORM OF LEGAL OPINION
-99-
[LOGO]
___________________________, 1997
ACG Acquisition XII LLC
c/o Aviation Capital Group Corp.
Three Stamford Landing
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SANWA BUSINESS CREDIT CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: LEASE AGREEMENT 809 dated as of _____________________, 1997 ("Lease
Agreement") between ACG ACQUISITION XII LLC ("Lessor") and ALOHA
AIRLINES, INC. ("Lessee") relating to one (1) The Boeing Company
Model 737-2Q9 Aircraft, bearing manufacturer's serial no. 21720 and
U.S. registration no. N809AL, together with two (2) ▇▇▇▇▇ & Whitney
Model JT8D-15 engines bearing engine manufacturer's serial nos.
P688676 and P688677 (the "Aircraft").
Gentlemen:
We are counsel to Aloha Airlines, Inc. in regard to the above referenced
transaction.
You have asked us to render an opinion in connection with the transactions
governed by the following documents:
1. the Lease Agreement; and
2. the Acceptance Certificate dated as of ______________, 1997
executed by Lessee;
The documents listed above collectively referred to as the "Operative
Documents." Except as otherwise expressly stated herein, words and
expressions used herein shall bear the same meanings as defined in the
Operative Documents.
In rendering the opinions expressed below, we have examined the (a) the
Operative Documents, (b) the Certificate of incorporation and By-Laws of
Lessee, (c) certain certificates executed by officers of Lessee and (d)
other documents, in our judgment and to our knowledge, necessary or
appropriate to examine to enable us to give the opinions expressed below.
Having reviewed the foregoing described documents, and having regard to the
relevant laws of the State of Hawaii, the United States of America, and the
general corporate laws of the State of Delaware it is our opinion that:
A LAW CORPORATION - SUITE 850, DAVIES PACIFIC CENTER, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇ - FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
[LOGO]
ACG ACQUISITION XII LLC
SANWA BUSINESS CREDIT CORPORATION
______________, 1997
Page -2-
A. Lessee (i) is qualified to do business in the State of Hawaii
as a foreign corporation; (ii) to our knowledge and without
any inquiry except review of a certification as to the
following provided by Lessee, is qualified to do business in
all other jurisdictions in which the nature of its business or
its properties requires it to be qualified, (iii) presently
maintains its principal place of business and chief executive
office in Honolulu, Hawaii, (iv) has full power to carry on
its business as it is now being conducted and to enter into,
legally bind itself by, and perform its obligations under the
Operative Documents and (v) to our knowledge and without any
inquiry except review of a certification as to the following
provided by Lessee, has complied with all material statutory
and other requirements relative to its businesses;
B. To our knowledge and without any inquiry except review of a
certification as to the following provided by Lessee, (i) all
consents, resolutions and authorizations necessary or
advisable in order for Lessee to enter into the Operative
Documents and to lease the Aircraft in accordance with the
terms and conditions of the Operative Documents have been
obtained, and (ii) no further consents or authorizations are
necessary for the lease of the aircraft by Lessee pursuant to
the provisions of the Operative Documents and for the
performance by Lessee of all of its obligations pursuant to
the provisions of the Operative Documents;
C. The Operative Documents (i) constitute valid and binding
obligations of Lessee, enforceable against Lessee in
accordance with their respective terms, (ii) are in full force
and effect, and (iii) the provisions of the Operative
Documents with respect to choice of substantive law to govern
the interpretation and enforcement of such Operative Documents
and consent to jurisdiction and choice of forum in connection
with such interpretation and enforcement are legal, valid and
binding; however, the state and federal courts in the state of
Hawaii may not apply the procedural law, including without
limitation, law relating to remedies or provisional remedies,
of a non-forum state, such as, without limitation, New York;
A LAW CORPORATION
[LOGO]
ACG ACQUISITION XII LLC
SANWA BUSINESS CREDIT CORPORATION
______________, 1997
Page -3-
D. The execution and delivery of and the performance of the
provisions of the Operative Documents and of the
transactions contemplated thereby do not contravene any of
the charter documents (including the certificate of
incorporation, and by-laws) of Lessee; and to our knowledge
and without any inquiry except review of a certification as
to the following provided by Lessee, the execution and
delivery of and the performance of the provisions of the
Operative Documents and of the transactions contemplated
thereby and hereby do not contravene in any material respect
any applicable law, regulation, decree, order, permit or
contractual or other restriction now existing and binding on
Lessee or on any of the properties of Lessee;
E. To our knowledge and without inquiry except review of a
certification as to the following provided by Lessee, (i)
there are no outstanding judgments against Lessee and (ii) no
action, claim, suit or proceeding pending or threatened
(including, but not limited to, tax liens or tax actions)
against or affecting Lessee or any of the property of Lessee
before any court, board of arbitration or administrative
agency which could reasonably be expected to result in any
material adverse change in the business or condition
(financial or otherwise) of Lessee;
F. To our knowledge and without inquiry except review of a
certification as to the following provided by Lessee, Lessee
is not in default under any agreement to which it is a party
or by which it may be bound, nor in default of any kind in
respect of any financial commitment or obligation (including
obligations under guarantees) which could have a material
adverse effect on the ability of Lessee to perform its
obligations under the Operative Documents nor is there any
fact which by giving of notice or by lapse of time or
otherwise might constitute such default by Lessee;
G. None of the Operative Documents or any other document
executed in connection with the Operative Documents or
contemplated thereby nor any filing required or permitted
thereunder is subject to any registration tax, any stamp
duty or similar tax;
H. To our knowledge and without inquiry except for review of a
certification as to the following provided by
A LAW CORPORATION
[LOGO]
ACG ACQUISITION XII LLC
SANWA BUSINESS CREDIT CORPORATION
______________, 1997
Page -4-
Lessee, Lessee has furnished Lessor and Sanwa business credit
Corporation with consolidated financial statements of Aloha
Airgroup, Inc., the corporate parent of Lessee, reflecting the
financial results of Aloha Airgroup, Inc. and its subsidiaries
(including Lessee) as of December 31, 1996.
I. Lessee is (i) a "United States citizen" as that term is used
and defined in Section 40102(a)(15) of Title 49 of the
United States Code, and (ii) a duly certified United States
Air Carrier pursuant to the provisions of 14 C.F.R. 121;
J. To our knowledge and without inquiry except for review of a
certification as to the following provided by Lessee, no
written information given by Lessee in relation to the
Operative Documents contains any misstatement of fact or omits
to state a fact which would be adverse to the interest of
Lessor or Sanwa Business Credit Corporation or which would be
necessary to make any statement or representation or warranty
contained herein or therein not misleading;
K. To our knowledge and without inquiry except for review of a
certification as to the following provided by Lessee, there has
occurred no event which, with the giving of notice or lapse of
time or both, would constitute an Event of Default or Default
under the Operative Documents;
L. To our knowledge and without inquiry except for review of a
certification as to the following provided by Lessee, Lessee
does not do business under any assumed or trade names;
M. Except for the filing of appropriate financing statements
(UCC-1s) with the Bureau of Conveyances, State of Hawaii and
the filing of the Lease Agreement with the Federal Aviation
Administration, no further actions are necessary to record or
perfect Lessor's interest in the Lease in the United States
or in the State of Hawaii;
N. The Operative Documents do not violate any law relating to
the charging, contracting for or payment or collection of
interest or the like; and
A LAW CORPORATION
[LOGO]
ACG ACQUISITION XII LLC
SANWA BUSINESS CREDIT CORPORATION
______________, 1997
Page -5-
0. In the event that 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 and Sanwa
Business credit corporation by virtue of the assignment of
Lessor's interest in the Aircraft and Lease will be entitled
to the benefits of Section 1110 of Title 11 of the United
States Code.
The opinions expressed above are qualified to the extent that:
1. We are members of the Bar of the State of Hawaii and do not
hold ourselves out as being conversant with, and express no
opinion as to, the laws of any jurisdiction other than those
of the State of Hawaii, the United States of America, and the
general corporate laws of the State of Delaware.
2. With regard to the opinion set forth in subpart A above, we
are relying, in part, on the opinions rendered by Shearman &
Sterling to Lessor and Lender in that certain letter dated
_____________, 1997 and have made no inquiry into the accuracy
of the opinions set forth in that letter; provided, however,
that such reliance is limited to the specific opinions set
forth in that letter.
3. With regard to the opinion set forth in subpart I above, we
are relying, in part, on the opinions rendered by ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ to Aloha Airlines, Inc, in that certain
letter dated January 14, 1997 addressed to Aloha Airlines,
Inc. (a copy of which is appended hereto) and have made no
inquiry into the accuracy of the opinions set forth in that
letter; provided, however, that such reliance is limited to
the specific opinions set forth in that letter.
4. The opinions expressed herein are solely for your benefit and
may not be relied upon in any manner or for any purpose by any
other person.
5. In conducting our examination, we have assumed the genuineness
of all signatures (other than the signatures of Lessee), the
correctness of all certificates, the authenticity of all
documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of
A LAW CORPORATION
[LOGO]
ACG ACQUISITION XII LLC
SANWA BUSINESS CREDIT CORPORATION
______________, 1997
Page -6-
the originals of such copies, and the accuracy and
completeness of all records made available to us by Lessee. In
making our examination of documents and instruments, we have
assumed that each party to such documents and instruments
(other than Lessee and its affiliates) has: (i) the power and
capacity to enter into and perform all its obligations under
such documents and instruments, (ii) duly authorized all
requisite action with respect to such documents and
instruments, and (iii) duly executed and delivered such
documents and instruments.
6. The opinions expressed above are qualified to the extent that
(i) enforceability of the operative Documents and transactions
contemplated thereby may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general
application from time to time affecting the rights of
creditors, lessors and secured parties generally and providing
relief for debtors; and (ii) a particular court may refuse to
grant certain equitable or legal remedies, including without
limiting the generality of the foregoing, specific performance
or foreclosure, with respect to the enforcement of any
provisions of the operative Documents.
7. This opinion letter is limited to the matters stated herein
and no opinion may be implied or inferred beyond the matters
expressly stated herein.
8. The opinions given herein are as of the date hereof and we
assume no obligation to update or supplement such opinions to
reflect any facts or circumstances which may hereafter come to
our attention or any changes in law which may hereafter occur.
Very truly yours,
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ & ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
cc: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇▇
A LAW CORPORATION
SQUIRE, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLB
TELEPHONE (▇▇▇) ▇▇▇-▇▇▇▇ COUNSELLORS AT LAW DIRECT DIAL NUMBER
[ILLEGIBLE] ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
TELEPHONE (▇▇▇) ▇▇▇-▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇ 202/626-6651
Washington, D.C. 200440-407
January 14, 1997
VIA TELECOPIER 808/836-7472
Mr. ▇▇▇▇▇▇▇ Ing
Director, Development and Analysis
Aloha Airlines, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Re: ALOHA AIRLINES, INC. AND ISLANDAIR, INC. REINCORPORATION IN DELAWARE
Dear Mr. Ing:
Aloha Airlines, Inc. ("Aloha") and its sister corporation, IslandAir,
Inc. ("IslandAir") have requested our opinion on whether the change of the
state of incorporation for both Aloha and IslandAir will require the U.S.
Department of Transportation ("DOT") or the Federal Aviation Administration
("FAA") to reissue or otherwise amend the economic operating authority issued
by the DOT to Aloha and IslandAir or the air carrier certificates issued by
the FAA to Aloha and IslandAir. Except for the communication which has
already been sent to the DOT's Office of General Counsel and the possible
exception of Aloha and IslandAir simply advising their respective Principal
Operations Inspectors in Honolulu by letter that Aloha and IslandAir have
been reincorporated in the State of Delaware, the Offices of the General
Counsel of the DOT and of the Chief Counsel of the FAA have advised the
undersigned that no application or other formal document has to be filed with
either the DOT or the FAA.
On the basis of our conveying to the DOT's Office of General Counsel the
information received from you that the name, assets, liabilities, directors,
officers, key personnel and shareholders of both Aloha and IslandAir will
Mr. ▇▇▇▇▇▇▇ Ing
January 14, 1997
Page 2
remain unchanged by reason of this change in their state of incorporation,
DOT's Office of General Counsel has stated that the undersigned need only
send such Office a letter confirming the fact of the continuation of the
status quo with respect to each of the just described elements except for the
state of incorporation. That letter was sent on December 26, 1996.
In our discussion with the FAA's Office of Chief Counsel, the
undersigned was told that no formal communication to the FAA was required,
but that, out of an abundance of caution, Aloha and IslandAir may wish to
send letters to their respective Principal Operations Inspectors in Honolulu
simply informing these FAA employees of the change in the state of
incorporation. It is the undersigned's understanding that such letters are in
preparation and will shortly be sent.
Even apart from the advice received from the Offices of General Counsel
and Chief Counsel of the DOT and FAA, respectively, the undersigned had also
concluded and so advised you that no application or other formal process
would be required to preserve the legal validity of the economic operating
authority and air carrier certificates previously issued to Aloha and
IslandAir. The DOT and FAA have traditionally only evidenced interest in
matters such as reincorporation when they are also accompanied by other
substantial changes in the ownership, management, financial condition or name
of the air carrier. On the basis of the information conveyed to us by your
office, we understand that that did not occur in this instance and thus no
application or other formal process is required.
The undersigned understands that the firm of Char, Sakamato, Ishii and
▇▇▇ has requested and intends to rely on this opinion. The undersigned agrees
that this opinion may be shared with and relied on by Char, Sakamato, Ishii
and ▇▇▇.
Very truly yours,
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
MSS/nlh
SCHEDULE 6
FORM OF LETTER OF CREDIT
-100-
[GRAPHIC] First Hawaiian Bank
International Banking
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
May 20, 1997
BENEFICIARY:
Sanwa Business Credit Corporation
Attention: Senior Vice President, Transportaion Finance
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
Effective May 21, 1997, we hereby establish our Irrevocable Standby
Letter of Credit No. S/B 970039 to Sanwa Business Credit Corporation
("Lender") in accordance with the terms of that certain Security Agreement
(21720) dated as of May 1, 1997 between Lender and Lessor, available by your
draft(s) on First Hawaiian Bank, International Banking, Honolulu, Hawaii at
sight for the account of Aloha Airlines, Inc., ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇, up to an aggregate amount of U.S.$228,000.00 (Two Hundred
Twenty-Eight Thousand United States Dollars) accompanied by:
1) A statement purportedly signed by a duly authorized officer
of Sanwa Business Credit Corp. certifying:
"An "Event of Default" has occurred and is continuing
under that certain Lease Agreement 809 dated as of
_______, 19__, by and between Aloha Airlines, Inc. and
ACG Acquisition XII LLC ("Lessor"), as assigned to Lender
in accordance with the terms of that certain Security
Agreement (21720) dated as of May 1, 1997 between Lender
and Lessor."
2) This Letter of Credit.
Payment of amounts under this Letter of Credit shall be made in full
without any offset or counterclaim whatsoever and free and clear of any
deductions or withholdings. Until all amounts which may be or become payable
to the Lessor or the Lender by the Lessee have been irrevocably paid in full,
we shall not by virtue of this Letter of Credit be subrogated to any of the
Lessor's or the Lender's rights or claim in competition with the Lessor or
the Lender against the Lessee.
It is a condition of this Letter of Credit that it shall be deemed
automatically extended without amendment for an additional period of one (1)
year from the present or each future expiration date unless at least thirty
(30) days prior to any such expiry date, we shall notify you in writing by
certified mail at the above address, that we elect not to consider this
Letter of Credit renewed for such additional period. Upon receipt of such
notice, you may draw hereunder by means of your draft on us at sight
accompanied by this Letter of Credit and your written certification stating:
Aloha Airlines, Inc.
S/B 970039
Page 2
"Sanwa Business Credit Corporation has received a notice of
non-renewal from First Hawaiian Bank, Honolulu, Hawaii to its
Letter of Credit No. S/B 970039."
Partial drawings permitted.
All drafts must bear the clause "Drawn under Credit No. S/B 970039
of First Hawaiian Bank, Honolulu, Hawaii dated May 20, 1997."
This Letter of Credit is transferable only by Beneficiary. Notice of
such Transfer, if any, must be mailed immediately to First Hawaiian Bank,
International Banking, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
All banking charges relating to this Letter of Credit are for the
account of the Aloha Airlines, Inc.
Alternatively, drawings may be sent via fax to our International
Banking at Fax No. (▇▇▇) ▇▇▇-▇▇▇▇, originals to follow by mail. Drawings by
fax or by presentment of original documents must be received by First
Hawaiian Bank, International Banking on or before 3:00 P.M. Hawaii Standard
Time on December 31, 1997, the expiration date or any automatically extended
date.
Except as otherwise expressly stated, this Credit is subject to the
"Uniform Customs and Practice for Documentary Credits" (1993 Revision)
International Chamber of Commerce Publication No. 500.
We hereby engage with you that all drafts drawn under and in
compliance with the terms and conditions of this Credit shall be duly honored
if drawn and presented on or before December 31, 1997, the expiration date,
or any automatically extended date, at our International Banking counters in
Honolulu, Hawaii.
Sincerely,
FIRST HAWAIIAN BANK
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
------------------------------------ ------------------------------------
Authorized Signature Authorized Signature
SCHEDULE 7
FORM OF SEMI-ANNUAL STATUS REPORT
AIRCRAFT TYPE REG. ▇▇▇▇ SERIAL NO. MONTH ENDING
Boeing 737-2Q9 N809AL 21720 ..........
1. AIRCRAFT UTILIZATION:
(a) Airframe Total Flight Hours .............................
(b) Airframe Total Cycles .............................
(c) Airframe Flight Hours for Month .............................
(d) Airframe Flight Cycles for Month .............................
2. POWERPLANT STATUS: NO.1 NO.2
(a) Serial Nos. of Delivered Engines ...... ......
(b) Serial Nos. of Replacement Engines ...... ......
(if applicable)
(c) Serial Nos. of Installed Engines ...... ......
(if different from (a) or (b) above)
(d) Current Location of Delivered or ...... ......
Replacement Engines (as applicable)
(if not installed on Airframe)
(e) Total Time Since New of Delivered ...... ......
or Replacement Engines (as applicable)
(f) Total Cycles Since New of Delivered ...... ......
or Replacement Engines (as applicable)
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(g) Total Flight Hours for the Month for ...... ......
each Delivered or Replacement Engine
(as applicable)
(h) Total Cycles for the Month for each ...... ......
Delivered or Replacement Engine
(as applicable)
(i) Serial No. of Delivered APU ........
(j) Serial No. of Replacement APU ........
(if applicable)
(k) Serial No. of Installed APU ........
(if different from (a) or (b) above)
(l) Current Location of Delivered or ........
Replacement APU (as applicable)
(if not installed on Airframe)
(m) Total Time Since New of Delivered ........
or Replacement APU (as applicable)
(n) Total Cycles Since New of Delivered ........
or Replacement APU (as applicable)
(o) Total Hours for the Month for ........
Delivered or Replacement APU
(as applicable)
(p) Total Cycles for the Month for ........
Delivered or Replacement APU
(as applicable)
3. ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:
(a) Routine Checks (A and above) performed during Month:
(b) Airworthiness Directives complied with during Month:
-102-
(c) Service Bulletins complied with during Month:
4. AIRCRAFT DAMAGE OR ENGINE CHANGES:
Details of any repairs carried out to the Aircraft beyond SRM limits
and Engine changes, giving reasons for repair or change:
5. UPCOMING MAINTENANCE CHECKS
(a) Maintenance Checks (C segment and above) scheduled or expected to be
performed on the Airframe during the next 12 months:
(b) Scheduled shop visits or heavy maintenance visits scheduled or
expected to be performed on the Engines during the next 12 months:
(c) Overhauls, or replacements scheduled or expected to be performed on
the APU or Landing Gear during the next 12 months:
Date: __________, ____ CERTIFIED FOR AND ON BEHALF OF
ALOHA AIRLINES, INC.
By: _________________________________
Name:
Title:
-103-
CERTIFICATE OF ACCEPTANCE 809
This Certificate of Acceptance 809 is delivered on the date set forth in
paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
Acquisition XII LLC (the "LESSOR") pursuant to Lease Agreement 809, dated
May 21, 1997, between the Lessor and the Lessee (the "AGREEMENT").
Capitalized terms used but not defined in this Certificate of Acceptance
809 shall have the meaning given to such terms in the Agreement.
1. DETAILS OF ACCEPTANCE
The Lessee hereby confirms to the Lessor that the Lessee has at 10:27
a.m. H.S.T. on this 21st day of May, 1997, over international
waters, accepted the following, in accordance with the provisions of
the Agreement and the Annex:
(a) Airframe: Boeing 737-2Q9 airframe, Manufacturer's Serial
No. 21720 and FAA Registration No. N809AL;
(b) Engines: two Pratt& Whitney JT8D-15 Engines, bearing
Manufacturer's Serial Nos. P688676 and P688677, each
having 750 or more rated take-off horsepower;
(c) All Parts installed on, attached to or appurtenant to the
Airframe and Engines; and
(d) Aircraft Documents as specified in Schedule 1 - Part 2 of the
Agreement.
2. LESSEE'S CONFIRMATION The Lessee confirms to the Lessor that as at the
time indicated above, being the time of Delivery:
(a) the Lessee's representations and warranties contained in
Clauses 2.1 and 2.2 of the Agreement are hereby repeated;
(b) the Aircraft is insured as required by the Agreement; and
(c) the Lessee confirms that there have been affixed to the
Aircraft and the Engines the fireproof notices required by the
Agreement.
3. LESSOR'S CONFIRMATION The Lessor confirms to the Lessee that, as at
the time indicated above, being the time of Delivery, the Lessor's
representations and warranties contained in Clause 2.4 of the
Agreement are hereby repeated.
IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 809 on the date shown at the beginning of this Agreement.
SIGNED on behalf of
ACG ACQUISITION XII LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Manager
SIGNED ON behalf of
ALOHA AIRLINES, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
-2-
IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 809 on the data shown at the beginning of this Certificate.
SIGNED on behalf of
ACG ACQUISITION XII LLC
By:
--------------------------------------
Name:
Title:
SIGNED on behalf of
ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: SR. VICE PRESIDENT FINANCE &
PLANNING AND CFO
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: VICE PRESIDENT PLANNING & DEVELOPMENT
-2-
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SECURITY AGREEMENT (21720)
dated as of May 1, 1997
between
ACG ACQUISITION XII LLC,
as Borrower
and
SANWA BUSINESS CREDIT CORPORATION,
as Lender
-------------------------------------------------------------------------------
VEDDER, PRICE, ▇▇▇▇▇▇▇ & KAMMHOLZ
CHICAGO
TABLE OF CONTENTS
Page
1. Defined Terms .........................................................................1
2. Grant of Security Interest ............................................................6
3. Limitations on Lender's Obligations ..................................................10
4. Representations and Warranties .......................................................10
(a) Title; No Other Security Interests ......................................10
(b) Perfected First Priority Security Interest ..............................10
(c) Contracts
5. Covenants
(a) Further Documentation; Pledge of Instruments and Chattel Paper ..........11
(b) Indemnification .........................................................12
(c) Notices .................................................................12
(d) Pledge of Collateral ....................................................12
6. Lender's Appointment as Attorney-in-Fact .............................................12
(a) Powers ..................................................................12
(b) Other Powers ............................................................13
(c) No Duty on Lender's Part ................................................14
7. Performance by Lender of Borrower's Obligations ......................................14
8. Proceeds .............................................................................14
9, Remedies .............................................................................14
10. Limitation on Duties Regarding Preservation of Collateral ............................15
11. Powers Coupled with an Interest ......................................................16
12. Severability .........................................................................16
13. Paragraph Headings ...................................................................16
14. No Waiver- Cumulative Remedies .......................................................16
i
Page
15. Waivers and Amendments; Successors and Assigns; Governing Law ........................16
16. Submission to Jurisdiction; Waivers ..................................................16
17. Notices ..............................................................................17
ii
SECURITY AGREEMENT (21720)
THIS SECURITY AGREEMENT (21720), dated as of May 1,
1997, is made by ACG ACQUISITION XII LLC, a Delaware limited liability
company (the "Borrower"), in favor of SANWA BUSINESS CREDIT
CORPORATION, a Delaware corporation (the "Lender").
W I T N E S S E T H :
WHEREAS, the Borrower and the Lender are parties to that
certain Loan Agreement (21720), dated as of May 1, 1997 (as amended,
supplemented or otherwise modified from time to time, the "LOAN AGREEMENT").
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed
to make a loan to the Borrower upon the terms and subject to the conditions
set forth therein, to be evidenced by the Note issued by the Borrower
thereunder, and it is a condition precedent to the obligation of the Lender
to make its loan to the Borrower under the Loan Agreement that the Borrower
shall have executed and delivered this Security Agreement to the Lender.
NOW, THEREFORE, in consideration of the premises and to induce
the Lender to enter into the Loan Agreement and to make its loan to the
Borrower thereunder, the Borrower hereby agrees with the Lender as follows:
1. DEFINED TERMS. For purposes hereof, the following terms
shall have the following meanings:
"AFFILIATE": with respect to any Person, any other Person who,
directly or indirectly, controls or is controlled by or is under common
control with, such Person. For purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH"), with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"AIRCRAFT": the Aircraft specified by make, model, serial
number and U.S. Registration Number in the Lease.
"AIRCRAFT DOCUMENTS": all books, manuals, logs, records,
writings, data, information and other like property (and any and all
additions, renewals, revisions and replacements) relating to the
Aircraft, Engines or any Part (including, without limitation, any
warranties).
"AIRFRAME": as defined in the Lease.
[Security Agreement (21720)]
"BASIC AGREEMENTS": this Agreement, the Note, the Loan
Agreement, the Pledge Agreement, the Guarantee, the Purchase Agreement,
the Lease, the ▇▇▇▇ of Sale, the FAA ▇▇▇▇ of Sale and the Letter of
Credit (if any), together with all notices, consents, certificates and
other documents from time to time issued or entered into by the
Borrower pursuant to or in connection with any thereof.
"▇▇▇▇ OF SALE": the full Warranty ▇▇▇▇ of Sale (substantially
in the form attached to the Purchase Agreement as Exhibit A) for the
Aircraft, dated the Closing Date, executed by the Seller and the Seller
Beneficiary in favor of Borrower specifically referencing the Airframe
and each Engine constituting a part of the Aircraft.
"BUSINESS DAY": a day, other than a Saturday or Sunday or a
day on which banks in Chicago,
Illinois, New York, New York or
Honolulu, Hawaii are required or authorized to be closed.
"CITIZEN OF THE UNITED STATE": as defined in Section
40102(a)(15) of Title 49 of the United States Code.
"CLOSING DATE". the date on which the Loan is made under the
Loan Agreement.
"CODE" means the Uniform Commercial Code as from time to time
in effect in the State of
Illinois.
"COLLATERAL" shall have the meaning assigned to it in
Section 2 of this Security Agreement.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"DEFAULT": any "Default" under the Loan Agreement.
"DEFAULT RATE": the prime rate for the time being charged by
Citibank, N.A., plus 3.0 % (compounded monthly and calculated on the
basis of a 360-day year and the actual number of days elapsed).
"EARLY TERMINATION OPTION": as defined in the Lease.
"ENGINE" or "ENGINES": as defined in the Lease.
"ENGINE LOSS": as defined in the Lease.
2
[Security Agreement (21720)]
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EVENT OF DEFAULT": ally "Event of Default" under the Loan
Agreement.
"EVENT OF LOSS PROCEEDS": the proceeds of any insurance, or
any compensation, requisition, or similar payment, arising in respect
of a Total Loss or and Engine Loss.
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or
payable to or in respect of the Borrower, its Affiliates, successors
and permitted assigns and its directors, officers, employees, servants
and agents pursuant to Section 10 of the Lease, (ii) proceeds of public
liability insurance in respect of the Aircraft payable as a result of
insurance claims made, or losses suffered, by the Borrower, which are
payable directly to or in respect of the Borrower, or its Affiliates,
successors and permitted assigns and its directors, officers,
employees, servants and agents, respectively, for its own account,
(iii) proceeds of insurance maintained with respect to the Aircraft by
the Borrower or any Affiliate thereof for its or their own account or
benefit, (iv) any interest that pursuant to the Basic Agreements may
from time to time accrue in respect of any of the amounts described in
clauses (i) through (iii) above, (v) the proceeds from the enforcement
of any right to enforce the payment of any amount described in clauses
(i) through (iv) above (provided that the rights referred to in this
clause (v) shall not be deemed to include the exercise of any remedies
provided for in the Lease other than the right to ▇▇▇ for specific
performance of any covenant to make such payment or to ▇▇▇ for damages
in respect of the breach of any such covenant), and (vi) any right to
exercise any election or option or make any decision or determination,
or to give or receive any notice, consent, waiver or approval, or to
take any other action in respect of, but in each case, only to the
extent relating to, any Excluded Payments (provided that the rights
referred to in this clause (vi) shall not be deemed to include the
exercise of any remedies provided for in the Lease other than the right
to ▇▇▇ for specific performance of any covenant to make such payment or
to ▇▇▇ for damages in respect of the breach of any such covenant),
"FAA": the United States Federal Aviation Administration and
any successor agency or agencies thereto.
"FAA ▇▇▇▇ OF SALE": the ▇▇▇▇ of Sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the FAA on the
Closing Date executed by the Seller in favor of Borrower.
"FAIR MARKET SALES VALUE": the value which would be obtained
in an arm's-length sale between an informed and willing buyer (other
than the Borrower or an Affiliate
3
[Security Agreement (21720)]
thereof) under no compulsion to buy and an informed and willing seller
unaffiliated with such buyer under no compulsion to sell.
"GOVERNMENTAL AUTHORITY": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTOR": Aviation Capital Group Corp., a Delaware
corporation.
"GUARANTEE": that certain Guarantee Agreement (21720),
substantially in the form of Exhibit E to the Loan Agreement, dated as
of the date hereof, executed by Guarantor in favor of Lender.
"LEASE": Lease Agreement 809 dated May 21, 1997, between
Borrower, as lessor, and Lessee, as lessee, with respect to one 1979
Boeing 737-2Q9 aircraft bearing Manufacturer's Serial Number 21720 and
U.S. Registration Number N809AL, as amended, modified or supplemented
from time to time.
"LEASE EVENT OF DEFAULT": has the same meaning as an "Event of
Default" as defined in the Lease,
"LENDER": Sanwa Business Credit Corporation and each other
Lender party hereto from time to time, and their respective successors
and assigns.
"LESSEE": Aloha Airlines, Inc., a Delaware corporation.
"LESSOR LIEN(S)": as defined in the Lease.
"LETTER OF CREDIT": as defined in the Lease.
"LOAN": the loan made by Lender to Borrower pursuant to
Section 2.1 of the Loan Agreement.
"MANUFACTURER": The Boeing Company, a Delaware corporation.
"OBLIGATIONS" means the unpaid principal amount of, and
interest on (including, without limitation, interest accruing after the
maturity of the Loan and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like Proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loan and any and all other obligations and
liabilities of the Borrower to the Lender, whether direct or
4
[Security Agreement (21720)]
indirect, absolute or contingent, recourse or non-recourse, due or to
become due; or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Loan Agreement, the Note,
this Security Agreement or any other Basic Agreement and any other
document made, delivered or given by the Borrower in connection
therewith or herewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel
to the Lender that are required to be paid by the Borrower pursuant to
the terms of the Loan Agreement) or otherwise.
"PART": as defined in the Lease.
"PERMITTED LIEN(S)": as defined in the Lease.
"PERSON": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature,
"PLEDGE AGREEMENT": that certain Pledge Agreement and
Irrevocable Proxy (21720), dated as of the date hereof, between the
Pledgors and Lender, substantially in the form of Exhibit D to the Loan
Agreement.
"PLEDGORS": collectively, Pacific Mutual Life Insurance
Company, PM Group Life Insurance Company, ACG/▇▇ ▇▇ LLC and ACG
Acquisition VI LLC,
"PROCEEDS" shall have the meaning specified in the Code.
"PURCHASE AGREEMENT": that certain Aircraft Purchase Agreement
dated as of May 21, 1997 between Borrower, as buyer, and Seller, as
seller, as modified, amended or supplemented in accordance with the
terms of the Basic Agreements.
"RENTAL": Basic Rent and any payment of interest as a result
of the late payment of the foregoing required pursuant to the Lease.
"REQUIRMENT OF LAW": as to any Person, the organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator, court, or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"SECURITY AGREEMENT" or "AGREEMENT" means this Security
Agreement, as amended, supplemented or otherwise modified from time to
time.
5
[Security Agreement (21720)]
"SECURITY DOCUMENTS": this Security Agreement, the Guarantee
and the Pledge Agreement.
"SECURITY INTEREST". any mortgage, charge, pledge,
hypothecation, assignment, deposit arrangement, right of possession or
detention, right of set-off (but excluding any right of set-off,
consolidation, merger or combination of accounts arising in flavor of
a bank by operation of law), encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing).
"SELLER", First Security Bank, National Association, not in
its individual capacity but solely as owner trustee.
"SELLER BENEFICIARY": 1980 Aircraft Investors, a California
limited partnership.
"STATE OF REGISTRATION": the United States or any other state
in which the Aircraft may be registered in accordance with the terms of
the Lease.
"SUBSIDIARY": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one Or more intermediaries, or both, by
such Person.
"TAXES": all present and future taxes, levies, imposts,
duties or charges of any nature whatsoever, and wheresoever imposed,
and any franchise, transfer, sales, use, business, occupation, excise,
personal property, real property, stamp, withholding or other tax
imposed by any national or regional taxing or fiscal authority or
agency, together with tax imposed by any national or regional taxing or
fiscal authority or agency, together with any penalties, additions to
tax, fines or interest thereon; and "taxes" and "taxation" shall be
construed accordingly.
"TOTAL LOSS": as defined in the Lease.
"US$" AND "DOLLARS": the lawful currency of the United States
of America.
2. GRANT OF SECURITY INTEREST.
6
[Security Agreement (21720)]
(a) GRANT OF SECURITY INTEREST. As collateral security for the
prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations, the
Borrower hereby grants to the Lender a security interest in all of the
following property now owned or at any time hereafter acquired by the
Borrower or in which the Borrower now has or at any time in the future
may acquire any right, title or interest (collectively, the
"COLLATERAL"):
(1) The Aircraft (being one 1979 Boeing Model 737-2Q9 aircraft
bearing Manufacturer's Serial Number 21720 and U.S. Registration Number
N809AL, together with two ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model JT8D-15 Engines bearing
Manufacturer Serial Numbers P688676 and P688677, respectively, each of
which Engines is of 750 or more rated takeoff horsepower or the
equivalent of such horsepower as the same is now and will hereafter be
constituted, whether now owned by the Borrower or hereafter acquired,
leased or intended to be leased under the Lease, and in the case of
such Engines, whether or not any such Engine shall be installed in or
attached to the Airframe or any other airframe, together with (a) all
avionics and parts of whatever nature, which are from time to time
incorporated or installed in or attached to the Aircraft and Engines,
whether now owned or hereafter acquired, and all substitutions,
renewals and replacements of and additions, improvements, accessions
and accumulations to the Airframe and Engines and (b) all logs, manuals
and data and inspection,, modification and overhaul records maintained
in respect of the Aircraft, including the Engines, including, without
limitation, all such logs, manuals, data and records required to be
maintained by the FAA or by the applicable regulatory agency or body of
any other jurisdiction in which the Aircraft may then be registered;
(2) All of Borrower's right, title and interest in, to and under
the Lease, including, but not limited to:
(a) any and all Rentals, insurance and condemnation
proceeds, warranty payments, payments in the nature of maintenance
or other reserves, payments upon a Total Loss or Engine Loss. and
other moneys due or to become due (including, without limitation,
any and all amounts owed by Lessee pursuant to Section 12.4(b) of
the Lease in connection with the redelivery of the Aircraft), and
any and all claims, rights, powers, remedies, title and interest
of the Borrower in and to or under or arising out of the Lease
(including, without limitation, all claims for damages or other
sums arising upon the sale or other disposition of or loss of use
of or requisition of title or use of the Aircraft, Engines, Parts
and related equipment and Aircraft Documents at any time subject
to the Lease) and any and all credit support or collateral
security of whatever type or description (whether in the nature of
cash, a guarantee, letter of credit, credit insurance, lien on or
security interest in any property or otherwise) (including,
without limitation,
7
(Security Agreement (21720)]
the Security Deposit (as defined in the Lease) and the Letter of
Credit (as defined in the Lease)) which the Borrower now or
hereafter may hold to further assure or secure the obligations of
the Lessee under the Lease,
(b) all rights, powers, privileges, remedies and other
benefits of the Borrower under the Lease and all rights to make
determinations, exercise options or elections, give or withhold
consents, waivers and approvals, give notices and exercise
remedies (including the right to declare or exercise remedies with
respect to a Default or an Event of Default under the Lease and to
repossess any property), to appoint any appraiser or to take any
other action under or in respect of the Lease or accept any
surrender or redelivery of the Aircraft, Engines or Parts or
Aircraft Documents, as well as all the rights, powers and remedies
on the part of the Borrower, whether arising under the Lease or by
statute or at law or in equity or otherwise: as a result of any
Default or Event of Default under the Lease, and
(c) all the Borrower's rights and interests in any sublease
under the Lease;
(3) All right, title, interest, claims and demands of the
Borrower in, to and under
(a) the Purchase Agreement,
(b) the ▇▇▇▇ of Sale and the FAA ▇▇▇▇ of Sale, and
(c) any and all other contracts, agreements and instruments
relating to the Aircraft and Engines or any rights or interests
therein to which the Borrower is now or may hereafter be a party,
together with all rights, powers, privileges, licenses, easements,
options and other benefits of the Borrower under each contract,
agreement and instrument referred to in this clause (3), including,
without limitation, the right to receive and collect all payments to
the Borrower thereunder now or hereafter payable to or receivable by
the Borrower pursuant thereto and the right to make all waivers and
agreements, to give and receive notices and other instruments or
communications, or to take any other action under or in respect of any
thereof or to take such action upon the occurance of a default
thereunder, including the commencement, conduct and consummation of
legal, administrative or other proceedings, as shall be permitted
thereby or by law, and to do any and a) I other things which the
Borrower is or may be entitled to do thereunder and any right to
8
[Security Agreement (21720)]
restitution from the Lessee or any other Person in respect of any
determination of invalidity of any thereof;
(4) All rents, issues, profits, revenues and other income of the
property subjected or required to be subjected to the Security Interest
of this Security Agreement including all payments or proceeds payable
to the Borrower after termination of the Lease with respect to the
Aircraft as the result of the sale, lease or other disposition thereof,
and all estate, right, title and interest of every nature whatsoever of
the Borrower in and to the same;
(5) Without limiting the generality of the foregoing, all
insurance and requisition proceeds with respect to the Aircraft or any
part thereof, including but not limited to the insurance required under
Section 9 of the Lease;
(6) Without limiting the generality of the foregoing, all monies
and securities from time to time deposited or required to be deposited
with the Lender pursuant to any terms of this Security Agreement or the
Lease or required hereby or by the Lease to be held by the Lender
hereunder as security for the obligations of the Lessee under the Lease
or of the Borrower hereunder or under the Loan Agreement; and
(7) All Proceeds of the foregoing.
Notwithstanding the foregoing, in no event shall Collateral
include Excluded Payments. Concurrently with the delivery hereof, the
Borrower is delivering to the Lender the original executed chattel paper
counter-part of the Lease and initial Lease Supplement (to each of which a
chattel paper receipt is attached), the Security Deposit or, if applicable,
the Letter of Credit, and an executed copy of the Purchase Agreement.
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Lender, and its successors and assigns, in trust for the equal and
proportionate benefit and security of the holders, from time to time, of one
or more Notes, without any preference, distinction or priority of any one
Note over any other by reason of priority of time of issue, sale,
negotiation, date of maturity thereof or otherwise for any reason whatsoever,
and for the uses and purposes and in all cases and as to all property
specified in paragraphs (1) through (6), inclusive, above, subject to the
terms and provisions set forth in this Security Agreement.
(b) RESERVED RIGHTS. Notwithstanding the provisions of
clause (a) hereof, whether or not an Event of Default shall have
occurred and be continuing: the Borrower shall have the right
(together Aith and not to the exclusion of the Lender) (i) to
receive from the Lessee copies of all notices, certificates,
reports, filings, opinions of counsel and other documents and all
information which any thereof is permitted or required to give or
9
[Security Agreement (21720)]
furnish to the Borrower pursuant to any Basic Agreement, (ii) to
exercise inspection rights pursuant to the Lease, (iii) to provide
or carry insurance in addition to that required to be carried by
the Lessee pursuant to the Lease and (iv) to consent or to
withhold consent to any amendment, modification or waiver of the
provisions of the Lease.
3. LIMITATIONS OF LENDER'S OBLIGATIONS. Notwithstanding
anything to the contrary contained herein, the Borrower shall remain liable
under each of the agreements pledged hereby to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all
in accordance with and pursuant to the terms and provisions of each such
agreement, to die same extent as if this Security Agreement had not been
executed. The Lender shall have no obligation or liability under any such
agreement by reason of or arising out of this Security Agreement or the
receipt by the Lender of any payment relating to such agreement pursuant
hereto, nor shall the Lender be obligated in any manner to perform any of the
obligations of the Borrower under or pursuant to any agreement, to make any
payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any
party under any such agreement, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
4. REPRESENTATIONS AND WARRANTIES, The Borrower hereby
represents and warrants that:
(a) Title: No Other Security Interests. Except for the
Security Interest granted to the Lender pursuant to this Security
Agreement and the other Security Interests permitted to exist on
the Collateral pursuant to the Loan Agreement, the Borrower has
not granted any Security Interest in, or other claims in respect
of, the Collateral. No security agreement financing statement or
other public notice with respect to all or any part of the
Collateral has been placed by the Borrower on file or of record in
any public office, except such as may have been filed in favor of
the Lender, pursuant to this Security Agreement.
(b) PERFECTED FIRST PRIORITY SECURITY INTEREST. The
Borrower will take such action as the Lender reasonably determines
necessary in order to perfect a first priority (subject, in the
case of the Aircraft, to Permitted Liens (other than Lessor Liens
arising by, through or under the Borrower) and any other Security
Interest created by Seller, Seller Beneficiary, Lessee or arising
through or under any such Person) Security Interest in the
Collateral in favor of the Lender.
(c) CONTRACTS. Other than consents obtained and delivered
to the Lender pursuant to the Loan Agreement, to the Borrower's
knowledge no consent of any party (other than the Borrower) to any
agreement pledged hereby is required, or is purported to
10
[Security Agreement (21720)]
be required, in connection with the execution, delivery and
performance of this Security Agreement. Assuming the due
authorization, execution and delivery by the other parties
thereto, each agreement pledged hereby to which the Borrower is a
party is in full force and effect and constitutes a legal, valid
and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally. No consent or authorization of, filing with or
other act by or in respect of any Governmental Authority
applicable to it is required in connection with the execution,
delivery and performance by the Borrower or the validity or
enforceability against the Borrower of any of such agreements
other than those which have been duly obtained, made or performed.
The Borrower is not in default or likely to become in default in
the performance or observance of any of the terms thereof. The
Borrower has fully performed all of its obligations owing up to
this date under each such agreement. No defense, offset,
counterclaim or claim has been asserted or alleged against the
Borrower as to any such agreement. The Borrower has delivered to
the Lender a complete and correct copy of each such agreement,
including all amendments, supplements and other modifications
thereto.
5. COVENANTS. The Borrower covenants and agrees with the Lender
that, from and after the date of this Security Agreement until the Obligations
are paid in full:
(a) FURTHER DOCUMENTATION, PLEDGE OF INSTRUMENTS AND
CHATTEL PAPER. At any time and from time to time, upon, the
written request of the Lender, and at the sole expense of the
Borrower, the Borrower will promptly and duly execute and deliver
such further instruments and documents and take such further
action as the Lender may reasonably request for the purpose of
obtaining or preserving the full benefits of this Security
Agreement and of the rights and powers herein granted, including,
without limitation, the filing of financing or continuation
statements under the Uniform Commercial Code in effect in the
applicable jurisdiction with respect to the Security Interests
created hereby to the extent permitted by applicable law. A
carbon, photographic or other reproduction of this Security
Agreement shall be sufficient as a financing statement for filing
in any jurisdiction, to the extent permitted by applicable law. If
any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any Instrument or
Chattel Paper (as such terms are defined under the Code), such
Instrument or Chattel Paper shall be immediately delivered to the
Lender, duly endorsed in a manner satisfactory to the Lender, to
be held as Collateral pursuant to this Security Agreement. The
Borrower shall not assign, delegate, pledge, grant a Security
Interest in or otherwise encumber any of its rights or obligations
with respect to the Collateral, except for the Security Interest
granted to Lender pursuant to this Security Agreement, Permitted
Liens (other than Lessor Liens arising by, through or under the
(Security Agreement (21720)]
Borrower) and any other Security Interest permitted to exist on
the Collateral pursuant to the Loan Agreement.
(b) INDCMNIFICATION. In any suit, proceeding or action
brought by the Lender with respect to any of the Collateral for
any sum owing thereunder, or to enforce any provisions of any
contract pledged hereby, the Borrower will save, indemnify and
keep the Lender harmless for, from and against any and all
expenses (including, without limitation, reasonable attorneys'
fees), loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction or liability whatsoever of
the account debtor or obligor thereunder, arising out of a breach
by the Borrower of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing to or
in favor of such account debtor or obligor or its successors from
the Borrower other than expenses, loss or damage to the extent
caused by the gross negligence or willful misconduct of the Lender.
(c) NOTICES. The Borrower will advise the Lender
promptly, in reasonable detail, at its address set forth in the
Loan Agreement, of any Security Interest (other than Security
Interests created hereby or permitted under the Loan Agreement)
on, or claim asserted against, any of the Collateral known to it.
(d) PLEDGE OF COLLATERAL. The Borrower hereby covenants
that it shall not, so long as this Security Agreement shall remain
in effect, assign, pledge, grant a Security Interest in or
otherwise encumber, any of its right, title or interest with
respect to the Collateral, to anyone other than the Lender, or
delegate any of its obligations with respect to the Collateral,
and that it shall not, without the prior written consent of the
Lender and subject to Section 2(b) hereof, enter into any
agreement amending or supplementing the Lease, execute any waiver
or modification of, or consent under, the terms of, or exercise
any rights, powers or privileges under, the Lease, settle or
compromise, any claim arising under the Lease, terminate the Lease
(including, without limitation, by way of exercise of the Early
Termination Option) or submit or consent to the submission of any
dispute, difference or other matter arising tinder or in respect
of the Lease to arbitration thereunder.
6. LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. The Borrower hereby irrevocably constitutes
and appoints the Lender and any officer or agent thereof, with
full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the
place and stead of the Borrower and in the name of the Borrower or
in its own name, from time to time ill the Lender's discretion,
for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute
any and all documents
12
[Security Agreement (21720)]
and instruments which may be necessary or desirable to accomplish
the purposes of this Security Agreement, and, without limiting the
generality of the foregoing, the Borrower hereby gives the Lender
the power and right, on behalf of the Borrower, without notice to
or assent by the Borrower, to do the following:
(i) in the case of any Collateral, at any time
when any Event of Default shall have occurred and is
continuing, in the name of the Borrower or its own name,
or otherwise, to take possession of and endorse and
collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under any part
of the Collateral or with respect to any other Collateral
and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise
deemed appropriate by the Lender for the purpose of
collecting any and all such moneys due under any part of
the Collateral or with respect to any other Collateral
whenever payable;
(ii) to pay or discharge taxes and Security
Interests levied or placed on or threatened against the
Collateral to the extent that the Borrower is obligated
under any of the Basic Agreements to pay or discharge
such taxes and Security Interests, and such taxes or
Security Interests are not timely paid or satisfied by
the Borrower; and
(iii) subject to Section 2(b) hereof, upon the
occurrence and during the continuance of any Event of
Default (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and
all moneys due or to become due thereunder directly to
the Lender or as the Lender shall direct; (B) to ask or
demand for, collect, receive payment of and receipt for,
any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of
any Collateral; (C) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court
of competent jurisdiction to collect the Collateral or
any thereof and to enforce any other right in respect of
any Collateral; and (D) to defend any suit, action or
proceeding brought against the Borrower with respect to
any Collateral; and to do, at the Lender's option and the
Borrower's expense, at any time, or from time to time,
all acts and things which the Lender deems necessary to
protect, preserve or realize upon the Collateral
(including, without limitation, to perform, Or cause to
be performed, all or any part of the obligations and
agreements of the Borrower under the Lease, without
releasing the Borrower therefrom) and the Lender's
Security Interests thereon and to effect the intent of
this Security Agreement, all as fully and effectively as
the Borrower might do and subject to the standard of care
set forth in paragraph 10 hereof.
13
[Security Agreement (21720)]
This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) OTHER POWERS. The Borrower also authorizes the
Lender, at any time and from time to time, to execute, in
connection with the sale provided for in Section 9 hereof, any
endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) NO DUTY ON LENDER'S PART. The powers conferred on
the Lender hereunder are solely to protect the Lender's interests
in the Collateral and shall not impose any duty upon the Lender to
exercise any such powers. The Lender shall be accountable only for
amounts that it actually receives as a result of the exercise of
such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrower for any
act or failure to act hereunder, except for its own gross
negligence or willful misconduct.
7. PERFORMANCE BY LENDER OF BORROWER'S OBLIGATIONS. If
the Borrower fails to perform or comply with any of its
agreements contained herein and the Lender, as provided for by
the terms of this Security Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Lender incurred in connection with
such performance or compliance, together with interest thereon at
the Default Rate, shall be payable by the Borrower to the Lender
on demand and shall constitute Obligations secured hereby.
8. PROCEEDS. It is agreed that if an Event of Default
shall occur and be continuing (a) all proceeds received by the
Borrower consisting of cash, checks and other near-cash items
shall be held by the Borrower in trust for the Lender, segregated
from other funds of the Borrower, and shall, forthwith upon
receipt by the Borrower, be turned over to the Lender in the exact
form received by the Borrower (duly endorsed by the Borrower to
the Lender, if required), and (b) any and all such proceeds
received by the Lender (whether from the Borrower or otherwise)
may, in the sole discretion of the Lender, be held by the Lender
as collateral security for, and/or then or at any time thereafter
may be applied by the Lender against, the Obligations (whether
matured or unmatured) in accordance with the provisions of the
Loan Agreement.
9. REMEDIES. If an Event of Default shall occur and be
continuing, the Lender may exercise, in addition to all other
rights and remedies granted to it in this Security Agreement and
in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the
foregoing, the Lender, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law
14
(Security Agreement (21720)]
referred, to below) to or upon the Borrower or any other Person
(all and each of which demands, defenses, advertisements and
notices Borrower hereby waives), may in such circumstances, and
subject in all respects to the rights of Lessee (and any
sublessee) under the Lease, forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
including; without limitation entering upon the premises where all
or any part of the Collateral is located and taking immediate
possession of and removing the same (together with any engine or
any part which is not an Engine or a Part but which is installed
on an Aircraft subject to the rights of the owner, lessor or
secured party of such engine or part, provided that such engine or
part shall be held for the account of any such owner, lessor or
secured party or, if owned by Borrower, such engine or pan may at
the option of Lender, be exchanged for an Engine or Part) by
summary proceedings or otherwise (and/or, at Lender's option,
storing the same at Lessee's premises (at Borrower's expense)
until disposal thereof by Lender), all without liability accruing
to Lender, and/or may forthwith sell, lease, amend, assign, give
option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of The
foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of the Lender or
elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on, credit or
for future delivery without assumption of any credit risk. The
Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Borrower,
which right or equity is hereby waived. or released. The Borrower
further agrees, at the Lender's request, to assemble the
Collateral and make it available to the Lender at places which
the Lender shall reasonably select, whether at the Borrower's
premises or elsewhere. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given, and the Lender
agrees to give such notice to the Borrower in any event, at least
20 days before such sale or other disposition. The Borrower shall
remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the
Obligations and the reasonable fees and disbursements of any
attorneys employed by the Lender to collect such deficiency.
Notwithstanding any other provision of this Section 9 to the
contrary, it is understood and agreed that if the Lender shall
proceed to foreclose the Security Interest of this Agreement, it
shall, to the extent that it is then entitled to do so under (and
always subject to the provisions of) the Lease, and is not then
stayed or prevented from doing so by operation of law or
otherwise, proceed (to the extent it has not already done so) to
exercise one or more of the remedies, as determined by the Lender
in the Lender's sole discretion, referred to in Section 13 of the
Lease; and if the Lender is unable to exercise any right or remedy
under the Lease by reason of any such stay or legal prohibition as
described above, the Lender shall not proceed to foreclose the
Security Interest of this Agreement (i) until the earlier of (x)
90 days from the date of such stay or legal prohibition, if any,
and (y) actual repossession of the Aircraft from the Lessee (such
period, as described in (x) or (y), as applicable, the "Stay
Period") so long as, during the Stay Period, the Borrower is
making all payments due the Lender under the Loan Agreement, and
the Aircraft is being maintained and insured in accordance with
the provisions of
15
[Security Agreement (21720)]
the Lease or (ii) so long as the Lessee is performing all of its
obligations under the Lease pursuant to an agreement under 11
U.S.C. ss. 1110 (a)(1)(A) (or any similar successor provision)
and no Lease Event of Default has occurred and is continuing other
than Under Clause 13.1(g) or (h) of the Lease.
10. LIMITATION ON DUTIES REGARDING PRESERVATION OF
COLLATERAL. The Lender's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be
to deal with it in the same manner as the Lender deals with
similar property for its own account. Neither the Lender nor any
of its directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon all or any part of
the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the
request of the Borrower or otherwise.
11. POWERS COUPLED WITH AN INTEREST. All
authorizations and agencies herein contained with respect to the
Collateral are irrevocable and powers coupled with an interest.
12. SEVERABILITY. Any provision of this Security
Agreement 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 unenforceable such provision in any other jurisdiction.
13. PARAGRAPH HEADINGS. The paragraph headings used in
this Security Agreement are for convenience of reference only and
are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
14. NO WAIVER: CUMULATIVE REMEDIES. The Lender shall not
by any act (except by a written instrument pursuant to Section 15
hereof), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay
in exercising, on the part of the Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies
provided by law.
16
[Security Agreement (21720)]
15. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS;
GOVERNING LAW. None of the terms or provisions of this Security
Agreement may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Borrower
and the Lender, PROVIDED that any provision of this Security
Agreement may be waived by the Lender in a written letter or
agreement executed by the Lender or by facsimile transmission from
the Lender. This Security Agreement shall be binding upon the
successors and permitted assigns of the Borrower and shall inure
to the benefit of the Lender and its successors and permitted
assigns.
16. SUBMISSION TO JURISDICTION, WAIVERS. THIS AGREEMENT
HAS BEEN DELIVERED IN CHICAGO,
ILLINOIS AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
ILLINOIS. THE
BORROWER HEREBY (I) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
THIS AGREEMENT; (II) IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED IN ▇▇▇▇ COUNTY,
ILLINOIS, OVER
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS AGREEMENT; (III) IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT THE BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING; (IV) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW; AND (V) AGREES NOT TO INSTITUTE ANY LEGAL ACTION
OR PROCEEDING AGAINST LENDER OR ANY OF LENDER'S DIRECTORS,
OFFICER, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT OTHER
THAN ONE LOCATED IN ▇▇▇▇ COUNTY,
ILLINOIS. NOTHING IN THIS
PARAGRAPH SHALL AFFECT OR IMPAIR LENDER'S RIGHT TO SERVE LEGAL
PROCESS IN ANY MANNER PERMITTED BY LAW OR LENDER'S RIGHT TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTIES IN
THE COURTS OF ANY OTHER JURISDICTION.
17. NOTICES. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in
writing (including telecopy) and sent by personal delivery,
reputable overnight courier or telecopy (any such telecopied
notice to be followed within 24 hours by written notice by
personal delivery or reputable overnight courier), and unless
otherwise expressly provided herein, shall be deemed to have been
duly given or made upon receipt thereof (which, in the case of a
telecopy, shall be deemed to be the time of receipt by the sender
of a confirmation report that all pages of the telecopy
transmission were properly transmitted; provided, however, that if
the telecopy was transmitted later than 5:30 p.m., the recipient's
local time, the telecopy shall be deemed to have been received on
the succeeding Business Day), addressed as follows, or to such
other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
17
[Security Agreement (21720)]
The Borrower; c/o Aviation Capital Group Corp.
Three Stamford Landing
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇. Managing Director
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Aviation Capital Group Corp.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
The Lender: Sanwa Business Credit Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Senior Vice President, Transportation
Finance
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
* * *
18
[Security Agreement (21720)]
IN WITNESS WHEREOF, the Borrower has caused this Security
Agreement to be duty executed and delivered as of the date first above written.
ACG ACQUISITION XII LLC, as Borrower
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Title: Manager
---------------------------------
SANWA BUSINESS CREDIT CORPORATION,
as Lender
By:____________________________________
Name: _________________________________
Title: ________________________________
[Security Agreement (21720)]
IN WITNESS WHEREOF, the Borrower has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
ACG ACQUISITION XII LLC,
as Borrower
By: ___________________________________
Name: _________________________________
Title: ________________________________
SANWA BUSINESS CREDIT CORPORATION,
as Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Vice President
--------------------------------
LEASE AGREEMENT ASSIGNMENT
This Lease Agreement Assignment (the "Assignment"), dated as of May 1,
2000, is between First Security Bank, National Association, a national
banking association, not individually but as Owner Trustee ("Assignee"), and
ACG Acquisition XII LLC, a Delaware limited liability company ("Assignor").
RECITALS
WHEREAS, Assignor and Aloha Airlines, Inc., a Delaware corporation
("LESSEE"), are parties to a Lease Agreement 809 (the "LEASE AGREEMENT")
dated May 21, 1997, as supplemented by Certificate of Acceptance 809
(recorded by the Federal Aviation Administration on August 28, 1997, as
Conveyance No. HK010357) and the other agreements relating thereto as more
fully described in Schedule 1 hereto (collectively, the "LEASE DOCUMENTS"),
pursuant to which Assignor leases to Lessee one used Boeing 737-2Q9 aircraft
bearing manufacturer's serial number 21720 and FAA registration number
N809AL, and two ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model JT8D-15 engines bearing, respectively,
manufacturer's serial numbers P688676 and P688677 (each of which engines has
750 or more rated takeoff horsepower or the equivalent of such horsepower)
(collectively, the "AIRCRAFT").
WHEREAS, Assignor has agreed to sell the Aircraft to Assignee (the
"PURCHASE") pursuant to the terms of that certain Purchase and Sale Agreement
dated as of May 1, 2000 (the "PURCHASE AGREEMENT"; capitalized terms used
herein and defined in the Purchase Agreement shall have the same meaning
herein unless otherwise defined herein), subject to the Lease Agreement, and
to assign the Lease Agreement and the Lease Documents, except the Assignor's
Rights (as defined below), to Assignee.
NOW THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the adequacy and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
1. EFFECTIVENESS. This Assignment, and the rights and obligations of
Assignor and Assignee hereunder, shall become effective upon, but only upon,
the occurrence of the Closing (as defined in the Purchase Agreement) of the
Purchase, or upon filing of this assignment with the Federal Aviation
Administration. Assignor and Assignee shall notify Lessee (a) of the
occurrence of this Assignment pursuant to a notice given on the date hereof
substantially in the form of Annex A hereto (the "NOTICE OF ASSIGNMENT"), and
(b) of the occurrence of the Purchase immediately upon delivery of the
Aircraft under the Purchase Agreement pursuant to a notice substantially in
the form of Attachment A to the Notice of Assignment.
2. ASSIGNMENT. In consideration of the payment of US$1.00 by Assignee
to Assignor and for other good and valuable consideration, the adequacy and
receipt of which are
FILED WITH FAA
AIRCRAFT REGISTRATION
00 MAY 1 PM 2:31
OKLAHOMA CITY
OKLAHOMA
[ILLEGIBLE]
hereby acknowledged, Assignor hereby sells, assigns, delegates, conveys,
transfers and sets over to Assignee all rights and obligations of Assignor
under the Lease Agreement and the Lease Documents, subject to the rights of
Lessee under the Lease Agreement and the Lease Documents and subject to the
reservation by Assignor (on a non-exclusive basis) of the Assignor's Rights
as defined below, which Assignor's Rights Assignor shall continue to benefit
from after the Purchase. "ASSIGNOR'S RIGHTS" means and includes the rights of
the "Lessor" under the Lease Agreement and the Lease Documents: (a) to each
and every defense (whether arising by contract, law or equity) under or with
respect to the Lease Agreement and the Lease Documents; (b) under the
liability insurance provisions of the Lease Agreement, and (c) under all
indemnities made by the Lessee, and all disclaimers made by the Lessor, under
the Lease Agreement, in each case, to the extent such rights vested, or
relate to events occurring, prior to the time of Closing. The retention by
Assignor of the Assignor's Rights shall not prejudice Assignee's right to the
benefit of the Assignor's Rights (including, without limitation, liability
insurance under the Lease Agreement, or the right to enforce any of the
foregoing) in each case to the full extent applicable to the Assignee
(whether or not relating to the period after the assignment of the Lease
Agreement).
3. ASSIGNEE ACCEPTANCE AND ASSUMPTION. Assignee hereby accepts and
assumes all of Assignor's rights (other than the Assignor's Rights) and
obligations under the Lease Agreement and the Lease Documents. Assignee shall
be deemed to be a party to the Lease Agreement and the Lease Documents in
place of Assignor and agrees to be bound by all of the terms of, and to
undertake all of the obligations of, "Lessor" under the Lease Agreement and
the Lease Documents.
4. ENTIRE AGREEMENT. This Assignment and the Purchase Agreement
constitutes the entire agreement between the parties in relation to the
subject matter hereof and supersedes all previous proposals, agreements and
other written and oral communications in relation hereto.
5. GOVERNING LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE GOVERNED BY
AND CONSTITUTED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS.
6. COUNTERPARTS. This Assignment may be executed in any number of
counterparts and by either party on one or more of such counterparts, each of
which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.
7. FURTHER ASSURANCES. Assignor agrees from time to time after the
execution and delivery of this Agreement, it shall upon the request of
Assignee and at Assignee's expense duly execute and deliver such further
documents and instruments and take such further action as Assignee may
reasonably request in order to effectuate fully the intent and purposes of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.
ACG ACQUISITION XII LLC
as Assignor
By: /s/ [ILLEGIBLE]
-------------------------------------
Name: [ILLEGIBLE]
Title: [ILLEGIBLE]
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
as Assignee
By:
-------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.
ACG ACQUISITION XII LLC
as Assignor
By:
-------------------------------------
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
as Assignee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
SCHEDULE 1
LEASE DOCUMENTS
Letter of Credit dated May 20, 1997
UCC financing statement # 97-067398 filed in Hawaii on May 22, 1997
Insurance Certificate dated May 21, 1997
Insurance Broker's Undertaking dated May 21, 1997
Opinion of Lessee's Counsel dated May 21, 1997
Certificate of Incorporation, By-laws and Good Standing Certificate of Lessee
certified on May 21, 1997
Incumbency Certificate of Lessee dated May 21, 1997
Certified Resolutions of board of directors of Lessee dated May 21, 1997
Officer's Certificate of Lessee dated May 21, 1997
Lease Termination Certificate- Lease A - FAA dated November 14, 1994, signed
by Phoenix Ventures Inc. (Lessor) and Luchtvaartmaatschappij Transavia
Holland B.V. (Lessee)
Lease Termination Certificate- Lease B - FAA dated November 14, 1994, signed
by First Security Bank of Utah (Lessee) and Phoenix Ventures Inc. (Lessor)
Lease Termination Certificate- Lease C - FAA dated May 21, 1997, signed by
First Security Bank of Utah (Lessor) and Aloha Airlines, Inc. (Lessee)
Evidence of FAA Aircraft Registration dated May 21, 1997
Lessee's financial statements
Semi-Annual Status Reports delivered by Lessee to Assignor
Certificate of Acceptance of Lessee
Letter of Assignor to Lessee exercising Lease extension option
Annex A
to Lease Agreement Assignment
NOTICE OF AND CONSENT TO ASSIGNMENT
April ____, 2000
Aloha Airlines, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President Finance and Planning
Re: NOTICE OF AND CONSENT TO ASSIGNMENT OF LEASE AGREEMENT
Ladies and Gentlemen:
Reference is hereby made to that certain Lease Agreement dated May 21,
1997 between Aloha Airlines, Inc. ("LESSEE") and ACG Acquisition XII LLC, as
amended, modified and supplemented (the "LEASE AGREEMENT"), pursuant to which
ACG Acquisition XII LLC ("ASSIGNOR") is leasing to you one Boeing 737-2Q9
aircraft bearing manufacturer's serial number 21720 including the two ▇▇▇▇▇ &
▇▇▇▇▇▇▇ model JT8D-15 engines bearing manufacturer's serial numbers P688676
and P688677 ( "AIRCRAFT")
You are hereby notified that Assignor has assigned and delegated all
of its rights (other than Assignor's Rights) and obligations under the Lease
Agreement and related documents to First Security Bank, as Owner Trustee
("ASSIGNEE") pursuant to a Lease Agreement Assignment between Assignor and
Assignee (a copy of which Lease Agreement Assignment is attached hereto (the
"ASSIGNMENT")). Such assignment and delegation shall become effective upon
consummation of the purchase of the Aircraft by Assignee from Assignor.
Assignor and Assignee shall give you notice of consummation of the purchase
of the Aircraft by Assignee (the "PURCHASE NOTICE") in the form attached
hereto as Attachment A.
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Lease Agreement Assignment. Lessee,
Assignee and Assignor hereby agree as follows:
Section 1. LEASE PROVISIONS. With effect from the date of the Purchase
Notice:
(a) PAYMENTS. All rental payments and other payments due from Lessee
under the Lease will be paid to Southern Pacific Bank, Torrance, California,
ABA No. 322 286 476, Account Name: Coast Business credit, Attention ▇▇▇▇
▇▇▇▇▇▇, reference First Security Bank/Aloha/BCI 809 (Client Loan Name) until
further notice from Lessor.
(b) NOTICES. All notices and other communications from Lessee to
"Lessor" under the Lease Agreement and the other Lease Documents shall be
delivered to:
First Security Bank, National
Association, as Owner Trustee
Corporate Trust Services
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Copy to: BCI 2000, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
(c) INSURANCE. Lessee shall modify the insurance policies covering
the Aircraft to acknowledge First Security Bank, National Association, as
Owner Trustee, as owner and Lessor of the Aircraft and BCI 2000, L.L.C. as
additional loss payee as its interests may appear.
Section 2. LESSEE CONSENT. With effect from the date of the Purchase
Notice, Lessee consents to the Assignment and consummation of the
transactions contemplated thereby.
Section 3. ASSIGNOR RELEASE. With effect from the date of the Purchase
Notice Assignor shall have no further obligations under the Lease Agreement
or the Lease Documents and is hereby released therefrom.
Section 4. LESSEE'S REPRESENTATIONS AND AGREEMENTS. Lessee hereby
represents, warrants and agrees that:
(a) Other than as listed in the documents listed in Schedule 1 to
the Assignment, there has been no amendment or modification of the Lease
Agreement and the Lease Documents.
(b) The Basic Rent and Supplemental Rent (as defined in the
Lease Agreement) have each been paid through April 21, 2000 and no Basic Rent
or Supplemental Rent has been prepaid.
(c) Lessee has no claim against Assignor by reason of the
condition of the Aircraft as of the date hereof.
(d) The Lessee Agreement and the Lease Documents are in full force
and effect.
(e) No "Event of Default" has occurred and is continuing under
the Lease Agreement.
(f) Assignor is in full compliance with the provisions of the
Lease Agreement and the Lease Documents and Lessee has no claims for
unperformed obligations or liabilities of Assignor.
(g) With effect from the date of the Purchase Notice, Lessee will
perform, observe and comply with all of its obligations and undertakings
under the Lease Agreement and the Lease documents in favor of the Assignee
and for the benefit of Assignee as if Assignee were named as "Lessor" therein
instead of the Assignor.
(h) Lessee acknowledges the retention by Assignor of the
Assignor's Rights as provided in the Lease Assignment and that such retention
shall not prejudice Assignee's rights to the benefits of the relevant
provisions of the Lease AGreement and the Lease Documents to the extent
applicable to Assignee (whether or not relating to the period after the date
of the Purchase Notice).
(i) The Expiry Date of the Lease is May 20, 2002.
(j) Assignee shall be entitled to rely on all representations and
warranties of Lessee in the Lease Agreement and in any certificate or
document furnished by Lessee in connection with the Lease Agreement as though
the Assignee were the Assignor.
(k) Lessee acknowledges that for purposes of Section 2.5 of the
Lease Agreement, the words, "Delaware" in Section 2.4(a) and 2.4(e) shall be
deemed to be the word "
Illinois".
(l) Lessee will, on the date of the Purchase Notice, deliver or
cause to be delivered to Assignee (i) the financing statements referred to in
Section 14.2(c)(ii) of the Lease Agreement, (ii) the certificate referred to
in Section 14.2(c)(iii) of the Lease Agreement, (iii) the certificates of
insurance and broker's letter of undertaking referred to in Section 14(c)(iv)
of the Lease Agreement, (iv) the opinion referred to in Section 14.2 (c)(v)
of the Lease Agreement, (v) documents referred to in Section 14.2 (c)(vii) of
the Lease Agreement.
(m) Lease will, on the date of the Purchase Notice, deliver or
cause to be delivered such agreements, certificates, opinions and other
documents as Assignee shall request pursuant to Section 14.3 (b) of the Lease
Agreement.
Section 6. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
SECTION.
Section 7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by any party on one or more of such counterparts, each of
which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.
If you are in agreement with the foregoing, please do indicate by
signing and returning a copy of this letter to the undersigned.
Thank you for your cooperation.
Very truly yours,
ACG ACQUISITION XII LLC
By: ___________________
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
By: ___________________
Name:
Title:
Accepted and Agreed:
ALOHA AIRLINES, INC.
By: ___________________
Name:
Title:
Attachment A to
Notice of Assignment
April ____, 2000
Aloha Airlines, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President Finance and Planning
Re: NOTICE OF EFFECTIVENESS OF SALE
Ladies and Gentlemen:
Reference is hereby made to that certain Lease Agreement (the
"AGREEMENT") dated as of April __, 2000 between ACG Acuisition XII LLC and
First Security Bank, National Association, as Owner Trustee, relating to one
Boeing 737-2Q9 aircraft bearing manufacturer's serial number 21720 (and U.S.
registration number N809AL).
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Agreement.
Pursuant to the Notice to Lessee delivered under the Agreement, you
are hereby notified that the Purchase has occurred and the Agreement is,
consequently, effective.
This letter may be executed in any number of counterparts and by
either party on one or more of such counterparts.
Very truly yours,
ACG ACQUISITION XII LLC FIRST SECIRITY BANK,
NATIONAL ASSOCIATION,
AS OWNER TRUSTEE
By: __________________ By: _________________
Name: Name:
Title: Title:
F&J 4/26/00
ASSIGNMENT OF LEASE 809 AND LETTER OF CREDIT
This ASSIGNMENT OF LEASE 809 AND LETTER OF CREDIT, dated as of May 1,
2000 (this "Agreement"), is between FIRST SECURITY BANK, NATIONAL ASSOCIATION
("FSB"), a national banking association, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, as owner trustee under the Trust Agreement, dated as of
May 1, 2000, between BCI 2000, L.L.C. (the "Beneficiary") and FSB ("Debtor"),
and COAST BUSINESS CREDIT, a division of Southern Pacific Bank, a California
corporation, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "Secured Party").
W I T N E S S E T H :
WHEREAS, Debtor is the Lessor (as transferee of ACG Acquisition XII LLC)
under that certain Aircraft Lease Agreement 809 dated as of May 21, 1997,
between ACG Acquisition XII LLC and Aloha Airlines, Inc., a Delaware
corporation (the "Lessee"), as supplemented by the Notice of Lease Extension
dated as of March 15, 2000 by Lessor as further described on Schedule F
(together with all amendments, modifications, supplements, addenda and
extensions thereto from time to time, the "Lease 809"), covering one Boeing
model 737-2Q9 airframe, manufacturer's serial number 21720, United States
registration number N809AL, together with two (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ model
JT8D-15A aircraft engines, manufacturer's serial numbers 688676 and 688677
(the "Engines" and, collectively, the "Aircraft 809");
WHEREAS, the Letter of Credit has been furnished by the Lessee as
security for the performance of the obligations of the Lessee under the
Lease 809, and has been amended to name the Secured Party as beneficiary;
WHEREAS, in connection with financing from the Secured Party, Debtor has
entered into (i) the Loan Agreement 809, dated as of May 1, 2000 (the "Loan
Agreement") among the Debtor, as Borrower, the Beneficiary, as Beneficiary
and Secured Party, as Lender, pursuant to which Secured Party has advanced
some or all of the Loan 809 (as defined therein) to the Debtor and (ii) the
Aircraft Security Agreement 809 dated as of the date hereof between Debtor
and Secured Party (the "Aircraft Security Agreement 809"); and
WHEREAS, all capitalized terms used herein and not otherwise defined
herein shall have the meanings provided therefor in the Lease 809 of the Loan
Agreement 809, PROVIDED, FURTHER, that any definition of a document used
herein shall refer to such document as it may nor or later be amended or
supplemented;
FILED WITH FAA
AIRCRAFT REGISTRATION
00 MAY 1 PM 2:32
OKLAHOMA CITY
OKLAHOMA
[ILLEGIBLE]
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agree as
follows:
1. As security for the payment and performance of the Liabilities
(whether as scheduled, upon acceleration or otherwise, including, without
limitation, repayment of the Loans made or to be made by the Secured Party
under the Loan Agreement 809 as they may be outstanding from time to time,
accrued interest thereon, the Prepayment Fee and all other interest, fees and
expenses payable by the Debtor pursuant to the Loan Agreement 809 and the
other Operative Documents) and of all costs of collection and enforcement of
the Liabilities, the Debtor hereby collaterally assigns, transfers, conveys
and sets over to the Secured Party all of its right, title and interests in,
to and under, the Lease 809 and the Letter of Credit and any replacements or
renewals thereof furnished under the terms of Section 29 of the Lease 809
(but none of Debtor's obligations thereunder), including, without limitation,
the right under the Lease 809(i) to collect all Basic Rent, Supplemental
Rent, and other income, proceeds (including, but not limited to insurance
proceeds), awards, revenues and other sums payable by Lessee to Debtor
pursuant to the Lease, and (ii) after the occurrence and during the
continuance of a Lease Event of Default, to enforce all of Debtor's other
rights and remedies under the Lease 809 and the Letter of Credit, but not
limited to the right to apply any of the Lease 809 payments in accordance
with the terms of the Lease 809.
2. All notices, demands and other communications made by one party to
the other party in connection with this Agreement shall be in writing and
given to or made upon such party as provided in Section 11.01 of the Loan
Agreement 809.
3. This Agreement shall be binding upon and inure to the benefit of the
Debtor and the Secured Party and their respective successors and permitted
assigns. This Agreement may not be assigned by the Debtor, in whole or in
part, without the prior written consent of the Secured Party. The parties
hereto acknowledge and agree that the Secured Party may assign its rights
hereunder to a Transferee (as defined in the Loan Agreement 809) as provided
in Section 11.08 of the Loan Agreement 809.
4. This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and all of such counterparts shall
constitute one and the same Agreement.
5. This Agreement has been delivered in the State of New York. Each
party hereto agrees that, to the maximum extent permitted by the law of the
State of New York, this Agreement, and the rights and duties of the parties
hereunder, shall be governed by, and construed in accordance with, the laws
of the State of New York (including sections 5-1401 and 5-1402 of the New
York General Obligations Law) in all respects, including in respect of all
matters of construction, validity and performance but without giving effect
to any provision thereof that may require application of the laws of another
jurisdiction.
- 2-
6. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST DEBTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN NEW YORK SUPREME COURT,
MANHATTAN COUNTY OR THE UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, DEBTOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT (SUBJECT TO ANY RIGHT OF
APPEAL BY A HIGHER COURT). Debtor hereby agrees that service of all process
upon it may be made by registered or certified mail, return receipt
requested, to the Debtor at its address for notices specified or determined
in accordance with Section 11.01 of the Loan Agreement, such service being
hereby acknowledged by the Debtor to be sufficient for personal jurisdiction
in any action against the Debtor in connection with this Agreement and to be
otherwise effective and binding service in every respect. Debtor hereby
confirms that service of process to it should be sent to Superintendent of
Banking of the State of New York, State of New York Banking Department,
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or any successor agent
for service of process located in New York, New York reasonably acceptable to
Secured Party (the "Process Agent") and agrees that service of process upon
such Process Agent shall be deemed to be service of process upon the Debtor,
with respect to any proceeding related to this Agreement. Nothing herein
shall affect the right to serve process in any other manner permitted by law
or shall limit the right of Secured Party to bring proceeding against the
Debtor in the courts of any other jurisdiction, including, but limited to,
where some or all of the Aircraft is located.
7. EACH OF DEBTOR AND SECURED PARTY HEREBY KNOWINGLY VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF OR IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THE LOAN AGREEMENT AND MAKING
THE LOAN TO DEBTOR TO FINANCE THE AIRCRAFT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in
any court and that related to the subject matter of this transaction,
including without limitation contract claims, [ILLEGIBLE] claims, breach of
duty claims and all other common law and statutory claims. Each of Debtor and
Secured Party further warrants and represents that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THIS AGREEMENT. In the event of litigation, this Agreement may be
filed as written consent to a trial by the court.
- 3 -
IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Lease 809
to be executed by their duly Authorized Officers as of the day first above
written.
Debtor: FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity solely
as Owner Trustee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
Secured Party: COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By:
-------------------------------------
Name:
Title:
Assignment of Lease and Letter of Credit 809
Boeing Model 737-2Q9 Aircraft
U.S. Registration No. N809AL
IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Lease 809
to be executed by their duly Authorized Officers as of the day first above
written.
Debtor: FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity solely
as Owner Trustee
By:
-------------------------------------
Name:
Title:
Secured Party: COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Assignment of Lease and Letter of Credit 809
Boeing Model 737-2Q9 Aircraft
U.S. Registration No. N809AL
SCHEDULE I
DESCRIPTION OF LEASE
Lease Agreement dated May 21, 1997, between ACG Acquisition XII, LLC as
lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate of
Acceptance 809, recorded by the Federal Aviation Administration ("FAA") on
August 28, 1997, as Conveyance No. HK010357, as supplemented by Notice of
Lease Extension N809AL dated March 15, 2000, by ACG Acquisition XII, LLC as
lessor, which was not filed with the FAA, as assigned by the Lease Agreement
Assignment dated as of May 1, 2000, between ACG Acquisition XII, LLC as
assignor and First Security Bank, National Association of Owner Trustee,
assignee, which is being filed with the FAA contemporaneously herewith.
Assignment of Lease
Boeing Model 737-2Q9 Aircraft
U.S. Registration No. N809AL
EXECUTION VERSION
AGREEMENT 809
THIS AGREEMENT 809 (this "Agreement" dated the 5th day of November,
2001, is by and among Aloha Airlines, Inc. (the "Lessee"), ▇▇▇▇▇ Fargo Bank
Northwest, National Association (formerly known as First Security Bank,
National Association), as Owner Trustee (the "Lessor") and Coast Business
Credit, a division of Southern Pacific Bank (the "Secured Party"), and
consented to by BCI 2000, L.L.C. (the "Beneficiary") and BCI Aircraft
Leasing, Inc. (the "Guarantor"). Capitalized terms used herein and not
otherwise defined are used as defined in Appendix A to the Loan Agreement (as
defined below).
WHEREAS, Lessee and Lessor (as assignee of ACG Acquisition XII LLC) are
parties to Lease Agreement 809 dated May 21, 1997 (as extended, amended and
supplemented from time to time, the "Lease'), as collaterally assigned by
Lessor to Secured Party pursuant to the Assignment of Lease 809 and Letter of
Credit dated as of May 1, 2000 between Lessor and Secured Party (the "Lease
Assignment") which Lease Assignment has been consented to by Lessee pursuant
to the Consent and Agreement 809 dated as of May 1, 2000 among Lessee, Lessor
and Secured Party (the "Lessee Consent"), each such document relates to one
Boeing model 737-2Q9 Aircraft bearing manufacturer's serial number 21720 and
United States Registration No. N809AL together with two ▇▇▇▇▇ & Whitney model
JT8D-15A aircraft engines bearing manufacturer's serial numbers P688676 and
P688677 (collectively, the "Aircraft");
WHEREAS, Lessor, Beneficiary and Secured Party are parties to Loan
Agreement 809 dated as of May 1, 2000 (the "Loan Agreement"), pursuant to
which Secured Party provided financing for Lessor's purchase of the Aircraft;
WHEREAS, Guarantor executed and delivered in favor of the Secured Party
a Guaranty dated May 1, 2000 (the "Guaranty") with respect to certain
obligations of the Lessor under the Loan Agreement;
WHEREAS, an Event of Default (as defined in the Lease) has occurred and
is continuing under Clause 13.1(a) of the Lease by reason of Lessee's failure
to make payment of Basic Rent on September 20, 2001 (a Rent Date) pursuant to
Clause 5.3 of the Lease; and
WHEREAS, an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing under each of Sections 9.01(a) and 9.01(f) of the
Loan Agreement by reason of, among other things, Lessor's failure to make
payment of principal and interest (including, but not limited to, Interest
Deficiency) on September 20, 2001 (a Payment Date) pursuant to Section 2.04
of the Loan Agreement Guarantor's failure to make payment of Interest
Deficiency on September 20, 2001 (a Payment Date) pursuant to Section 1.1 of
the Guaranty and Lessee's
------------------------
*Indicates that information has been omitted as confidential information,
and is filed separately with the Commission.
1
failure to make payment of Basic Rent on September 20, 2001 (a Rent Date)
pursuant to Clause 5.3 of the Lease.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. On or about November 5, 2001, Secured Party shall call and draw on the
irrevocable Standby Letter of Credit No. S/B 970039 issued by First Hawaiian
Bank on May 20, 1997 in favor of the Secured Party (as extended, amended and
supplemented from time to time, the "Letter of Credit") in the amount of
US$* and use or apply the proceeds (net of any cost or expense to be
incurred in connection therewith) in or towards satisfaction of all sums due and
payable to the Secured Party under the Loan Agreement as of September 20, 2001
and October 20, 2001, each a Payment Date under the Loan Agreement and a Rent
Date under the Lease. In the event of any excess amount remaining after the use
or application of the proceeds (net of any cost or expense to be incurred in
connection therewith) of the Letter of Credit pursuant to the preceding
sentence, such excess amount shall be retained by the Secured Party and applied
by the Secured Party, in or towards satisfaction of the outstanding amount of
principal and interest of the Loan under the Loan Agreement, as a mandatory
prepayment thereof, provided that no Prepayment Fee shall be payable in
connection with such mandatory prepayment and the amount of the excess will be
applied to the next payments due upon the Loan in chronological order.
2. Provided that the Secured Party shall have actually received the
amount of US$* in connection with its drawing under the Letter of
Credit pursuant to clause 1 above, Secured Party and Lessor agree as follows:
notwithstanding the requirement set out in Clause 5.1(b)(ii) of the Lease
which provides that the Lessee shall immediately, on demand of the Lessor or
the Secured Party, procure the issuance of a new Letter of Credit (as defined
in the Lease) acceptable to the Lessor and the Secured Party for an amount
equal to the amount used or applied pursuant to clause 1 above, Secured Party
and Lessor agree that Lessee may, and Lessee shall, within twelve (12) months
from the date that the Secured Party shall have actually received the amount
of US$* in connection with its drawing under the Letter of Credit
pursuant to clause 1 above, procure the issuance of a new clean Letter of
Credit (as defined in the Lease), satisfying the requirements set forth in
the definition of "Letter of Credit" in Clause 1.1 of the Lease, in an amount
drawable thereunder equal to US$*, or shall pay to the Secured Party an
amount in cash equal to US$* to be held pursuant to Clause 5.1(a) of
the Lease (as assigned pursuant to the Lease Assigmnent).
3. (a) Lessor and Lessee hereby agree that:
2
(i) the Lease is hereby amended by replacing the number
"$*" which appears in the definition of "Agreed Value" in Section 1.1 of
the Lease with the number "$*";
(ii) the amendment to the Lease as set forth in clause 3(a)(i)
above shall not be effective until execution and delivery of this Agreement by
the Secured Party; and
(iii) except as expressly provide herein, all of the provisions
of the Lease as heretofore amended and supplemented and as further amended and
supplemented by clause 3(a)(i) above are hereby ratified and confirmed and
shall, as so amended and supplemented, remain in full force and effect. From and
after the date hereof, all references in any document or instrument to the Lease
shall mean the Lease as heretofore amended and supplemented by clause 3(a)
above.
(b) By executing this Agreement, the Secured party hereby
consents to the amendment to the Lease as set forth in clause 3(a)(i) above;
provided that Secured Party does not waive, and should not be deemed to waive,
any of its rights, powers or remedies under the Loan Agreement or any other
Operative Document by virtue of its consent hereunder.
4. This Agreement shall be effective following execution and delivery of
this Agreement by each of the parties hereto and upon Secured Party's actual
receipt of US$* following the drawing under the Letter of Credit pursuant
to clause 1 above.
5. Except with respect to any payment defaults cured by application of the
drawings under the Letter of Credit, Secured Party does not waive, and should
not be deemed to waive, any of its rights or remedies with respect to existing
or future Events of Default under the Loan Agreement and the other Operative
Documents by virtue of this Agreement or any negotiations that it may engage in
regarding the Events of Default described herein and Secured Party hereby
expressly reserves the right to pursue its rights and remedies at a time and in
a manner of its choosing with respect to the Events of Default described above
and any other Event of Default that has occurred or may occur in the future.
Pursuant to Section 9.02(c) of the Loan Agreement, Lessor is responsible for all
of Secured Partys reasonable out-of-pocket costs and expenses incurred in
connection with the Events of Default described in this Agreement, including,
without limitation, reasonable fees and expenses of Secured Party's counsel.
6. Except with respect to any Payment defaults cured by application of the
drawings under the Letter of Credit, Lessor does not waive, and should not be
deemed to waive, any of its rights or remedies with respect to existing or
future Events of Default under the Lease by virtue of this Agreement or any
negotiations that it may engage in regarding the Events of Default described
herein and Lessor hereby expressly reserve the right to pursue its rights and
remedies at a time and in a manner of its choosing with respect to the Events of
Default described above and
3
any other Event of Default that has occurred or may occur in the future.
Pursuant to Clause 13.4 of the Lease, Lessee is responsible for all of Lessor's
and Secured Party's (as Lessor's assignee pursuant to the Lease Assignment and
Lessee Consent) loss, damage, expense, cost or liability which the Lessor or
Secured Party (as Lessor's assignee pursuant to the Lease Assignment and Lessee
Consent) may sustain or incur directly or indirectly as a result of the
occurrence of a Default (as defined in the Lease).
7. Lessee and Lessor hereby expressly agree that any default by Lessee in
the performance of its obligations under this Agreement shall constitute an
Event of Default under the Lease.
8. By countersigning this Agreement, Beneficiary hereby directs the Lessor
under the Trust Agreement to execute and deliver this Agreement.
9. By countersigning this Agreement, each of Beneficiary and Guarantor
consents to all the terms of this Agreement and agrees to be bound by all such
terms in all respects.
10. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
11. This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of New
York.
[Signature Pages Follow]
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement 809 to be
executed by their duly Authorized Officers as of the day first above written.
LESSEE: ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President & CFO
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President Planning
and Business Development
LESSOR: ▇▇▇▇▇ FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION (formerly known as
First Security Bank, National Association),
as Owner Trustee
By:
------------------------------------
Name:
Title:
SECURED PARTY: COAST BUSINESS CREDIT,
A DIVISION OF SOUTHERN PACIFIC BANK
By:
------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement 809 to be
executed by their duly Authorized Officers as of the day first above written.
LESSEE: ALOHA AIRLINES, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
LESSOR: ▇▇▇▇▇ FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION (formerly known as
First Security Bank, National Association),
as Owner Trustee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
SECURED PARTY: COAST BUSINESS CREDIT,
A DIVISION OF SOUTHERN PACIFIC BANK
By:
------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement 809 to be
executed by their duly Authorized Officers as of the day first above written.
LESSEE: ALOHA AIRLINES, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
LESSOR: ▇▇▇▇▇ FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION (formerly known as
First Security Bank, National Association),
as Owner Trustee
By:
------------------------------------
Name:
Title:
SECURED PARTY: COAST BUSINESS CREDIT,
A DIVISION OF SOUTHERN PACIFIC BANK
By: /s/ ▇▇▇▇▇▇ Oon
------------------------------------
Name: ▇▇▇▇▇▇ Oon
Title: Vice President
EACH OF THE UNDERSIGNED BENEFICIARY AND GUARANTOR HEREBY CONSENTS TO ALL THE
TERMS OF THE FOREGOING AGREEMENT AND AGREES TO BE BOUND BY ALL SUCH TERMS IN ALL
RESPECTS.
BCI 2000, L.L.C., as Beneficiary
by BCI Aircraft Leasing, Inc., as Manager
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
BCI AIRCRAFT LEASING, INC., as Guarantor
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President