<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-Q
____________
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission file number 0-22526
TOWER AIR, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2621046
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
HANGAR NO. 17
J.F.K. INTERNATIONAL AIRPORT
JAMAICA, N.Y. 11430
(Address of principal executive offices) (Zip Code)
(718) 553-4300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No__
---
As of October 31, 1998, there were 15,365,251 shares of Common Stock,
par value $.01 per share, outstanding.
- --------------------------------------------------------------------------------
Page 1 of 25 pages
<PAGE>
TOWER AIR, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 1998
and December 31, 1997..................................... 3
Statements of Operations for the three months and nine
months ended September 30, 1998 and 1997.................. 4
Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997............................... 5
Notes to Financial Statements............................... 6
Selected Operating Data..................................... 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 22
PART II. OTHER INFORMATION........................................... 23
SIGNATURES ............................................................ 25
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOWER AIR, INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Note)
-------------------- ---------------------
ASSETS
- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,478 $ 3,922
Certificates of deposit, at cost,
which approximates market 2,157 2,407
Receivables, net 35,799 28,151
Income tax receivable 150 3,850
Prepaid expenses and other current assets 3,052 880
------------------- --------------------
Total current assets 42,636 39,210
Property and Equipment, at cost:
Flight equipment 449,921 419,851
Ground property and equipment 33,949 33,489
------------------- --------------------
483,870 453,340
Less accumulated depreciation and amortization 223,732 186,945
------------------- --------------------
260,138 266,395
Other Assets 7,020 4,515
------------------- --------------------
$ 309,794 $ 310,120
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Notes payable $ 12,797 $ 21,038
Accounts payable 50,786 55,313
Accrued liabilities 30,373 40,698
Air traffic liability 15,801 18,867
Current maturities of long-term debt (Note 2) 46,594 43,273
------------------- --------------------
Total current liabilities 156,351 179,189
Long-Term Debt (Note 2) 75,855 63,321
Deferred Income Taxes 20,679 16,399
Deferred Rent 1,707 1,790
Stockholders' Equity (Note 3):
Preferred stock, $.01 par value;
5,000,000 shares authorized; none issued -- --
Common stock, $.01 par value;
35,000,000 shares authorized;
issued 15,575,251 shares at September 30, 1998 and
15,500,006 at December 31, 1997 156 155
Additional paid-in capital 44,429 43,885
Retained earnings 12,128 6,892
Less treasury stock, at cost (210,000 shares) (1,511) (1,511)
------------------- --------------------
Total stockholders' equity 55,202 49,421
=================== ====================
$ 309,794 $ 310,120
=================== ====================
</TABLE>
See accompanying notes to financial statements.
Note: The Balance Sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
3
<PAGE>
TOWER AIR, INC.
STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Revenues:
Scheduled Passenger Service $ 127,684 $ 102,545 $ 254,414 $ 200,389
Commercial Charter Service 13,916 34,265 58,461 90,779
Military Charter Service 12,409 15,952 43,052 47,723
Cargo Service 4,335 6,387 14,124 7,353
Other 4,531 3,111 9,120 6,602
---------- ---------- ----------- ----------
Total operating revenues 162,875 162,260 379,171 352,846
Operating Expenses:
Fuel 22,548 30,660 55,085 62,943
Flight equipment rentals and insurance 8,321 6,761 25,739 18,086
Maintenance 12,564 14,938 38,054 35,650
Crew costs and other 7,982 7,243 23,324 20,364
Aircraft and traffic servicing 27,485 26,527 66,183 57,003
Passenger servicing 16,903 16,466 42,540 37,107
Promotion, sales and commissions 22,451 23,186 52,556 50,458
General and administrative 5,912 4,977 15,385 14,416
Depreciation and amortization 14,524 13,875 41,550 36,754
---------- ---------- ----------- ----------
Total operating expenses 138,690 144,633 360,416 332,781
---------- ---------- ----------- ----------
Operating Income 24,185 17,627 18,755 20,065
Other (Income) Expenses:
Other (income) (770) (125) (1,565) (143)
Interest expense 3,030 3,313 10,804 9,122
---------- ---------- ----------- ----------
Total other expenses 2,260 3,188 9,239 8,979
---------- ---------- ----------- ----------
Income Before Income Taxes 21,925 14,439 9,516 11,086
Income Tax Provision 9,865 5,944 4,280 4,433
---------- ---------- ----------- ----------
Net Income $ 12,060 $ 8,495 $ 5,236 $ 6,653
========== ========== =========== ==========
Basic Income Per Share $ 0.79 $ 0.56 $ 0.34 $ 0.44
========== ========== =========== ==========
Diluted Income Per Share $ 0.79 $ 0.55 $ 0.34 $ 0.43
========== ========== =========== ==========
Weighted Average Shares Outstanding-
Basic 15,365 15,290 15,350 15,290
========== ========== =========== ==========
Weighted Average Shares Outstanding-
Dilutive 15,365 15,416 15,469 15,457
========== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
TOWER AIR, INC.
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------
1998 1997
-------------- --------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,236 $ 6,653
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 41,550 36,754
Provision for doubtful accounts 637 221
Deferred income taxes 4,280 4,433
Deferred rent and other 260 (84)
(Gain) Loss on disposal of property and equipment (1,936) 15
Changes in operating assets and liabilities:
Receivables (8,281) 4,490
Income tax receivable 3,700 6,397
Prepaid expenses and other assets (4,544) (1,641)
Accounts payable and accrued liabilities 2,431 (7,622)
Air traffic liability (3,066) 1,086
-------------- --------------
Net cash provided by operating activities 40,267 50,702
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of flight equipment (29,186) (51,494)
Purchase of ground property and equipment (459) (337)
Proceeds from sale of property and equipment 3,490 100
Decrease (Increase) in certificates of deposit 250 (2,407)
-------------- --------------
Net cash used in investing activities (25,905) (54,138)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 347,007 350,955
Principal payments on borrowings (363,185) (344,945)
Proceeds from the exercise of stock options 202 --
Other (830) (566)
-------------- --------------
Net cash (used in) provided by financing activities (16,806) 5,444
-------------- --------------
Net (decrease) increase in cash and cash equivalents (2,444) 2,008
Cash and cash equivalents at beginning of period 3,922 2,968
============== ==============
Cash and cash equivalents at end of period $ 1,478 $ 4,976
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 10,668 $ 8,984
Cash paid during the period for income taxes, net $ -- $ 42
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of flight equipment accrued but not paid $ 1,463 $ 6,967
Purchase of flight equipment financed through debt $ 19,279 $ 9,208
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by Tower Air,
Inc. (the "Company") in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, these financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position, results of operations and
cash flows for the periods indicated. These interim financial statements and
related notes should be read in conjunction with the financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. The results of operations for the three months and the nine
months ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the full year.
2. LONG-TERM DEBT
In September 1997, the Company entered into the Amended and Restated Loan and
Security Agreement (the "Loan Agreement") with Heller Financial, Inc. ("Heller")
which extended the term of a line of credit until September 1999. The line of
credit, which is for $15.0 million, is secured by accounts receivable, general
intangibles, inventory, intellectual property, cash held in the Company's lock-
box account, one spare airframe, aircraft spare parts and landing and gate
rights. The Loan Agreement provides that the Company shall not, directly or
indirectly, create or become liable in respect of any indebtedness, with certain
specified exceptions.
Since February 1998, the Company has entered into seven amendments to the Loan
Agreement providing, among other things, for (i) changes in the maximum amount
of the revolving loan during different periods; (ii) subordination of loans made
to the Company by officers and directors; (iii) increases to the spread between
the amount of collateral required and the amount of available borrowing under
the Loan Agreement; (iv) modification of the financial covenant relating to the
Company's Tangible Net Worth (as defined therein) to facilitate compliance by
the Company; and (v) increases in the interest rate from Prime (as defined
therein) plus 0.75% to Prime plus 1.50% (10.0% at September 30, 1998). Through a
combination of the fourth amendment on May 14, 1998 and the sixth amendment on
July 13, 1998, the Company and Heller agreed to modify the Tangible Net Worth
covenant in the Loan Agreement by reducing the amount of Tangible Net Worth the
Company is required to maintain from $47.0 million prior to August 31, 1998 and
$55.0 million thereafter to $35.0 million through May 1998, $38.0 million for
June 1998, $47.5 million through August 1, 1998 and $55.0 million from August
31, 1998 and thereafter. On June 1, 1998, the fifth amendment permanently
limited the maximum amount of borrowings under the facility to $15.0 million
beginning on June 29, 1998, a decrease from the $25.0 million maximum amount
originally permitted. The sixth amendment to the Loan Agreement waived defaults
resulting from the repayment of the 12% Note (as defined herein), the issuance
6
<PAGE>
of the Nachtomi Note (as defined herein) and the defaults referred to below. On
August 27, 1998, the seventh amendment to the Loan Agreement between the Company
and Heller modified the Tangible Net Worth covenant in the Loan Agreement by
reducing the amounts of Tangible Net Worth the Company is required to maintain
to $44.5 million in July 1998, $45.0 million from August 1998 through March 1999
and to $50.0 million in April and May 1999. As of September 30, 1998, the
Company had $12.8 million of obligations outstanding under the Loan Agreement of
which an additional $2.0 million consisted of letters of credit issued to
various suppliers and insurance companies.
In January 1998, the Company entered into a $13.6 million loan agreement with a
commercial financial institution secured by twelve Pratt & Whitney JT9D engines,
of which $11.3 million was used to pay the balance remaining on two previous
agreements with the same commercial financial institution and $1.6 million was
to be paid toward engines under repair. As of September 30, 1998, this amount
remains unpaid.
In February and March 1998, the Company borrowed $6.0 million which bears
interest at a rate of 12% (the "12% Note") from Funding Enterprises, LLC, a
limited liability Company in which the Company's Chairman and former President
were members. On July 1, 1998, the Company discharged its obligations under the
12% Note by issuing a new note (the "Nachtomi Note"), due August 7, 1998, to the
Company's Chairman in the principal amount of $3.0 million and repaying the
balance of the 12% Note in cash. The Nachtomi Note bears interest at an annual
rate of 12.0%. The Nachtomi Note was amended so that it bears interest at an
annual rate of 12.0% after August 7, 1998 and matures on April 30, 1999. In
connection with the 12% note, warrants for the purchase of 1.2 million shares of
Common Stock of the Company were issued with an exercise price of $5.00. The
warrants expire in February 2008.
On July 15, 1998, the Company purchased an existing leased aircraft from a
lessor for a purchase price of $13.5 million of which a credit of $6.0 million
was given by the lessor to the Company for the payments of maintenance reserves
paid during the lease period and a balance of $7.5 million was financed by the
same lessor. In addition, the lessor waived all previously outstanding rent and
maintenance reserves through June 30, 1998 amounting to $1.4 million. This loan
requires a monthly payment of approximately $50,000 of interest only starting
October 1998 through May 1999 and then a total monthly payment of approximately
$0.4 million including principal and interest through March 2001.
On August 13, 1998, the Company restructured three existing loans with a
financial institution under which the Company was required to pay a total
monthly principal payment of $1.5 million. Under the terms of these Aircraft
Loan and Security Agreements, the Company is required to pay an aggregate
monthly principal payment of $0.5 million plus interest through June 1999, which
will pay off one of the three loans by March 1999, and the remaining two loans
will require a monthly principal payment, commencing July 1999, of $1.0 million
and $0.4 million plus interest through December 2002 and February 2003,
respectively.
7
<PAGE>
In September 1997, the Company entered into a finance agreement involving the
conversion and refurbishment of Pratt & Whitney engines. In connection with this
transaction, seven engines were financed for $24.3 million with interest at
prime plus 2% (10.50% at September 30, 1997). The Company also had a remaining
unpaid amount of $4.2 million related to other engines previously overhauled. On
September 28, 1998, a total of $27.2 million loan was restructured by the
Company which now requires a total monthly payment of $1.5 million through March
1999 and $2.0 million through July 1999 and $2.5 million through August 2000
which also allows the Company to repair/overhaul additional engines currently at
the repair facility with interest at 6% going up to a maximum of 9% per annum.
From time to time during 1998, the Company has been in default under certain
provisions of the Loan Agreement, including maintenance of minimum levels of
Tangible Net Worth (as defined therein) and EBITDA (as defined therein). The
Company has entered into amendments with Heller waiving such defaults, and is
currently in compliance with such provisions as they have been amended.
The Company has obtained agreements with other lessors for deferred or revised
payment terms for approximately $8.1 million outstanding as of June 30, 1998 of
lease and maintenance reserve payments. As of September 30, 1998, the balance
remaining on these deferred amounts is $5.9 million. In addition, the Company
agreed with certain of its vendors and suppliers to extend payment terms, and
has, in some cases, obtained payment extensions with respect to certain of the
Company's current obligations. As a result of some of the payment term
extensions, the Company is required to pay interest on the deferred amounts.
To the extent that the Company's access to capital is constrained, the Company
may not be able to make certain capital expenditures, meet certain other
requirements or continue to implement certain other aspects of its strategic
plan. The Company's ability to make scheduled principal and interest payments
and to refinance its indebtedness and to meet its other obligations and future
capital commitments will be dependent upon its financial and operating
performance, which is subject to general economic conditions and to financial,
business and other factors, including factors beyond its control. Although
management believes that the Company's cash flow from its operations and
financing activities should be sufficient in the next twelve months to meet the
Company's debt service and other obligations, future capital commitments and
liquidity requirements, the airline industry in general and the Company in
particular are subject to significant risks and uncertainties. Therefore, there
can be no assurance that the Company's operating results and financing
activities will be sufficient in the foreseeable future to meet such obligations
and commitments.
3. STOCKHOLDERS' EQUITY
In an effort to conserve cash, the Company did not pay a cash dividend on the
Common Stock during the nine months ended September 1998.
8
<PAGE>
4. INCOME TAXES
Income taxes are calculated at the estimated annual effective tax rate, which
differs from the federal statutory rate of 35.0%, primarily due to the effect of
state income taxes and certain nondeductible items.
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------- -----------------------------------------
1998 1997 1998 1997
------------------- ----------------- ------------------- --------------------
(in thousands except for per share data)
<S> <C> <C> <C> <C>
Numerator for basic earnings per
share - income available to common
stockholders 12,060 8,495 5,236 6,653
Numerator for diluted earnings per
share-income available to common
stockholders after assumed
conversions 12,060 8,495 5,236 6,653
Denominator:
Denominator for basic
earnings per share-weighted
average shares 15,365 15,290 15,350 15,290
Effect of dilutive securities:
Employee stock options -- 126 119 167
-------------- ---------------- ----------------- -----------------
Dilutive potential common shares
-- 126 119 167
Denominator for diluted earnings per
share-adjusted weighted-average
shares and assumed conversions 15,365 15,416 15,469 15,457
============== ================ ================= =================
Basic earnings per share $0.79 $0.56 $0.34 $0.44
============== ================ ================= =================
Diluted earnings per share $0.79 $0.55 $0.34 $0.43
============== ================ ================= =================
</TABLE>
9
<PAGE>
TOWER AIR, INC.
SELECTED OPERATING DATA
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------ -------------------------------------------
1998 1997 1998 1997
---------------------- ---------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Scheduled Passenger Service:
Revenue passengers carried
(in thousands) 596 471 1,225 946
Revenue passenger miles
(in thousands) (RPMs) (1) 1,520,647 1,364,217 3,189,782 2,641,289
Available seat miles
(in thousands) (ASMs) (2) 1,947,502 1,657,196 4,193,252 3,421,184
Passenger load factor (3) 78.08% 82.32% 76.07% 77.10%
Yield per RPM (4) .0839 $ .0752 $ .0798 $ .0759
Block hours flown (5) 9,234 7,668 19,913 16,006
Operating expense per ASM (6) $ .0506 $ .0512 $ .0527 $ .0507
Revenue per block hour (7) $ 13,828 $ 13,373 $ 12,776 $ 12,520
Variable expense per block hour (8) $ 9,609 $ 11,091 $ 9,876 $ 9,948
Commercial Charter Service:
Block hours flown (5) 1,680 3,232 8,235 11,825
Revenue per block hour (7) $ 8,283 $ 10,602 $ 7,099 $ 7,677
Variable expense per block hour (8) $ 4,975 $ 7,634 $ 4,148 $ 4,618
Military Charter Service:
Block hours flown (5) 985 1,279 3,592 3,973
Revenue per block hour (7) $ 12,598 $ 12,472 $ 11,986 $ 12,012
Variable expense per block hour (8) $ 5,531 $ 8,157 $ 6,585 $ 7,731
Cargo Service:
Block hours flown (5) 872 925 2,799 1,164
Revenue per block hour (7) $ 4,971 $ 6,905 $ 5,046 $ 6,317
Variable expense per block hour (8) $ 1,975 $ 6,363 $ 2,279 $ 5,427
Total:
Block hours flown (5) 12,771 13,104 34,539 32,968
Revenue per block hour (7) $ 12,399 $ 12,145 $ 10,714 $ 10,502
Variable expense per block hour (8) $ 8,164 $ 9,321 $ 7,552 $ 7,492
Average hours of daily utilization (9) 9.8 10.4 9.3 9.9
Employees (at period-end) 2,005 1,616 2,005 1,616
Number of aircraft in service
(at period-end) (10) 16 16 16 16
</TABLE>
___________________________________
(1) Revenue passenger miles" or "RPMs" represent the number of miles flown by
revenue passengers.
(2) "Available seat miles" or "ASMs" represent the number of seats available
for passengers multiplied by the number of miles those seats are flown.
(3) "Passenger load factor" represents revenue passenger miles divided by
available seat miles.
(4) "Yield per RPM" represents total revenue from scheduled passenger service
divided by revenue passenger miles.
(5) "Block hours" represent the period of time between the aircraft's departure
from the place where it is parked to its arrival at its destination.
(6) "Operating expense per ASM" represents certain direct variable costs for
scheduled passenger service, which include passenger liability insurance,
catering, crew costs, fuel, landing and handling fees, maintenance,
navigation fees, "power by the hour" rent, plus marketing and reservations,
and an allocation of other fixed costs based on block hours, divided by
total scheduled passenger service ASMs .
(7) "Revenue per block hour" represents total revenue from scheduled passenger
service, commercial charter service, military charter service and cargo
service divided by total block hours flown.
(8) "Variable expense per block hour" represents total direct variable costs,
which include passenger liability insurance, catering, crew costs,
commissions, fuel, landing and handling fees, maintenance, navigation fees
and insurance and "power by the hour" rent, divided by block hours.
(9) "Average hours of daily utilization" represents the actual number of block
hours per aircraft per operating day.
(10) For the relevant periods, aircraft in service (at end of each period)
excludes a cargo aircraft which has been out of service since February 1996
pursuant to certain Airworthiness Directive requirements ("ADs") and two
passenger aircraft which have not been in the active fleet since June 1997
and January 1998, respectively.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:
Certain statements contained herein constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements incorporate assumptions that entail uncertainties and unknown risks.
A variety of factors may cause the actual results and performance of the Company
or industry to differ materially from any future results or performance
expressed or implied by such forward-looking statements. The factors related to
the Company include, among others, the following: substantial indebtedness;
significant capital expenditure requirements and limited liquidity; recent
operating losses and future uncertainties relating to results of operations; the
age of the fleet and noise reduction requirements; dependency on aircraft
availability; capital intensive nature of aircraft acquisitions; international
business risks, dependence on certain routes and charters; control by the
principal stockholder, Morris Nachtomi; new management and dependence on key
personnel; employee relations; relations with travel agents and tour operators
and insurance coverage. In addition, factors related to the industry include,
among other things, the following: competition; the cost of fuel; government
regulation and political, social and economic conditions.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1997
For the three-months ended September 30, 1998 (the "1998 Third Quarter"), the
Company reported an operating profit of $24.2 million compared to an operating
profit of $17.6 million for the three months ended September 30, 1997 (the "1997
Third Quarter"). The net income in the 1998 Third Quarter was $12.1 million
compared to a net income of $8.5 million in the 1997 Third Quarter. Scheduled
passenger service unit operating expenses (per scheduled ASM) declined by 1.2%
in the 1998 Third Quarter compared to the 1997 Third Quarter. Overall operating
margins increased from 10.9% in the 1997 Third Quarter to 14.8% in the 1998
Third Quarter.
OPERATING REVENUES. The Company's total operating revenues increased by $0.6
million, or 0.4% to $162.9 million in the 1998 Third Quarter from $162.3 million
in the 1997 Third Quarter.
Scheduled passenger service revenues increased $25.1 million, or 24.5%, to
$127.7 million in the 1998 Third Quarter from $102.5 million in the 1997 Third
Quarter. This increase was primarily attributable to increased frequencies on
certain existing routes and the inception of new domestic and international
markets, an increase in yields partially offset by a lower load factor.
Scheduled passenger traffic (as measured in RPMs) for the 1998 Third Quarter
increased by 11.5% and scheduled capacity (as measured in ASMs) for the 1998
Third Quarter increased by 17.5%, resulting in a load factor of 78.1% in the
1998 Third Quarter compared to 82.3% in the 1997 Third Quarter. Passenger yield
for the 1998 Third Quarter, increased 11.6% to $0.0839 per
11
<PAGE>
RPM compared to $0.0752 per RPM for the 1997 Third Quarter. Increased yields
were due primarily to an increase in the average ticket price. Domestic market
demand also increased during the 1998 Third Quarter which resulted in an
increase of $17.4 million, or 46.5%, in additional revenue for the 1998 Third
Quarter over the 1997 Third Quarter. The Company also realized a $7.7 million,
or 12.3%, increase in international revenues primarily due to the servicing of
new markets.
Commercial charter revenues decreased $20.3 million, or 59.4%, to $13.9 million
in the 1998 Third Quarter from $34.3 million in the 1997 Third Quarter. This
decrease was primarily due to the Company's strategy to increase scheduled
passenger business and allocate more of its available aircraft resulting in a
decrease in aircraft availability for commercial charter business.
Military charter revenues decreased by $3.5 million, or 22.2%, to $12.4 million
in the 1998 Third Quarter from $16.0 million in the 1997 Third Quarter primarily
as a result of decreased activities related to the deployment or repatriation of
troops. The military charter business depends in large part upon the deployment
or repatriation of troops, and revenues from this market are subject to
significant fluctuation.
Cargo service revenue decreased to $4.3 million in the 1998 Third Quarter from
$6.4 million in the 1997 Third Quarter due to a number of factors, including (i)
block hours decreased by 5.7% despite the addition of an aircraft in March 1998
to the Company's cargo fleet as a result of the conversion of a leased passenger
aircraft, (ii) a change in the type of contract from a full charter (where
carrier incurs all costs associated with the operation of the aircraft) in the
1997 Third Quarter to an aircraft, crew, maintenance and insurance contract
("ACMI Contract") with a South American airline in the 1998 Third Quarter. The
Company had operated only one cargo aircraft since February 1996, when the FAA
promulgated certain ADs which restricted the cargo carrying capacity of one of
the Company's Boeing 747-100 cargo aircraft, as well as nine other similarly
converted Boeing 747-100 cargo aircraft operated by other carriers. At that
time, the Company decided to ground the aircraft rather than operate it with
restricted payload as required by such ADs. In order to return the cargo
capacity of such aircraft to what the Company believes to be economically
attractive levels, an FAA-approved modification plan will be required. Such
modifications are being designed and tested by the GATX-Airlog Co. There can be
no assurance, however, that such modifications, if successfully designed, will
obtain FAA approval and that such aircraft will be returned to service.
OPERATING EXPENSES. The Company's operating expenses decreased $5.9 million, or
4.1%, to $138.7 million in the 1998 Third Quarter from $144.6 million for the
1997 Third Quarter. Operating expenses, excluding fuel and depreciation,
increased by 1.5% in the 1998 Third Quarter. This increase in operating expenses
reflected higher rental expense as a result of the addition of two aircraft to
the Company's fleet and the conversion of one aircraft to cargo configuration.
Aircraft fuel expenses decreased $8.1 million, or 26.5%, to $22.5 million in the
1998 Third Quarter from $30.7 million in the 1997 Third Quarter. This decrease
reflected an 11.6% decrease in fuel consumption with a 15.9% decrease in the
cost of fuel.
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Flight equipment rentals and insurance expenses increased $1.6 million, or
23.1%, to $8.3 million in the 1998 Third Quarter from $6.8 million in the 1997
Third Quarter. This increase was attributable to charges associated with the
rental of two additional leased aircraft to support the Company's fleet
requirements as well as increased aircraft rent resulting from the conversion of
one leased aircraft from passenger to cargo configuration, partially offset by
decreased engine rental due to delivery of some of the Company's owned engines
from repair shops.
Maintenance costs decreased $2.4 million, or 15.9%, to $12.6 million in the 1998
Third Quarter from $14.9 million in the 1997 Third Quarter. This decrease
reflected a number of factors, including (i) the Company's May 1998
implementation of a FAA approved program which allows the Company to reduce
expenses associated with bench-testing serviceable spare parts components at
third-party facilities, (ii) lower parts loan charges due to the Company's cost
control efforts, and (iii) lower maintenance reserves on engine rentals due to
delivery of some of the Company's owned engines from repair shops partially
offset by the increased maintenance reserves associated with the rental of two
additional leased aircraft.
Crew costs and other expenses increased $0.7 million, or 10.2%, to $8.0 million
in the 1998 Third Quarter from $7.2 million in the 1997 Third Quarter. This
increase was primarily due to increases in pay rates as a result of longevity
with the Company and some cost increases due to certain foreign regulations
affecting certain of the Company's charter operations which are more restrictive
than FAA regulations, resulting in increased crew cost, such as additional
overtime and per diem.
Aircraft and traffic servicing expenses increased $1.0 million, or 3.6%, to
$27.5 million in the 1998 Third Quarter from $26.5 million in the 1997 Third
Quarter. This increase resulted primarily from the change in the Company's
business mix described above. Scheduled service block hours, where the Company
is responsible for all expenses, increased from 7,668 to 9,234. As a percentage
of total block hours, scheduled service block hours represented 72.3% in the
1998 Third Quarter compared to 58.5% in the 1997 Third Quarter.
Passenger servicing expenses increased $0.4 million, or 2.7%, to $16.9 million
in the 1998 Third Quarter from $16.5 million in the 1997 Third Quarter. This
increase resulted primarily from the change in the Company's business mix
described above.
Promotion, sales and commission expenses decreased $0.7 million, or 3.2%, to
$22.5 million in the 1998 Third Quarter from $23.2 million in the 1997 Third
Quarter. This decrease was primarily due to lower overall commission rates
partially offset by higher commission expenses from increased scheduled
passenger service revenues in the 1998 Third Quarter.
General and administrative expenses increased $0.9 million, or 18.8%, to $5.9
million in the 1998 Third Quarter from $5.0 million in the 1997 Third Quarter.
This increase primarily related to increased accounting and legal costs. As a
percentage of operating revenue, general and administrative expenses for the
1998 Third Quarter were 3.6% compared with 3.1% for the 1997 Third Quarter.
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Depreciation and amortization expenses increased $0.6 million, or 4.7%, to $14.5
million in the 1998 Third Quarter from $13.9 million in the 1997 Third Quarter.
This increase was primarily due to depreciation expense associated with
capitalized engine overhauls and the purchase of an aircraft, which was
partially offset by the June 1998 revision to the Company's maintenance program
that involves spreading certain work typically performed during infrequent major
overhauls over the course of more frequent, smaller maintenance checks. This
revision also schedules heavy service maintenance overhauls as a function of
both aircraft utilization and elapsed time since the last heavy overhauls while
the prior program scheduled heavy maintenance overhauls based solely on elapsed
time. As a result of the revision, the Company is able to depreciate its heavy
airframe maintenance overhaul expenses over a longer time period.
OTHER EXPENSES AND INCOME. Interest expense decreased $0.3 million, or 8.5%, to
$3.0 million in the 1998 Third Quarter from $3.3 million in the 1997 Third
Quarter. This decrease reflects a credit of $0.3 million recognized due to the
restructuring of an outstanding loan with a debtor which resulted in a lower
interest rate partially offset by a higher average outstanding debt balance in
the 1998 Third Quarter. The increase in other income reflects a gain of $1.5
million recognized from the outcome of a legal case with a vendor.
INCOME TAX PROVISION. The income tax provision for the 1998 Third Quarter was
$9.9 million compared with $5.9 million in the 1997 Third Quarter. This increase
was principally attributable to increased profits earned during the period.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1997
For the nine months ended September 30, 1998 (the "1998 Nine-Month Period"), the
Company reported an operating profit of $18.8 million compared to an operating
profit of $20.1 million for the nine months ended September 30, 1997 (the "1997
Nine-Month Period"). The net income in the 1998 Nine-Month Period was $5.2
million compared to a net income of $6.7 million in the 1997 Nine-Month Period.
Scheduled passenger service unit operating expenses (per scheduled ASM) rose by
3.9% in the 1998 Nine-Month Period compared with the 1997 Nine-Month Period.
Overall operating margins decreased from 5.7% in the 1997 Nine-Month Period to
4.9% in the 1998 Nine-Month Period.
OPERATING REVENUES. The Company's total operating revenues increased by $26.3
million, or 7.5% to $379.2 million in the 1998 Nine-Month Period from $352.8
million in the 1997 Nine-Month Period.
Scheduled passenger service revenues increased $54.0 million, or 27.0%, to
$254.4 million in the 1998 Nine-Month Period from $200.4 million in the 1997
Nine-Month Period. This increase was primarily attributable to increased
frequencies on certain existing routes and an increase in yields partially
offset by a lower load factor. Scheduled passenger traffic (as measured in RPMs)
for the 1998 Nine-Month Period increased by 20.8% and scheduled capacity (as
measured in ASMs) for the 1998 Nine-Month Period
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increased by 22.6%, resulting in a load factor of 76.1% in the 1998 Nine-Month
Period compared to 77.1% in the 1997 Nine-Month Period. Passenger yield for the
1998 Nine-Month Period increased 5.1% to $.0798 per RPM compared with $.0759 per
RPM for the 1997 Nine-Month Period. Increased yields were due primarily to an
increase in the average ticket price. Domestic market demand also increased
during the 1998 Nine-Month Period which resulted in an increase of $41.3
million, or 52.5%, in domestic revenues for the 1998 Nine-Month Period over the
1997 Nine-Month Period. The Company also realized an $8.7 million, or 10.5%,
increase in Tel Aviv revenues due to increased marketing and sales activities.
Commercial charter revenues decreased $32.3 million, or 35.6%, to $58.5 million
in the 1998 Nine-Month Period from $90.8 million in the 1997 Nine-Month Period.
This decrease resulted from a number of factors including: (i) the cancellation
of certain charter flights that were scheduled to commence in March 1998 because
of the late release of three aircraft from heavy maintenance facilities, and
(ii) the Company's strategy to increase scheduled passenger business and
allocate more of its available aircraft resulting in a decrease in aircraft
availability for commercial charter business.
Military charter revenues decreased by $4.7 million, or 9.8%, to $43.1 million
in the 1998 Nine-Month Period from $47.7 million in the 1997 Nine-Month Period
primarily as a result of decreased activities related to the deployment or
repatriation of troops. The military charter business depends in large part upon
the deployment or repatriation of troops, and revenues from this market are
subject to significant fluctuation.
Cargo service revenue increased by $6.8 million, or 92.1%, to $14.1 million in
the 1998 Nine-Month Period from $7.4 million in the 1997 Nine-Month Period due
to a new aircraft, crew, maintenance and insurance contract ("ACMI Contract")
with a South American airline and the addition of an aircraft in March 1998 to
the Company's cargo fleet as a result of the conversion of a leased passenger
aircraft, partially offset by a change in the type of contract to ACMI in the
1998 Nine-Month Period from a full charter (where the carrier incurs all costs
associated with the operation of the aircraft) in the 1997 Nine-Month Period.
The Company had operated only one cargo aircraft since February 1996, when the
FAA promulgated certain ADs which restricted the cargo carrying capacity of one
of the Company's Boeing 747-100 cargo aircraft, as well as nine other similarly
converted Boeing 747-100 cargo aircraft operated by other carriers. At that
time, the Company decided to ground the aircraft rather than operate it with
restricted payload as required by such ADs. In order to return the cargo
capacity of such aircraft to what the Company believes to be economically
attractive levels, an FAA-approved modification plan will be required. Such
modifications are being designed and tested by the GATX-Airlog Co. There can be
no assurance, however, that such modifications, if successfully designed, will
obtain FAA approval and that such aircraft will be returned to service.
OPERATING EXPENSES. The Company's operating expenses increased $27.6 million, or
8.3%, to $360.4 million in the 1998 Nine-Month Period from $332.8 million for
the 1997 Nine-Month Period. Operating expenses, excluding fuel and depreciation,
increased by 13.2% in the 1998 Nine-Month Period. This increase in operating
expenses reflected a number of factors, including: (i) higher costs arising from
delayed completion of work on, and late release of, three aircraft from heavy
maintenance and one aircraft from cargo conversion facilities, (ii) delayed
completion of overhauls on eight of the Company's owned engines due in part to
the Company's cash deficiencies, resulting in
15
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an increase in the number of engines leased by the Company, (iii) higher rental
expense as a result of the addition of two aircraft to the Company's fleet and
the conversion of one aircraft to cargo configuration, and (iv) increased crew
costs resulting from certain of the Company's commercial charter operations.
Aircraft fuel expenses decreased $7.9 million, or 12.5%, to $55.1 million in the
1998 Nine-Month Period from $62.9 million in the 1997 Nine-Month Period. This
decrease resulted from an 11.9% decrease in the cost of fuel partially offset by
a 2.4% increase in consumption.
Flight equipment rentals and insurance expenses increased $7.7 million, or
42.3%, to $25.7 million in the 1998 Nine-Month Period from $18.1 million in the
1997 Nine-Month Period. This increase was attributable to charges associated
with the rental of two additional aircraft to support the Company's fleet
requirements as well as increased aircraft rent resulting from the conversion of
one leased aircraft from passenger to cargo configuration. In addition, rental
expenses associated with certain flight equipment increased in the 1998 Nine-
Month Period relative to the 1997 Nine-Month Period in accordance with terms of
the relevant sale and leaseback transaction and increased engine rental charges
as a result of the delayed completion of work on certain of the Company's owned
engines.
Maintenance costs increased $2.4 million, or 6.7%, to $38.1 million in the 1998
Nine-Month Period from $35.7 million in the 1997 Nine-Month Period. This
increase was attributable primarily to increased maintenance reserves associated
with aircraft and engine rentals described above. This increase was partially
offset by the Company's May 1998 implementation of an FAA-approved program which
allows the Company to reduce expenses associated with bench-testing serviceable
spare part components at third-party facilities.
Crew costs and other expenses increased $3.0 million, or 14.5%, to $23.3 million
in the 1998 Nine-Month Period from $20.4 million in the 1997 Nine-Month Period.
This increase was primarily due to increases in pay rates and some cost
increases due to certain foreign regulations affecting certain of the Company's
charter operations which are more restrictive than FAA regulations, resulting in
increased crew cost, such as additional overtime, per diem and hotel costs.
Aircraft and traffic servicing expenses increased $9.2 million, or 16.1%, to
$66.2 million in the 1998 Nine-Month Period from $57.0 million in the 1997 Nine-
Month Period. This increase resulted primarily from the change in the Company's
business mix described above. Scheduled service block hours, where the Company
is responsible for all operating expenses, increased from 16,006 to 19,913. As a
percentage of total block hours, scheduled service block hours represented 57.7%
in the 1998 Nine-Month Period compared to 48.6% in the 1997 Nine-Month Period.
Passenger servicing expenses increased $5.4 million, or 14.6%, to $42.5 million
in the 1998 Nine-Month Period from $37.1 million in the 1997 Nine-Month Period.
This increase resulted primarily from the change in the Company's business mix
described above.
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Promotion, sales and commission expenses increased $2.1 million, or 4.2%, to
$52.6 million in the 1998 Nine-Month Period from $50.5 million in the 1997 Nine-
Month Period. This increase was primarily due to higher commission expenses from
increased scheduled passenger service revenues partially offset by lower
commission rates in the 1998 Nine-Month Period.
General and administrative expenses increased $1.0 million, or 6.7%, to $15.4
million in the 1998 Nine-Month Period from $14.4 million in the 1997 Nine-Month
Period. This increase is primarily related to increased accounting and legal
costs. As a percentage of operating revenue, general and administrative expenses
for the 1998 Nine-Month Period remained constant with the 1997 Nine-Month Period
at 4.1% for both periods.
Depreciation and amortization expenses increased $4.8 million, or 13.0%, to
$41.6 million in the 1998 Nine-Month Period from $36.8 million in the 1997 Nine-
Month Period. This increase was primarily due to depreciation expense associated
with capitalized engine overhauls, heavy airframe maintenance and purchase of an
aircraft, which was partially offset by the June 1998 revision to the Company's
maintenance program that involves spreading certain work typically performed
during infrequent major overhauls over the course of more frequent, smaller
maintenance checks. This revision also schedules heavy service maintenance
overhauls as a function of both aircraft utilization and elapsed time since the
last heavy overhauls while the prior program scheduled heavy maintenance
overhauls based solely on elapsed time. As a result of the revision, the Company
is able to depreciate its heavy airframe maintenance overhaul expenses over a
longer time period.
OTHER EXPENSES AND INCOME. Interest expense increased $1.7 million, or 18.4%, to
$10.8 million in the 1998 Nine-Month Period from $9.1 million in the 1997 Nine-
Month Period. This increase primarily reflects a higher average outstanding debt
balance in the 1998 Nine-Month Period, increases in the interest rate under the
Loan Agreement and a one-time charge of $0.4 million associated with warrants
issued in connection with borrowings from Funding Enterprises LLC, partially
offset by a credit of $0.3 million recognized due to the restructuring of an
outstanding loan with a debtor which resulted in a lower interest rate. The
increase in other income also reflects a gain of $1.5 million recognized from
the outcome of a legal case with a vendor. See Note 2 to the Notes to the
Company's Financial Statements included elsewhere herein for additional
information regarding the financing of certain flight equipment expenditures.
INCOME TAX PROVISION. The income tax provision for the 1998 Nine-Month Period
was $4.3 million compared with $4.4 million in the 1997 Nine-Month Period. This
decrease was principally attributable to lower profits for the 1998 Nine-Month
Period.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its working capital and capital
expenditure requirements with cash flow generated from operations and through
lease, debt and equity financing.
The Company's cash, cash equivalents and short-term investments at September 30,
1998 and December 31, 1997 were $3.6 million and $6.3 million, respectively. The
Company generated cash from operations for the 1998 Nine-Month Period and 1997
Nine-Month Period of $40.3 million and $50.7 million, respectively.
Net cash used in investing activities was $25.9 million for the 1998 Nine-Month
Period compared with $54.1 million for the 1997 Nine-Month Period. The Company's
expenditures for flight equipment were $29.2 million for the 1998 Nine-Month
Period compared with $51.5 million for the 1997 Nine-Month Period. Expenditures
for flight equipment in the 1998 Nine-Month Period included the purchase of an
aircraft, capitalized engine overhauls and heavy airframe maintenance (See Note
2 to the Financial Statements for additional information regarding the financing
of certain flight equipment expenditures).
As of September 30, 1998, the Company had a working capital deficit of $113.7
million compared to a working capital deficit of $140.0 million as of December
31, 1997. Historically, the Company has operated with a working capital deficit.
In September 1997, the Company entered into the Loan Agreement which extended
the term of a line of credit with Heller until September 1999. The line of
credit, which is for $15.0 million is secured by accounts receivable, general
intangibles, inventory, intellectual property, cash held in the Company's lock-
box account, one spare airframe, aircraft spare parts and landing and gate
rights. The Loan Agreement provides that the Company shall not, directly or
indirectly, create or become liable in respect of any indebtedness, with certain
specified exceptions.
Since February 1998, the Company has entered into seven amendments to the Loan
Agreement providing, among other things, for (i) changes in the maximum amount
of the revolving loan during different periods; (ii) subordination of loans made
to the Company by officers and directors; (iii) increases to the spread between
the amount of collateral required and the amount of available borrowing under
the Loan Agreement; (iv) modification of the financial covenant relating to the
Company's Tangible Net Worth (as defined therein) to facilitate compliance by
the Company; and (v) increases in the interest rate from Prime (as defined
therein) plus 0.75% to Prime plus 1.50% (10.0% at September 30, 1998). Through a
combination of the fourth amendment on May 14, 1998 and the sixth amendment on
July 13, 1998, the Company and Heller agreed to modify the Tangible Net Worth
covenant in the Loan Agreement by reducing the amount of Tangible Net Worth the
Company is required to maintain from $47.0 million prior to August 31, 1998 and
$55.0 million thereafter to $35.0 million through May 1998, $38.0 million for
June 1998, $47.5 million through August 1, 1998 and $55.0 million from August
31, 1998 and thereafter. On June 1, 1998, the fifth amendment permanently
limited the maximum amount of borrowings under the facility to $15.0 million
beginning on June 29, 1998, a decrease from the $25.0 million maximum amount
originally permitted. The sixth amendment to the Loan Agreement waived
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<PAGE>
defaults resulting from the repayment of the 12% Note (as defined herein), the
issuance of the Nachtomi Note (as defined herein) and the defaults referred to
below. On August 27, 1998, the seventh amendment to the Loan Agreement between
the Company and Heller modified the Tangible Net Worth covenant in the Loan
Agreement by reducing the amounts of Tangible Net Worth the Company is required
to maintain to $44.5 million in July 1998, $45.0 million from August 1998
through March 1999 and to $50.0 million in April and May 1999. As of September
30, 1998, the Company had $12.8 million of obligations outstanding under the
Loan Agreement of which an additional $2.0 million consisted of letters of
credit issued to various suppliers and insurance companies.
In January 1998, the Company entered into a $13.6 million loan agreement with a
commercial financial institution secured by twelve Pratt & Whitney JT9D engines,
of which $11.3 million was used to pay the balance remaining on two previous
agreements with the same commercial financial institution and $1.6 million was
to be paid toward engines under repair. As of September 30, 1998, this amount
remains unpaid.
In February and March 1998, the Company borrowed $6.0 million which bears
interest at a rate of 12% (the "12% Note") from Funding Enterprises, LLC, a
limited liability Company in which the Company's Chairman and former President
were members. On July 1, 1998, the Company discharged its obligations under the
12% Note by issuing a new note (the "Nachtomi Note"), due August 7, 1998, to the
Company's Chairman in the principal amount of $3.0 million and repaying the
balance of the 12% Note in cash. The Nachtomi Note bears interest at an annual
rate of 12.0%. The Nachtomi Note was amended so that it bears interest at an
annual rate of 12.0% after August 7, 1998 and matures on April 30, 1999. In
connection with the 12% note, warrants for the purchase of 1.2 million shares of
Common Stock of the Company were issued with an exercise price of $5.00. The
warrants expire in February 2008.
On July 15, 1998, the Company purchased an existing leased aircraft from a
lessor for a purchase price of $13.5 million of which a credit of $6.0 million
was given by the lessor to the Company for the payments of maintenance reserves
paid during the lease period and a balance of $7.5 million was financed by the
same lessor. In addition, the lessor waived all previously outstanding rent and
maintenance reserves through June 30, 1998 amounting to $1.4 million. This loan
requires a monthly payment of approximately $50,000 of interest only starting
October 1998 through May 1999 and then a total monthly payment of approximately
$0.4 million including principal and interest through March 2001.
On August 13, 1998, the Company restructured three existing loans with a
financial institution under which the Company was required to pay a total
monthly principal payment of $1.5 million. Under the terms of these Aircraft
Loan and Security Agreements, the Company is required to pay an aggregate
monthly principal payment of $0.5 million plus interest through June 1999, which
will pay off one of the three loans by March 1999, and the remaining two loans
will require a monthly principal payment, commencing July 1999, of $1.0 million
and $0.4 million plus interest through December 2002 and February 2003,
respectively.
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In September 1997, the Company entered into a finance agreement involving the
conversion and refurbishment of Pratt & Whitney engines. In connection with this
transaction, seven engines were financed for $24.3 million with interest at
prime plus 2% (10.50% at September 30, 1997). The Company also had a remaining
unpaid amount of $4.2 million related to other engines previously overhauled. On
September 28, 1998, a total of $27.2 million loan was restructured by the
Company which now requires a total monthly payment of $1.5 million through March
1999 and $2.0 million through July 1999 and $2.5 million through August 2000
which also allows the Company to repair/overhaul additional engines currently at
the repair facility with interest at 6% going up to a maximum of 9% per annum.
The Company has entered into a letter of intent with International Lease Finance
Corp. to lease two new Boeing 777 aircraft for an initial term of ten years. If
a definitive agreement is executed, the Company will be required to pay $4.8
million in deposits for the two leased aircraft, of which $0.4 million is due
during the first half of 1999. The deposits are refundable, subject to certain
conditions, at the end of the lease term.
The Company has cancelled its letter of intent with Boeing to purchase two new
Boeing 777 aircraft with the option to purchase two additional new Boeing 777
aircraft.
From time to time during 1998, the Company has been in default under certain
provisions of the Loan Agreement, including maintenance of minimum levels of
Tangible Net Worth (as defined therein) and EBITDA (as defined therein). The
Company has entered into amendments with Heller waiving such defaults, and is
currently in compliance with such provisions as they have been amended.
The Company has obtained agreements with other lessors for deferred or revised
payment terms for approximately $8.1 million outstanding as of June 30, 1998 of
lease and maintenance reserve payments. As of September 30, 1998, the balance
remaining on these deferred amounts is $5.9 million. In addition, the Company
agreed with certain of its vendors and suppliers to extend payment terms, and
has, in some cases, obtained payment extensions with respect to certain of the
Company's current obligations. As a result of some of the payment term
extensions, the Company is required to pay interest on the deferred amounts.
To the extent that the Company's access to capital is constrained, the Company
may not be able to make certain capital expenditures, meet certain other
requirements or continue to implement certain other aspects of its strategic
plan. The Company's ability to make scheduled principal and interest payments
and to refinance its indebtedness and to meet its other obligations and future
capital commitments will be dependent upon its financial and operating
performance, which is subject to general economic conditions and to financial,
business and other factors, including factors beyond its control. Although
management believes that the Company's cash flow from its operations and
financing activities should be sufficient in the next twelve months to meet the
Company's debt service and other obligations, future capital commitments and
liquidity requirements, the airline industry in general and the Company in
particular are subject to significant risks and uncertainties. Therefore, there
can be no assurance that
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the Company's operating results and financing activities will be sufficient in
the foreseeable future to meet such obligations and commitments.
As of September 30, 1998, the Company had $46.6 million of required principal
payments on long-term debt due within one year.
In an effort to conserve cash, the Company suspended cash dividends on its
Common Stock after the third quarter of 1996.
YEAR 2000
The Year 2000 problem exists because many computer programs use only the last
two digits to refer to a year. This convention could affect date-sensitive
calculations that treat "00" as the year 1900, rather than 2000. An additional
issue is that 1900 was not a leap year, whereas the Year 2000 is. Therefore,
some programs may not properly provide for February 29, 2000. This anomaly could
result in miscalculations when processing critical date-sensitive information
after December 31, 1999.
The Company recently restructured its MIS Department with the hiring of three
computer experts who are familiar with information system issues confronting
both the Company in particular and the airline industry in general. The
Company's comprehensive Year 2000 initiative will be managed by this new
internal MIS team. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operation and that transactions
with customers, suppliers and financial institutions are fully supported The
Company has determined that due to its most recent and near term software
upgrades, its internal systems will function properly with respect to dates in
the Year 2000 and beyond. The Company has initiated discussions with its
significant suppliers, large customers and financial institutions to ensure that
those parties have appropriate plans to remediate Year 2000 issues where their
systems interface with the Company's systems or otherwise impact its operations.
The Company is assessing the extent to which its operations are vulnerable
should those organizations fail to remediate properly their computer systems.
While the Company believes its planning efforts are adequate to address its Year
2000 concerns, there can be no guarantee that the systems of other companies or
governmental agencies on which the Company's systems and operations rely will be
converted on a timely basis and, if not so converted, will not have a material
adverse effect on the Company's business.
The Company's new MIS team will be assessing the need to develop remediation
contingency plans and business resumption contingency plans specific to the Year
2000. Remediation contingency plans address the actions to be taken if the
current approach to remediating a system is falling behind schedule or otherwise
appears in jeopardy of failing to deliver a Year 2000 ready system when needed.
Business resumption contingency plans address the actions that would be taken if
critical business functions can not be carried out in the normal manner upon
entering the next century due to system or supplier failure.
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The Company, as an IATA member airline, is a participant in the "IATA Year 2000
Project". The IATA Year 2000 Project is an initiative to increase the awareness
of third party suppliers - such as airports, ATS providers and manufacturers -
and to assess and promote their Year 2000 preparedness. Working closely with
ICAO, the Airports Council International, the ATA and other industry
organizations, IATA has developed and piloted a standard methodology to assess
Year 2000 readiness. The project will provide training on how to use the
methodology, and will track the status of remedial programs so that problems can
be identified early. IATA estimates that the cost of the Project will be
approximately $20 million, of which the Company's pro rata share is
approximately $67,000. The Company does not expect the total cost of its Year
2000 initiatives to have a material adverse effect on the Company's business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The only changes in legal proceedings as disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 and in the Company's
Form 10-Q for each of the quarterly periods ended March 31, 1998 and June 30,
1998 are the following:
On July 23, 1998, Terry V. Hallcom, the former President and Executive Vice
President-Operations of the Company filed a Demand for Arbitration (the
"Demand") with the American Arbitration Association. The Demand alleges that the
Company is liable for breach of contract, fraud, misrepresentation and
defamation in connection with the resignation of Hallcom from his employment
with the Company, and seeks unspecified monetary damages, specific performance
of Hallcom's employment agreement, declaratory relief, punitive damages, costs
and attorneys fees. The Company has denied the allegations in the Demand and has
filed counterclaims against Hallcom alleging breach of his fiduciary duties to
the Company, breach of his employment contract, fraud, malfeasance, misfeasance,
and nonfeasance. The Company believes it has meritorious defenses to the
allegations in the Demand and plans to vigorously defend against Hallcom's
claims and to pursue its counterclaims against Hallcom. On August 21, 1998,
the Company initiated a special proceeding in the Supreme Court of the State of
New York, County of New York, in order to disqualify Hallcom's counsel from
representing Hallcom in the arbitration due to counsel's irreconcilable
conflicts of interest. A hearing was held on October 16, 1998, at which time the
Court stayed the arbitration pending a decision in the special proceeding.
The lawsuit entitled UNC Camco Incorporated, et. al. v. Tower Air, Inc., was
---------------------------------------------------
settled by a settlement agreement dated as of September 30, 1998.
The Leticia Parra, individually and on behalf of all persons similarly situated
---------------------------------------------------------------------------
v. Tower Air, Inc., case was re-filed in the New York State Court on July 15,
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1998, and served on July 24, 1998. Index No. 603467/98. The plaintiff alleges
she was denied boarding and seeks designation as representative of a similarly
situated class of over 1,000 persons. Claim is made for $1,000,000 for each
class member with an additional $1,000,000 per class member being claimed in
compensatory and punitive damages with respect to mental anguish and emotional
distress. The case is in the discovery phase and is being vigorously defended by
the Company, both as to class certification and on the merits.
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ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 10 (31) The CIT Group/Equipment Financing, Inc. Loan
Agreement, dated July 15, 1998
Exhibit 10(32) C.I.T. Leasing Corporation Purchase and Sale
Agreement, dated July 15, 1998
Exhibit 10(33) Finova Capital Corporation Amended &
Restated Promissory Note, dated August 13, 1998
Exhibit 10(34) Finova Capital Corporation Amended &
Restated Promissory Note, dated August 13, 1998
Exhibit 10(35) Finova Capital Corporation Consolidated, Amended
and Restated Promissory Note, dated
August 13, 1998
Exhibit 10(36) Finova Capital Corporation Second Amendment to
Aircraft Loan & Security Agreement, dated
August 13, 1998
Exhibit 10(37) Finova Capital Corporation Sixth Amendment to
Aircraft Loan & Security Agreement, dated
August 13, 1998
Exhibit 10(38) Heller Financial, Inc. Seventh Amendment to Loan
& Security Agreement, dated August 27, 1998
Exhibit 10(39) GE Aircraft Engines Maintenance Services
Agreement, dated October 1, 1996
Exhibit 10(40) GE Aircraft Engines/Tower Air Payment Plan
dated September 28, 1998
(b) Exhibit 27 Financial Data Schedule
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tower Air, Inc.
(Registrant)
Date: November 16, 1998 /s/ Morris K. Nachtomi
----------------------
Morris K. Nachtomi
President, Chief Executive Officer
and Chairman of the Board of Directors
(Principal Executive Officer)
Date: November 16, 1998 /s/ Nathan Nelson
-----------------
Nathan Nelson
Chief Financial Officer and
Treasurer (Principal
Financial and Accounting Officer)
25
<PAGE>
Exhibit 10(31)
================================================================================
LOAN AGREEMENT
dated as of
July 15, 1998
between
TOWER AIR, INC.,
Borrower,
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
Lender
One Boeing 747-238B Aircraft
Manufacturer's Serial No. 20011
U.S. Registration No. N607PE
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS; REFERENCES.................................................................................. 1
1.01. Definitions..................................................................................... 1
1.02. Usage........................................................................................... 3
2. LOAN; ISSUANCE OF NOTES; REPLACEMENT NOTES............................................................... 3
2.01. Making the Loan................................................................................. 3
2.02. Procedure for Making the Loan................................................................... 4
2.03. Replacement Notes............................................................................... 4
3. SECURITY FOR BORROWER'S OBLIGATIONS...................................................................... 4
3.01. Security Interest in Collateral................................................................. 4
4. PAYMENTS BY BORROWER..................................................................................... 4
4.01. How Payments Are Made........................................................................... 4
4.02. Right to Prepay................................................................................. 4
4.03. Mandatory Prepayments........................................................................... 5
4.04. Interest on Past Due Amounts.................................................................... 5
4.05. Limit on Interest Payable....................................................................... 5
5. BORROWER'S REPRESENTATIONS AND WARRANTIES................................................................ 5
5.01. Corporate Standing.............................................................................. 5
5.02. Corporate Powers................................................................................ 5
5.03. Binding Effect.................................................................................. 5
5.04. Litigation...................................................................................... 5
5.05. Financial Statements............................................................................ 6
5.06. Taxes........................................................................................... 6
5.07. Citizenship, Air Carrier and Section 1110 status................................................ 6
5.08. Location of offices............................................................................. 6
5.09. Governmental Consents........................................................................... 6
5.10. Condition of Aircraft........................................................................... 6
5.11. Absence of ERISA Liability...................................................................... 6
5A. LENDER'S REPRESENTATIONS AND WARRANTIES.................................................................. 6
5A.01. Corporate Standing.............................................................................. 7
5A.02. Corporate Powers................................................................................ 7
6. AFFIRMATION COVENANTS.................................................................................... 7
6.01. Financial Statements............................................................................ 7
6.02. Inspection of Collateral and Records............................................................ 8
6.03. Corporate Existence............................................................................. 8
6.04. Merger, etc..................................................................................... 8
6.05. Citizenship and Air Carrier Status.............................................................. 9
6.06. Compliance with ERISA........................................................................... 9
6.07. Certificate of No Default....................................................................... 9
6.08. UCC Location.................................................................................... 9
7. CONDITIONS PRECEDENT..................................................................................... 9
7.01. Conditions Precedent............................................................................ 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
8. EVENTS OF DEFAULT; REMEDIES............................................................................. 11
8.01. Events of Default.............................................................................. 11
8.02. Remedies....................................................................................... 12
9. BORROWER'S INDEMNITIES.................................................................................. 12
9.01. General Indemnity.............................................................................. 13
9.02. Taxes.......................................................................................... 14
9.03. Survival....................................................................................... 18
10. MISCELLANEOUS........................................................................................... 18
10.01. No Waivers; Cumulative Remedies................................................................ 18
10.02. Notices........................................................................................ 18
10.03. Transaction Expenses........................................................................... 18
10.04. Amendments..................................................................................... 18
10.05. Successors and Assigns......................................................................... 18
10.06. Governing Law; Jurisdiction; Jury Trial Waiver................................................. 19
10.07. Further Assurances; Performance by Lender...................................................... 19
10.08. Headings....................................................................................... 20
10.09. Execution in Counterparts...................................................................... 20
10.10. Survival of Representations and Warranties..................................................... 20
10.11. Severability................................................................................... 20
</TABLE>
EXHIBIT A PROMISSORY NOTE
EXHIBIT B SECURITY AGREEMENT AND CHATTEL MORTGAGE
ii
<PAGE>
LOAN AGREEMENT
--------------
This Loan Agreement is entered into as of July 15, 1998 between Tower Air,
Inc. ("Borrower") and The CIT Group/Equipment Financing, Inc. ("Lender").
Borrower and Lender agree as follows:
1. DEFINITIONS; REFERENCES.
1.01. Definitions. Terms defined in the Mortgage and not in this
-----------
Agreement have the same meanings herein as in the Mortgage. The following
terms, when capitalized as below, have the following meanings:
"Agreement": this Loan Agreement.
---------
"Aircraft": the Boeing 747-238B aircraft to be financed under this
--------
Agreement, as more particularly described in the Mortgage Supplement.
"Basic Documents": the Purchase Agreement, this Agreement, the Mortgage,
---------------
the Note, the Mortgage Supplement and each other document, agreement, instrument
and certificate entered into in connection with the transactions contemplated
hereby.
"Business Day": any day, other than a Saturday or Sunday, on which
------------
commercial banks are open for business in New York, New York.
"Closing Date": the date on which Borrower purchases the Aircraft from
------------
Seller and Lender makes the Loan hereunder to Borrower.
"Code": the Internal Revenue Code of 1986, as amended.
----
"Collateral": defined in the Mortgage.
----------
"Default": any event or condition that would become an Event of Default
-------
upon the giving of notice or lapse of time or both, or any Event of Default.
"Dollars" and "$": United States dollars.
------- -
"ERISA": defined in Section 5.11.
-----
"Event of Default": defined in Section 8.01.
----------------
"Event of Loss": defined in the Mortgage.
-------------
"FAA": the Federal Aviation Administration of the United States, or any
---
instrumentality of the United States succeeding to its function.
"Financed Amount": $7,519,468.79
---------------
"Financial Default": a Default of the type described in Section 8.01 (a),
-----------------
(k) or (1) hereof, or an Event of Default.
"GAAP": generally accepted accounting principles as in effect in the United
----
States and
<PAGE>
applied on a basis consistent with that used in the preparation of the financial
statements referred to in Section 5.05, except for changes therein with which
Borrower's independent public accountants concur that are disclosed in the notes
to the relevant financial statements.
"Indemnitee": Lender, or any agent, employee, officer, director, successor,
----------
or permitted assign of Lender.
"Interest Period": each period beginning on a Payment Date and ending on
---------------
(but excluding, for purposes of computing interest) the following Payment Date.
"Interest Rate": 3% over the Treasury Yield, based on a 360-day year of 12
-------------
30-day months.
"Lease Termination Agreement": Lease Termination Agreement dated the
---------------------------
Closing Date between Seller and Borrower.
"Liabilities": defined in Section 9.01.
-----------
"Lien": any mortgage, pledge, assignment, encumbrance, lien (statutory or
----
other), or other security interest or claim of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, or any lease
in the nature thereof).
"Loan": the loan to be made by Lender to Borrower pursuant to Section 2.01
----
hereof, such loan to be equal to the Financed Amount.
"Materially Adverse Change" or "Materially Adverse Effect": any event, act,
------------------------- -------------------------
condition, or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding)
that, singly or in conjunction with any other event(s), act(s), condition(s), or
occurrences), whether or not related, results in a materially adverse change in,
or has a materially adverse effect upon, any of (a) the financial condition,
operations, business, properties, or prospects of Borrower and its consolidated
subsidiaries, taken as a whole, (b) the rights and remedies of Lender under the
Basic Documents, or Borrower's ability to perform its obligations under the
Basic Documents, or (c) the legality, validity, or enforceability of any Basic
Document, giving due consideration to any insurance coverage available to
Borrower for such event, act, condition, or occurrence.
"Mortgage": the Security Agreement and Chattel Mortgage between Borrower
--------
and Lender, substantially in the form of Exhibit B.
"Mortgage Supplement": defined in Section 3.01.
-------------------
"Note": Borrower's promissory note, in the form of Exhibit A, or a note
----
issued in exchange or replacement for such a note.
"Officer's Certificate": a certificate signed in the name of Borrower (or,
---------------------
with respect to Section 6.04(c), of the Successor) by the chairman of the board,
the president, or the chief financial officer of Borrower (or the Successor).
"Payment Date": the eighteenth (18th) day of each calendar month following
------------
the Closing Date, except that any Payment Date that falls on a day which is not
a Business Day shall instead occur on the following Business Day.
2
<PAGE>
"Permitted Lessee": defined in the Mortgage.
----------------
"Permitted Lien": defined in the Mortgage.
--------------
"Person": any individual, corporation, limited liability company,
------
partnership, joint venture, or other legal or governmental entity.
"Prior Lease": the Aircraft Lease Agreement dated as of October 22, 1992
-----------
between Seller and Borrower.
"Purchase Agreement": the Aircraft Purchase Agreement dated as of September
------------------
15, 1998 between Seller and Borrower.
"Related Lease": the Aircraft Lease Agreement dated as of September 30,
-------------
1992 between Seller and Borrower in respect of one Boeing 747-212B aircraft
bearing manufacturer's serial no. 21439 and U.S. registration no. N6186.
"Section 1110 Person": defined in Section 5.07.
-------------------
"Secured Obligations": defined in the Mortgage.
-------------------
"Seller": C.I.T. Leasing Corporation.
------
"Successor": defined in Section 6.04(a).
---------
"Taxes": defined in the last sentence of Section 9.02(a).
-----
"Taxing Authorities": defined in the first sentence of Section 9.02(a).
------------------
"Treasury Yield" shall mean the yield as quoted by the Telerate U.S.
--------------
Treasury Yield Money Markets page 5 or any successor or alternate publication
then reporting yields on U.S. Treasury Notes and Bonds, at the close of business
two Business Days prior to the Closing Date, on actively traded U.S. Treasury
Notes and Bonds with maturities approximately equal to the weighted average life
of the Note.
"Verifying Firm": defined in the last paragraph of Section 9.01.
--------------
1.02. Usage. Any agreement or instrument referred to in Section 1.01
-----
means such agreement or instrument as from time to time supplemented and
amended. References to sections, exhibits, and the like refer to those in or
attached to -this Agreement unless otherwise specified. "Including" means
"including but not limited to". "Or" means one or more, or all, of the
alternatives listed or described. "Herein", "hereof", "hereunder", etc. mean
in, of, or under, etc. this Agreement (and not merely in, of, under, etc. the
section or provision where that reference appears).
2. LOAN; ISSUANCE OF NOTES; REPLACEMENT NOTES
2.01. Making the Loan. Subject to the satisfaction of the conditions in
---------------
Section 7, and on the terms and conditions in this Section 2, on the Closing
Date, Borrower shall issue the Note to Lender, and Lender shall disburse the
proceeds of the Loan to Seller, on Borrower's
3
<PAGE>
behalf, to enable Borrower to acquire the Aircraft. The Note shall be issued for
its face amount, and the face amount of the Note shall equal the Financed
Amount. The term, interest rate and amortization schedule for the Note shall be
as set forth in the form of Note in Exhibit A, with the first Payment Date being
the 18th of October 1998.
2.02. Procedure for Making the Loan. At Lender's offices at 1211 Avenue
-----------------------------
of the Americas, New York, New York 10036 (or such other location as Lender
shall designate in writing) , not later than 2:00 p.m. (New York City time) on
the Closing Date, upon fulfillment of the conditions in Section 7, Lender will
disburse the proceeds of the Loan, and Borrower will issue the Note, as set
forth in Section 2.01.
2.03. Replacement Notes. If (a) the Note becomes mutilated, defaced,
-----------------
lost, stolen, or destroyed, (b) a successor lender buys the Note, or (c) Lender
otherwise reasonably requests, then, upon Lender's request and at Lender's
expense, Borrower shall promptly execute and deliver to Lender a replacement
Note, and Lender shall surrender to Borrower, in exchange for such replacement
Note, the Note being replaced (if not lost, stolen, or destroyed). The
replacement Note shall have the same terms as the Note that it replaces.
3. SECURITY FOR BORROWER'S OBLIGATIONS.
3.01. Security Interest in Collateral. To secure Borrower's obligations
-------------------------------
to Lender under the Note and the other Basic Documents to which Borrower is or
becomes a party, Borrower shall execute and deliver to Lender, on the Closing
Date, a supplement to the Mortgage (a "Mortgage Supplement"), substantially in
the form of Schedule A to the Mortgage, granting to Lender a perfected purchase
money security interest in the Aircraft.
4. PAYMENTS BY BORROWER
4.01. How Payments Are Made. Borrower shall make its payments and
---------------------
prepayments of principal and interest due on the Note, and all other amounts
payable by Borrower to Lender under the Basic Documents, to The Chase Manhattan
Bank (ABA # 021-000-021) at 270 Park Avenue, New York, New York 10019, for
credit to The CIT Group Account No. 116-003855, Reference: Tower N607PE (or at
such other place or account as Lender from time to time notifies Borrower), in
immediately available funds and in Dollars, no later than 1:00 pm (New York City
time) on the date when due. Any payment made by Borrower to Lender after 1:00
PM (New York City time) on any day shall be deemed to have been made on the
following Business Day. If any payment due under the Basic Documents comes due
on a day which is not a Business Day, such payment shall instead be made on the
following Business Day.
4.02. Right to Prepay. Borrower shall have the right to prepay (in full
---------------
or in part), without any prepayment premium, the outstanding principal amount of
the Note. Borrower shall give to Lender at least 10 days' prior written notice
(which notice shall be irrevocable) of such prepayment. Upon any prepayment of
the Note, in full, under this Section 4.02 or under Section 4.03 or 8.02,
Borrower shall pay all accrued and unpaid interest on the principal of the Note
to the date of prepayment, plus all other Secured Obligations then due to
Lender. Partial prepayments shall reduce the outstanding principal amount of
each remaining installment under the Note (and interest thereon) on a pro rata
basis. Upon any partial prepayment, Lender shall provide Borrower with a
replacement Note reflecting the new amortization, and Borrower shall execute and
deliver that Note to Lender, all at Borrower's expense.
4.03. Mandatory Prepayments. Following the occurrence of an Event of Loss
---------------------
to the Aircraft, Borrower shall prepay the Note in accordance with Section 6.01
of the Mortgage,
4
<PAGE>
without any prepayment premium. Upon acceleration of the Note pursuant to
Section 8.02, Borrower shall prepay the Note. Following the occurrence of an
Event of Loss solely with respect to an Engine, unless Lender has required the
replacement of such Engine pursuant to Section 6.02 of the Mortgage, Borrower
shall prepay the Note in part in accordance with Section 4.02 hereof and Section
6.02 of the Mortgage.
4.04. Interest on Past Due Amounts. Any amounts past due (by acceleration
----------------------------
or otherwise) and at any time outstanding under the Note or from Borrower under
any other Basic Document shall (to the extent permitted by law) bear interest,
payable on demand, from the due date until payment in full, at a rate per annum
equal to 2% over the Interest Rate.
4.05. Limit on Interest Payable. The amount of interest due or payable
-------------------------
under this Agreement or the Note shall not in any event exceed the maximum
allowable by applicable law, and this sentence shall override any contrary
provision in this Agreement or the Note.
5. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.01 Corporate Standing. Borrower is a corporation duly organized, and
------------------
existing in good standing, under the laws of Delaware, has the corporate power
and legal authority to own or lease its properties and to carry on its business
as now conducted, and is duly qualified to do business in all jurisdictions
wherein such qualification is necessary (except in any jurisdictions in which
the failure to qualify would have no Materially Adverse Effect).
5.02 Corporate Powers. Borrower's execution, delivery, and performance
----------------
of the Basic Documents to which it is (or is to become) a party are within
Borrower's corporate powers; and the Basic Documents to which it is (or is to
become) a party have been duly authorized by all necessary corporate action on
Borrower's part, and do not contravene, result in a breach of, or require any
consent under any law, judgment, decree, order, or contractual restriction
binding on Borrower or any agreement or instrument to which Borrower is a party
or to which it or any of its property is subject.
5.03 Binding Effect. The Basic Documents to which Borrower is (or is to
--------------
become) a party are (or will be when executed and delivered) legal, valid, and
binding obligations of Borrower enforceable against Borrower in accordance with
their terms, except as may be limited by bankruptcy, insolvency, or other
similar laws affecting enforcement of creditors, rights generally and by general
principles of equity.
5.04 Litigation. There are no pending or (to the best of Borrower's
----------
knowledge after due inquiry of Borrower's officers, employees and counsel)
threatened actions or proceedings before any court or administrative agency
which may be expected to have a Materially Adverse Effect after the exhaustion
of all appeals or which seek to question or set aside any of the transactions
herein contemplated except as specifically set forth in the opinion of counsel
to Borrower delivered pursuant to Section 7.01(a)(7).on Appendix A attached
hereto.
5.05 Financial Statements. Borrower's audited balance sheet as of
--------------------
December 31, 1997, and the related results of operations for the year and
quarter then ended, have been prepared in accordance with GAAP and fairly
present Borrower's financial condition as of such date and results of operations
for such period, and since December 31, 1997, there has been no Materially
Adverse Change other than as previously disclosed in writing to Lender.
5.06 Taxes. Borrower has filed or caused to be filed all federal, state,
-----
material local,
5
<PAGE>
and material foreign tax returns which (after giving effect to any extensions of
time to file properly claimed) it is or was required to file, and has paid all
taxes shown to be due and payable on those returns or any assessment received by
it, except such taxes of Borrower, if any, (x) that are being contested
diligently in good faith, and by appropriate proceedings, if the failure of such
contest to succeed could not result in any Materially Adverse Effect, or (y) as
to which adequate reserves have been provided in accordance with GAAP.
5.07 Citizenship, Air Carrier, and Section 1110 status. Borrower is a
-------------------------------------------------
"citizen of the United States" as that term is used in 49 U.S.C. (S)40102 (a)
(15), and is an air carrier holding a valid air carrier operating certificate
issued pursuant to 49 U.S.C. Chapter 447 for aircraft capable of carrying 10 or
more individuals (a "Section 1110 Person"). Under current law, Lender would be
entitled to the benefit of 11 U.S.C. (S)1110, with respect to the Aircraft, for
all Borrower's obligations under the Note, if Borrower were to become a debtor
under 11 U.S.C. Chapter 11.
5.08 Locations of offices. Borrower's chief executive office and
--------------------
principal place of business, and the place where Borrower keeps its financial
records concerning the Collateral, is located at its address set forth in
Section 9.04 of the Mortgage.
5.09 Governmental Consents. Borrower's execution, delivery, and
---------------------
performance of the Basic Documents do not require the consent or approval of,
giving of notice to, registration with, or taking of any other action in respect
of any federal, state, or foreign governmental authority or Agency (including
any judicial body) except for (a) the filing and recording of the Mortgage, the
Mortgage Supplement, and the FAA bill of sale and the FAA application for
registration for the Aircraft with the FAA; (b) the filing and recording of UCC-
1 financing statements with the New York Secretary of State and the County Clerk
of Queens County, New York; (c) the registration of the Aircraft with the FAA
pursuant to 49 U.S.C. subtitle VII; and (d) any that have been previously
obtained or accomplished.
5.10 Condition of Aircraft. On the Closing Date, Borrower shall have
---------------------
good and marketable title to the Aircraft, subject to Lender's Lien under the
Mortgage.
5.11 Absence of ERISA Liability. Each employee person benefit plan (as
--------------------------
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as from time to time amended ("ERISA")) of Borrower is in compliance with the
applicable provisions of ERISA and of the Internal Revenue Code of 1986, as from
time to time amended, in all respects, except to the extent that noncompliance
would not have any Materially Adverse Effect.
5A. LENDER'S REPRESENTATIONS AND WARRANTIES
Lender represents and warrants as follows:
5A.01 Corporate Standing. Lender is a corporation duly organized, and
------------------
existing in good standing, under the laws of Delaware, has the corporate power
and legal authority to own or lease its properties and to carry on its business
as now conducted, and is duly qualified to do business in all jurisdictions
wherein such qualification is necessary (except in any jurisdictions in which
the failure to qualify would have no Materially Adverse Effect).
5A.02 Corporate Powers. Lenders's execution, delivery, and performance of
----------------
the Basic Documents to which it is (or is to become) a party are within Lender's
corporate powers; and
6
<PAGE>
the Basic Documents to which it is (or is to become) a party have been duly
authorized by all necessary corporate action on Lender's part, and do not
contravene, result in a breach of, or require any consent under any law,
judgment, decree, order, or contractual restriction binding on Lender or any
agreement or instrument to which Lender is a party or to which it or any of its
property is subject
6. AFFIRMATIVE COVENANTS
So long as the Note, or any amount owed by Borrower under any other Basic
Document, remains outstanding or unpaid:
6.01. Financial Statements. Borrower shall furnish to Lender:
--------------------
(a) within 45 days (or such longer period, not to exceed a total of
60 days, as is permitted for such filings under the federal securities
laws) after the end of each of the first three quarters in each fiscal
year, Borrower's Form 10-Q for such quarter (or, if Borrower is not then an
SEC-reporting company, consolidated statements of operations of Borrower
and its consolidated subsidiaries for the period from the beginning of the
then-current fiscal year to the end of such quarterly period, and balance
sheets of Borrower and its consolidated subsidiaries, on a consolidated
basis, as of the end of such quarter prepared in accordance with GAAP and
setting forth in each case in comparative form figures for the
corresponding period in the preceding year, all in reasonable detail and
certified by the Chief Financial Officer of Borrower, subject to changes
resulting from year-end adjustments);
(b) within 90 days (or such longer period, not to exceed a total of
120 days, as is permitted for such filings under the federal securities
laws) after the end of each fiscal year, Borrower's Form 10-K for such year
(or, if Borrower is not then an SEC-reporting company, consolidated
statements of operations of Borrower and its consolidated subsidiaries, for
such year, and the balance sheets of Borrower and its consolidated
subsidiaries, on a consolidated basis, as of the end of such year, setting
forth in each case in comparative form corresponding figures from the
preceding annual audit, all in reasonable detail, and certified to Borrower
by its independent certified public accountants and to Lender by Borrower's
Chief Financial Officer, as presenting fairly the financial position and
results of operations of Borrower and its consolidated subsidiaries and as
having been prepared in accordance with GAAP);
(c) within five Business Days after the president, chairman of the
board, or chief financial officer of Borrower obtains actual knowledge of
any Default, an Officer's Certificate specifying its nature, the period of
its existence, and what action Borrower proposes to take with respect to
it; and
(d) promptly upon request, such other data or information (financial
or otherwise) regarding Borrower or the Collateral as Lender from time to
time reasonably requests.
6.02. Inspection of Collateral and Records. Borrower shall permit any
------------------------------------
person(s) from time to time designated by Lender, at Lender's expense (or at
Borrower's expense if a Default exists at the time), to visit and inspect any of
the Collateral and Borrower's (or those of any other user of the Aircraft)
records with respect to the Collateral, at such times as Lender reasonably
requests. No such inspection shall unreasonably interfere with Borrower's (or
any other user's) operations or maintenance. Lender shall not have any duty to
make any such
7
<PAGE>
inspection, and Lender shall not incur any liability or obligation by reason of
not making any such inspection. Upon Lender's request, Borrower shall promptly
notify Lender of the maintenance operations then scheduled on the Aircraft for
the six-month period following such request.
6.03. Corporate Existence. Except as permitted by Section 6.04, Borrower
-------------------
shall maintain its corporate existence in good standing in the state of its
incorporation and in all jurisdictions where qualification is then necessary
(except in any jurisdiction in which the failure to qualify would have no
Materially Adverse Effect). Borrower shall preserve and renew its rights
(charter and statutory), patents, and franchises, unless the preservation
thereof is no longer necessary or desirable in the conduct of its business and
the loss thereof will not have any Materially Adverse Effect.
6.04. Merger, etc. Unless Lender gives its prior written consent (which
------------
shall not be unreasonably withheld) to such transaction, Borrower shall not
consolidate or merge with any other corporation, or convey, transfer, or lease
all or substantially all of its assets as an entirety to any Person, unless:
(a) the corporation formed by or surviving after such consolidation
or merger or the Person who acquires by conveyance, transfer, or lease all
or substantially all of Borrower's assets as an entirety (the "Successor")
(i) is a corporation organized and existing under the laws of the United
States of America or any state or the District of Columbia, (ii) is a
Section 1110 Person, and (iii) has a tangible net worth (one day after such
consolidation, merger, conveyance, transfer, or lease) of not less than $__
million, and not less than __% of that of Borrower one day before such
consolidation, merger, conveyance, transfer, or lease; and the Successor,
(x) executes and delivers to Lender an agreement, in form and substance
satisfactory to Lender, containing an assumption by the Successor of the
due and punctual performance and observance of all Borrower's obligations
under the Basic Documents to which Borrower is then a party, and (y) makes
such filings and recordings, including any filing or recording with the FAA
pursuant to 49 U.S.C. subtitle VII or any filing under the UCC, as are
necessary or reasonably requested by Lender to evidence such consolidation,
merger, conveyance, transfer, or lease with or to the Successor;
(b) immediately after giving effect to such transaction, no Default
exists, and such transaction will not cause any Materially Adverse Change
to occur; and
(c) Borrower or the Successor delivers to Lender, promptly upon
consummation of such transaction, an Officer's Certificate stating that the
conditions precedent set forth in clause (a) have been complied with and an
opinion of counsel for Borrower or for the Successor, in form and substance
reasonably satisfactory to Lender, stating that the agreements entered into
to effect such consolidation, merger, conveyance, transfer, or lease and
such assumption agreements have been duly authorized, executed, and
delivered by the Successor and that they (and the Basic Documents so
assumed) constitute legal, valid, and binding obligations of the Successor,
enforceable in accordance with their terms (to the same extent as the Basic
Documents so assumed were enforceable against Borrower immediately prior to
such transaction).
Upon any such consolidation, merger, conveyance, transfer, or lease,
the Successor shall succeed to, shall be substituted for, and may exercise
every right and power of Borrower under the Basic Documents to which
Borrower is a party, with the
8
<PAGE>
same effect as if the Successor had been named as Borrower therein. No such
conveyance, merger, transfer, or lease shall have the effect of releasing
Borrower (or any Successor) from its liability under the Basic Documents to
which it is a party. Nothing in this section shall permit any lease,
sublease, or other arrangement for the use, operation, or possession of the
Aircraft except in compliance with the applicable provisions of this
Agreement and the Mortgage.
6.05. Citizenship and Air Carrier Status. Borrower will at all times
----------------------------------
remain a Section 1110 Person.
6.06. Compliance with ERISA. Within five Business Days after the
---------------------
occurrence of any event or circumstance, including any event which is classified
as a "Reportable Event" under ERISA, in connection with any employee benefit
plan to which it is a party, that might constitute grounds for termination of an
employee benefit plan to which Borrower is a party by the Pension Benefit
Guaranty Corporation or might result in the appointment of a trustee by a United
States District Court under Section 4042 of ERISA to administer such employee
benefit plan, Borrower will provide Lender with an Officer's Certificate
describing the event or circumstance, stating the reasons for any such action by
the Pension Benefit Guaranty Corporation or a United States District Court, and
specifying the action Borrower proposes to take with respect thereto.
6.07. Certificate of No Default. Along with Borrower's delivery of the
-------------------------
quarterly financial statements required by Section 6.01(b), Borrower shall
furnish to Lender a certificate of Borrower's Chief Financial Officer certifying
that to the best of his or her knowledge no Default exists (or, if a Default
does exist, a statement as to its nature and the action that Borrower proposes
to take with respect to it).
6.08. UCC Location. If Borrower changes the location of its chief
------------
executive office or principal place of business from its address set forth in
Section 9.04 of the Mortgage, it shall give prior notice thereof to Lender,
specifying Borrower's new address for UCC filing purposes.
7. CONDITIONS PRECEDENT
7.01. Conditions Precedent. Lender's obligation to make the loan
--------------------
hereunder on the Closing Date is subject to the satisfaction of the following
conditions on or before the Closing Date:
(a) Lender shall have received the following, each dated as of the
Closing Date, in form and substance satisfactory to Lender:
(1) the Note executed by Borrower
(2) the Mortgage executed by Borrower,
(3) the Mortgage Supplement executed by Borrower,
(4) a certificate of Borrower's secretary, dated the Closing
Date, certifying attached copies of the resolutions of Borrower's
board of directors evidencing approval of the transactions
contemplated by the Purchase Agreement and the Basic Documents to
which it is (or is to become) a party, and showing the names and
specimen signatures) (or copies thereof) of Borrower's officer(s)
authorized to sign this Agreement and the related
9
<PAGE>
documents to which it is (or is to become) a party,
(5) an Officer's Certificate to the effect that: (x) Borrower's
representations and warranties in this Agreement are true and accurate
as though made the Closing Date, and (y) no Default exists or will
result from Lender's making the Loan contemplated by this Agreement,
(6) a certificate of insurance describing the insurance
maintained by Borrower with respect to the Aircraft, and stating that
such insurance conforms to the requirements of the Mortgage,
(7) one or more opinions from Borrower's counsel as to the
legality and binding nature of the transaction, Section 1110, and
other matters as Lender may reasonably request,
(8) an opinion from McAfee & Taft, special FAA counsel; and
(9) such additional opinion(s) and document(s) as Lender
reasonably requests;
(b) Lender shall have received copies of the Purchase Agreement, the
FAA Application for Aircraft Registration, FAA Bill of Sale and the Lease
Termination Agreement pertaining to the Aircraft, in each case, executed by
Borrower and/or Seller, as applicable;
(c) Borrower's representations and warranties in the Basic Documents
shall be true and accurate as though made on and as of the Closing Date;
(d) no Default shall exist or shall result from Lender's making the
loan contemplated by this Agreement;
(e) all filings, recordings, and other actions necessary to
establish, protect, preserve, and perfect Lender's interests under the
Mortgage shall have been duly made or taken and Lender shall have received
satisfactory evidence thereof; and
(f) in Lender's reasonable judgment, since December 31, 1997, no
Materially Adverse Change, other than as previously disclosed in writing to
Lender, shall have occurred.
8. EVENTS OF DEFAULT; REMEDIES
8.01. Events of Default. Each of the following shall constitute an "Event
-----------------
of Default":
(a) Borrower fails to make any payment due from Borrower on the Note
or under any other Basic Document (including any amount due under Section
4.04 hereof) when due, and such failure continues for three Business Days
after written notice;
(b) any representation or warranty made by Borrower in the Basic
Documents, or in any certificate or other document that it furnishes
pursuant to the Basic Documents, is incorrect in any material respect when
made; provided, that if all material effects of such misrepresentation or
false warranty are reasonably curable by Borrower within 30 days after
receiving written notice of such incorrectness, then
10
<PAGE>
Borrower shall have 30 days after receiving written notice from Lender to
cure such incorrectness;
(c) Borrower fails to maintain the insurance required by the terms of
the Mortgage;
(d) Borrower fails to keep the Aircraft registered with the FAA;
(e) Lender fails or ceases to have a perfected first priority security
interest in the Aircraft (unless directly attributable to any willful
misconduct or negligence of Lender or any voluntary transfer of its
interest);
(f) a Lien (other than a Permitted Lien) on the Aircraft exists;
(g) Borrower ceases to be a Section 1110 Person;
(h) Borrower fails to provide Lender with the Officer's Certificate
required by Section 6.01 (c) or 6.06 within the time frame required
therein;
(i) any violation of Section 6.04 hereof or Section 3.02 of the
Mortgage occurs;
(j) Borrower fails in any material respect to perform any other
covenant or agreement in the Basic Documents, and (if remediable) such
failure to perform continues for 30 days after Borrower's receipt of
written notice of such default from Lender;
(k) Borrower (1) applies for or consents to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of
itself or of all or a majority of its property, (2) makes a general
assignment for the benefit of its creditors, (3) commences a voluntary case
under the federal Bankruptcy Code (as now or hereafter in effect), (4)
files a petition seeking to take advantage (as debtor) of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, or (5) fails to controvert in a
timely manner, or acquiesces in writing to, any petition filed against it
in an involuntary case under the federal Bankruptcy Code;
(1) a proceeding or case is commenced, without Borrower's
application or consent, in any court of competent jurisdiction,
seeking (1) its liquidation, reorganization, dissolution, or winding-
up, or the composition or readjustment of its debts,
(2) the appointment of a trustee, receiver, custodian, liquidator,
or the like of Borrower or of all or a majority of its assets, or (3)
similar relief in respect of Borrower under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case continues
undismissed, or an order, judgment, or decree approving or ordering
any of the foregoing is entered and continues unstayed and in effect,
for a period of 60 days; or an order for relief against Borrower is
entered in an involuntary case under the federal Bankruptcy Code;
(l) loan, lease, or deferred purchase obligations of Borrower are in
default
11
<PAGE>
the expiration of any applicable grace period, if the effect of such
default is to cause a total of more than $____ million of such obligations
to be accelerated or otherwise declared to be due and payable prior to
their stated maturity, or Borrower defaults (after giving effect to any
applicable grace period) in the payment when due of more than $_____
million of loan, lease, or deferred purchase obligations, or Borrower
defaults (after giving effect to any applicable grace period) in the
payment of any amount when due under the terms of any financing with Lender
or any affiliate thereof, provided such financing was, at any time, for an
amount in excess of $__ million, or any "event of default" occurs under the
Related Lease;
(m) one or more judgment(s) is/are rendered by one or more court(s) of
competent jurisdiction against Borrower for a total of more than $___
million and is/are not stayed or discharged, or fully bonded against,
within 30 days of the date of entry; or
(n) any "Reportable Event" under ERISA shall have occurred, or any
finding or determination shall be made with respect to an employee benefit
plan to which Borrower is a party under Section 4041(c) or (e) of ERISA, or
any fact or circumstance shall occur with respect to an employee benefit
plan to which Borrower is a party, that, in Lender's counsel's opinion,
provides grounds for the commencement of any proceeding under Section 4042
of ERISA, or any proceeding shall be commenced under Section 4042 of ERISA
with respect to an employee benefit plan to which Borrower is a party.
8.02. Remedies. If an Event of Default (other than under Section 8.01(k))
--------
exists, Lender may declare the Note to be immediately due and payable, whereupon
the Note shall become and be immediately due and payable without presentment,
demand, protest, or other notice of any kind, all of which Borrower hereby
waives. If an Event of Default under Section 8.01(k) which Borrower hereby
waives. Upon the occurrence of any Event of Default, Lender may exercise any of
its rights and remedies under the Basic Documents, and all other rights and
remedies available at law or in equity.
9. BORROWER'S INDEMNITIES
9.01. General Indemnity. Borrower assumes liability for, and agrees to
-----------------
indemnify each Indemnitee against, and on written demand to pay, or to reimburse
each Indemnitee for the payment of, any and all Liabilities.
"Liabilities" means any and all liabilities, obligations, losses, damages,
penalties, claims (including claims involving strict liability in tort), suits,
actions, costs, expenses, and disbursements, including reasonable legal fees and
expenses, of whatsoever kind and nature imposed on, incurred by, or asserted
against: any Indemnitee relating to or arising out of any Basic Document, the
enforcement against Borrower of any of the terms of the Basic Documents, or any
lease or relinquishment of possession of the Aircraft or any part thereof or any
action or inaction of Borrower or of any lessee, assignee, or transferee of
Borrower in connection therewith, the purchase of the Aircraft by Borrower, the
ownership of the Aircraft, the acquisition, delivery, nondelivery, acceptance,
nonacceptance, rejection, registration, deregistration, insuring, storage,
manufacture, assembly, transportation, importation, exportation, maintenance,
condition, modification, testing, repair, fitness for use, merchantability,
sale, abandonment, lease, sublease, assignment, transfer, transfer of title,
possession, repossession, use, operation, return, or other application or
disposition of the Aircraft or any component thereof, including latent or other
defects, whether or not
12
<PAGE>
discoverable, loss of or damage to any property or the environment, death or
injury of any person, and any claim for patent, trademark, copyright, or mask
work infringement and the violation or infringement by Borrower of any laws,
rules, or regulations.
However, this Section 9.01 shall not require Borrower to pay or indemnify
any Indemnitee under this section (i) for any Liability to the extent resulting
from any Indemnitee's acts of gross negligence or willful misconduct; (ii) for
any Taxes (Borrower's duties in respect of Taxes being set forth in Section
9.02) or for any cost or expense relating to the preparation, execution,
deliverer, or enforcement of the Basic Documents (Borrower's duties in respect
of such costs and expenses being set forth in Section 10.03); (iii) for any
Liability that such Indemnitee incurs to the extent resulting from its breach of
any of its representations, warranties, or covenants in any Basic Document; (iv)
for any Liability with respect to transfer taxes or other expenses payable with
respect to the transfer of the Note, other than a transfer after the occurrence
of an Event of Default; (v) for any violation or purported violation of any law
relating to usury or the charging or collecting of excess interest or finance
charges, or (vi) for any Liability giving rise to a Permitted Lien, so long as
such Lien is a Permitted Lien.
If any Indemnitee obtains knowledge of any claim or liability required to
be indemnified against under this Section 9.01, such Indemnitee shall promptly
notify Borrower, but the failure to do so shall not relieve Borrower from any
liability that it otherwise would have to such Indemnitee under this section
(except to the extent that such failure to notify materially impairs Borrower's
ability to contest such claim or liability). Subject to the rights of insurers
under policies of insurance required to be maintained by Borrower under the
Mortgage, Borrower shall, at its expense, have the right to investigate, and (so
long as Borrower shall have acknowledged to Lender in writing its obligation to
provide indemnification with respect to such Liability), the right to
participate in or assume the defense of or compromise any Liability for which
indemnification is sought under this Section 9.01 with counsel selected by
Borrower and reasonably satisfactory to Lender; provided, that Borrower shall
not be entitled to control the defense of or compromise any Liability (i) if a
Default shall exist, (ii) if such Liability involves the risk of imposition of
criminal liability upon any Indemnitee, (iii) if, in the reasonable opinion of
such Indemnitee, actual or potential material conflict of interest exists where
the defense of such Indemnitee cannot be properly conducted by Borrower and it
is therefore advisable for such Indemnitee to be represented by separate
counsel, or (iv) if such Liability involves a material risk of the sale, loss,
or forfeiture of any of the Collateral or the creation of any Lien (other than a
Permitted Lien) thereon and Borrower shall not have complied with a reasonable
request by Lender for bonding or other security satisfactory to Lender in
connection with such Liability. Where Borrower undertakes the defense of an
Indemnitee in accordance with the terms hereof, no additional fees or expenses
of such Indemnitee in connection therewith will be indemnified hereunder unless
such fees and expenses were incurred at the request of Borrower (or its
insurers); provided, that if (a) Borrower is not entitled to control the defense
of any Liability hereunder and an Indemnitee elects to conduct such defense, the
fees and expenses (including reasonable attorneys' fees) of such Indemnitee
shall be borne by Borrower, and (b)(i) in the reasonable opinion of such
Indemnitee, an actual or potential material conflict of interest exists where
the defense of such Indemnitee cannot be properly conducted by Borrower and it
is therefore advisable for such Indemnitee to be represented by separate
counsel, or (ii) such Indemnitee may be subject to criminal liability, at such
Indemnitee's request, the fees and expenses of such Indemnitee's separate
counsel will be borne by Borrower. An Indemnitee may participate at its expense
(except as provided above) in any proceeding-controlled by Borrower in
accordance herewith, and such participation shall not constitute a waiver of the
indemnification provided in this Section 9.01. Nothing in this Section 9.01
shall be deemed to require an Indemnitee to contest any Liability or assume
responsibility for or control of any proceeding with respect thereto.
13
<PAGE>
Borrower shall be obligated under this Section 9.01 irrespective of whether
the Indemnitee is also indemnified with respect to the same matter under any
other Basic Document or other document by any other Person, and the Indemnitee
may proceed directly against Borrower under this Section 9.01 without first
resorting to any such rights of indemnification. Upon the payment in full of
any indemnities due and owing under this Section 9.01, Borrower shall be
subrogated to any right of the Indemnitee in respect of the matter for which
payment has been made. Borrower's indemnities in this section shall survive
expiration or termination of the Mortgage and payment in full of the Note.
Any payment or indemnity pursuant to this Section 9.01 shall include the
amount, if any, necessary to hold the Indemnitee harmless on an after-tax basis
from all taxes required to be paid by such recipient with respect to such
payment or indemnity. The amount of any payment or indemnity required under
this section shall be determined by the Indemnitee reasonably and in good faith,
and subject to verification (if requested) in accordance with the terms of this
paragraph) that determination shall be conclusive. The Indemnitee will provide
Borrower with a summary explanation of the bases for the Indemnitee's
computations. Within 30 days after Borrower receives that summary explanation,
Borrower may request that a "Big 6" accounting firm selected by Lender (the
"Verifying Firm") verify whether the calculations submitted by Lender are based
on the correct assumptions and are mathematically correct. The Verifying Firm
shall be requested to make its determination within 30 days. If the Verifying
Firm determines that such computations are inaccurate or based on incorrect
assumptions, then the Verifying Firm shall determine what it believes to be the
appropriate computations. Such verification shall be final and binding on the
parties hereto. The costs and expenses of such verification shall be paid by
Borrower (unless, according to such verification, Lender's computation should be
reduced by __% or more, in which case the costs and expenses of such
verification shall be paid by Lender).
9.02. Taxes.
-----
(a) Indemnity. Except as provided in Section 9.02 (b), Borrower agrees
---------
to indemnify each Indemnitee against, and on written demand to pay or reimburse
each Indemnitee for the payment of, any and all Taxes imposed upon or asserted
against any Indemnitee, the Aircraft or any part thereof or interest therein,
any Basic Document, any lease of the Aircraft or any part thereof, or the
rentals received under such a lease, by any federal, state, or local government
or other taxing authority in the United States (including any territory or
possession of the United States) or by any foreign government or any political
subdivision or taxing authority thereof where any part of the Aircraft is
located, used, or registered ("Taxing Authorities") upon or with respect to (1)
the mortgaging, financing, refinancing by or at the request of Borrower,
purchase, acquisition, acceptance, nonacceptance, rejection, delivery,
nondelivery, transport, insuring, ownership, registration, deregistration,
assembly, possession, repossession, operation, use, condition, maintenance,
modification, repair, fitness for use, merchantability, testing, return,
abandonment, storage, manufacture, leasing, subleasing, importation,
exportation, sale, assignment, transfer, transfer of title, return, or other
disposition of, or the imposition of any Lien or the occurrence of any liability
to refund or pay over any amount as a result of any Lien on the Aircraft or any
part thereof or interest therein, (2) any amount paid or payable by Borrower
under the Basic Documents or the receipts or earnings arising from or received
with respect to the Aircraft or any part thereof or interest therein, (3) the
Aircraft or any part thereof or interest therein, (4) any of the Basic Documents
and any other documents contemplated thereby or the execution, sale, delivery,
acquisition, or filing of any of the Basic Documents, or (5) otherwise with
respect to or in connection with the transactions effected under the Basic
Documents. The term "Taxes" shall
<PAGE>
mean any and all fees, taxes, levies, imposts, duties, charges, assessments, or
withholdings of any nature whatsoever, together with any and all penalties,
fines, additions to tax, and interest thereon or computed by reference thereto.
(b) Exclusions from Indemnity. The provisions of Section 9.02 (a) shall
-------------------------
not apply to:
(1) any Tax based on, or measured by, gross or net income, gross
receipts, capital, franchise, or net worth (other than taxes in the nature
of sales, use, property, or value-added taxes), including related
surcharges and withholding taxes, or any withholding taxes on an
Indemnitee's gross income, to the extent that such withholding taxes are
imposed solely because that Indemnitee has a place of business outside the
United States or holds the Note outside the United States; provided, that
the provisions of this clause (b)(1) shall not apply to any Taxes imposed
in respect of the receipt or accrual of any indemnity payment made or
payable pursuant to this Section 9.02;
(2) any Tax imposed on an Indemnitee as a result of a transfer or
other disposition, by such Indemnitee or any of its predecessors in
interest, of any interest in the Aircraft or any Basic Document, unless
such transfer or disposition occurs after the occurrence of an Event of
Default;
(3) any Tax in the nature of a penalty, an addition to tax, interest,
or fines resulting from the negligence or misconduct of the Indemnitee in
connection with the preparation or filing of (or failure to prepare or
file) tax returns, or the payment of or failure to pay its taxes, but in
each case not if in any way attributable to Borrower's failure to notify
such Indemnitee of its obligations to prepare and file its returns in
respect of Taxes indemnified pursuant to this Section 9.02, to the extent
Borrower shall have actual knowledge of such obligations, or to provide any
information necessary for the preparation or filing of such returns or the
conduct of such proceedings or otherwise to perform its duties and
responsibilities pursuant to the Basic Documents;
(4) any Tax imposed on an Indemnitee to the extent that such tax
results from that Indemnitee's gross negligence, willful misconduct, or bad
faith;
(5) any Tax that would not have been imposed but for any failure of an
Indemnitee to file proper and timely reports or returns or to pay any Tax
when due, if Borrower has actual knowledge of such Tax and specifically
notifies that Indemnitee in a timely manner of the pertinent filing or
payment requirement;
(6) any Tax imposed on an Indemnitee with respect to any period
commencing after the payment of all Secured Obligations (but not excluding
penalties, fines, additions to tax, and interest on or computed by
reference to indemnifiable Taxes);
(7) any Tax that is not yet due or that is being contested under
Section 9.02(c);
(8) any Tax imposed on an Indemnitee that is, or is in the nature of,
an intangible or similar tax upon or with respect to the value of such
Indemnitee's interest in the Note; or
(9) any Tax imposed by Code Section 4975 or under Part 4 or Part 5 of
15
<PAGE>
subtitle B of ERISA.
(c) Contest. Borrower shall be entitled, at its expense, to require the
-------
imposition of any Tax for which it is obligated to indemnify hereunder to be
contested, and (after notice to the pertinent Indemnitee) to withhold payment of
any Tax not theretofore paid by an Indemnitee, during pendency of such contest
unless prior payment is a condition to such contest. At an Indemnitee's
election, such contest shall be conducted by Borrower in Borrower's name, but
only if Borrower is permitted as a matter of law so to contest such Tax. If any
claim is made or any proceeding is commenced against: any Indemnitee for any Tax
as to which Borrower has an indemnity obligation pursuant to this Section 9.02,
such Indemnitee shall promptly notify Borrower of any such claim or proceeding,
but the failure to provide such notice shall not release Borrower from its
indemnity obligation hereunder (except to the extent that Borrower's contest of
that claim is precluded by such failure). If an Indemnitee is requested by
Borrower in writing to contest an indemnifiable Tax, so long as no Financial
Default exists, such Indemnitee shall in good faith, with due diligence, and at
Borrower's expense, contest the validity, applicability, or amount of such Tax
by, in such Indemnitee's sole discretion (but after consulting with Borrower),
(a) resisting payment thereof, (b) not paying the same except under protest, if
protest is necessary and proper, or (c) if payment is made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings; provided, that the Indemnitee shall not be required to take any
action pursuant to this sentence unless and until (aa) Borrower provides to that
Indemnitee a written acknowledgment that Borrower is liable to indemnify such
Indemnitee for the contested Taxes to the extent that the contest is
unsuccessful; (bb) Borrower provides to that Indemnitee, upon request, an
opinion of tax counsel, selected by Borrower and reasonably satisfactory to such
Indemnitee, to the effect that such contest has a reasonable possibility of
success under applicable law and the standards of ABA Formal Opinion 85-352
(and, in the case of any appeal, that there is "substantial authority" (within
the meaning of Code Section 6662) for such appeal: ; and (cc) Borrower shall
have agreed to pay (and shall actually pay) on demand to such Indemnitee all
reasonable costs and expenses (including reasonable attorneys, fees) that such
Indemnitee may incur in contesting such claim. If any such contest involves
payment of the Tax in question, Borrower shall either (x) make such payment
directly to the appropriate authority, or (y) furnish to such Indemnitee
sufficient funds (on an interest-free basis) to make such payment, and indemnify
such Indemnitee, in a manner satisfactory to such Indemnitee, against any
adverse tax consequence resulting from such interest-free advance.
An Indemnitee shall not settle any contest required by this Section 9.02
without Borrower's prior written consent, unless (1) that Indemnitee foregoes
its right to be indemnified for the Tax being contested, or (2) Borrower
unreasonably withholds or delays such consent.
If any Indemnitee obtains a refund attributable to any Tax paid or
indemnified by Borrower, such Indemnitee shall (if no Financial Default exists)
pay to Borrower an amount equal to the amount of such refund, plus any interest
received or credited and attributable thereto, plus any net tax benefit (and
minus any net tax detriment) realized (or sustained) by such Indemnitee as a
result of any refund received and payment by such Indemnitee made pursuant to
this sentence. Such amount shall be payable not later than 30 days after such
refund or interest is received.
Nothing contained in this 9.02(c) shall require any Indemnitee to contest
or permit Borrower to contest a claim which it would otherwise be required to
contest pursuant to this Section 9.02 if such Indemnitee shall (a) waive payment
by Borrower of any Amount that might otherwise be payable by Borrower under this
Section 9.02 by way of indemnity in
16
<PAGE>
respect of such claim, and (b) repay to Borrower any amounts paid by Borrower
pursuant to the penultimate sentence of the first paragraph of this Section
9.02(c).
(d) Calculation of General Tax Indemnity Payments. Any payment which
---------------------------------------------
Borrower is required to make to or for the account of any Indemnitee with
respect to any Tax which is subject to indemnification under this Section 9.02
shall be made on a net basis, taking into account offsetting credits or
deductions available to such Indemnitee as a result of the payment of such Tax,
and shall include the amount necessary to hold such Indemnitee harmless on an
after-tax basis from the net amount of all Taxes required to be paid by such
Indemnitee as the result of such payment (including any Taxes imposed on such
indemnity payment) pursuant to the laws of any Taxing Authority. The amount of
any payment or indemnity required under this section shall be determined by the
Indemnitee reasonably and in good faith, and (subject to verification in
accordance with the terms of this paragraph) that determination shall be
conclusive. The Indemnitee will provide Borrower with a summary explanation of
the basis for the Indemnitee's computations. Within 30 days after Borrower
receives that summary explanation, Borrower may request that the Verifying Firm
verify whether the calculations submitted by Lender are based on the correct
assumptions and are mathematically correct. The Verifying Firm shall be
requested to make its determination within 30 days. If the Verifying Firm
determine that such computations are inaccurate or based on incorrect
assumptions, then the Verifying Firm shall determine what it believes to be the
appropriate computations. Such verification shall be final and binding on the
parties hereto. The costs and expenses of such verification shall be paid by
Borrower (unless, according to such verification, such Indemnitee's computation
should be reduced by 5% or more, in which case the costs and expenses of such
verification shall be paid by such Indemnitee).
(e) Reports. Borrower shall timely file any report, return, or statement
-------
required to be filed with respect to any Tax which is subject to indemnification
under this Section 9.02, except for any such report, return, or statement which
an Indemnitee has notified Borrower that it intends to file. Borrower shall file
such report, return, or statement, and shall send a copy to Lender and each
Indemnitee if such Lender or Indemnitee would be liable for the Tax covered by
such report, return, or statement. Each Indemnitee shall promptly forward to
Borrower any notice, bill, or advice received by it concerning any Tax.
9.03. Survival. The requirements in this Section 9 shall survive
--------
termination of this Agreement and the other Basic Documents and the payment of
the Note.
10. MISCELLANEOUS
10.01. No Waivers; Cumulative Remedies. No failure or delay in exercising
-------------------------------
any power or right under any Basic Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude
other or further exercise thereof or the exercise of any other right or power
under any Basic Document. No notice to or demand on any party in any case
shall, of itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
10.02. Notices. All communications and notices provided for under this
-------
Agreement shall be given, and shall become effective, in the manner specified in
the Mortgage.
10.03. Transaction Expenses.
--------------------
(a) Borrower will pay on demand all reasonable out-of-pocket expenses in
connection with the preparation, execution, delivery, administration (excluding
routine administration), and enforcement of the Basic Documents, or in
connection with any scheduled
17
<PAGE>
closing that is postponed or cancelled, including (i) all fees and expenses of
McAfee & Taft, special FAA counsel; (ii) all FAA and UCC filing and lien search
fees; (iii) all fees and expenses (including legal fees and expenses) of Lender
in connection with actual or proposed amendments, waivers, or consents to or
under this Agreement or the other Basic Documents (unless requested by Lender
and unconnected with a Default); and (iv) all fees and expenses (including legal
fees and expenses) of Lender in connection with the actual or proposed
enforcement of any Basic Document against Borrower or Lender's protection of its
rights thereunder, or in connection with any bankruptcy, reorganization,
liquidation, insolvency, or similar proceeding involving Borrower or any Item
(including relief-from-stay motions, cash collateral disputes,
assumption/rejection motions, and disputes concerning any proposed disclosure
statement or plan proposed during a case).
(b) Lender shall be entitled to receive reimbursement, within five Business
Days after its request, for all reasonable expenses incurred or made by it in
accordance with this Agreement or any other Basic Document.
10.04. Amendments. Any provision of the Basic Documents, may be amended,
----------
terminated, waived, or otherwise modified only in writing and signed by Borrower
and Lender.
10.05. Successors and Assigns. This Agreement shall bind and benefit
----------------------
Lender and Borrower and their successors and assigns, except that Borrower may
not assign or transfer its rights under this Agreement without Lender's prior
written consent which shall not be unreasonably withheld. Lender shall have a
free right to assign, convey, or otherwise transfer any of its interest in the
Basic Documents, or offer to do any of the foregoing, to any bank, credit
company, finance company, insurance company, or other financial institution (but
in any event not to an airline in direct competition with Borrower), except in
any manner that would result in a violation of 49 U.S.C. subtitle VII, the
Securities Act of 1933, as amended, or ERISA.
10.06. Governing Law; Jurisdiction; Jury Trial Waiver. This Agreement
----------------------------------------------
shall be governed by the laws of the state of New York (excluding any conflict-
of-laws rule that would apply the laws of any other jurisdiction). Any legal
action or proceeding with respect to the Basic Documents may be brought in such
of the courts of competent jurisdiction of the State of New York in the City of
New York or in the United States District Court for the Southern District of New
York and by execution and delivery of this Agreement, each of Borrower and
Lender irrevocably submits to the non-exclusive jurisdiction of such courts, and
to appellate courts therefrom, for purposes of legal actions and proceedings
hereunder and, in the case of any such legal action or proceeding brought in the
above-named New York courts, hereby irrevocably consents, during such time, to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered mail,
postage prepaid, at their respective addresses as provided in the Mortgage, or
by any other means permitted by applicable law. To the extent permitted by law,
final judgment (a certified copy of which shall be conclusive evidence of the
fact and of the amount of any indebtedness of Borrower to Lender) in any such
legal action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on an unsatisfied judgment. Each of Borrower and Lender
hereby irrevocably waives and agrees not to assert, by way of motion, as a
defense, or otherwise, in any legal action or proceeding brought hereunder in
any of the above-named courts, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts, (b) that it or any of its
property is immune from the legal process described in this paragraph (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, or otherwise), (c) that such action or proceeding is brought in
18
<PAGE>
an inconvenient forum, that venue for the action or proceeding is improper, or
that any Basic Document may not be enforced in or by such courts, or (d) any
defense that would hinder or delay the levy, execution, or collection of any
amount to which either party hereto is entitled pursuant to a final judgment of
any court having jurisdiction, after exhaustion of all available appeals.
Nothing in this Section 10.06 shall limit any right to bring actions, suits, or
proceedings in the courts of any other jurisdiction. Borrower expressly
acknowledges that the foregoing waiver is intended to be irrevocable. Each of
Borrower and Lender hereby waives any right which it may have to request a trial
by jury in any action relating to the Basic Documents.
10.07. Further Assurances; Performance by Lender. (a) Borrower shall
-----------------------------------------
execute and deliver to Lender from time to time, upon Lender's reasonable
request, all such documents and instruments, and take all such other action, as
Lender deems necessary or proper to perfect or otherwise preserve and protect
its interests under the Basic Documents or to enable Lender to obtain the full
benefit of the Basic Documents and the rights and powers herein and therein
granted. Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney in fact, while an Event of Default exists, with full power
of attorney and full power of substitution, in Lender's discretion and without
any further act of Borrower, to execute and deliver in the name and on behalf of
the Borrower any and all documents and take any or all action to perfect and
otherwise protect and preserve the interests created under the Basic Documents.
Lender shall not be obligated to do any of the acts or exercise any of the
powers authorized in this Section 10.07, but if Lender elects to do any such act
or exercise any such powers, it shall not be accountable for more than it
actually receives as a result of such exercise of power, and it shall not be
responsible to Borrower except for Lender's gross negligence, willful
misconduct, or breach of Section 3. 07 of the Mortgage. All powers conferred
upon Lender by this Agreement, being coupled with an interest, shall be
irrevocable so long as any Secured obligations remain unpaid or unperformed.
(b) If Borrower fails at any time to comply with any of its obligations
under the Basic Documents, Lender may, at is option, take any action it may deem
necessary for the maintenance, preservation, or protection of the Collateral or
otherwise in furtherance of the performance of Borrower's unperformed
obligations, including discharging taxes or other Liens at any time levied or
placed on the Collateral or paying insurance premiums or filing fees. All money
advanced and all expenses (including legal fees) incurred by Lender in
connection with any such action, together with interest thereon at the rate
described in Section 4.64 of this Agreement, shall be repaid to Lender upon
demand. The making of any such advance by Lender shall not cure any breach by
Borrower until the full amount of any such advance and interest thereon shall
have been repaid to Lender and such breach shall have otherwise been cured.
10.08. Headings. Section headings in this Agreement are for convenience
--------
only and are not a substantive part of this Agreement.
10.09. Execution in Counterparts. This Agreement may be executed in
-------------------------
separate counterparts.
10.10. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties in this Agreement or made in writing in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
Mortgage.
10.11. Severability. If any part of any provision in this Agreement, or
------------
any document contemplated hereby, is or becomes invalid or unenforceable under
applicable law, that part shall be ineffective to the extent of such invalidity
only, without in any way affecting the
19
<PAGE>
remaining parts of that provision or the remaining provisions.
[The remainder of this page has been intentionally left blank.]
20
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Loan Agreement.
TOWER AIR, INC.
By: /s/ Philip R. Brookmeyer
------------------------
Title: VP - Legal
----------------------
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ Karen Scowcroft
-------------------------
Title: Vice President
-------------------------
<PAGE>
EXHIBIT A
TOWER AIR, INC.
PROMISSORY NOTE
(Issued in Connection with
Boeing 747-238B Aircraft
Bearing U.S. Registration No. N607PE)
New York, New York
$7,519,468.79 September __, 1998
For value received, Tower Air, Inc. ("Borrower"), a Delaware
corporation, promises to pay to the order of The CIT Group/Equipment Financing,
Inc. ("Lender") the principal sum of Seven Million Five Hundred Nineteen
Thousand Four Hundred Sixty-Eight and 79/100 Dollars ($7,519,468.79), and to pay
interest on the unpaid principal balance thereof from and including the date of
this Note to but excluding the date payment in full of the principal amount of
this Note is made, at a rate of 8.5%. per annum (based on a 360-day year of 12
30-day months), on each Payment Date beginning on October 18, 1998. Payments
not made when due (including payments due because of an acceleration) shall, to
the extent permitted by law, bear interest, payable upon demand, at a rate equal
to 10.5% per annum. The amount of interest due or payable under this Note or
the Loan Agreement shall not in any event exceed the maximum allowable by
applicable law.
All payments due under this Note shall be made to The Chase Manhattan
Bank (ABA # 021-000-021), at 270 Park Avenue, New York, New York 10019, for
credit to The CIT Group Account No. 116-003855, Reference: Tower N607PE (or at
such other place as the holder hereof may from time to time notify Borrower in
writing), in the United States, not later than 1:00 pm (New York City time) on
the due date thereof in United States dollars in funds immediately available in
New York City.
Payments on this Note shall be made in eight (8) consecutive
installments of interest only followed by 22 consecutive installments of
principal and interest, due on the Payment Dates from October 18, 1998 through
April 18, 2001, as shown on the attached schedule; provided, that the final
installment shall in any event be an amount sufficient to pay all then-
outstanding principal amount of this Note and all then-unpaid interest accrued
on this Note.
Interest accrued on the principal amount of this Note shall be paid on
each Payment Date, and on the date the principal hereof is paid in full, except
that interest accrued on overdue principal or interest payments shall be payable
on demand.
Borrower waives presentment, demand, protest, and notice of dishonor,
and any and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby consents
to any extensions of time, renewals, releases of any party to this Note, waivers
or modifications that may be granted or consented to by the holder of this Note.
This Note is the Note referred to in, and is subject to, the Loan
Agreement, which provides for the acceleration of the maturity of this Note upon
the occurrence of an Event of
<PAGE>
Loss to the Aircraft or an Event of Default (each as defined in the Loan
Agreement), and which provides for the prepayment of this Note. This Note is
also entitled to benefits under the Mortgage (such term being defined in the
Loan Agreement).
As used in this Note, the following terms shall have the following
meanings:
"Business Day": any day, other than a Saturday or Sunday, on which
commercial, banks are open for business in New York, New York.
"Loan Agreement": the Loan Agreement dated as of July 15, 1998 between
Borrower and Lender, as from time to time amended.
"Payment Date": the 18th day of each month after the date of this Note,
through April 18, 2001, except that any Payment Date that falls on a day which
is not a Business Day shall instead occur on the following Business Day.
This Note shall be governed by, and construed in accordance with, the laws
of the state of New York (excluding any conflict-of-laws rule that would apply
the laws of any other jurisdiction).
TOWER AIR, INC.
By: /s/ Philip R. Brookmeyer
-------------------------
Title: V.P. - Legal
----------------------
2
<PAGE>
EXHIBIT B
SECURITY AGREEMENT AND CHATTEL MORTGAGE
dated as of July 15, 1998
between
TOWER AIR, INC.,
Borrower,
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
Lender.
One Boeing Model 747-238B Aircraft
Manufacturer's Serial No. 20011
U.S. Registration No. N607PE
<PAGE>
SECURITY AGREEMENT AND CHATTEL MORTGAGE
This Security Agreement and Chattel Mortgage is entered into as of July 15,
1998, by and between Tower Air, Inc. ("Borrower") and The CIT Group/Equipment
Financing, Inc. ("Lender").
Recitals: Borrower and Lender have entered into the Loan Agreement, which
provides for a loan to Borrower by Lender, to be used to purchase the Aircraft.
Borrower and Lender are entering into this Mortgage so that Borrower will grant
to Lender, through the Mortgage Supplement, a purchase money security interest
in the Collateral as security for the payment of the Note and of other sums
owing under this Mortgage or the Loan Agreement and as security for Borrower's
performance of its obligations under the Basic Documents to which it is a party.
Borrower and Lender agree as follows:
1. DEFINITIONS; REFERENCES
1.01. Definitions. The following terms, when capitalized as below, have
the following meanings:
"Aircraft": the Airframe and the four Engines.
--------
"Airframe": the Boeing model 747-238B aircraft listed by U.S. registration
--------
number and manufacturer's serial number on the Mortgage Supplement (except for
any Engines or engines from time to time installed thereon), including all Parts
incorporated in such airframe.
"Basic Documents": the Purchase Agreement, this Mortgage, the Loan
---------------
Agreement, the Note, the Mortgage Supplement and each other document, agreement,
instrument and certificate entered into in connection with the transactions
contemplated hereby.
"Business Day": any day, other than a Saturday or Sunday, on which
------------
commercial banks are open for business in New York, New York.
"Closing Date": the date of this Mortgage.
------------
"Collateral": defined in Section 2.01.
----------
"Default": any event or condition that would become an Event of Default
-------
upon the giving of notice or lapse of time or both, or any Event of Default.
"Dollars" or "$": United States dollars.
------- -
"Engine": any of the four Pratt & Whitney JT9D-7J engines listed by
------
manufacturer's serial numbers in the Mortgage Supplement, whether installed on
the Airframe or on any other airframe, including any Replacement Engine
substituted for an Engine under this Mortgage, and including all Parts
incorporated in such engine.
"Event of Default": defined in Section 8.01.
----------------
"Event of Loss": with respect to any Item, any of the following events: (i)
-------------
the
<PAGE>
destruction or damage beyond economic repair of such Item or rendition of such
Item permanently unfit for normal use for any reason whatsoever; (ii) any damage
which results in an insurance settlement with respect to such Item on the basis
of a total loss or a constructive or compromised total loss (as agreed between
Borrower and the underwriter); (iii) the condemnation, confiscation, or
requisition of title to such Item; (iv) the loss, theft, disappearance,
confiscation, or seizure of such Item for a continuous period of at least 60
days; or (v) the requisition of use of such Item, by any Person other than the
Government, for a continuous period of at least 6 months. An Event of Loss with
respect to the Aircraft shall be deemed to have occurred if an Event of Loss
occurs with respect to the Airframe.
"FAA": the United States Federal Aviation Administration, and any
---
instrumentality of the United States succeeding to its function.
"Financial Default": a Default of the type described in Section 8.01
-----------------
(a),(k), or (1) of the Loan Agreement, or an Event of Default.
"Government": the federal government of the United States, or any
----------
instrumentality or agency thereof.
"incorporated in": incorporated or installed in, attached to, or otherwise
---------------
made a part of.
"Insured Value": with respect to the Aircraft, $25,000,000 and, with
-------------
respect to an Engine, while such Engine is off-wing, $3,500,000, but in any
event a maximum of $25,000,000.
"Item": the Airframe or an Engine.
----
"Lien": any mortgage, pledge, assignment, encumbrance, claim of ownership,
----
lien (statutory or other) , or other security interest of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
or lease in the nature thereof).
"Loan Agreement": the Loan Agreement dated as of July 15, 1998 between
--------------
Borrower and Lender.
"Mortgage": this Security Agreement and Chattel Mortgage.
--------
"Mortgage Supplement": a supplement to this Mortgage, substantially in the
-------------------
form of Schedule A hereto.
"Note": the promissory note issued by Borrower to Lender in connection with
----
the Aircraft.
"Parts": all appliances, parts, instruments, appurtenances, accessories,
-----
furnishings and other equipment of whatever nature (other than complete Engines
or engines) which are from time to time incorporated in the Airframe or any
Engine, or having been so incorporated are later removed therefrom, so long as
they are subject to this Mortgage pursuant to Section 4.02.
"Payment Date": the eighteenth (18th) day of each month occurring after the
------------
Closing Date, except that any Payment Date that falls on a day which is not a
Business Day shall instead occur on the following Business Day.
"Permitted Air Carrier": any Person who, at the time that a lease to it is
---------------------
entered into, is
2
<PAGE>
a Section 1110 Person, is not in bankruptcy, and (to the best of Borrower's
knowledge) is generally paying its financial obligations as they become due.
"Permitted Lease": a lease permitted under Section 3.02(a).
---------------
"Permitted Lessee": a lessee under a Permitted Lease.
----------------
"Permitted Lien": any Lien referred to in clauses (a) through (f) of
--------------
Section 7.01 that is not guaranteed by any "insider" (as defined in Bankruptcy
Code Section 101(30)) of Borrower.
"Person": any individual, corporation, limited liability company,
------
partnership, joint venture, or other legal or governmental entity.
"Purchase Agreement": the Aircraft Purchase Agreement dated as of July 15,
------------------
1998 between C.I.T. Leasing Corporation and Borrower.
"Records": defined in Section 4.05.
-------
"Replacement Engine": a Pratt & Whitney JT9D-7J engine having a value and
------------------
utility at least equal to the engine replaced (determined without regard to
hours or cycles remaining until the next scheduled overhaul, but assuming that
the engine replaced was in the condition required by this Mortgage), and which
is suitable for installation and use on the Airframe, which is substituted for
an Engine hereunder pursuant to Section 3.06 or Section 6.02.
"Section 1110 Person": a "citizen of the United States" (within the meaning
-------------------
of 49 U.S.C. (S)40102 (a) (15)) who is an air carrier holding a valid air
carrier operating certificate issued pursuant to 49 Chapter 447 for aircraft
capable of carrying 10 or more individuals.
"Secured Obligations": all of Borrower's obligations (of whatever nature)
-------------------
under the Basic Documents, whether such obligations exist now or arise in the
future.
"Term": the period commencing on the Closing Date and ending on the date
----
all Secured Obligations are paid in full.
1.02. Usage. Any agreement or instrument referred to in Section 1.01
-----
means such agreement or instrument as from time to time supplemented and
amended. References to sections, schedules, and the like refer to those in or
attached to this Mortgage unless otherwise specified. "Including" means
"including but not limited to". "Or" means one or more, or all, of the
alternatives listed or described. "Herein", "hereof", "hereunder", etc. mean
in, of, or under, etc. this Mortgage (and not merely in, of, under, etc. the
section or provision where that reference appears).
2. GRANT OF SECURITY INTEREST
2.01. Grant of Security Interest. To secure payment and performance of
--------------------------
the Secured obligations, Borrower hereby grants to Lender a purchase money
security interest in the following property (the "Collateral"):
(a) all Borrower's right, title, and interest in and to the Aircraft
(including the Engines), which shall be specifically subjected to the Lien
of this Mortgage on the Closing Date by means of the Mortgage Supplement;
3
<PAGE>
(b) the Records;
(c) all Borrower's right, title, and interest in, to, and under the
Purchase Agreement;
(d) all Borrower's right, title, and interest in, to, and under any
lease, sublease, pooling, or interchange agreement with respect to the
Aircraft;
(e) all money and securities deposited or required to be deposited
with Lender pursuant to any Basic Document or required to be held by Lender
hereunder; and
(f) all proceeds of any nature (including insurance) in respect of
the foregoing.
3. POSSESSION AND USE OF THE AIRCRAFT
3.01. Use of the Aircraft. Borrower shall not operate any Item, or permit
-------------------
any Item to be operated, in violation of any law, rule, regulation, or order of
any governmental authority having jurisdiction (domestic or foreign) or in
violation of any airworthiness certificate, license, or registration relating to
any Item issued by any such authority.
3.02. Possession. Borrower shall not, without Lender's consent, which
----------
shall not be unreasonably withheld, sell, lease, or otherwise in any manner
deliver, transfer, or relinquish possession of any Item, or install any Engine,
or permit any Engine to be installed, on any airframe other than the Airframe;
provided, that so long as no Default exists at the beginning of such lease,
delivery, transfer, relinquishment, or installation, Borrower may, without such
consent:
(a) (i) wet lease the Aircraft or (ii) lease any Item to any
Permitted Air Carrier, if (1) a copy of such lease is submitted to Lender
at least five Business Days before the Item is delivered to the lessee
thereunder, (2) such lease (x) is expressly subject and subordinate to the
Lien of this Mortgage and to all the rights of, and remedies available to,
Lender under this Mortgage, (y) is specifically assigned to Lender as
additional security for the payment and performance of the Secured
Obligations, with the chattel paper original delivered to Lender, and (z)
provides that, upon notice to the lessee thereunder by Lender that a
Financial Default then exists under this Mortgage, the lessee will make all
payments under such lease directly to Lender (provided, that the lessee may
make all payments under such lease directly to Borrower so long as the
lessee has not received any such notice), (3) the lease does not permit the
sublease of any Item, and (4) the lease requires that the lessee provide
Lender with semi-annual certificates of an appropriate officer of the
lessee, certifying that each leased Item is being maintained in accordance
with Section 4.01 of Mortgage;
(b) deliver or permit any Permitted Lessee to deliver possession
of any Item to any organization for testing, service, repair, maintenance,
or overhaul work or for permitted alterations, modifications, or additions;
(c) transfer or permit any Permitted Lessee to transfer possession
of any Item to the United States or any instrumentality or agency thereof;
(d) install or permit any Permitted Lessee to install an Engine on
an airframe
4
<PAGE>
owned by Borrower or such Permitted Lessee free and clear of all Liens,
except (i) Permitted Liens and Liens that do not apply to such Engine, (ii)
the rights of air carriers under normal interchange or pooling agreements
which are customary in the airline industry and do not contemplate, or
require, the transfer of title to such Engine, and (iii) Liens pursuant to
agreements that effectively provide that the secured party thereunder will
not acquire any interest in such Engine by reason of its installation on
such airframe at any time that such Engine is required to be subject to
this Mortgage;
(e) (i) install or permit any Permitted Lessee to install an Engine
on an airframe leased to Borrower or such Permitted Lessee or owned by
Borrower or such Permitted Lessee subject to a conditional sale or other
title retention agreement or to a security agreement, if such airframe is
free and clear of all Liens except the rights of the parties to the lease
or conditional sale or other title retention agreement, or security
agreement covering such airframe and except Liens of the type permitted by
clause (d) of this Section 3.02, and
(ii) Borrower or such Permitted Lessee has received, from the
lessor, conditional vendor, or secured party of such airframe, a written
agreement (which may be the lease or conditional sale or other security
agreement covering such airframe) , whereby such lessor, conditional
vendor, or secured party effectively agrees that it will not acquire any
interest in any Engine by reason of its installation on such airframe at
any time that such Engine is required to be subject to this Mortgage;
(f) install or permit a Permitted Lessee to install an Engine on an
airframe owned by Borrower or such Permitted Lessee, leased to Borrower or
such Permitted Lessee, or subject to a conditional sale or other security
agreement under circumstances where neither clause (d) nor clause (e) of
this Section 3.02 applies; provided, that such installation shall be deemed
an Event of Loss with respect to such Engine and Borrower shall comply with
Section 6.02 with respect to such Event of Loss;
(g) transfer, or permit a Permitted Lessee to transfer, possession of
any Engine to any Person for the purpose of shipment; or
(h) subject or permit any Permitted Lessee to subject any Engine to a
pooling or borrowing arrangement or any reciprocal leasing arrangement in
the nature thereof, in Bach case customary in the United States airline
industry entered into by Borrower or such Permitted Lessee in the ordinary
course of its business with one or more air carriers or the manufacturer of
the Engines.
Borrower shall remain primarily liable hereunder for the performance of the
terms of this Mortgage to the same extent as if no such lease, sublease,
pooling, interchange, installation, or transfer had occurred. No pooling or
interchange agreement, lease, or other relinquishment of possession of any Item
shall in any way discharge or diminish Borrower's obligations to Lender
hereunder. If Borrower or a Permitted Lessee shall have received, from the
lessor, conditional vendor, or secured party of any airframe or engine leased to
or operated or purchased by Borrower or such Permitted Lessee subject to a
lease, conditional sale, or other security agreement, a written agreement
complying with clause (ii) of Section 3. 02 (e) , Lender hereby agrees for the
benefit of such lessor, conditional vendor, or secured party that Lender will
not acquire or claim, as against such lessor, conditional vendor, or secured
party, any interest in any such engine as the result' of its installation on the
Airframe.
3.03. Pooling of Parts. Any Part may be removed from any Item and
----------------
subjected to a normal pooling arrangement customary in the airline industry
entered into in the ordinary
5
<PAGE>
course of Borrower's or a Permitted Lessee's business, if that Part is replaced
with a Part that complies with the provisions of Section 4.02 as promptly as
practicable after the removal of such removed Part. Any replacement Part when
incorporated in an Item in accordance with Section 4.02 may be owned by an air
carrier subject to such a normal pooling arrangement if Borrower, at its
expense, as promptly as practicable either (i) causes title to such replacement
Part to vest in Borrower in accordance with Section 4.02 or (ii) replaces such
replacement Part by incorporating in such Item a further replacement Part owned
by Borrower free and clear of all Liens except Permitted Liens.
3.04. Transfer of Parts. Borrower and any Permitted Lessee may install
-----------------
Parts in airframes or engines (other than the Airframe or an Engine) operated by
it or such lessee or sublessee, provided that any Parts so installed are
replaced as promptly as practicable as required by Section 4.02.
3.05. Operation and Location. Borrower shall not permit any Item to be
----------------------
operated or located at any place or under any condition outside the geographical
limits of or otherwise excluded from coverage by any insurance required under
this Mortgage. Without limiting the generality of the foregoing, Borrower will
not permit any Item to be operated or located in any recognized or, in Lender's
judgment (if communicated to Borrower in accordance with Section 9. 04) ,
threatened area of hostilities, unless covered by war-risk insurance in
accordance with the requirements of Section 5 or unless such Item is used by or
under contract with the Government under which use or contract the Government
assumes liability for any damage, loss, destruction, or failure to return
possession of such Item at the end of the term of such use or contract and for
injury to persons or damage to property of others.
3.06. [Intentionally Omitted.]
3.07. Quiet Enjoyment. If and so long as no Event of Default exists,
---------------
neither Lender nor any of its successors and assigns shall disturb the
possession or use of the Aircraft by Borrower or any Permitted Lessee, except as
permitted by the Basic Documents.
3.08. Registration. Borrower shall at all times cause the Aircraft to
------------
remain effectively registered in the name of Borrower with the FAA pursuant to
49 U.S.C. subtitle VII.
3.09. Nameplate; Ownership Markings. Borrower will not allow the name of
-----------------------------
any Person other than Borrower to be placed on any Item as a designation that
might be interpreted as a claim of ownership, except that Borrower may allow any
Item (1) to be lettered, painted, or marked in an appropriate manner for
convenience of identification of the interest therein of any Permitted Lessee
(including customary colors and insignia of such Permitted Lessee) , (2) to be
painted with advertising logo on the exterior of the Airframe, and (3) to bear
insignia plates or other markings identifying the supplier or manufacturer of
such Item or any Parts thereof. Borrower shall affix (and maintain at all
times), in the cockpit of the Airframe and on each Engine, a durable nameplate
or stencil bearing the inscription "Owned by Tower Air, Inc., and mortgaged to
The CIT Group/Equipment Financing, Inc." (such nameplate or stencil to be
replaced, if necessary, with a nameplate or stencil reflecting the name of any
successors) in interest to Lender).
4. MAINTENANCE AND OPERATION
4.01. Maintenance. Borrower shall (or shall cause a Permitted Lessee to)
-----------
maintain, service, repair, overhaul, alter, modify, add to, and test each Item,
and each other engine installed from time to time on the Airframe, in accordance
with Borrower's or such Permitted
6
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Lessee's FAA-approved maintenance program for the Aircraft, Airframes, or
Engines, or its substantial equivalent, so as to keep each Item in good
operating condition and in such condition as required to enable a Standard
Airworthiness Certificate (Transport Category) for the Aircraft to be maintained
in good standing at all times under 49 U.S.C. subtitle VII. Borrower will (or
shall cause a Permitted Lessee to) comply with all mandatory service,
inspection, maintenance, repair, and overhaul regulations, directives, and
instructions for United States operators of Boeing model 747-200 aircraft and
Pratt & Whitney JT9D-7J engines, and agrees that the Airframe and Engines will
not be maintained in violation of any law, rule, regulation, or order of any
government or governmental authority having jurisdiction (domestic or foreign).
4.02. Replacement of Parts. Except as provided in Section 4.03, Borrower
--------------------
shall promptly replace (or cause to be replaced) all Parts which from time to
time are incorporated in any Item and which from time to time become worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair, or
permanently rendered unfit for use for any reason whatsoever. In addition, if
Borrower removes (or permits to be removed) in the ordinary course of
maintenance, service, repair, overhaul, or testing any Part, whether or not worn
out, destroyed, damaged beyond repair, or permanently rendered unfit for use, or
subjects any Part to a pooling arrangement described in Section 3.03, Borrower
shall replace (or cause to be replaced) such Part as promptly as practicable
with a replacement Part, except as provided in Section 4.03. Each such
replacement Part shall be free and clear of all Liens (except Permitted Liens
and pooling arrangements to the extent permitted by Section 3.03), shall have at
least the same value and utility as the replaced Part, and shall be in good
operating condition. All Parts at any time removed from any Item as herein
provided shall remain subject to this Mortgage, no matter where located, until
such time as such Parts are replaced by Parts which have been incorporated in
the Aircraft and which meet the requirements for replacement Parts (as specified
in this section). Immediately upon any replacement Part's becoming incorporated
in any Item as provided in this section, without further act, such replacement
Part shall become subject to this Mortgage and be deemed a part of such Item for
all purposes hereof to the same extent as the Part replaced, and the replaced
Part shall no longer be subject to this Mortgage and shall no longer be deemed a
Part hereunder.
4.03. Alterations and Modifications. Borrower shall make or cause to be
-----------------------------
made all alterations and modifications in and additions to the Aircraft as are
required from time to time to meet the requirements of the FAA or (except to the
extent being contested by Borrower in good faith and by appropriate proceedings,
and only so long as non-compliance does not pose any material risk of the loss,
forfeiture, or grounding of the Aircraft) other governmental authority having
jurisdiction over any Item or Borrower. In addition, Borrower or any Permitted
Lessee may from time to time make alterations and modifications in and additions
to any Item as it deems desirable in the proper conduct of its business,
provided that no such alteration, modification, or addition (i) decreases the
value, utility, or remaining useful life of the Aircraft in any material respect
below its then-current value, utility, and remaining useful life assuming that
the Aircraft is at such time in the condition and repair as required by the
terms hereof (unless such alteration, modification, or addition is required to
comply with the first sentence of this Section 4.03) or (ii) adversely affects
the eligibility of the Aircraft for a Standard Airworthiness Certificate
(Transport Category). Lender shall not bear any liability whatsoever for the
alteration or modification of or addition to the Aircraft, whether in the event
of grounding or suspension of certificates or for any other cause whatsoever.
All Parts incorporated in the Aircraft as the result of such alteration,
modification, or addition (other than Parts referred to in the following
provisions and Parts that are subject to a pooling arrangement permitted by
Section 3.03), without further act, shall bear any subject to the Lien of this
Mortgage; provided, that so long as no Financial Default exists, Borrower may
remove
7
<PAGE>
and not replace any such Part that (x) is in addition to, and not in replacement
of or in substitution for, any Part incorporated in such Item on the Closing
Date (or any Part in replacement of or substitution for any such Part), (y) is
not required to be incorporated in such Item pursuant to the terms of Section
4.02 or any other provision of this Mortgage, and (z) can be removed from such
Item without diminishing the value, utility, or remaining useful life that such
Item would have had at such time had such alteration, modification, or addition
not occurred. Upon the removal by Borrower of any such Part as above provided,
such Part shall not be subject to the Lien of this Mortgage and shall not be a
Part hereunder.
4.04. Compliance with Law. Borrower shall comply (and shall cause each
-------------------
Permitted Lessee to comply) with all laws, of the jurisdictions in which the
Collateral is operated and with all laws, rules, regulations, orders, and
airworthiness directives of the FAA and any other legislative, executive,
administrative, or judicial body having jurisdiction over Borrower or any
Permitted Lessee to the extent that noncompliance with such laws, rules,
regulations, orders, and airworthiness directives would have any material
adverse effect on the operation, service, repair, overhaul, testing,
maintenance, or use of the Aircraft or Borrower's ability to fulfill its duties
and obligations under this Mortgage or any other Basic Document.
4.05. Records. Borrower shall maintain or cause to be maintained, in
-------
English, all logs, manuals, certificates, data, and inspection, modification,
and restoration records and other materials so long as required by any
governmental authority having jurisdiction over the Collateral to be maintained
in respect of the Collateral ("Records"). If any Item is repossessed pursuant
to Section 8, Borrower shall forthwith deliver all Records to Lender.
5. INSURANCE
5.01. Borrower to Maintain Insurance. Borrow maintain, or cause to be
------------------------------
maintained, on the Aircraft, the Airframe and each Engine, policies of insurance
in such form, of such and with insurers as maintained with respect to other
property of similar type in Borrower's fleet and in any event not less than as
follows:
(a) Borrower will at all times carry and maintain comprehensive aircraft
liability, passenger liability, products liability, cargo and contractual
liability, and property damage liability insurance, with insurers of recognized
responsibility, with respect to the Aircraft, the Airframe, and each Engine, and
acceptable to Lender, in an amount not less than that carried by Borrower on
similar items owned or leased by Borrower but in no event less than $500,000,000
combined single limit per occurrence. Such insurance shall be of the type
usually carried by corporations engaged in the same or a similar business as
that served by the Aircraft, similarly situated with Borrower and owning and
operating similar aircraft and engines in such business, and covering risks of
the kind customarily insured against by such corporations. Borrower may self -
insure portions of any of the risks described in this Section 5.01(a) to the
extent acceptable to Lender. The Aircraft may be insured under a ground risk
policy acceptable to Lender while the Aircraft is grounded or not operational.
Any policies of insurance carried in accordance with this Section 5.01(a)
shall (1) name Lender as an additional insured, (2) provide that in respect of
the interest of Lender in such policies the insurance shall not be invalidated
by any action or inaction of Borrower (or any Permitted Lessee) and shall insure
Lender regardless of any breach or violation by Borrower (or any Permitted
Lessee) of any warranty, declaration, or condition contained in such policies,
(3) provide that if such insurance is to be cancelled for any reason whatsoever,
or any change is to be made in the coverage which adversely affects the interest
of Lender, or such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change, or lapse shall not
8
<PAGE>
be effective as to Lender for 30 days (or the maximum notice period available;
seven days or such other period as is then generally available in the case of
any war risk and allied perils coverage) after Lender receives written notice
from such insurers of such cancellation, change, or lapse, (4) be effective with
respect to domestic and international operation, (5) provide that Lender shall
have no liability for premiums, commissions, calls, or assessments, or
warranties or representations to underwriters, with respect to such policies,
and (6) provide that the insurers shall waive any right to any set-off or
counterclaim or any other deduction, by attachment, or otherwise, with respect
to any liability of Lender. Each liability policy shall be primary without right
of contribution from any other insurance which is carried by Lender with respect
to its interest in the Aircraft.
(b) Borrower shall maintain, or cause to be maintained, with insurers of
recognized responsibility acceptable to Lender, all-risk aircraft hull insurance
covering the Aircraft (including ground, flight, and taxiing) and all-risk
coverage, on a replacement cost basis, with respect to any Engine or Part while
not installed on the Aircraft (including war-risk insurance covering hijacking
and acts of terrorism exposures), which is of the type and form, and in an
amount not less than that, carried by Borrower on similar items owned or leased
by Borrower and is in an aggregate amount not less than the Insured Value as the
"agreed value" for the Aircraft. Each Engine, after removal, shall be insured
for not less than the Insured Value applicable to an Engine under a ground risks
policy reasonably acceptable to Lender. If and to the extent that Borrower or a
Permitted Lessee operates the Aircraft outside the United States or Canada,
Borrower shall maintain or cause to be maintained in effect, with respect to the
Aircraft, war risks coverage against the additional exposures of confiscation,
expropriation, nationalization, and seizure (including confiscation by the
government of registry, if other than the United States), in an amount not less
than Insured Value as the "agreed value" for the Aircraft. With respect to the
insurance described in this Section 5.01 (b), Borrower or a Permitted Lessee may
self -insure, by way of deductible or premium adjustment provisions in insurance
policies or otherwise, the risks required to be insured against in an amount not
more than $500,000 per occurrence.
Any policies maintained in accordance with this Section 5. 01(b) shall (1)
provide that all payments up to but not exceeding Insured Value shall be payable
to Lender, as sole payee, for application in accordance with the Loan Agreement
(provided, that (x) unless Lender shall have notified such insurers that a
Default then exists, any payment for a loss not in excess of $100,000 and not
involving an Event of Loss to the Aircraft, and any excess over Insured Value,
shall be paid directly by insurers to Borrower, and (y) if Lender shall have so
notified such insurers that a Default then exists, or if the payment exceeds
$100,000, or if an Event of Loss to the Aircraft is involved, then the amount,
up to Insured Value, of all payments shall be payable to Lender, as sole payee,
for application in accordance with the Loan Agreement); (2) be effective with
respect to domestic and international operation; (3) provide that Lender shall
have no liability for premiums, commissions, calls, assessments, or advances, or
warranties or representations to underwriters, with respect. to such policies;
(4) provide that if such insurance is to be cancelled for any reason whatever,
or any change is to be made in the coverage which adversely affects Lender's
interest, or such insurance may be allowed to lapse for nonpayment of premium,
such cancellation, change, or lapse shall not be effective as to Lender for 30
days (or the maximum notice period available; seven days or such other period as
is then generally available in case of any war-risk and allied perils coverage)
after Lender receives written notice from such insurers of such cancellation,
change, or lapse; (5) provide that, in respect of the interests of Lender in
such policies, the insurance shall not be invalidated by any action or inaction
of Borrower (or any Permitted Lessee) and shall insure Lender regardless of any
breach or violation by Borrower (or any Permitted Lessee) of any warranty,
declaration, or condition contained in such policies; and (6) provide that the
insurers shall
9
<PAGE>
waive any right to any set-off or counterclaim or any other deduction, by
attachment or otherwise, with respect to any liability of Lender or Borrower.
Each all-risk hull insurance policy shall be primary without right of
contribution from any other insurance which is carried by Lender with respect to
its interest in the Aircraft.
5.02. Insurance Certificates. Borrower agrees to furnish to Lender, prior
----------------------
to the Closing Date and prior to each policy expiration or replacement until the
Secured Obligations are paid in full, an original insurance certificate signed
by an independent insurance broker (who may be the broker regularly retained by
Borrower or any Permitted Lessee) of recognized national standing, reasonably
acceptable to Lender, certifying that the insurance required by this Section 5
is in full force and effect, stating that in such broker's opinion such
insurance being carried by Borrower (or any Permitted Lessee) complies with the
requirements of this Section 5, and specifically referring to this Section 5.
Such insurance certificate shall provide that (a) the broker will notify Lender
in writing promptly of any default in the payment of any premium and of any
other act or omission on the part of Borrower of which such broker has knowledge
and which might invalidate or render unenforceable in whole or in part any
insurance on the Aircraft, and (b) no insurance provided pursuant to this
Section 5 shall expire or terminate, or change in a manner adverse to Lender,
prior to 30 days (or the maximum notice period available; or, with respect to
war risk and allied perils insurance, seven days or such other period as is :hen
generally available) after Lender has received written notice thereof.
5.03. Insurance Proceeds. Subject to Section 6.03, any proceeds of
------------------
insurance received by Lender as a result of an Event of Loss (a) with respect to
the Aircraft shall be applied in accordance with Section 6. 01, or (b) with
respect to an Engine only, shall be applied in accordance with Section 6.02. Any
proceeds of insurance required to be maintained hereunder which are received by
Lender as the result of any property damage or loss not constituting an Event of
Loss shall be paid to Borrower unless a Default exists.
5.04. Indemnification by United States Government. Lender agrees to
-------------------------------------------
accept, in lieu of insurance against any risk with respect to the Aircraft,
indemnification from the Government against such risk in an amount which, when
added to the amount of any insurance against such risk maintained by or for the
benefit of Borrower (including permitted deductibles) with respect to the
Aircraft, shall be at least equal to the amount of insurance against such risk
otherwise required by this Section 5.
5.05. Industry Standards. In the event of a dispute with respect to
------------------
applicable industry standards for insurance coverage, to the extent not
specifically addressed in this Section 5, such standards shall be determined, at
the expense borne equally by Borrower and Lender, by a consensus opinion of two
nationally recognized aviation insurance brokers, one selected by Borrower and
one selected by Lender. If such insurance brokers do not reach a consensus,
such brokers shall select a third nationally recognized aviation insurance
broker to determine at Borrower's expense the applicable industry standards for
insurance coverage.
6. EVENT OF LOSS
6.01. Event of Loss to the Airframe. Upon the occurrence of an Event of
-----------------------------
Loss to the Airframe, Borrower shall within five days after such occurrence give
to Lender written notice of such event and shall, on or before the earlier of
(a) the 91st day following the date of occurrence of such Event of Loss, and (b)
five days following the receipt of insurance proceeds with respect to such Event
of Loss, pay to Lender an amount that, when added to the insurance and other
proceeds held by Lender in connection with such Event of Loss, will be
sufficient to
10
<PAGE>
prepay the Note and all other Secured Obligations in full.
6.02. Event of Loss to an Engine. In the case of an Event of Loss solely
--------------------------
with respect to an Engine, Borrower shall within five days after such occurrence
give to Lender written notice of such event and shall, on or before the earlier
of (a) the 91st day following the date of occurrence of such Event of Loss, and
(b) five days following the receipt of insurance proceeds with respect to such
Event of Loss, pay to Lender an amount that, when added to the insurance and
other proceeds held by Lender in connection with such Event of Loss, will be
sufficient to prepay the Note in part in an amount equal to the product obtained
by multiplying the then outstanding principal amount of the Note by a fraction
the numerator of which is the Insured Value of such Engine and the denominator
of which is the Insured Value of the Aircraft, together with all accrued and
unpaid interest on such portion of the Note to be prepaid and any other Secured
Obligations then due to Lender. Notwithstanding the foregoing, Lender may, in
its sole discretion, require Borrower to replace such Engine as promptly as
practicable (but in any event within 60 days after such Event of Loss, or such
longer period (if any) as Lender may agree to after receiving full cash
collateral for such Engine on terms acceptable to Lender) with a Replacement
Engine. Borrower shall cause such Replacement Engine to be subject to the first
and prior security interest created by this Mortgage, free and clear of all
Liens other than Permitted Liens. In addition, Borrower will, not later than
the date on which the Replacement Engine is substituted hereunder, (a) furnish
Lender with a copy of the bill of sale pursuant to which Borrower acquired title
to the Replacement Engine or other evidence of ownership reasonably acceptable
to Lender, (b) execute a supplement to this Mortgage, in scope and substance
satisfactory to Lender, subjecting the Replacement Engine to the terms of this
Mortgage, and cause such supplement to be recorded pursuant to 49 U.S.C.
subtitle VII, (c) furnish Lender with such evidence as it requests of compliance
by Borrower with the terms of the Basic Documents with respect to the
Replacement Engine, including Section 5, (d) furnish to Lender a certificate of
an officer of Borrower, and if reasonably requested by Lender, an independent
aircraft appraisal, certifying that the Replacement Engine is of at least equal
value and utility, and in as good operating condition, as the Engine being
replaced (determined without regard to hours or cycles remaining until the next
scheduled overhaul, but assuming that the Engine replaced was in the condition
required by this Mortgage), and (e) upon Lender's request, cause to be delivered
an opinion of independent counsel to Borrower, selected by Borrower and
reasonably satisfactory to Lender, to the effect that the Replacement Engine has
been conveyed to Borrower free and clear of all Liens of record (other than
Permitted Liens), and that Lender has a duly perfected first priority security
interest on the Replacement Engine under this Mortgage. Such Replacement Engine
shall thereafter be an "Engine" for all purposes of this Mortgage. Upon such
replacement, Lender shall (at Borrower, s expense) take all actions reasonably
requested by Borrower to release its security interest in the Engine suffering
the Event of Loss. If Lender has received any proceeds in connection with such
Event of Loss, Lender shall pay such loss proceeds to Borrower promptly upon
such replacement. However if a Default exists, Lender shall hold such loss
proceeds as security for the Secured Obligations, and if and when no Default
exists and Borrower has completed such replacement, the loss proceeds remaining
after the curing of all Defaults shall be promptly paid to Borrower.
6.03. Investment of Proceeds. If an Event of Loss occurs to an Engine and
----------------------
Section 6.02 applies, then, upon Borrower's written request (and so long as no
Default exists) , Lender shall use its reasonable efforts to invest, at
Borrower's request, direction, and risk, any payments received with respect to
such Engine from any insurer under insurance maintained hereunder, from
Borrower, or from any governmental authority or other party with respect to the
applicable Event of Loss or otherwise. Any such investments shall be in
obligations of the Government, obligations guaranteed as to principal and
interest by the Government, or
11
<PAGE>
commercial paper issued by The CIT Group, Inc., in each case having a stated
maturity not later than one year from the date of acquisition. All profits on
such investments shall become part of the Collateral, and (if no Default then
exists) shall be paid to Borrower promptly upon completion of the replacement
or' repairs involved, and Borrower will promptly pay to Lender on demand the
amount of any loss realized as the result of such investment (together with any
fees, commissions, and other expenses (including any taxes) incurred in
connection with such investment). In order to make the payments provided for in
Section 6, Lender may sell any obligations so purchased, and shall not be
required to make such payments to Borrower until after having had a reasonable
tine to sell such obligations and to obtain the sale proceeds therefrom.
7. LIENS
7.01. Liens. Borrower will not directly or indirectly create, incur,
-----
assume, or suffer to exist any Lien on or with respect to the Aircraft or this
Mortgage except: (a) the rights of the parties to the Basic Documents, including
the Lien created by this Mortgage; (b) the rights of others under agreements or
arrangements to the extent permitted by the terms of Section 3 or Section 4; (c)
Liens for taxes, assessments, or other governmental charges either not yet due
or being contested in good faith (and for the payment of which adequate reserves
have been provided) by appropriate proceedings so long as such proceedings do
not involve any danger of the sale, forfeiture, loss, or loss of use of the
Aircraft; (d) materialmen's, mechanics', workers', repairers', employees', or
other like Liens arising in the ordinary course of business for amounts the
payment of which is not yet due; (e) Liens arising out of any judgment or award
that is, within 30 days after entry thereof, discharged, vacated, or appealed
with execution thereof stayed pending appeal; and (f) a transferee's rights
resulting from Lender's transfer of its rights in the Aircraft or under this
Mortgage. Borrower will promptly take (or cause to be taken) such action at its
own expense as may be necessary duly to discharge any such Lien not excepted
above.
8. EVENTS OF DEFAULT AND REMEDIES
8.01. Events of Default. The following shall constitute Events of Default
-----------------
hereunder:
(a) Borrower fails to make any payment due from Borrower on the
Note, or any other payment due under any Basic Document, when due, and such
failure continues for three Business Days after written notice; or
(b) any default exists under any Basic Document, if the effect of
such default is to permit Borrower's obligations under the Loan Agreement
or under the Note to be accelerated or otherwise declared to be, or become,
due before their stated maturity.
8.02. Action upon Event of Default. If the unpaid balance of the Secured
----------------------------
Obligations has become (by declaration or otherwise) immediately due and payable
pursuant to Section 8.02 of the Loan Agreement, Lender may exercise any or all
of the rights and powers and pursue any or all of the remedies permitted by this
Section 8, and may (without notice, hearing, or posting bond or other security,
except as otherwise required by the terms hereof or by applicable law) take
possession of all or any part of the Collateral and may exclude Borrower and all
Persons claiming under or through Borrower wholly or partly therefrom.
8.03. Remedies. If the unpaid balance of the Secured Obligations has
--------
become (by declaration or otherwise) immediately due and payable pursuant to
Section 8.02 of the Loan Agreement, then, and in every such case, Lender may
exercise any or all of the rights and
12
<PAGE>
powers and pursue any and all of the remedies available to it hereunder or
available to a secured party under the Uniform Commercial Code or any other
provision of law, and may sell, assign, transfer, and deliver the whole, or from
time to time, to the extent permitted by law, any part of the Collateral or any
interest therein, at any private sale or public auction with or without demand,
advertisement, or notice (except as herein required or as may be required by
law) of the date, time, and place of sale and any adjournment thereof, for cash
or Loan or other property, for immediate or future delivery and for such price
or prices and on such terms as Lender in its discretion determines or as are
required by law. It is agreed that 10 days' notice to Borrower of the date,
time, and place (and terms, in the case of a private sale) of any proposed sale
by Lender of the Collateral (or any part thereof or interest therein) is
reasonable.
8.04. Return of Collateral, etc.
--------------------------
(a) If the unpaid balance of the Secured Obligations has become (by
declaration or otherwise) immediately due and payable pursuant to Section 8.02
of the Loan Agreement, at Lender's request, Borrower shall promptly execute and
deliver to Lender such instruments of title and other documents as Lender deems
necessary or advisable to enable Lender (or an agent or representative
designated by Lender), at such time (s) and place (s) as Lender may specify, to
obtain possession of all or any part of the Collateral that Lender shall-at the
time be entitled to possess hereunder. If Borrower fails to execute and deliver
any such instrument(s) or documents) after such demand by Lender, Lender may (1)
obtain a judgment conferring on Lender the right to immediate possession of the
Collateral and requiring Borrower to deliver such instrument(s) or document(s)
to Lender, or (2) pursue all or any part of such Collateral wherever it may be
found and enter any of the premises of Borrower (or lessee from Borrower)
wherever such Collateral may be or may be supposed to be and search for such
Collateral and take possession of and remove such Collateral.
(b) Upon every such taking of possession, Lender may from time to time,
but shall have no obligation to, make all such expenditures for maintenance,
insurance, repairs, replacements, and alterations to and of the Collateral as it
deems necessary or advisable in order to dispose of the Collateral properly, and
all such expenditures shall be Secured Obligations. In each such case, Lender
shall have the right to use, operate, store, or manage the Collateral as Lender
deems best, including the right to enter into any and all such agreements with
respect to the maintenance, operation, leasing, storage, or disposition of the
Collateral or any part thereof as Lender deems appropriate; and Lender shall be
entitled to collect and receive all rents, revenues, income, and profits of the
Collateral and every part thereof, without prejudice, however, to the right of
Lender under any provision of this Mortgage to collect and receive all cash held
by, or required to be deposited with, Lender hereunder. Such rents, revenues,
income, and profits shall be applied to pay Lender's expenses of holding and
operating the Collateral, and of all maintenance, repairs, replacements, and
alterations effected by or on behalf of Lender, and to make all payments which
Lender is required or elects to make, if any, for taxes, assessments, insurance,
or other proper charges upon the Collateral or any part thereof (including the
employment of engineers and accountants to examine, inspect, and make reports
upon the Collateral and the books and records of Borrower relating thereto) ,
and all other payments which Lender is required or authorized to make under any
provision of the Basic Documents, as well as just and reasonable compensation
for the services of Lender (including fees and commissions for remarketing or
arranging financing (if such financing is provided by a Person not affiliated
with Lender) for the Collateral), and of all persons properly engaged and
employed by Lender, and any balance shall be applied to the Secured Obligations
in such order as Lender shall determine in its discretion, and thereafter as
required by law.
13
<PAGE>
8.05. Remedies Cumulative. Each and every right, power, and remedy given
-------------------
to Lender in the Basic Documents shall be cumulative and shall be in addition to
every other right, power, and remedy in the Basic Documents now or hereafter
existing at law, in equity, or by statute, and each and every right, power, and
remedy may be exercised from time to time and as often and in such order as
Lender deems expedient, and the exercise or the beginning of the exercise of any
right, power, or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power, or remedy. No
delay or omission by Lender in exercising or pursuing any right, remedy, or
power shall impair any such right, power, or remedy or be construed to be a
waiver of any default on the part of Borrower or to be an acquiescence therein.
8.06. Discontinuance of Proceedings. If Lender has proceeded to enforce
-----------------------------
any right, power, or remedy under this Mortgage by foreclosure, entry, or
otherwise, and such proceeding has been discontinued or abandoned for any reason
or has been determined adversely to Lender, Borrower and Lender shall be
restored to their former positions and rights hereunder with respect to the
Collateral, and all rights, remedies, and powers of Lender shall continue as if
no such proceedings had been taken.
9. MISCELLANEOUS
9.01. Termination of Mortgage. This Mortgage and the security interests
-----------------------
created hereby shall terminate and this Mortgage shall be of no further force or
effect upon the payment in full of the Secured Obligations. Upon any such
payment in full, Lender shall pay all excess money or other properties or
proceeds constituting part of the Collateral to Borrower, this Mortgage and the
security interests created hereby shall terminate and shall be of no further
force or effect, and Lender shall (at Borrower's expense) execute and deliver
any instrument evidencing such termination as Borrower reasonably requests.
9.02. Amendments, Waivers, Consents, etc. No amendment, waiver, consent,
----------------------------------
or supplement to this Mortgage shall be effective unless in writing and signed
by Borrower and Lender.
9.03. Successors and Assigns. The provisions of this Mortgage shall bind
----------------------
and benefit the parties hereto and their successors and assigns.
9.04. Notices. All notices provided for under this Mortgage shall be in
-------
writing (including telecopy), shall be in English, and shall become effective
when delivered. Any notice shall be mailed by certified mail (return receipt
requested) or delivered (including by telecopy) as follows:
(a) if to Borrower:
Tower Air, Inc.
Hangar 17
JFK International Airport
Jamaica, New York 11430
Attention: Chairman
Fax: (718) 553-4387
with a copy to:
14
<PAGE>
Hewes, Gelband, Lambert & Dann, P.C.
Suite 300
The Flour Mill
1000 Potomac Street, N.W.
Washington, D.C. 20007-3533
Attention: Stephen L. Gelband
Fax: (202) 333-0871
(b) if to Lender:
The CIT Group/Equipment Financing, Inc.
c/o The CIT Group/Capital Finance, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: General Counsel
Fax: (212) 536-1388
or to such other address as such party designates by notice given in accordance
with this section.
9.05. Headings. The section headings herein have been inserted for
--------
convenience only and are not a substantive part of this Mortgage.
9.06. Counterparts. This Mortgage may be executed in several
------------
counterparts.
9.07. Severability. Any provision hereof prohibited by or unlawful or
------------
unenforceable under any applicable law of any jurisdiction shall be ineffective
in such jurisdiction without modifying the remaining provisions of this mortgage
or its effectiveness in any other jurisdiction. Where, however, the provisions
of such applicable law may be waived, they are hereby waived by Lender and
Borrower to the full extent permitted by law, to the end that this Mortgage
shall be a valid and binding agreement enforceable in accordance with its terms.
9.08. Governing Law. This Mortgage is being delivered in the state of New
-------------
York, and shall in all respects be governed by and construed in accordance with
the laws of the state of New York (excluding any conflict-of-laws rule that
would apply the laws of any other jurisdiction).
15
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Security
Agreement and Chattel Mortgage.
TOWER AIR, INC.
By: /s/ Philip R. Brookmeyer
-------------------------------
Title: V.P. - Legal
----------------------------
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ Karen Scowcroft
-------------------------------
Title: Vice President
----------------------------
<PAGE>
Schedule A to Mortgage
Mortgage Supplement No. 1
This Mortgage Supplement (this "Supplement") is entered into on September
__, 1998 to supplement the Security Agreement and Chattel Mortgage dated as of
July 15, 1998 (the "Mortgage") between Tower Air, Inc. ("Borrower") and The CIT
Group/Equipment Financing, Inc. ("Lender").
Terms that are defined in the Mortgage have the same meanings when used in
this Supplement.
Borrower has executed and delivered the Mortgage to cover one Boeing model
747-238B aircraft and other collateral described in the Mortgage, to secure
Borrower's payment and performance of the Secured Obligations.
The Mortgage and this Supplement are being filed for recordation with the
FAA under the Act as one document.
The Mortgage provides for the execution and delivery of a supplement to the
Mortgage, substantially in the form of this Supplement, for the purpose of
specifically subjecting to the Lien of the Mortgage the Aircraft financed under
the Loan Agreement.
NOW, THEREFORE, to secure the payment and performance of the Secured
Obligations, and in consideration of Lender's purchase of the Note, Borrower
hereby grants to Lender a purchase money security interest under the Uniform
Commercial Code in the following Aircraft:
one Boeing model 747-238B aircraft, bearing U.S. registration no. N607PE
and manufacturer's serial no. 20011, including four Pratt & Whitney JT9D-7J
engines (each of which has 750 or more rated takeoff horsepower or its
equivalent) bearing manufacturer's serial nos. 663047, 685779, 689579 and
663054.
This Supplement forms a part of the Mortgage. Except as supplemented by
this Supplement, the Mortgage is hereby ratified, approved, and confirmed.
This Supplement is being delivered in the state of New York and shall be
governed by the laws of the state of New York (excluding any conflict-of-laws
rule that would apply the laws of any other jurisdiction).
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Mortgage Supplement No. 1.
TOWER AIR, INC.
By: /s/ Philip R. Brookmeyer
-----------------------------
Title: V.P. - Legal
--------------------------
<PAGE>
Exhibit 10(32)
PURCHASE AND SALE AGREEMENT
This AGREEMENT made as of this 15th day of July, 1998 (this
"Agreement"), by and between C.I.T. LEASING CORPORATION, a Delaware corporation,
having a principal place of business at 1211 Avenue of the Americas, New York,
New York 10036 (hereinafter referred to as the "Seller"), and TOWER AIR, INC., a
Delaware corporation, having its principal place of business at Hangar 17, JFK
International Airport, Jamaica, New York 11430 (hereinafter referred to as the
"Buyer").
W I T N E S S E T H:
-------------------
WHEREAS, Seller currently owns the aircraft identified on Schedule 1
attached hereto and made a part hereof (the "Aircraft");
WHEREAS, upon the terms and subject to the conditions herein set
forth, Seller desires to sell and Buyer desires to purchase from Seller all of
Seller's right, title and interest in and to the Aircraft;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
1. DEFINITIONS: The following terms, when capitalized as below,
-----------
shall have the following meanings:
"Agreement": this Purchase and Sale Agreement.
---------
"Aircraft": as set forth in the first "whereas" clause hereof.
--------
"Bill of Sale": as set forth in Section 4(a)(i) hereof.
------------
"Certificate of Acceptance": as set forth in Section 4(b)(ii) hereof.
-------------------------
"Closing": as set forth in Section 3 hereof.
-------
"FAA Bill of Sale": as set forth in Section 4(a)(ii) hereof.
----------------
"Lease": as set forth in Section 4(a)(iv) hereof.
-----
"Lease Termination Agreement": as set forth in Section 4(a)(iv)
---------------------------
hereof.
"Lessor's Liens": as set forth in Section 5 hereof.
--------------
"Purchase Price": as set forth in Section 2 hereof.
--------------
"Records": the "Aircraft Records", as such term is defined in the
-------
Lease.
"Sale Documents": as set forth in Section 6(a) hereof.
--------------
<PAGE>
2. AGREEMENT TO PURCHASE; PURCHASE PRICE: (a) Upon the terms
-------------------------------------
herein set forth, Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller, the Aircraft.
(b) The purchase price for the Aircraft shall be $13,500,000.00 (the
"Purchase Price") plus applicable sales, use and similar transfer taxes in
respect of the transactions contemplated hereby. Buyer agrees to buy the
Aircraft by delivery of such Purchase Price (i) by directing Buyer's lender to
wire transfer $7,519,468.79, in immediately available funds, to Seller to: The
Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, for The CIT
Group Account No. 116-003855, ABA No. 021-000-021, Reference: N607PE Sale Price,
with verbal confirmation (including Fed wire number) to Carolle Sorel at (212)
536-9460, and (ii) by directing Seller to apply the unapplied Maintenance
Reserves (as such term is defined in the Lease) currently held by Seller under
the Lease in accordance with the Lease Termination Agreement to payment of the
Purchase Price.
3. CLOSING: The closing of the sale and purchase of the Aircraft
-------
(the "Closing") will take place at the offices of Seller at 10:00 a.m. on
September 29, 1998, or at such other place and time on or prior to September 30,
1998 as the parties may agree. The Closing is conditioned upon delivery of the
documents, instruments and funds provided for in Section 4 hereof.
4. DELIVERIES AT CLOSING:
---------------------
(a) At Closing Seller shall execute and deliver to Buyer the
following:
(i) a bill of sale, dated the date of Closing, substantially in the
form attached hereto as Exhibit A (the "Bill of Sale") in
respect of the Aircraft;
(ii) a bill of sale, dated the date of Closing, in the form required
for recording with the Federal Aviation Administration ("FAA
Bill of Sale") in respect of the Aircraft;
(iii) a certificate of incumbency of Seller signed by the Secretary or
an Assistant Secretary of Seller, which certificate shall
certify the names of the officers of Seller authorized to
execute this Agreement and any related agreement on behalf of
Seller, together with specimen signatures of such officers; and
(iv) a lease termination agreement, dated the date of Closing,
substantially in the form of Exhibit C hereto (the "Lease
Termination Agreement"), with respect to the Aircraft Lease
Agreement dated as of October 22, 1992 between Seller and Buyer
(as amended, modified and supplemented, the "Lease").
(b) At Closing Buyer shall deliver to Seller the following:
(i) payment of the Purchase Price as provided in Section 2 hereof;
(ii) a certificate of delivery and acceptance of the Aircraft and the
Records in the form of Exhibit B (the "Certificate of
Acceptance") duly executed and delivered by Buyer;
<PAGE>
(iii) a copy of all corporate proceedings of Buyer, certified by the
Secretary or an Assistant Secretary of Buyer, evidencing that
all action required to be taken in connection with the
authorization, execution, delivery and performance of this
Agreement and the transactions contemplated hereby has been duly
taken, and a certificate of incumbency of Buyer signed by the
Secretary or an Assistant Secretary of Buyer, which certificate
shall certify the names of the officers of Buyer authorized to
execute this Agreement and any related agreement on behalf of
Buyer, together with specimen signatures of such officers;
(iv) evidence reasonably satisfactory to Seller as to Buyer's
compliance with the covenant set forth in the last sentence of
Section 11(c) hereof; and
(v) the Lease Termination Agreement, duly executed and delivered by
Buyer.
The taking by each of Seller and Buyer of the actions to be taken by
such party in this Section 5 on the date of Closing shall constitute a
reaffirmation by such party that its representations and warranties set forth in
this Agreement are true and correct on and as of the date of Closing.
5. TITLE: Full legal and beneficial title to the Aircraft shall be
-----
conveyed pursuant to and in accordance with the Bill of Sale and, except as
expressly set forth in the Bill of Sale, such title shall be conveyed without
representation or warranty of any kind whatsoever, except that Seller shall
represent and warrant good and marketable title to the Aircraft, free and clear
of any and all liens, encumbrances and rights of others of any nature
whatsoever, other than any liens or encumbrances arising through Buyer or which
Buyer is obligated to pay, remove, or indemnify Seller for under the Lease
("Lessor's Liens"). Title and risk of loss of the Aircraft shall pass from
Seller to Buyer concurrently with payment for and delivery of the Aircraft at
Closing.
6. REPRESENTATIONS OF BUYER: Buyer makes the following
------------------------
representations to Seller, each of which shall survive the execution and
delivery of this Agreement:
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority necessary to enter this Agreement and all other
documents contemplated hereby (the "Sale Documents"), to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby.
(b) The execution, delivery and performance of this Agreement and
the other Sale Documents and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate action on the part of Buyer; and each of this Agreement and each other
Sale Document is a legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally or by equitable limitations on the availability of
remedies. The execution, delivery and performance of this Agreement and the
other Sale Documents by Buyer and the consummation by Buyer of the transactions
contemplated hereby and thereby, will not (i) conflict with or result in a
breach of any provisions of the Certificate of Incorporation or By-Laws of
Buyer; (ii) violate the provisions of any agreement or contract (A) binding upon
Buyer or (B) which affects the Aircraft and to which Seller is not a party; or
(iii) violate any statute, rule, regulation, judgment,
-3-
<PAGE>
order, writ, injunction or decree of any court, administrative agency or
governmental body (A) applicable to Buyer or (B) which affects the Aircraft and
is not solely applicable to Seller.
(c) No filing with, or permit, authorization, consent or approval of,
any governmental authority or agency or third party is necessary for the
consummation by Buyer of the transactions contemplated by this Agreement other
than the filing with the Federal Aviation Administration of the FAA Bill of Sale
and the Application for Registration of the Aircraft.
(d) Buyer has not employed any broker or finder or incurred any
liability for brokerage fees, commissions or finder's fees in connection with
the transactions contemplated by this Agreement and Seller shall have no
liability for any such fees or commissions.
(e) All state and local sales, use or other taxes required to be paid
as a result of the consummation of the transactions described herein have been
paid by Buyer.
7. REPRESENTATIONS OF SELLER: Seller makes the following
-------------------------
representations to Buyer, each of which shall survive the execution and delivery
of this Agreement:
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority necessary to enter this Agreement and the other
Sale Documents, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby.
(b) The execution, delivery and performance of this Agreement and the
other Sale Documents and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate action on the part of Seller; and each of this Agreement and each
other Sale Document is a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally or by equitable limitations on the
availability of remedies. The execution, delivery and performance of this
Agreement and the other Sale Documents by Seller and the consummation by Seller
of the transactions contemplated hereby and thereby, will not (i) conflict with
or result in a breach of any provisions of the Certificate of Incorporation or
By-Laws of Seller; (ii) violate the provisions of any agreement or contract (A)
binding upon Seller or (B) which affects the Aircraft and to which Buyer is not
a party; or (iii) violate any statute, rule, regulation, judgment, order, writ,
injunction or decree of any court, administrative agency or governmental body
(A) applicable to Seller or (B) which affects the Aircraft and is not solely
applicable to Buyer.
(c) No filing with, or permit, authorization, consent or approval of,
any governmental authority or agency or third party is necessary for the
consummation by Seller of the transactions contemplated by this Agreement other
than the filing with the Federal Aviation Administration of the FAA Bill of Sale
and the Application for Registration of the Aircraft.
(d) Seller has not employed any broker or finder or incurred any
liability for brokerage fees, commissions or finder's fees in connection with
the transactions contemplated by this Agreement.
8. ACCEPTANCE AND DELIVERY OF THE AIRCRAFT AND RECORDS: Buyer shall
---------------------------------------------------
accept the Aircraft, together with (i) the avionics, appliances, parts,
instruments, appurtenances, accessories, furnishings and other equipment
attached thereto or
-4-
<PAGE>
installed thereon and (ii) the Records, and Seller shall deliver the Aircraft,
together with (i) such avionics, appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment attached thereto or installed
thereon and (ii) such Records, to Buyer, and Buyer shall have taken delivery of
the Aircraft and the Records from Seller, immediately upon the Closing, without
any further action on the part of Buyer or Seller, at the location specified on
Schedule 1 attached hereto.
9. WARRANTY DISCLAIMER: SELLER IS NOT A MANUFACTURER OF, OR A
-------------------
DEALER IN, AIRCRAFT, NOR HAS SELLER INSPECTED THE AIRCRAFT PRIOR TO DELIVERY AND
ACCEPTANCE BY BUYER. EXCEPT AS EXPRESSLY SET FORTH IN THE BILL OF SALE, SELLER
DOES NOT WARRANT THE AIRCRAFT IN ANY WAY, OR MAKE ANY OTHER WARRANTY IN
CONNECTION WITH THIS AGREEMENT OR THE SALE AND DELIVERY OF THE AIRCRAFT, IN ANY
CASE, EITHER EXPRESSLY OR BY IMPLICATION, THE CONVEYANCE OF THE AIRCRAFT BEING
MADE HEREBY ON AN "AS-IS, WHERE-IS" BASIS, WITHOUT RECOURSE TO SELLER, AND,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY
IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS OR ADEQUACY FOR ANY PURPOSE OR USE,
QUALITY, PRODUCTIVENESS OR CAPACITY, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO AIRWORTHINESS, DESIGN, VALUE, CONDITION, SUITABILITY, ABSENCE OF
LATENT OR OTHER DEFECTS WHETHER OR NOT DISCOVERABLE, ABSENCE OF ANY INFRINGEMENT
OF ANY PATENT, TRADEMARK OR COPYRIGHT OR ABSENCE OF OBLIGATION BASED ON STRICT
LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY OF ANY KIND
WHATSOEVER; AND BUYER HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS
EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES. SELLER SHALL
NOT HAVE ANY RESPONSIBILITY OR LIABILITY TO BUYER OR ANY OTHER PERSON, WHETHER
ARISING IN CONTRACT OR TORT OUT OF ANY NEGLIGENCE OR STRICT LIABILITY OF SELLER
OR OTHERWISE, FOR (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE
CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR ANY PART THEREOF
OR BY ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER
CIRCUMSTANCE IN CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF
THE AIRCRAFT OR ANY RISKS RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE,
LOSS OF BUSINESS OR ANTICIPATED PROFITS OR CONSEQUENTIAL DAMAGES OR (iv) THE
DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT
OF THE AIRCRAFT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AND
NOTWITHSTANDING ANY IMPLICATION TO THE CONTRARY CONTAINED HEREIN, SELLER HEREBY
MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE YEAR 2000 COMPLIANCE OF
THE AIRCRAFT OR ANY PART THEREOF. FOR PURPOSES OF THIS AGREEMENT, THE TERM
"YEAR 2000 COMPLIANCE" SHALL MEAN AND INCLUDE THE ABILITY OF THE AIRCRAFT AND
EACH PART THEREOF TO ACCURATELY PROCESS, PROVIDE AND/OR RECEIVE DATE/TIME DATA
(INCLUDING, WITHOUT LIMITATION, CALCULATING, COMPARING, OUTPUTTING AND
SEQUENCING), WITHIN, FROM, INTO, AND BETWEEN THE TWENTIETH CENTURY AND THE
TWENTY-FIRST CENTURY, INCLUDING LEAP YEAR CALCULATIONS SUCH THAT NEITHER THE
AIRCRAFT NOR ANY PART THEREOF OR SERVICE RELATED THERETO WILL BE AFFECTED BY
DATES/TIMES PRIOR TO, ON, AFTER OR SPANNING JANUARY 1, 2000.
10. BUYER'S REMEDY: Buyer's remedy and Seller's limit of liability
--------------
for
-5-
<PAGE>
any and all losses or damages resulting from any Lessor's Lien, or from any
other cause, shall be, Seller's removal of said encumbrance from infringement
upon Buyer's title.
11. INDEMNITIES AND INSURANCE:
-------------------------
(a) Buyer agrees that all payments to Seller hereunder shall be free
of expense to Seller with respect to the amount of any local, state, federal or
foreign taxes (other than those measured by Seller's net income or capital or
franchise taxes) or withholdings, license fees, duties, assessments, charges,
fines or penalties hereafter levied or imposed upon or in connection with or
measured by this Agreement or any sale, registration, rental, use, payment,
shipment, delivery or transfer of title with respect to the Aircraft, all of
which Buyer assumes and agrees to pay in addition to the payments provided for
herein. Specifically, Buyer agrees to pay, and to indemnify and save Seller
harmless from, any delay (unless caused by Seller) in paying, all sales, use,
stamp and personal property taxes, if any, which may be payable or determined to
be payable in connection with this Agreement and the transactions contemplated
herein.
(b) Any amount payable to Seller or Buyer pursuant to Section 10 or
this Section 11 shall be paid by the responsible party to the other party
immediately upon receipt of a written demand therefor from such other party, in
immediately available funds at such bank or to such account as specified by such
other party in written directions to the responsible party, or, if no such
directions shall have been given, by check of the responsible party payable to
the order of such other party and mailed to such other party by certified mail,
postage prepaid at its address set forth in the introductory paragraph of this
Agreement. Any amount payable by the responsible party under this Section 11 or
otherwise under this Agreement which is not paid when due shall bear interest at
a rate per annum equal to three percent (3%) over the rate publicly announced
from time to time as the prime rate of The Chase Manhattan Bank.
(c) Buyer shall defend and pay on behalf of, and indemnify and hold
harmless, Seller and its officers, directors, employees and agents from and
against all liabilities, damages, claims, losses and judgments, including all
costs and expenses incidental thereto, which may be suffered by, accrued against
or charged to or recoverable from Seller or its officers, directors, employees
or agents by reason of loss or damage to property (including the Aircraft or
loss of use thereof) or by reason of injury or death of any person resulting
from the operation, use or ownership of the Aircraft by Buyer after Closing.
In furtherance thereof, for two (2) years following the date of Closing, Buyer
shall name Seller as an additional insured with respect to any public liability
insurance which is obtained by or on behalf of Buyer in respect of the Aircraft.
(d) Buyer further agrees and confirms that its obligations and
agreements with respect to indemnification set forth herein shall survive the
execution and delivery of this Agreement and the payment of the Purchase Price
for the Aircraft hereunder.
12. DELAY, FAILURE TO PERFORM AND TERMINATION:
-----------------------------------------
(a) Seller shall be excused from and not be liable for any failure to
deliver or delay in delivery of the Aircraft arising from any cause beyond the
control of Seller and, in the event of delay, the date of Closing specified
above shall be extended by a period equal to such delay, but in no event more
than ninety (90) days after the date of Closing specified above. Such causes
include, without limitation, any act or omission of Buyer, acts of God or public
enemy, war, insurrection or riots, fires, floods, explosions or accidents,
epidemics, governmental acts, priorities, regulations or directives affecting
Seller's or Buyer's facilities or the Aircraft, damage to or casualty loss of
the Aircraft, strikes or other labor difficulties causing a stoppage or
-6-
<PAGE>
slowdown of work, inability to procure vendor furnished parts or materials, or
failure of a vendor to make timely deliveries of orders for materials or parts,
or suspensions of flying operations due to inclement weather.
(b)(1) In the event that Buyer defaults in the payment of any sums due
hereunder, or Buyer fails to accept delivery of the Aircraft within three (3)
days of tender of delivery by Seller, or earlier states its intention not to
accept the Aircraft when it is tendered for delivery, or fails to make the
Aircraft available for tender of delivery on or prior to September 30, 1998,
Seller shall be entitled to terminate this Agreement and retain all monies
theretofore paid by Buyer. In such case, Seller shall have no further liability
to Buyer hereunder and may use monies paid by Buyer to offset any damages
suffered by Seller as a result of Buyer's breach. Seller shall also be entitled
to recover reasonable attorneys' fees and expenses incurred in enforcing or
preserving Seller's rights under this Agreement.
(2) Either party may terminate this Agreement at any time prior to
delivery of the Aircraft if the other party becomes insolvent, applies for or
consents to the appointment of a receiver, or makes an assignment for the
benefit of creditors, commences any bankruptcy, reorganization, insolvency or
liquidation proceedings, or other proceedings for relief under any bankruptcy
law or similar law for relief of debtors or any such proceeding is instituted
against it and is not dismissed within thirty (30) days after such institution.
(3) The right to terminate under subparagraphs (1) and (2) above
shall not be exclusive and the non-defaulting party shall be entitled to pursue
all rights and remedies under law or in equity.
(4) In the event that for any reason either party hereunder fails,
without fault by the other party hereunder, to tender delivery of the Aircraft
or to accept delivery of the Aircraft and to pay the Purchase Price therefor, in
each case, by September 30, 1998, such other party shall have the right, at its
option, to terminate this Agreement, other than Section 13(a) hereof, upon
giving written notice thereof to the nonperforming party.
13. MISCELLANEOUS:
-------------
(a) Each party hereto shall be responsible for all fees and expenses,
including, without limitation, the fees and expenses of its counsel and/or any
technical, inspection or appraisal costs, incurred directly by it in connection
with the negotiation, preparation and execution of this Agreement and all
related documentation, and neither Seller nor Buyer shall have any right of
reimbursement or indemnity for such costs and expenses as against the other,
provided that (i) any filing or recordation fees and expenses and (ii) the
reasonable fees and expenses of McAfee & Taft, special FAA counsel for the
transactions contemplated hereby, shall be for the sole account of Buyer, and
Seller shall have no responsibility therefor.
(b) This Agreement, together all Schedules and Exhibits hereto, the
Lease Termination Agreement, the Bill of Sale, the FAA Bill of Sale and the
Certificate of Acceptance constitute the entire agreement between Seller and
Buyer with respect to the purchase and sale of the Aircraft and no
representation or statement not contained, or referred to herein or in the Lease
Termination Agreement, the Bill of Sale, the FAA Bill of Sale or such
Certificates shall be binding upon Seller or Buyer as a warranty or otherwise.
(c) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY, PERFORMANCE AND ENFORCEMENT. The parties hereto agree that all actions
or proceedings initiated by either party arising out of this
-7-
<PAGE>
Agreement may be litigated in the state courts of the State of New York in New
York County or in the United States District Court for the Southern District of
New York. The parties hereto expressly submit and consent in advance to such
jurisdiction and venue in any action or proceeding commenced by either party in
any of such courts, agree that jurisdiction and venue is proper in such courts,
and hereby waive personal service of the summons and complaint or other process
or papers issued therein and agree that such service of the summons and
complaint may be made by registered mail, return receipt requested, addressed to
Seller or Buyer, as the case may be, at its address set forth in the
introductory paragraph hereof.
(d) The headings appearing in this Agreement and in any other
documents relating to this transaction are inserted only as a matter of
convenience and in no way define, limit or describe the scope or intent of such
sections or paragraphs nor in any way affect this Agreement or any other
documents relating to this transaction.
(e) The parties hereto agree to execute and deliver, or cause to be
executed and delivered, such further instruments or documents and take such
other action as may be required effectively to carry out the transactions
contemplated herein.
(f) This Agreement can be modified only by a writing signed by Buyer
and Seller.
(g) All notices, requests and demands to or upon any party hereto
shall be deemed to have been duly given, made or received (i) three (3) days
after deposit in the United States mail, first class postage prepaid, or (ii)
one (1) day after deposit with an overnight air carrier, addressed to such party
at the address set forth in the introductory paragraph of this Agreement, in the
case of Buyer, to the attention of Morris Nachtomi, Chairman/President/CEO, with
a copy to Stephen Gelband, Esq. Hewes, Gelband, Lambert & Dann, P.C., Suite 300,
The Flour Mill, 1000 Potomac Street, N.W., Washington, D.C. 20007-3533, and in
the case of Seller, to the attention of General Counsel, or to such party at
such other address as may be hereafter designated in writing by such party to
the other party hereto.
(h) This Agreement may be executed in two or more counterparts, and
such counterparts taken together shall constitute one and the same instrument.
(i) This Agreement may not be assigned by either party without the
prior written consent of the other party hereto, which consent shall not be
unreasonably withheld; provided that, notwithstanding the foregoing, Seller may
assign its rights, but not its obligations, hereunder in order to effect a like-
kind exchange under the provisions of Section 1031 of the Internal Revenue Code
of 1986, as amended, and the regulations thereunder, and Buyer agrees to use
reasonable efforts to cooperate with Seller in connection therewith. Subject to
the foregoing, this Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
(j) Any provision of this Agreement that 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 or affecting the validity or enforceability of such
provisions in any other jurisdiction.
(k) BUYER AND SELLER AGREE THAT ANY REMEDIES PROVIDED HEREIN OR
AVAILABLE AT LAW OR EQUITY SHALL BE LIMITED TO ACTUAL OR COMPENSATORY DAMAGES
AND NEITHER PARTY SHALL BE LIABLE FOR LOSS OF PROSPECTIVE PROFITS OR SPECIAL,
INDIRECT, INCIDENTAL, CONSEQUENTIAL
-8-
<PAGE>
OR PUNITIVE DAMAGES OF ANY KIND OR IN ANY AMOUNT.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
TOWER AIR, INC. C.I.T. LEASING CORPORATION
(Buyer) (Seller)
By: /s/ Philip R. Brookmeyer By: /s/ Anthony Diaz
------------------------- ------------------------
Name: Name:
----------------------- ----------------------
V.P. - Legal
Title:______________________ Title: Senior Vice President
<PAGE>
SCHEDULE 1
DESCRIPTION OF AIRCRAFT
AND
DELIVERY LOCATION
One (1) Boeing 747-238B Aircraft bearing manufacturer's serial number 20011 and
FAA Registration Number N607PE equipped with four (4) Pratt & Whitney JT9D-7J
engines bearing manufacturer's serial numbers 663047, 685779, 689579 and 663054,
together with the avionics, appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment attached thereto or installed
thereon, and all Records.
Delivery Location: JFK International Airport, New York or such other location
as Buyer and Seller shall agree upon.
<PAGE>
EXHIBIT A
AIRCRAFT BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
THAT C.I.T. Leasing Corporation ("Seller") is the owner of that certain
Boeing 747-238B aircraft bearing Manufacturer's Serial Number 20011, and four
(4) Pratt & Whitney JT9D-7J engines bearing Manufacturer's Serial Numbers
663047, 685779, 689579 and 663054, respectively, with power to convey full legal
and beneficial title to said aircraft and engines.
THAT, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Seller does this 29th day of September, 1998,
grant, convey, transfer, bargain and sell, deliver and set over unto Tower Air,
Inc. ("Buyer"), whose address is Hangar 17, JFK International Airport, Jamaica,
New York 11430, and unto its successors and assigns, all of Seller's right,
title, and interest in and to the above-described aircraft and engines.
THAT Seller hereby warrants to Buyer, its successors and assigns, that
there is hereby conveyed to Buyer on the date hereof legal and beneficial title
to the aforesaid aircraft and engines, free and clear of any liens, encumbrances
and rights of others of any nature whatsoever, other than any liens or
encumbrances arising through Buyer or which Buyer is obligated to pay, remove,
or indemnify Seller for under the Aircraft Lease Agreement dated as of October
22, 1992, as amended, between Seller and Buyer and that Seller will defend such
title forever against all claims and demands whatsoever.
THAT THE AIRCRAFT AND ENGINES CONVEYED HEREBY ARE BEING SOLD "AS IS",
"WHERE IS", WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND AS TO THE CONDITION
OF THE PROPERTY OR ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
ANY OTHER REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED
(EXCEPT AS EXPRESSLY MADE HEREIN WITH RESPECT TO TITLE AND ABSENCE OF LIENS).
Seller hereby assigns to Buyer (to the extent to which the same may be
assignable), any applicable warranty of the manufacturer of the above-described
aircraft with respect to such aircraft and engines.
Buyer shall be responsible for any personal property, rental, use or sales
tax or similar levies assessed in connection with the sale of the above-
described aircraft and engines.
THIS Bill of Sale shall be governed by the laws of the State of New York,
exclusive of any choice of law rule of that or any other jurisdiction which
would cause any matter to be referred to the law of any jurisdiction other than
New York.
<PAGE>
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed in
its name this 29th day of September, 1998.
C.I.T. LEASING CORPORATION
By: /s/ Anthony Diaz
---------------------------
Title: Senior Vice President
------------------------
<PAGE>
EXHIBIT B
CERTIFICATE OF ACCEPTANCE
TOWER AIR, INC. ("Buyer") hereby acknowledges final and irrevocable
delivery and acceptance this ____ day of September, 1998, at JKF International
Airport, New York of (i) one (1) Boeing 747-238B aircraft bearing manufacturer's
serial number 20011 and FAA registration number N607PE, together with four (4)
Pratt & Whitney JT9D-7J engines bearing manufacturer's serial numbers 663047,
685779, 689579, and 663054, respectively (the "Aircraft") and (ii) the Records
(as such term is defined in the Purchase and Sale Agreement dated as of
September 15, 1998 between Buyer and C.I.T. Leasing Corporation ("Seller")).
Buyer hereby acknowledges that Buyer has had the opportunity to fully inspect
the Aircraft and the Records and that the Aircraft and the Records are in
complete conformance with Buyer's specifications and requirements. Buyer hereby
acknowledges that, on the date set forth above, Seller has transferred and
delivered to Buyer and Buyer has accepted from Seller risk of loss, ownership
of, and title to the Aircraft.
TOWER AIR, INC.
By: /s/ Philip R. Brookmeyer
-----------------------------
Title: V.P. - Legal
--------------------------
<PAGE>
EXHIBIT C
LEASE TERMINATION AGREEMENT
THIS LEASE TERMINATION AGREEMENT ("Agreement") is made as of the ___
day of September, 1998, by and between TOWER AIR, INC., a Delaware corporation
("Lessee"), and C.I.T. LEASING CORPORATION, a Delaware corporation ("Lessor").
WHEREAS, Lessor and Lessee are parties to: (i) that certain Aircraft Lease
Agreement dated as of October 22, 1992, as supplemented by the Lease Supplement,
dated March 26, 1993, which documents were recorded as one instrument by the
Federal Aviation Administration ("FAA") on April 2, 1993 as Conveyance No.
---
M30367; (ii) that certain Amendment Number One and Agreement to Aircraft Lease
Agreement dated as of August 31, 1994 (the "First Amendment"), which document
---------------
was recorded by the FAA on October 13, 1994 as Conveyance No. NN007220; (iii) a
letter agreement dated June 24, 1997 ("Letter Agreement One"); (iv) that certain
--------------------
Amendment Number Two and Agreement to Aircraft Lease Agreement dated as of
October 31, 1997 (the "Second Amendment"), which document was recorded by the
----------------
FAA on March 4, 1998 as Conveyance No. JJ25162; (v) a letter agreement dated
November 26, 1997 ("Letter Agreement Two"), (vi) that certain Amendment Number
--------------------
Three and Agreement to Aircraft Lease Agreement dated as of December 31, 1997
(the "Third Amendment"), which document was recorded by the FAA on May 4, 1998
---------------
as Conveyance No. S103866; (vii) that certain Amendment Number Four and
Agreement to Aircraft Lease Agreement dated as of January 30, 1998 (the "Fourth
------
Amendment"), which document was not filed for recording with the FAA, but a copy
- ---------
of which Fourth Amendment is attached hereto as Exhibit A; and (viii) that
certain Amendment Number Five and Agreement to Aircraft Lease Agreement dated as
of April 20, 1998 (the "Fifth Amendment"), which document was not filed for
---------------
recording with the FAA, but a copy of which Fifth Amendment is attached hereto
as Exhibit B (such Aircraft Lease Agreement, as heretofore amended, modified and
supplemented, hereinafter referred to as the "Lease"), which relates to one (1)
-----
Boeing 747-238B Aircraft bearing U.S. Registration Number N607PE and
Manufacturer's Serial Number 20011, together with Pratt & Whitney JT9D-7J
engines bearing serial numbers 663047, 685779, 689579and 663054 (collectively,
the "Aircraft"); and
--------
WHEREAS, Lessor and Lessee have reached agreement on the manner in
which (i) Lessee shall return the Aircraft and the Aircraft Records to Lessor,
and (ii) the Lease shall be terminated, except for the provisions thereof which
by their terms survive the expiration or termination of the Lease;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Recitals. The above recitals are hereby incorporated and made a
--------
part hereof in
<PAGE>
their entirety.
2. Return of Aircraft and Aircraft Records. Lessee and Lessor hereby
---------------------------------------
acknowledge and agree that on the date hereof Lessee has returned the Aircraft
and the Aircraft Records to Lessor at JFK International Airport, New York.
Lessee hereby relinquishes any right, interest or claim it may have under the
Lease in and to the Aircraft or the Aircraft Records.
3. Termination of Lease. The parties hereto agree that the Lease is
--------------------
hereby terminated and the Aircraft is hereby released from the terms and
conditions of the Lease, without prejudice to the rights of Lessor or Lessee
hereunder or under those provisions of the Lease which by their terms survive
the expiration or termination of the Lease (including, without limitation, the
provisions of Articles 10, 13 and 16 of the Lease). Lessee acknowledges and
agrees that, from and after the date hereof, it has no further rights in and to
the Aircraft under the Lease.
4. Basic Rent and Maintenance Reserves. Lessee hereby acknowledges
-----------------------------------
and agrees that as of the date hereof the following amounts of Basic Rent and
Maintenance Reserves are due and payable by Lessee to Lessor under the Lease:
Basic Rent $ 1,714,562.20
Maintenance Reserves $ 1,330,147.16
Lessor hereby agrees that, upon (a) Lessee=s execution and delivery of
(i) the Purchase and Sale Agreement dated as of July 15, 1998 between Lessor and
Lessee (the "Purchase Agreement") and (ii) the Loan Agreement dated as of July
------------------
15, 1998 between Lessee and The CIT Group/Equipment Financing, Inc. and (b) the
consummation of the transactions contemplated by each such agreement, the above-
described amounts shall be deemed to have been paid in full to Lessor. Lessor
and Lessee agree that as of the date hereof $5,980,531.21 of Maintenance
Reserves have been paid by Lessee to Lessor under the Lease, but have not been
applied as contemplated by Exhibit F thereto. Lessee hereby relinquishes any
right, interest or claim it may have in such Maintenance Reserves under the
Lease, and agrees that Lessee has, from and after the date hereof, no further
rights in and to such Maintenance Reserves under the Lease and that Lessor shall
retain the full amount of such Maintenance Reserves. Lessor and Lessee hereby
agree that such amount of Maintenance Reserves shall be applied in partial
payment of the purchase price to be paid by Lessee pursuant to Section 2 of the
Purchase Agreement.
5. No Waiver. Notwithstanding the termination of the Lease hereunder
---------
and return of the Aircraft in accordance with the provisions hereof and of the
Lease, except as expressly provided herein, nothing set forth herein shall
constitute a waiver by Lessor or Lessee of any right, remedy or privilege Lessor
may have under the Lease of any provision in respect of indemnities given by
Lessee in favor of the Lessor or any other provision thereof which by its terms
survives the termination of the Lease. Accordingly, except as expressly
provided herein, Lessor and Lessee do not waive or modify any rights, remedies
or privilege of Lessor or Lessee
-2-
<PAGE>
under the Lease or pursuant to applicable Law.
6. Further Assurances. Lessee, at Lessee=s expense, will promptly
------------------
and duly execute and deliver to Lessor such further documents and assurances and
take such further actions as Lessor may from time to time reasonably request in
order to more effectively carry out the intent and purpose of this Agreement and
to establish and protect the rights and remedies created or intended to be
created in favor of Lessor hereunder or under the Lease, and Lessor, at Lessor=s
expense, will promptly and duly execute and deliver to Lessee such further
documents and assurances to take such further actions as Lessee may from time to
time reasonably request in order to more effectively carry out the intent and
purpose of this Agreement and to establish and protect the rights and remedies
created or intended to be created in favor of Lessee hereunder or under the
Lease.
7. Definitions. Capitalized terms used but not otherwise defined
-----------
herein shall have the meanings given such terms in the Lease.
8. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9. Survival. The representations, warranties, covenants and
--------
agreements of Lessee and Lessor set forth in this Agreement and the Lease (to
the extent they provide for such survival), and Lessor's and Lessee's
obligations hereunder and under the Lease, shall survive the expiration or other
termination of this Agreement and the Lease to the extent required for full
performance and satisfaction thereof.
10. Entire Agreement. This Agreement and the Lease constitute the
----------------
entire agreement between Lessee and Lessor regarding the Aircraft and there are
no other prior or contemporaneous written or oral understandings with regard to
the subject matter hereof.
11. Successors and Assigns. This Agreement shall be binding on and
----------------------
shall inure to the benefit of Lessee, Lessor and their respective successors and
assigns.
12. Jurisdiction; Governing Law. The terms and provisions of Section
---------------------------
19.1 of the Lease are hereby incorporated by reference in this Agreement to the
same extent as if fully set forth herein. THIS AGREEMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
13. WAIVER OF JURY TRIAL. LESSEE AND LESSOR HEREBY WAIVE TRIAL BY
--------------------
JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
-3-
<PAGE>
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT OR THE LEASE OR THE RELATIONSHIP ESTABLISHED
HEREUNDER OR THEREUNDER.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
TOWER AIR, INC. C.I.T. LEASING CORPORATION
By: /s/ Philip R. Brookmeyer By: /s/ Anthony Diaz
----------------------------- --------------------------
Name: Name: Anthony Diaz
---------------------------
Title: V.P. - Legal Title: Senior Vice President
--------------------------
<PAGE>
EXHIBIT 10(33)
AMENDED AND
RESTATED PROMISSORY NOTE
--------------------------
USD18,081,512.07 August 13, 1998
FOR VALUE RECEIVED, TOWER AIR, INC. (the "Maker"), a Delaware
corporation, having its principal place of business and chief executive office
at Hangar No. 17, John F. Kennedy International Airport, Jamaica, New York
11430, does hereby unconditionally promise to pay to FINOVA CAPITAL CORPORATION
(the "Holder") or its order, at the Holder's principal place of business at 1850
North Central Avenue, Phoenix, Arizona 85002, or at such other place as the
Holder may from time to time in writing direct, the principal sum of
USD18,081,512.07 (the "Loan"), in consecutive monthly installments consisting,
in some cases, of interest only and, in other cases, of principal and interest
(an "Installment"), on the days and in the amounts set forth on Schedule I
attached hereto and made a part hereof; provided, however, that the last such
-------- -------
Installment shall be in the amount necessary to pay all amounts due and owing to
the Holder under the Loan Agreement. Each date on which an Installment is due
is hereinafter referred to as a "Due Date." Interest shall accrue on any and
all principal amounts remaining unpaid hereunder from time to time outstanding
from the date hereof until such principal amounts are paid in full, at a fixed
rate per annum of 10.27% computed from the date hereof. If any Due Date shall
fall on a date which is not a Business Day, the amount due on such date shall be
paid on the immediately succeeding Business Day.
Capitalized terms used herein and not otherwise defined shall have the
same meaning as is ascribed to such terms in that certain Aircraft Loan and
Security Agreement dated May 8, 1996, as at any time amended (the "Loan
Agreement"), between the Maker, as borrower therein, and the Holder, as lender
therein.
This Amended and Restated Promissory Note (the "Note") is made
pursuant and subject to the terms and conditions of the Loan Agreement,
providing, among other things, for the acceleration of the maturity hereof upon
the happening of certain stated events and for the prepayment of the Loan by the
Maker. This Note is secured, among other things, by a lien and security
interest granted to the Holder in the Aircraft by the Loan Agreement and the
Mortgage, to which reference is made for a description of the Aircraft and the
rights of the parties with respect thereto.
<PAGE>
This Note amends and replaces the obligations of the Maker under the
Amended and Restated Promissory Note dated December 24, 1997 (the "December 24,
1997 Note") and restates the terms and conditions of the December 24, 1997 Note.
On and after the date hereof this Note supercedes all of the terms and
conditions of the December 24, 1997 Note.
If any amount or portion thereof payable hereunder is not paid when
due, the Maker shall pay interest thereon at the Overdue Rate from the Due Date
thereof to and including the earlier to occur of (i) the date(s) of payment in
full of such overdue amount or portion thereof or (ii) the date the Unpaid
Amount is declared due and payable.
Interest calculations under this Note shall be made on a 360 day year
based on the actual number of days elapsed.
In the event (i) the Maker fails to pay any amount when due hereunder
and such failure continues for five (5) days after receipt by the Maker of
written notice thereof, or (ii) an Event of Default occurs under the Loan
Agreement or the other Documents, then, upon such occurrence, the Holder may, at
the Holder's option, declare this Note immediately due and payable; whereupon,
this Note shall be due and payable and the Maker shall immediately pay to the
Holder the Unpaid Amount plus all costs and expenses, including, but not limited
to, reasonable attorneys' fees, suffered or incurred in connection with the
enforcement of this Note.
Amounts due hereunder shall be paid (i) without set-off, counterclaim,
recoupment, abatement, demand, deduction, defense or any other circumstance of
whatsoever kind and (ii) free and clear of and without deduction for any present
or future taxes, restrictions or conditions of whatsoever kind.
Notwithstanding any provisions to the contrary herein contained, the
Holder shall not collect a rate of interest on any obligation owing by Maker to
the Holder in excess of the maximum rate of interest permitted by applicable
law. Maker understands and believes that the obligations evidenced by this Note
comply with all applicable usury laws; however, if any interest or other charges
in connection with the obligations evidenced by this Note are ever determined to
exceed the maximum amount permitted by law, then Maker agrees that (a) the
amount of interest or charges payable pursuant to this Note shall be reduced to
the maximum amount permitted by law and (b) any excess amount previously
collected from Maker in connection with this Note that exceeded the maximum
amount permitted by law shall be credited against the principal balance of this
Note then outstanding. If the outstanding principal balance hereunder has been
paid in full, the excess amount shall be refunded to Maker.
The contracted for rate of interest with respect to the obligations
evidenced
-2-
<PAGE>
by this Note shall include, without limitation, the following:
(i) The interest rate calculated and applied to the principal balance
of this Note in accordance with the provisions hereof;
(ii) Post-maturity interest, calculated and applied to the principal
balance of this Note in accordance with the provisions hereof; and
(iii) All fees, charges, goods, things in action or any sum or things
of value ("Additional Sums") paid or payable by Maker in accordance with the
provisions of the Loan Agreement or this Note, howsoever described. If any such
Additional Sums may, under applicable law, be deemed to be interest with respect
to the lending transaction which is the subject of this Note and the Loan
Agreement, then, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to the lending transaction
which is the subject of this Note and Loan Agreement, such Additional Sums shall
be payable by Maker as, and shall be deemed to be, Additional Interest, and, for
such purposes only, the agreed upon and "contracted for rate of interest" of
this transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums.
The Maker hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the Holder of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.
This Note shall be governed by and construed in accordance with the
laws of the State of Arizona.
The Maker waives the benefit of any statute of limitations affecting
its liability hereunder.
The Maker hereby irrevocably submits to the jurisdiction of the
Superior Court of Maricopa County, State of Arizona, or any successor to said
Court, and to the jurisdiction of the United States District Court for the
District of Arizona, or any successor to said Court, for purposes of any suit,
action or proceeding which relates to this Note. The Maker hereby waives and
agrees, to the extent permitted by applicable law, not to assert, by way of
motion as a defense or otherwise in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of the Arizona
Courts, that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this Note
or any transaction provided for or contemplated herein may not be enforced in or
by the Arizona Courts. The Maker hereby agrees not to seek, and hereby waives,
any collateral review by any
-3-
<PAGE>
other court which may be called upon to enforce the judgment of any Arizona
Courts of the merits of any such suit, action or proceeding or the jurisdiction
of said Arizona Courts. Nothing herein shall limit the Holder's right to bring
any suit, action or other proceeding against the Maker in any other appropriate
jurisdiction or forum or to serve process on the Maker by any means authorized
by applicable law.
The Maker hereby waives, to the fullest extent possible under
applicable law, the right to trial by jury in any action, suit or proceeding
brought by the Holder to enforce its rights hereunder.
Time is of the essence with respect to the terms and provisions of
this Note.
TOWER AIR, INC.
By /s/ M.K. Nachtomi
-------------------------------------
Title Chairman, President & CEO
Tax ID No.: 11-262-1046
-4-
<PAGE>
Exhibit 10(34)
AMENDED AND
RESTATED PROMISSORY NOTE
--------------------------
USD4,033,293.63 August 13,1998
FOR VALUE RECEIVED, TOWER AIR, INC. (the "Maker"), a Delaware
corporation, having its principal place of business and chief executive office
at Hangar No. 17, John F. Kennedy International Airport, Jamaica, New York
11430, does hereby unconditionally promise to pay to FINOVA CAPITAL CORPORATION
(the "Holder") or its order, at the Holder's principal place of business at 1850
North Central Avenue, Phoenix, Arizona 85002, or at such other place as the
Holder may from time to time in writing direct, the principal sum of
USD4,033,293.63 (the "Loan"), in consecutive monthly installments consisting of
principal and interest (an "Installment"), on the days and in the amounts set
forth on Schedule I attached hereto and made a part hereof; provided, however,
-------- -------
that the last such Installment shall be in the amount necessary to pay all
amounts due and owing to the Holder under the Loan Agreement with respect to the
November 1996 Loan. Each date on which an Installment is due is hereinafter
referred to as a "Due Date." Interest shall accrue on any and all principal
amounts remaining unpaid hereunder from time to time outstanding from the date
hereof until such principal amounts are paid in full, at a fixed rate per annum
of 10.27% computed from the date hereof. If any Due Date shall fall on a date
which is not a Business Day, the amount due on such date shall be paid on the
immediately succeeding Business Day.
Capitalized terms used herein and not otherwise defined shall have the
same meaning as is ascribed to such terms in that certain Consolidated, Amended
and Restated Aircraft and Engine Loan and Security Agreement dated March 25,
1996, as at any time amended (the "Loan Agreement"), between the Maker, as
borrower therein, and the Holder, as lender therein.
This Amended and Restated Promissory Note (the "Note") is made
pursuant and subject to the terms and conditions of the Loan Agreement,
providing, among other things, for the acceleration of the maturity hereof upon
the happening of certain stated events and for the prepayment of the Loan by the
Maker. This Note is secured, among other things, by a lien and security
interest granted to the Holder in the Aircraft by the Loan Agreement and the
Mortgage, to which reference is made for a description of the Aircraft and the
rights of the parties with respect thereto.
<PAGE>
This Note amends and replaces the obligations of the Maker under the
Amended and Restated Promissory Note dated March 10, 1998 (the "March 10, 1998
Note") and restates the terms and conditions of the March 10, 1998 Note. On and
after the date hereof this Note supercedes all of the terms and conditions of
the March 10, 1998 Note.
If any amount or portion thereof payable hereunder is not paid when
due, the Maker shall pay interest thereon at the Overdue Rate from the Due Date
thereof to and including the earlier to occur of (i) the date(s) of payment in
full of such overdue amount or portion thereof or (ii) the date the Unpaid
Amount is declared due and payable.
Interest calculations under this Note shall be made on a 360 day year
based on the actual number of days elapsed.
In the event (i) the Maker fails to pay any amount when due hereunder
and such failure continues for five (5) days after receipt by the Maker of
written notice thereof, or (ii) an Event of Default occurs under the Loan
Agreement or the other Documents, then, upon such occurrence, the Holder may, at
the Holder's option, declare this Note immediately due and payable; whereupon,
this Note shall be due and payable and the Maker shall immediately pay to the
Holder the Unpaid Amount plus all costs and expenses, including, but not limited
to, reasonable attorneys' fees, suffered or incurred in connection with the
enforcement of this Note.
Amounts due hereunder shall be paid (i) without set-off, counterclaim,
recoupment, abatement, demand, deduction, defense or any other circumstance of
whatsoever kind and (ii) free and clear of and without deduction for any present
or future taxes, restrictions or conditions of whatsoever kind.
Notwithstanding any provisions to the contrary herein contained, the
Holder shall not collect a rate of interest on any obligation owing by Maker to
the Holder in excess of the maximum rate of interest permitted by applicable
law. Maker understands and believes that the obligations evidenced by this Note
comply with all applicable usury laws; however, if any interest or other charges
in connection with the obligations evidenced by this Note are ever determined to
exceed the maximum amount permitted by law, then Maker agrees that (a) the
amount of interest or charges payable pursuant to this Note shall be reduced to
the maximum amount permitted by law and (b) any excess amount previously
collected from Maker in connection with this Note that exceeded the maximum
amount permitted by law shall be credited against the principal balance of this
Note then outstanding. If the outstanding principal balance hereunder has been
paid in full, the excess amount shall be refunded to Maker.
The contracted for rate of interest with respect to the obligations
evidenced
-2-
<PAGE>
by this Note shall include, without limitation, the following:
(i) The interest rate calculated and applied to the principal
balance of this Note in accordance with the provisions hereof;
(ii) Post-maturity interest, calculated and applied to the principal
balance of this Note in accordance with the provisions hereof; and
(iii) All fees, charges, goods, things in action or any sum or things
of value ("Additional Sums") paid or payable by Maker in accordance with the
provisions of the Loan Agreement or this Note, howsoever described. If any such
Additional Sums may, under applicable law, be deemed to be interest with respect
to the lending transaction which is the subject of this Note and the Loan
Agreement, then, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to the lending transaction
which is the subject of this Note and Loan Agreement, such Additional Sums shall
be payable by Maker as, and shall be deemed to be, Additional Interest, and, for
such purposes only, the agreed upon and "contracted for rate of interest" of
this transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums.
The Maker hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the Holder of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.
This Note shall be governed by and construed in accordance with the
laws of the State of Arizona.
The Maker waives the benefit of any statute of limitations affecting
its liability hereunder.
The Maker hereby irrevocably submits to the jurisdiction of the
Superior Court of Maricopa County, State of Arizona, or any successor to said
Court, and to the jurisdiction of the United States District Court for the
District of Arizona, or any successor to said Court, for purposes of any suit,
action or proceeding which relates to this Note. The Maker hereby waives and
agrees, to the extent permitted by applicable law, not to assert, by way of
motion as a defense or otherwise in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of the Arizona
Courts, that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this Note
or any transaction provided for or contemplated herein may not be enforced in or
by the Arizona Courts. The Maker hereby agrees not to seek, and hereby waives,
any collateral review by any
-3-
<PAGE>
other court which may be called upon to enforce the judgment of any Arizona
Courts of the merits of any such suit, action or proceeding or the jurisdiction
of said Arizona Courts. Nothing herein shall limit the Holder's right to bring
any suit, action or other proceeding against the Maker in any other appropriate
jurisdiction or forum or to serve process on the Maker by any means authorized
by applicable law.
The Maker hereby waives, to the fullest extent possible under
applicable law, the right to trial by jury in any action, suit or proceeding
brought by the Holder to enforce its rights hereunder.
Time is of the essence with respect to the terms and provisions of
this Note.
TOWER AIR, INC.
By /s/ M.K. Nachtomi
--------------------------------
Title Chairman, President & CEO
Tax ID No.: 11-262-1046
-4-
<PAGE>
EXHIBIT 10(35)
CONSOLIDATED, AMENDED AND
RESTATED PROMISSORY NOTE
--------------------------
USD 41,351,030.82 August 13, 1998
FOR VALUE RECEIVED, TOWER AIR, INC. (the "Maker"), a Delaware
corporation, having its principal place of business and chief executive office
at Hangar No. 17, John F. Kennedy International Airport, Jamaica, New York
11430, does hereby unconditionally promise to pay to FINOVA CAPITAL CORPORATION
(the "Holder") or its order, at the Holder's principal place of business at 1850
North Central Avenue, Phoenix, Arizona 85002, or at such other place as the
Holder may from time to time in writing direct, the principal sum of USD
41,351,030.82 (the "Loan"), in consecutive monthly installments consisting, in
some cases, of interest only and, in other cases, of principal and interest (an
"Installment"), on the days and in the amounts set forth on Schedule I attached
hereto and made a part hereof; provided, however, that the last such Installment
-------- -------
shall be in the amount necessary to pay all amounts due and owing to the Holder
under the Loan Agreement. Each date on which an Installment is due is
hereinafter referred to as a "Due Date." Interest shall accrue on any and all
principal amounts remaining unpaid hereunder from time to time outstanding from
the date hereof until such principal amounts are paid in full, at a fixed rate
per annum of 10.12% computed from the date hereof. If any Due Date shall fall
on a date which is not a Business Day, the amount due on such date shall be paid
on the immediately succeeding Business Day.
Capitalized terms used herein and not otherwise defined shall have the
same meaning as is ascribed to such terms in that certain Consolidated, Amended
and Restated Aircraft and Engine Loan and Security Agreement dated March 25,
1996, as at any time amended (the "Loan Agreement"), between the Maker, as
borrower therein, and the Holder, as lender therein.
This Consolidated, Amended and Restated Promissory Note (the "Note")
is made pursuant and subject to the terms and conditions of the Loan Agreement,
providing, among other things, for the acceleration of the maturity hereof upon
the happening of certain stated events and for the prepayment of the Loan by the
Maker. This Note is secured, among other things, by a lien and security
interest granted to the Holder in the Aircraft and the Cash Collateral (as
defined in the First Loan Agreement) by the Loan
<PAGE>
Agreement and the Mortgage, to which reference is made for a description of the
Aircraft and the Cash Collateral and the rights of the parties with respect
thereto.
This Note: amends and consolidates and replaces the obligations of the
Maker under the Consolidated, Amended and Restated Promissory Note dated
December 24, 1997 (the ADecember 24, 1997 Note@) and restates the terms and
conditions of the December 24, 1997 Note. On and after the date hereof this
Note supersedes all of the terms of the December 24, 1997 Note.
If any amount or portion thereof payable hereunder is not paid when
due, the Maker shall pay interest thereon at the Overdue Rate from the Due Date
thereof to and including the earlier to occur of (i) the date(s) of payment in
full of such overdue amount or portion thereof or (ii) the date the Unpaid
Amount is declared due and payable.
Interest calculations under this Note shall be made on a 360 day year
based on the actual number of days elapsed.
In the event (i) the Maker fails to pay any amount when due hereunder
and such failure continues for five (5) days after receipt by the Maker of
written notice thereof, or (ii) an Event of Default occurs under the Loan
Agreement or the other Documents, then, upon such occurrence, the Holder may, at
the Holder's option, declare this Note immediately due and payable; whereupon,
this Note shall be due and payable and the Maker shall immediately pay to the
Holder the Unpaid Amount plus all costs and expenses, including, but not limited
to, reasonable attorneys' fees, suffered or incurred in connection with the
enforcement of this Note.
Amounts due hereunder shall be paid (i) without set-off, counterclaim,
recoupment, abatement, demand, deduction, defense or any other circumstance of
whatsoever kind and (ii) free and clear of and without deduction for any present
or future taxes, restrictions or conditions of whatsoever kind.
Notwithstanding any provisions to the contrary herein contained, the
Holder shall not collect a rate of interest on any obligation owing by Maker to
the Holder in excess of the maximum rate of interest permitted by applicable
law. Maker understands and believes that the obligations evidenced by this Note
comply with all applicable usury laws; however, if any interest or other charges
in connection with the obligations evidenced by this Note are ever determined to
exceed the maximum amount permitted by law, then Maker agrees that (a) the
amount of interest or charges payable pursuant to this Note shall be reduced to
the maximum amount permitted by law and (b) any excess amount previously
collected from Maker in connection with this Note that exceeded the maximum
amount permitted by law shall be credited against the principal balance of this
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<PAGE>
Note then outstanding. If the outstanding principal balance hereunder has been
paid in full, the excess amount shall be refunded to Maker.
The contracted for rate of interest with respect to the obligations
evidenced by this Note shall include, without limitation, the following:
(i) The interest rate calculated and applied to the principal balance
of this Note in accordance with the provisions hereof;
(ii) Post-maturity interest, calculated and applied to the principal
balance of this Note in accordance with the provisions hereof; and
(iii) All fees, charges, goods, things in action or any sum or things
of value ("Additional Sums") paid or payable by Maker in accordance with the
provisions of the Loan Agreement or this Note, howsoever described. If any such
Additional Sums may, under applicable law, be deemed to be interest with respect
to the lending transaction which is the subject of this Note and the Loan
Agreement, then, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to the lending transaction
which is the subject of this Note and Loan Agreement, such Additional Sums shall
be payable by Maker as, and shall be deemed to be, Additional Interest, and, for
such purposes only, the agreed upon and "contracted for rate of interest" of
this transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums.
The Maker hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the Holder of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.
This Note shall be governed by and construed in accordance with the
laws of the State of Arizona.
The Maker waives the benefit of any statute of limitations affecting
its liability hereunder.
The Maker hereby irrevocably submits to the jurisdiction of the
Superior Court of Maricopa County, State of Arizona, or any successor to said
Court, and to the jurisdiction of the United States District Court for the
District of Arizona, or any successor to said Court, for purposes of any suit,
action or proceeding which relates to this Note. The Maker hereby waives and
agrees, to the extent permitted by applicable law, not to assert, by way of
motion as a defense or otherwise in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of the Arizona
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<PAGE>
Courts, that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this Note
or any transaction provided for or contemplated herein may not be enforced in or
by the Arizona Courts. The Maker hereby agrees not to seek, and hereby waives,
any collateral review by any other court which may be called upon to enforce the
judgment of any Arizona Courts of the merits of any such suit, action or
proceeding or the jurisdiction of said Arizona Courts. Nothing herein shall
limit the Holder's right to bring any suit, action or other proceeding against
the Maker in any other appropriate jurisdiction or forum or to serve process on
the Maker by any means authorized by applicable law.
The Maker hereby waives, to the fullest extent possible under
applicable law, the right to trial by jury in any action, suit or proceeding
brought by the Holder to enforce its rights hereunder.
Time is of the essence with respect to the terms and provisions of
this Note.
TOWER AIR, INC.
By /s/ M.K. Nachtomi
----------------------------------------
Title Chairman, President & CEO
Tax ID No.: 11-262-1046
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<PAGE>
Exhibit 10(36)
SECOND AMENDMENT TO
AIRCRAFT LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO AIRCRAFT LOAN AND SECURITY AGREEMENT (this
"Amendment") made and entered into as of this 13/th/ day of August, 1998 by and
between FINOVA CAPITAL CORPORATION (formerly GREYHOUND FINANCIAL CORPORATION)
(the "Lender"), a corporation organized and existing under the laws of the State
of Delaware, with its chief executive office and principal place of business at
1850 North Central Avenue, Phoenix, Arizona 85002 and TOWER AIR, INC. (the
"Borrower"), a corporation organized and existing under the laws of the State of
Delaware, with its chief executive office and principal place of business at
Hangar No. 17, John F. Kennedy International Airport, Jamaica, New York 11430.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower and the Lender have previously entered into the
Aircraft Loan and Security Agreement dated as of May 8, 1996, as amended by the
First Amendment to Aircraft Loan and Security Agreement dated as of September
25, 1996 (the "First Amendment") (collectively, the "Loan Agreement");
WHEREAS, the Borrower has requested that the Lender grant to the Borrower a
deferral of the payment of principal (other than a $152,586.15 payment in May,
1998) for the period of April, 1998 through and including March, 1999 in
respect of the Amended and Restated Promissory Note dated December 24, 1997, in
the principal sum of $18,234,098.22 and to amend and restate such note to
provide for such principal deferral and an extension of the term for the
repayment thereof for a period of one year.
NOW THEREFORE, the undersigned hereto agree as follows:
1. DEFINITIONS.
-----------
Capitalized terms used herein unless otherwise defined herein shall
have the meaning ascribed to such terms in the Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT.
-----------------------------
2.1 Section 1.1 of the Loan Agreement is amended by deleting the
<PAGE>
definitions "Consolidated Note" and "Note" and inserting the following in place
thereof:
"CONSOLIDATED NOTE": collectively (a) that certain Consolidated,
Amended and Restated Promissory Noted dated March 25, 1996 issued by the
Borrower to the Lender, as at any time amended or restated, (b) that
certain Promissory Note dated November 27, 1996 issued by the Borrower to
the Lender, as at any time amended or restated and (c) any other note
issued by the Borrower to the Lender pursuant to the terms of the
Consolidated Loan Agreement, as at any time amended or restated."
"NOTE: that certain Promissory Note dated May 8, 1996 issued by
the Borrower to the Lender, as amended and restated by the Amended and
Restated Promissory Note dated May 8, 1996 and as at any time further
amended or restated."
2.2 Clause (b) of Section 2.4 is deleted in its entirety and
replaced by the following:
"The unpaid principal amount of the Loan together with any
unpaid accrued interest thereon and all other amounts owing
hereunder shall be repaid by the Borrower in full on February 28,
2003."
3. REPRESENTATIONS AND WARRANTIES.
------------------------------
3.1 Except for the representations and warranties set forth in
Sections 6.4, 6.7, 6.8, 6.9, 6.10, 6.14, 6.16 and 6.17, the Borrower restates
the representations and warranties set forth in Section 6 of the Loan Agreement
as if such representations and warranties were set forth in full herein,
provided, however that every reference in such representations and warranties to
the term "Documents" shall be deemed to include this Amendment and the New Note,
the Consolidated Note, the Amended Note and the Assignment Agreement
(collectively, the "Loan Document Amendments").
3.2 On and as of the date hereof, the Borrower represents and
warrants as follows:
(a) Except as set forth on Attachment A hereto, and as further
described in the opinion of Borrower's counsel delivered pursuant to Section 4
(g) hereof, there is no litigation currently pending or expected against the
Borrower before any court or
-2-
<PAGE>
administrative agency which may have a materially adverse effect on the assets,
business, financial condition or operations of the Borrower or which would or do
prevent or hinder the performance by the Borrower of its obligations under the
Documents.
(b) The Lender's Security Interest in and to the Aircraft, is duly
perfected and properly preserved and perfected and continues to constitute a
first priority security interest in and to the Aircraft, in accordance with
applicable laws and regulations.
(c) The Borrower (i) owns and holds good and marketable title to the
Other Aircraft and the Other Engines, free and clear of all liens, security
interest, charges, claims and encumbrances of whatsoever nature (other than the
Security Interest granted and conveyed to the Lender by the Consolidated
Mortgage) and (ii) will defend title to each Other Aircraft and each Other
Engine against the claims and demands of all parties.
(d) There is no further registration, recording or filing with
respect to the Aircraft, the Other Aircraft and the Other Engines necessary or
advisable in order to continue the Borrower's title thereto nor to continue the
perfection of the Security Interest in favor of the Lender in and to the
Aircraft, the Other Aircraft and the Other Engines other than the filing of the
Mortgage and the First Amendment to Amended Mortgage, and the Uniform Commercial
Code financing statements.
(e) Borrower has furnished to Lender financial statements unaudited
on an interim basis and related financial information as of June 30, 1998,
prepared by Borrower in accordance with generally accepted accounting principles
for interim financial information (the "Financial Statements"). Such Financial
Statements (including notes thereto) fully and fairly present the financial
condition of Borrower as of the dates of the balance sheets contained therein,
and the results of its operations for the periods then ended all in conformity
with GAAP on a basis consistent with that of financial statements for
corresponding prior periods. Except as disclosed therein, Borrower has no
material contingent liabilities (including liabilities for taxes). Since June
30, 1998, there has been no material adverse change in the business, operations
or financial condition of Borrower.
(f) The reports as to the status and condition of the Aircraft
Engines have been true and accurate in all material respects.
4. CONDITIONS PRECEDENT
--------------------
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<PAGE>
4.1 Notwithstanding anything contained in this Amendment or the other
Loan Document Amendments to the contrary, the obligation of the Lender to grant
the principal deferral requested by the Borrower and to extend the repayment
term in respect of the Consolidated Note and the Amended Note, as defined below,
is expressly contingent on the fulfillment and/or satisfaction in the sole
discretion of the Lender of the following conditions precedent and the receipt
by the Lender (in form and substance satisfactory to the Lender) of such
documents and instruments, if any, therein required or deemed necessary by the
Lender to evidence the fulfillment and/or satisfaction of said conditions
precedent:
(a) The Borrower and the Lender have executed and delivered this
Amendment or have caused the same to be done;
(b) The Borrower has executed and delivered to the Lender the
Amended and Restated Promissory Note dated August 13, 1998 in the principal
amount of $ 4,033,293.63 (the "New Note"), the Consolidated, Amended and
Restated Promissory Note dated August 13, 1998 in the principal amount of
$41,351,030.82 (the "Consolidated Note"), and the Amended and Restated
Promissory Note dated August 13, 1998, in the principal amount of $18,081,512.07
(the "Amended Note");
(c) The Borrower and the Lender have executed the Assignment
Agreement dated August 13, 1998 (the "Assignment Agreement").
(d) The Borrower has executed and delivered the precautionary
UCC-1 filing required by the Assignment Agreement.
(e) The Borrower and the Lender have executed and delivered the
Sixth Amendment to Consolidated, Amended and Restated Aircraft and Engine Loan
and Security agreement dated as of August 13, 1998.
(f) The Lender has received a Certificate of Resolutions,
certified by the corporate secretary of the Borrower and setting forth a true,
complete and accurate copy of the resolutions approved by the Board of Directors
of the Borrower authorizing the entering into, execution and delivery of this
Amendment.
(g) The Lender has received an Opinion of Counsel from the
Borrower's counsel in form and substance acceptable to the Lender;
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<PAGE>
(h) The Lender has received an Officer's Certificate setting
forth the following: (i) the name of each of the duly elected and acting
officers of the Borrower together with the title of the office each holds; (ii)
the name and title of each officer of the Borrower who is authorized by the
Board of Directors of the Borrower to enter into, execute and deliver the
Documents on behalf of the Borrower and a specimen signature of each of said
officers, (iii) a certified copy of a current Certificate of Good Standing of
the Borrower certified by the Secretary of State of the State of Delaware and
(iv) a representation that there have been no changes in the Borrower's Articles
of Incorporation and By-Laws since the First Amendment to the Loan Agreement.
(i) Such other agreements, certificates, instruments or legal
opinions in writing as shall be deemed by the Lender or its counsel reasonably
necessary or desirable in order to more fully and completely service, protect,
perfect or preserve the Lender's Security Interests and other interests in and
to the Aircraft, and otherwise under the Documents and the Mortgage.
5. ACKNOWLEDGMENTS AND CONFIRMATIONS.
---------------------------------
5.1 All references in the Loan Agreement and every other agreement,
instrument and document executed and delivered by the Borrower in connection
therewith, to the "Loan Agreement" shall be deemed to refer to the Loan
Agreement as amended hereby.
5.2 The Loan Agreement and all agreements, instruments and documents
executed and delivered in connection with any of the foregoing, shall each be
deemed amended hereby to the extent necessary, if any, to give effect to the
provisions of this Amendment.
6. MISCELLANEOUS.
-------------
6.1 The Borrower will upon receipt of invoices by the Lender or upon
the Lender's demand, pay to or reimburse the Lender for all reasonable out-of-
pocket expenses of the Lender incurred in connection with the negotiation,
execution and delivery of this Amendment and each of the other Loan Document
Amendments contemplated hereby, including, without limitation, all reasonable
legal fees and
-5-
<PAGE>
disbursements of the Lender's counsel incurred in connection with all
professional services rendered and disbursements incurred by said lawyers with
respect thereto.
6.2 Except as specifically amended hereby, the Loan Agreement shall
remain in full force and effect in accordance with its terms, and each of the
Borrower and the Lender hereby ratify and affirm all of the terms and conditions
of the Loan Agreement as amended hereby.
6.3 THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ARIZONA.
6.4 This Amendment shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns. The
rights and obligations of the Borrower under this Amendment shall not be
assigned or delegated without the prior written consent of the Lender, and any
purported assignment or delegation without such consent shall be void.
6.5 Time is of the essence with respect to the terms and provisions
of this Amendment.
6.6 This Amendment may be executed in any number of counterparts, and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
WITNESS WHEREOF, the parties hereto have executed this Second Amendment to
Aircraft Loan and Security Agreement as of the day and year first above written.
TOWER AIR, INC.
By /s/ M.K. Nachtomi
-----------------------------------------
Title Chairman, President & CEO
Tax ID No.: 11-262-1046
FINOVA CAPITAL CORPORATION
By Don A. Luttenegger
-----------------------------------------
Title Division VP
-7-
<PAGE>
Exhibit 10(37)
SIXTH AMENDMENT TO
CONSOLIDATED, AMENDED AND RESTATED
AIRCRAFT AND ENGINE LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO CONSOLIDATED, AMENDED AND RESTATED AIRCRAFT AND
ENGINE LOAN AND SECURITY AGREEMENT (this "Amendment") made and entered into this
13/th/ day of August, 1998 by and between FINOVA CAPITAL CORPORATION (formerly
GREYHOUND FINANCIAL CORPORATION) (the "Lender"), a corporation organized and
existing under the laws of the State of Delaware, with its chief executive
office and principal place of business at 1850 North Central Avenue, Phoenix,
Arizona 85002 and TOWER AIR, INC. (the "Borrower"), a corporation organized and
existing under the laws of the State of Delaware, with its chief executive
office and principal place of business at Hangar No. 17, John F. Kennedy
International Airport, Jamaica, New York 11430.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower and the Lender have previously entered into the
Consolidated, Amended and Restated Aircraft and Engine Loan and Security
Agreement dated as of March 25, 1996, as amended by the First Amendment to
Consolidated, Amended and Restated Aircraft and Engine Loan and Security
Agreement dated as of May 8, 1996, the Second Amendment to Consolidated, Amended
and Restated Aircraft and Engine Loan and Security Agreement dated as of
September 25, 1996, the Third Amendment to Consolidated, Amended and Restated
Aircraft Engine Loan and Security Agreement dated as of November 27, 1996, the
Fourth Amendment to Consolidated, Amended and Restated Aircraft and Engine Loan
and Security Agreement dated as of January 16, 1997 and the Fifth Amendment to
Consolidated, Amended and Restated Aircraft Engine Loan and Security Agreement
dated December 24, 1997)the "Fifth Amendment") (collectively, the "Loan
Agreement");
WHEREAS, the Borrower has requested that (a) the Lender grant to the
Borrower a deferral of the payment of principal (other than the payment of
$1,500,000.00 in connection with the sale of certain Engines) for the period of
April, 1998 through and including March, 1999 in respect of the Consolidated,
Amended and Restated Promissory Note dated December 24, 1997 in the principal
amount of $ 42,851,030.82 and to amend and restate such note to provide for such
principal deferral and an extension of the term for the repayment thereof for a
period of one year , (b) the Lender grant to the Borrower a deferral of the
payment of principal (other than a payment of $152, 186.15 ) for the period
<PAGE>
of April, 1998 through and including March, 1999 in respect of Amended and
Restated Promissory Note dated December 24, 1997, in the principal sum of
$18,234,098.22 and to amend and restate such note to provide for such principal
deferral and an extension of the term for the repayment thereof for a period of
one year and (c) to amend and restate the Amended and Restated Promissory Note
dated March 10, 1998 (the "March 10, 1998 Note") to change the repayment terms
thereof; and
WHEREAS, the Borrower and the Lender amended the Loan Agreement on May 8,
1996 and September 25, 1996 in each case, among other things to add an event of
default in Section 8.1 of the Loan Agreement, but both such events of default
were mistakenly identified as Subparagraphs 8.1 (m), and the parties now wish to
correct such mistake in this Sixth Amendment to Consolidated, Amended and
Restated Aircraft and Engine Loan and Security Agreement.
NOW THEREFORE, the undersigned hereto agree as follows:
1. DEFINITIONS.
-----------
Capitalized terms used herein unless otherwise defined herein shall
have the meaning ascribed to such terms in the Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT.
-----------------------------
2.1 Section 1.1 of the Loan Agreement is amended by deleting the
definitions "November 1996 Note" and "November 1996 Loan" and inserting the
following in place thereof:
"NOVEMBER 1996 NOTE: shall mean that certain Promissory Note
dated November 27, 1996 issued by the Borrower to the Lender in the
principal amount of $2,000,000.00 as amended and restated by that
certain Amended and Restated Promissory Note dated January 15, 1997
issued by the Borrower to the Lender in the principal amount of
$4,000,000.00, as further amended and restated by that certain Amended
and Restated Promissory Note dated December 24, 1997 issued by the
Borrower to the Lender in the principal amount of $4,031,616.68, as
amended and restated by that certain Amended and Restated Promissory
Note dated March 10, 1998 in the principal amount of $4,668,403.20, as
amended and restated by that certain Amended and Restated Promissory
Note dated August 13, 1998 in the principal amount of $4,033,293.63,
as
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<PAGE>
amended and as at any time further amended, supplemented or restated."
"NOVEMBER 1996 LOAN: shall mean collectively, (a) USD
2,000,000.00 which was advanced by the Lender to the Borrower on
November 27, 1996; (b) USD 2,000,000.00 which was advanced by the
Lender to the Borrower on January 15, 1997; (c) USD $3,363,213.48
which was advanced by the Lender to the Borrower on December 24, 1997;
(d) USD $636,786.52 which was advanced by the Lender to the Borrower
on March 10, 1998 and (e) any other amounts at any time advanced by
the Lender to the Borrower pursuant to the terms of the Loan Agreement
or any amendments thereto."
2.2 Clause (c) of Section 3.4 is deleted in its entirety and replaced
by the following:
"The unpaid principal amount of that portion of the Loan equal to the
November 1996 Loan together with any unpaid accrued interest thereon shall
be repaid by the Borrower in full on March 31, 1999 and the unpaid
principal amount of that portion of the Loan equal to the Consolidated Loan
together with any unpaid accrued interest thereon shall be repaid by the
Borrower in full on December 31, 2002."
2.3 Section 8.1 is amended by (i) replacing the two Subparagraphs
thereof both previously denominated (m), with the following clause (m) and (n):
"(m) an 'Event of Default' under and as defined in the Loan Agreement
[N616 FF] shall have occurred and be continuing;
(n) A default under the Engine Upgrade Agreement by the Borrower has
occurred and is continuing; or"
and (ii) adding a new Subparagraph (o) after Subparagraph (n) which reads as
follows:
"(o) the Borrower shall have failed to comply with its obligations
pursuant to that certain Assignment Agreement between the Borrower and the
Lender dated August 13, 1998, which failure shall continue for a period of
five days subsequent to receipt by the Borrower of written notice thereof."
3. REPRESENTATIONS AND WARRANTIES.
------------------------------
-3-
<PAGE>
3.1 Except for the representations and warranties set forth in
Sections 7.4, 7.7, 7.8, 7.9, 7.13, 7.15 and 7.16 the Borrower restates the
representations and warranties set forth in Section 7 of the Loan Agreement as
if such representations and warranties were set forth in full herein, provided,
however that every reference in such representations and warranties to the term
"Documents" shall be deemed to include this Amendment and the New Note, the
Consolidated Note, the Amended Note and the Assignment Agreement (collectively,
the "Loan Document Amendments").
3.2 On and as of the date hereof, the Borrower represents and
warrants as follows:
(a) Except as set forth on Attachment A hereto, and as further
described in the opinion of Borrower's counsel delivered pursuant to Section 4
(g) hereof, there is no litigation currently pending or expected against the
Borrower before any court or administrative agency which may have a materially
adverse effect on the assets, business, financial condition or operations of the
Borrower or which would or do prevent or hinder the performance by the Borrower
of its obligations under the Documents.
(b) The Lender's Security Interest in and to the Aircraft, is duly
perfected and properly preserved and perfected and continues to constitute a
first priority security interest in and to the Aircraft, in accordance with
applicable laws and regulations.
(c) The Borrower (i) owns and holds good and marketable title to each
Aircraft and each Engine, free and clear of all liens, security interest,
charges, claims and encumbrances of whatsoever nature (other than the Security
Interest granted and conveyed to the Lender by the Mortgage and herein) and (ii)
will defend title to each Aircraft and each Engine against the claims and
demands of all parties.
(d) There is no further registration, recording or filing with
respect to the Aircraft or the Engines necessary or advisable in order to
continue the Borrower's title thereto nor to continue the perfection of the
Security Interest in favor of the Lender in and to the Aircraft or the Engines,
other than the filing of the Mortgage Amendments and the Uniform Commercial Code
financing statements.
(e) Borrower has furnished to Lender financial statements unaudited
on an interim basis and related financial information as of June 30, 1998,
prepared by
-4-
<PAGE>
Borrower in accordance with generally accepted accounting principles for interim
financial information (the "Financial Statements"). Such Financial Statements
(including notes thereto) fully and fairly present the financial condition of
Borrower as of the dates of the balance sheets contained therein, and the
results of its operations for the periods then ended all in conformity with GAAP
on a basis consistent with that of financial statements for corresponding prior
periods. Except as disclosed therein, Borrower has no material contingent
liabilities (including liabilities for taxes). Since June 30, 1998, there has
been no material adverse change in the business, operations or financial
condition of Borrower.
(f) The reports as to the status and condition of the Aircraft Engines
and the Engines have been true and accurate in all material respects.
4. CONDITIONS PRECEDENT
--------------------
4.1 Notwithstanding anything contained in this Amendment or the other
Loan Document Amendments to the contrary, the obligation of the Lender to grant
the principal deferral requested by the Borrower and to extend the repayment
term in respect of the Consolidated Note and the Amended Note, as defined below,
is expressly contingent on the fulfillment and/or satisfaction in the sole
discretion of the Lender of the following conditions precedent and the receipt
by the Lender (in form and substance satisfactory to the Lender) of such
documents and instruments, if any, therein required or deemed necessary by the
Lender to evidence the fulfillment and/or satisfaction of said conditions
precedent:
(a) The Borrower and the Lender have executed and delivered this
Amendment or have caused the same to be done;
(b) The Borrower has executed and delivered to the Lender the
Amended and Restated Promissory Note dated August 13, 1998 in the principal
amount of $ 4,033,293.63 (the "New Note"), the Consolidated, Amended and
Restated Promissory Note dated August 13, 1998 in the principal amount of
$41,351,030.82 (the "Consolidated Note"), and the Amended and Restated
Promissory Note dated August 13, 1998, in the principal amount of $18,081,512.07
(the "Amended Note");
(c) The Borrower and the Lender have executed the Assignment
Agreement dated August 13, 1998 (the "Assignment Agreement").
(d) The Borrower has executed and delivered the precautionary
-5-
<PAGE>
UCC-1 filing required by the Assignment Agreement.
(e) The Borrower and the Lender have executed and delivered the
Second Amendment to Aircraft Loan and Security Agreement dated as of August 13,
1998, which amends the Loan Agreement [N616FF].
(f) The Lender has received a Certificate of Resolutions, certified
by the corporate secretary of the Borrower and setting forth a true, complete
and accurate copy of the resolutions approved by the Board of Directors of the
Borrower authorizing the entering into, execution and delivery of this Amendment
and the New Note, the Consolidated Note, the Amended Note, and the Assignment
Agreement by the Borrower thereunder;
(g) The Lender has received an Opinion of Counsel from the Borrower's
counsel in form and substance acceptable to the Lender;
(h) The Lender has received an Officer's Certificate setting forth
the following: (i) the name of each of the duly elected and acting officers of
the Borrower together with the title of the office each holds; (ii) the name and
title of each officer of the Borrower who is authorized by the Board of
Directors of the Borrower to enter into, execute and deliver the Documents on
behalf of the Borrower and a specimen signature of each of said officers, (iii)
a certified copy of a current Certificate of Good Standing of the Borrower
certified by the Secretary of State of the State of Delaware and (iv) a
representation that there have been no changes in the Borrower's Articles of
Incorporation and By-Laws since the Fifth Amendment to the Loan Agreement.
(k) Such other agreements, certificates instruments or legal opinions
in writing as shall be deemed by the Lender or its counsel reasonably necessary
or desirable in order to more fully and completely service, protect, perfect or
preserve the Lender's Security Interests and other interests in and to the
Aircraft, and otherwise under the Documents and the Mortgage.
5. ACKNOWLEDGMENTS AND CONFIRMATIONS.
---------------------------------
5.1 All references in the Loan Agreement and every other agreement,
instrument and document executed and delivered by the Borrower in connection
therewith, to the "Loan Agreement" shall be deemed to refer to the Loan
Agreement as
-6-
<PAGE>
amended hereby.
5.2 The Loan Agreement and all agreements, instruments and documents
executed and delivered in connection with any of the foregoing, shall each be
deemed amended hereby to the extent necessary, if any, to give effect to the
provisions of this Amendment.
6. MISCELLANEOUS.
-------------
6.1 The Borrower will upon receipt of invoices by the Lender or
upon the Lender's demand, pay to or reimburse the Lender for all reasonable out-
of-pocket expenses of the Lender incurred in connection with the negotiation,
execution and delivery of this Amendment and each of the other Loan Document
Amendments contemplated hereby, including, without limitation, all reasonable
legal fees and disbursements of the Lender's counsel incurred in connection with
all professional services rendered and disbursements incurred by said lawyers
with respect thereto.
6.2 Except as specifically amended hereby, the Loan Agreement shall
remain in full force and effect in accordance with its terms, and each of the
Borrower and the Lender hereby ratify and affirm all of the terms and conditions
of the Loan Agreement as amended hereby.
6.3 THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ARIZONA.
6.4 This Amendment shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns. The
rights and obligations of the Borrower under this Amendment shall not be
assigned or delegated without the prior written consent of the Lender, and any
purported assignment or delegation without such consent shall be void.
6.5 Time is of the essence with respect to the terms and provisions
of this Amendment.
6.6 This Amendment may be executed in any number of counterparts,
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same Amendment.
-7-
<PAGE>
[ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment
to Consolidated, Amended and Restated Aircraft and Engine Loan and Security
Agreement as of the day and year first above written.
TOWER AIR, INC.
-8-
<PAGE>
By /s/ M.K. Nachtomi
------------------------------------------
Title Chairman, President & CEO
Tax ID No.: 11-262-1046
FINOVA CAPITAL CORPORATION
By /s/ Don A. Luttenegger
------------------------------------------
Title Division VP
-9-
<PAGE>
Exhibit 10(38)
--------------
SEVENTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Seventh Amendment to that certain Amended and Restated Loan and
Security Agreement ("AMENDMENT") is entered into this 27/th/ day of August 1998
by and between Tower Air, Inc. ("BORROWER"), the financial institutions listed
on the signature pages thereof (collectively, "LENDERS") and Heller Financial,
Inc., (in its individual capacity, "Heller"), for itself as a Lender and as
Agent ("AGENT").
WHEREAS, Agent, Lenders and Borrower are parties to a certain Amended and
Restated Loan and Security Agreement, dated September 1, 1997 and all amendments
thereto (the "AGREEMENT"); and
WHEREAS, the parties desire to further amend the Agreement as hereinafter
set forth;
NOW THEREFORE, in consideration of the mutual conditions and agreements set
forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment, unless
------------
otherwise defined herein, shall have the meaning ascribed to such term
in the Agreement.
2. AMENDMENTS. Subject to the conditions set forth below, the Agreement
----------
is amended as follows:
Section 6 is amended by deleting subsection 6.1 in its entirety,
effective as of July 31, 1998, and inserting the following in lieu
thereof;
6.1 Tangible Net Worth. Borrower shall maintain Tangible
-------------------
Net Worth equal to at least the amounts indicated for each
month during the periods set forth below:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
July 1998 $44,500,000
August 1998 - March 1999 $45,000,000
April 1999 - May 1999 $50,000,000
</TABLE>
3. CONDITIONS. The effectiveness of this Amendment is subject to the
----------
following conditions precedent (unless specifically waived in writing
by Agent):
<PAGE>
(a) Borrower shall have executed and delivered such other
documents and instruments as Agent may require;
(b) All proceedings taken in connection with the
transactions contemplated by this Amendment and all
documents, instruments and other legal matters incident
thereto shall be satisfactory to Agent and its legal
counsel;
(c) No Default or Event of Default shall be in existence.
4. CORPORATE ACTION. The execution, delivery, and performance of this
----------------
Amendment has been duly authorized by all requisite corporate action
on the part of Borrower and this Amendment has been duly executed and
delivered by Borrower.
5. SEVERABILITY. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or
unenforceable.
6. REFERENCES. Any reference to the Agreement contained in any document,
----------
instrument or agreement executed in connection with the Agreement,
shall be deemed to be a reference to the Agreement as modified by this
Amendment.
7. COUNTERPARTS. This Amendment may be executed in one or more
------------
counterparts, each of which shall constitute an original, but all of
which taken together shall be one and the same instrument
8. RATIFICATION. The terms and provisions set forth in this Amendment
------------
shall modify and supersede all inconsistent terms and provisions of
the Agreement, and shall not be deemed to be a consent to the
modification or waiver of any other term or condition of the
Agreement. Except as expressly modified and superseded by the
Amendment, the terms and provisions of the Agreement are ratified and
confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
HELLER FINANCIAL, INC. TOWER AIR, INC.
By: /s/Anthony Vizgirda By: /s/ Morris K. Nachtomi
- ------------------------------------ --------------------------------------
Title: Vice President Title: Chairman, President & CEO
- ------------------------------------ --------------------------------------
<PAGE>
EXHIBIT 10.39
TOWER CONTRACT
FINISHED DRAFT
COMPLETED: 1ST OCTOBER 1996
[LOGO OF AIRCRAFT ENGINES]
GE Aircraft Engines Proprietary Information
<PAGE>
AGREEMENT NUMBER GEAES-TOW-201-001
BETWEEN
GE AIRCRAFT ENGINE SERVICES LIMITED
AND
TOWER AIR INC.
INDEX
MAIN AGREEMENT
CLAUSE 1 SCOPE AND DEFINED TERMS
CLAUSE 2 PERIOD OF THE AGREEMENT
CLAUSE 3 SERVICES AND CHARGES
CLAUSE 4 OTHER CONDITIONS
CLAUSE 5 NOTICES
ANNEXES TO THE MAIN AGREEMENT:
A. CHECKING LISTS
B. LIST OF UNITS WITH PRICES AND TURNROUND, TIMES COVERED BY THIS AGREEMENT
C. MODIFICATION CATEGORIES
D. BASIC MINIMUM MODIFICATION STANDARD
E. STATUS OF WORK IN PROGRESS
F. NOTIFICATION OF HIGH COST WORK
G. CONCESSIONS
H. ENGINE HEALTH CHECK LIST
I. MUTUALLY AGREED WORKSCOPE FOR REFURBISHMENT AND CONVERSION TO -7J
SPECIFICATION
COPIES AND SIGNATURES
SCHEDULE OF STANDARD CONDITIONS
CLAUSE 1 CONFIDENTIALITY AND ASSIGNMENT
CLAUSE 2 DEFINITIONS
CLAUSE 3 DOCUMENTS AND PROCEDURES
CLAUSE 4 MODIFICATIONS
CLAUSE 5 TECHNICAL LIAISON
CLAUSE 6 STANDARDS
CLAUSE 7 TRANSPORTATION REQUIREMENTS
CLAUSE 8 TURNROUND TIMES
CLAUSE 9 POOLING
CLAUSE 10 CUSTODY CONTROL AND TITLE TRANSFER
CLAUSE 11 SELLER AND BUYER WARRANTIES
CLAUSE 12 SELLER'S INTELLECTUAL PROPERTY WARRANTY
CLAUSE 13 MANUFACTURER'S WARRANTY
CLAUSE 14 TERMS OF PAYMENT
CLAUSE 15 CHARGE VARIATION
CLAUSE 16 INDEMNITY AND LIABILITY
CLAUSE 17 FORCE MAJEURE
CLAUSE 18 TERMINATION
CLAUSE 19 NON WAIVER
CLAUSE 20 ALTERATIONS AND AMENDMENTS TO AGREEMENT
CLAUSE 21 APPLICABLE LAW, INVALIDITY AND RESTRICTIVE TRADE PRACTICES ACT
CLAUSE 22 ENTIRE AGREEMENT
DATED: September, 1996
<PAGE>
AGREEMENT NUMBER GEAES-TOW-201-001
----------------------------------
MAIN AGREEMENT
This Agreement is made this 30th day of September one thousand nine hundred and
ninety-six.
between
GE Aircraft Engine Services Limited, (a wholly owned subsidiary of International
General Electric (U.S.A.) Limited) whose registered office is situated at
Caerphilly Road, Nantgarw, Cardiff, South Glamorgan, CF4 7YJ, United Kingdom
(hereinafter referred to as "the Seller") of the one part.
and
Tower Air, Inc., whose registered office is situated at Hangar 17, JFK
International Airport, Jamaica, New York 11430, U.S.A. (hereinafter referred to
as "the Buyer" of the other part.)
Whereas
The Buyer wishes to contract and the Seller agrees to perform, in accordance
with the terms and conditions of this Agreement, engineering maintenance
Services in relation to Pratt & Whitney JT9D -7A and -7J Engines for
refurbishment and where required conversion to -7J specification removes as
defective or time expires from Boeing 747 aircraft, or used as spare engines for
such aircraft, owned or operated by the Buyer, (hereinafter referred to as
"Units")
Now it is hereby agreed as follows
<PAGE>
CLAUSE 1 - SCOPE AND DEFINED TERMS
- ----------------------------------
The Seller shall provide the Buyer with the Services and the Buyer shall accept
and pay for the Services as set out and subject to the terms and conditions of
the Main Agreement and the Standard Conditions more particularly referred to in
the Schedule hereto. Any defined terms used in the Agreement shall be
interpreted as defined in the Schedule.
CLAUSE 2 - PERIOD OF THE AGREEMENT
- ----------------------------------
Buyer agrees to use Seller as its exclusive provider of all engineering
maintenance Services in relation to the Units. This exclusive Agreement shall
become effective from the date of execution by both parties hereto and shall,
notwithstanding Clause 18.2 of the Schedule of Conditions, remain in full force
for a period of 5 years from the date of this agreement. For clarification,
during such 5-year period, Buyer shall not have the right to terminate this
Agreement pursuant to Clause 18.2 of the Schedule of Conditions. Seller retains
its rights of termination under Clause 18.2.
<PAGE>
CLAUSE 3 - SERVICES AND CHARGES
- -------------------------------
The Seller shall carry out, or cause to be carried out by an approved
organisation, the Services defined in Column A below, and the Buyer shall pay
the charges defined in Column B in respect of the Services defined in Column A.
The seller shall maintain FAA repair station approval for the duration of this
agreement.
<TABLE>
<CAPTION>
COLUMN A COLUMN B
<S> <C>
3.1 The arrangements for the collection Charges inclusive in Firm Fixed
and transportation of each Unit from prices set forth in Annex B of this
Buyer at JFK Airport at New York U.S.A. to Agreement.
the Seller's facilities.
3.2 The provision of labour at the Seller's Charges inclusive in Firm Fixed prices
facilities, for the unpacking, deblanking, set forth in Annex B of this Agreement.
receipt inspection and completion of the
Checking List, a copy of which is at
Annex A for each Unit.
3.3 To the extent that it is reasonably available, Charges inclusive in Firm Fixed prices
the provision of loan Accessories or Parts. set forth in Annex B of this Agreement.
to replace such items found missing or
damaged on receipt to enable each Unit to be
tested. The Seller will, prior to returning
each Unit to the Buyer, remove and re-inspect
such loan Accessories or Parts, and endorse
any relevant documents accordingly.
3.4 The provision of labour at the Seller's Charges inclusive in Firm Fixed prices
facilities to complete the engine health set forth in Annex B of this Agreement.
checks identified at Annex H.
3.5 To the extent that it is reasonably available, Charges inclusive in Firm Fixed prices
the provision of test bed availability at the set forth in Annex B of this agreement.
Seller's facilities, to complete a preinduction
test bed run of each Unit following its receipt
at the Seller's facilities.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.6 The provision of fuel and oil for all test Charges inclusive in Firm Fixed prices
bed runs. set forth in Annex B of this Agreement.
3.7 The provision of labour at the Seller's Charges inclusive in Firm Fixed prices
facilities, for the strip, overhaul, set forth in Annex B of this Agreement.
Refurbishment, Repair, modification,
calibration, inspection, reassembly and
other work, as required and as necessary
to restore any of the Units, listed in
Annex B, to a serviceable condition in
conformity with the approved data and or
standards, as laid down from time to time
by the FAA and/or other applicable
regulatory agency and the Buyer, and in
the turnaround time defined in Annex B.
3.8 Sub-contracted work in support of the Charges inclusive in Firm Fixed prices
Services defined in Main Agreement set forth in Annex B of this Agreement.
Clause 3.7.
3.9 The provision of Pooled Parts to facilitate Charges inclusive in Firm Fixed prices
the Services. set forth in Annex B of this Agreement.
3.10 The provision of test bed availability at Charges inclusive in Firm Fixed prices
the Seller's facilities, to complete a test set forth in Annex B of this Agreement.
bed run, of each Unit, on completion of the
Services defined in Main Agreement Clause 3.7.
3.11 The handling where practicable and where the
Buyer and the manufacturer allow
of manufacturer's warranties on behalf of the
Buyer, as follows:
</TABLE>
<PAGE>
3.11.1 The taking of action with the Charges inclusive in
manufacturer in respect of any Firm Fixed prices
warranties, to which the Buyer set forth in Annex B
is entitled within the limitations of this Agreement.
expressed in such warranties and in
accordance with their governing
conditions.
3.11.2 The preparation of such warranty Charges inclusive in
claims in the required form and, Firm Fixed prices
where applicable, on the set forth in Annex B
appropriate documentation. of this Agreement.
3.11.3 The assignment to the Buyer Charges inclusive in
of the benefit of any warranties Firm Fixed prices
or indemnities obtained by the set forth in Annex B
Seller from manufacturers of this Agreement.
(where permitted) in respect of
Parts and materials purchased by
the Seller and used in the
performance of the Services.
3.12 The provision of labour at the Seller's Charges inclusive in
facilities, for the blanking, packing and Firm Fixed prices
despatch inspection of each Unit, and set forth in Annex B
the completion of the Checking List of this Agreement.
for each Unit, a copy of which is at
Annex A.
3.13 The transportation and Redelivery Charges inclusive in
of each Unit from the Seller's Firm Fixed prices
facilities to Buyer at JFK International set forth in Annex B
Airport at New York. U.S.A. in of this Agreement.
accordance with the provisions of Clause
4.9 below.
3.14 Despatch to the Buyer of the following Charges inclusive in
documents after collection of the Unit by Firm Fixed prices
the Buyer. set forth in Annex B
of this Agreement.
3.14.1 Preliminary and final invoices
including sub-contractors
charges for the Services.
<PAGE>
3.14.2 Authorised FAA Release Certificate.
3.14.3 Serviceable Label.
3.14.4 Engineering Report.
3.14.5 Accessory Log Sheet.
3.14.6 Engine Inspection and Test Certificate.
3.14.7 Modification statement.
3.14.8 Life Limited Parts List, including a list of those
individual Life Limited Parts replaced.
3.14.9 Log Book.
Items 3.14.2, 3.14.3, 3.14.6 and 3.14.9 shall be despatched
with the engine and/or within 72 hours of despatch of the
Unit as appropriate, and the remainder within 30 days.
Seller shall additionally forward microfilm copy and
originals of "dirty finger print" shop documentation within
90 days of despatch of engine.
<TABLE>
<S> <C>
3.15 The provision of advice about modifications. Charges inclusive in Firm Fixed prices
set forth in Annex B of this Agreement.
3.16 At the request of the Buyer, the provision of Charges inclusive in Firm Fixed prices
qualified specialist support to resolve set forth in Annex B of this Agreement.
technical problems associated with the
provision of the Services.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.17 The presentation to the Local Charges inclusive in Firm Fixed prices
Representative. of invoices, prior set forth in Annex B of this Agreement
to submission to the Buyer, to
enable the local Representative
to validate such invoices.
3.18 The provision on both a regular Charges inclusive in Firm Fixed prices
and an ad hoc basis, to the Buyer, set forth in Annex B of this Agreement.
of reports about the status of work
in progress. Such advice will be
forwarded to the Buyer in a standard
form a copy of which is at Annex E.
3.19 The provision to the Buyer, in the Charges inclusive in Firm Fixed prices
event of termination of this Agreement, set forth in Annex B of this Agreement.
of all relevant technical records and
data relating to the Units at the date
of termination, and upon the reasonable
demand of the Buyer for additional
information related to work carried out
an any Units by the Seller during the
period such Units were under its control.
3.20 With the exception of those excluded At the manufacturer's catalogue price,
items listed in Clause 3.21 below, the current at the time of issue to the Unit,
provision of materials, Parts and or at 75 percent of the manufacturer's
modification kits, by the Seller to complete catalogue price in the case of Used
the Services defined in Main Agreement Serviceable Parts, consistent with the
Clause 3.7. agreed technical specification. In
addition, where the Seller purchases a
new - 7J modification kit and where
the Buyer submits the removed -7A
Parts to the manufacturer in order to
generate a price discount on that Kit
and where a discount results, then
such discount shall be passed on to
the Buyer. In addition. Used
Serviceable Life Limited Parts shall be
charged at the cost incurred by the
Seller.
</TABLE>
<PAGE>
3.21 The provison of the following At the manufacturer's catalogue
materials and Parts by the price current at the time of
Seller to complete the Services issue to the Unit or in the
defined in Main Agreement case of Used Serviceable Parts,
Clause 3.7: then at the percentage of the
manufacturers catalogue price
set forth below:
3.21.1 Diffuser Case. 35 percent
3.21.2 Exhaust Case. 35 percent
3.21.3 Low Pressure Turbine Case. 35 percent
3.21.4 Intermediate Case. 35 percent
3.21.5 1 Degree Fixed Stator. 60 percent
3.21.6 Fan Exit Case. 35 percent
3.21.7 Exhaust Plug. 35 percent
3.22 The handling of the inclusive list A fee of 9 percent of the
of Parts defined in Main Agreement manufacturer's catalogue price
Clause 3.21 provided F.O.C. by the current at the time of issue
Buyer to the Seller for the sole to the Unit. The maximum fee
reason of inability of the Seller per Part shall be $4500 US.
to match the substantiated purchase
price obtainable by the Buyer.
3.23 The provision of labour at the Seller's As set forth in the Seller's
facilities, to Repair Parts which current JT9D component repair
are subsequently returned to the catalogue. Work not listed in
Buyers Stock Holding. the Sellers current JT9D
component repair catalogue
shall be charged at $46.50 US
per booked manhour.
3.24 The storage, to a reasonable level,
of the Buyers property in a Buyer's
Stock Holding.
<PAGE>
3.25 The provision of office accommodation, All costs incurred by the
including the use of telephone, telex Seller (except fixed overhead
and facsimile services necessary for costs).
the performance of the Agreement, for
the Local Representative.
3.26 The provision of labour at the Seller's $46.50 US per booked manhour.
facilities, to rectify damaged Unit
transportation equipment.
3.27 The provision of materials and Parts At the manufacturer's
by the Seller to complete the Repairs catalogue price, current at
defined in Main Agreement Clause 3.26. the time of issue to the
equipment, plus 9 percent of
that price. The maximum fee
per Part or set of Parts
shall be $1500 US.
3.28 Upon the Buyer's request, and to the $720 US per 8 hour man day
extent that it is reasonably available, or part thereof plus the cost
the provision of technical assistance to the Seller of
in the form of working parties at any transportation, accommodation,
location requested by the Buyer. meals, laundry and allowances
paid to the working party
members in accordance with
the Seller's Staff
regulations.
3.29 Subject to Buyer's prior approval and $93.00 US per booked manhour.
where Seller is reasonable able to do so,
the design and development of approved
repair schemes and modifications for the
Units.
3.30 At the Buyer's request only, overtime At an additional charge of
working as follows: $46.50 US per booked manhour.
3.31 The handling of the Buyer's scrap
material in the following manner:
3.31.1 The storage, for up to 30 days Charges inclusive in Firm
after the return of the Unit Fixed prices set forth in
to the Buyer, of all scrapped Annex B of this Agreement.
Parts or sets of Parts whose
latest catalogue replacement
price exceeds $10.000 US
<PAGE>
Dollars. The Seller may, upon
expiry of this period, dispose
of such Parts or sets of Parts
without further reference to the
Buyer. The Buyer's account will
be credited with any proceeds
forthcoming from any disposal.
3.31.2 At the Buyer's request, the All costs incurred by the
return of any scrapped Parts or Seller.
sets of Parts to OWS for onward
shipment to a destination of the
Buyer's choice. All necessary
export documentation will be
prepared by a handling agent
appointed by the Buyer.
3.31.3 The packing, and preparation for All costs incurred by the
shipment, of all scrapped Parts or Seller.
sets of Parts for return to the
Buyer in accordance with Main
Agreement Clause 3.31.2
3.32 The arrangements, in the event of All costs incurred by the
termination of this Agreement, for the Seller.
return to the Buyer of all material held
in the Buyer's Stock Holding.
3.33 The handling of the following inclusive Charges inclusive in Firm
list of Parts provided FOC by the Buyer, Fixed prices set forth in
to the Seller to complete the Services Annex B of this Agreement.
defined in Main Agreement Clause 3.7:
3.33.1 Fan hub.
3.33.2 1 Degree Fixed Stator.
3.34 The provision of labour at the Seller's As set forth in the Seller's
facilities to Repair Parts, pursuant to then current JT9D component
repair catalogue.
<PAGE>
CLAUSE 4 - OTHER CONDITIONS
- ---------------------------
4.1 The labour charges detailed in Main Agreement Clause 3 shall apply to Units
inducted by the Seller before 1st January 1997.
Any increases in charges for work on Units inducted after this date shall
be notified in the manner specified in Schedule Caluse 15. Such increases
shall be effective on 1st January each year and shall only apply to Units
inducted after that date.
The then current Firm Fixed price as set forth in Annex B will be increased
by the effective escalation to actual labour costs incurred by the Seller.
Such escalaton shall apply to all Firm Fixed Prices.
Any increases in then current labour charges quoted in Main Agreement
Clause 3 and 4.4 will be increased by the effective escalation to actual
labour costs incurred by the Seller.
Any increases in then current maximum material handling fees quoted in Main
Agreement Clause 3 will be increased by the effective escalation in the
manufacturer's catalogue price.
4.2 Clause 8.2 of the Schedule of Standard Conditions shall be replaced by:
The Turnround Time referred to in Annex B will commence at the mutually
agreed Unit induction date of the date when all the doucumetation defined
in Schedule Clause 3.2 except 3.2.3.3 has been received by the Seller or
the date when the Unit is received at the Seller's facility in Wales,
whichever is the latest. The Turnround Time shall be deemed to end when the
same Unit is available for despatch from the Seller's facility in Wales.
4.3 If the Seller fails to meet, for a Unit the turnround time defined at Annex
B, for reasons other than those caused by the Buyer and/or its Affiliates
or for reasons beyond the control of the Seller, and, as a result, one of
the Buyer's aircraft is AOG, the Buyer shall use its best endeavors to
maintain the aircraft in operation by the use of any other available
Buyer's Unit. If the Buyer concludes that it requires to lease, or continue
to lease a replacement Unit, the Seller will lease such replacement Unit at
the Seller's expense, or at its option, reimburse the lump sum or periodic
charge for a period ending no later than the date of Redelivery of the
subject Buyer's Unit to Seller's designated carrier at JFK International
Airport, New York, U.S.A. Where the terms of such lease provide, in
addition to a lump sum and or periodic charge, for a flying hour or cyclic
charge such flying hour or cyclic charge shall be invoiced to the Buyer by
the Seller. The Seller will use best endeavours to provide lease Units to
Seller's designated carrier at JFK International Airport, New York, U.S.A
within 72 hours of request by the Buyer. In the event that the actual
turnround time is less than that defined at Annex B, the Buyer will pay the
Seller $500 US per day for each day that the actual Turnround plus
transportation time is less than the turnround time defined at Annex B.
4.4 All Units input for Repair hereunder shall be processed in accordance with
requirements as specified in
<PAGE>
Buyer's Purchase Order or amendment thereto. Should Seller determine
that Buyer's requirements are inadequate to comply with the
maintenance specification and Repair of Buyer's Units to those
requirements is likely to result in a test bed reject. Seller will
provide Buyer with a recommended workscope amendment. Should Buyer
reject Seller's recommendation, Buyer will be invoiced following a
test bed reject, an additional charge of $20,000 US per module removed
and/or reworked for the subsequent rework and retest of the affected
Units.
4.5 The Firm Fixed prices set forth in Annex B of this Agreement are based
upon the mutually agreed workscope detailed in Annex 1 of this
Agreement. These Firm Fixed prices exclude charges for the Repair or
replacement of those Parts where it has been determined to Seller's
reasonable satisfaction that such Parts require repair or replacement
for, or as a result of:
4.5.1 An accident.
4.5.2 Foreign Object Damage which is the primary cause of an
engine removal.
4.5.3 The incorporation of Service Bulletins not recommended by
the Seller.
4.5.4 Airworthiness Directives or other Mandatory Requirements
issued subsequent to the date of execution of this
Agreement.
4.5.5 Damage from a Military or Terrorist action.
4.5.6 An act of God.
4.5.7 Improper or negligent installation, operation or maintenance
of Buyer's Units.
4.5.8 Experimental test applied to the Units, unless performed by
the Seller.
4.5.9 Use of Parts, components or modules which have previously
had repairs applied which do not conform with the
Manufacturer's Overhaul Manual.
4.6 The Firm Fixed prices quoted in Annex B are based upon receipt by
Seller of a full Powerplant excluding the following items:
4.6.1 Nosecowl and its associated components.
4.6.2 Constant Speed Drive.
4.6.3 A.C. Generator.
4.6.4 Hydraulic Pump.
4.6.5 Thrust Reverser Pneumatic Drive Unit.
4.7 Security
4.7.1 Possessory Lien Under UK Law
In the event that (i) the Buyer fails to pay any sum due to
the Seller including interest on past duet amount, under
this Agreement on the due date (the "Indebtedness") or any
sum due to FINOVA Capital Corporation under any financing
arrangement including interest thereunder on the due date or
any sum due to any lien or security interest holder on the
Units or (ii) shall become insolvent or generally fail to
pay, or admit in writing its inability to pay debts as they
become due or (iii) the Buyer shall apply for, consent to,
or acquiesce in the appointment of a
<PAGE>
trustee, receiver, sequestrator or other custodian for Buyer of
any property or Buyer or make a general assignment for the
benefit of creditors; or (iv) in the absence of such application
consent or acquiescence, a trustee, receiver, sequestrator or
other custodian shall be appointed for Buyer or for a substantial
part of the property of Buyer and not be discharged within 30
days; or (v) any bankruptcy, reorganization, debt arrangement, or
other cause or proceeding under any bankruptcy or insolvency law,
or any dissolution, winding up or liquidation proceeding, shall
be commenced in respect of Buyer and, if not commenced by Buyer,
shall result in the entry of an order for relief or shall remain
for 30 days undismissed; or (vi) the Buyer shall take any action
to authorize, or in furtherance of, any of the foregoing; any or
all of the foregoing an "Event of Default," then the Seller shall
----------------
have a lien on all Units in the possession of the Seller for all
monies and liabilities due, owing or incurred by the Buyer to the
Seller under this agreement. The Seller may at any time after
such lien has arisen give notice to the Buyer of its intention to
sell all or any of the Units and if all the monies and
liabilities due, owing or incurred by the Buyer to the Seller are
not paid or discharged in full within 28 days of the date of such
notice, the Seller shall be entitled without further notice to
the Buyer to sell or otherwise dispose of all or any of the
Units. The Seller shall be entitled to deduct from the proceeds
of sale all costs and expenses relating to the storage of the
Units and the sale or disposal thereof and the net proceeds of
sale shall be applied by the Seller in or towards satisfaction
and discharge of the monies and liabilities due, owing or
incurred by the Buyer to the Seller.
4.7.2 CONSENSUAL LIEN/SECURITY INTEREST UNDER US LAW
(a) In order to secure the full and punctual payment of the
Indebtedness. Buyer hereby pledges, assigns and grants to
Seller or its assignees a first priority security interest
in the Units inducted into Seller's facilities under this
Agreement and the proceeds and products thereof (the
"Collateral"). The security interests to and in favor of
----------
Seller herein created are called the "Security Interest".
-----------------
This Security Interest shall continue in full force and
effect until the Indebtedness has been fully paid. After
the, occurrence and during the continuance of an Event of
Default, if the proceeds from the sale of the Collateral are
not sufficient to satisfy all amounts due and owing to
Seller by Buyer, Buyer acknowledges and agrees that Buyer
shall continue to be liable for any amounts which remain
outstanding. Until the Indebtedness is satisfied in full,
Buyer shall not permit any lien, claim or encumbrance to
remain against any of the Collateral, except any lien
existing as of the date hereof to and in favor of FINOVA
Capital Corporation, a Delaware corporation, or any Lien for
taxes due but not yet payable. Buyer shall perform at Buyers
expense and prior to any work performed on the Units by
Seller, any and all steps required to perfect, maintain and
protect the Seller's Security Interest in the Collateral,
including without limitation executing and filing financing
and continuation statements and documents with FAA in the
form and substance satisfactory to the Seller. If any Event
of Default shall occur, the Seller shall have, in addition
to all
<PAGE>
other rights and remedies available at law and in
equity, the rights and remedies of a secured party
under the Uniform Commercial Code as codified in the
State of New York, U.S.A. Further, the Seller may,
without notice, demand or legal process of any due and
owing under this agreement and take physical possession
of the Collateral and the Seller may sell and deliver
any or all Collateral at public or private sales. In a
manner that the Seller deems reasonable. The Seller
shall be entitled to deduct from the proceeds of such
sales all costs and expenses relating to the storage of
the Units and the sale or disposal thereof and the net
proceeds of the sale shall be applied by the Seller
toward the satisfaction and discharge of the
Indebtedness. Because the Collateral could be difficult
to preserve and dispose of and is subject to complex
maintenance and management, the Seller shall have the
widest possible latitude to preserve and protect such
Collateral and the Seller's Security Interest therein,
including the appointment of a receiver to preserve,
possess and protect the Collateral. The Buyer will
provide evidence of Seller's first priority security
interest in such Units at the time of delivery of each
Unit as more fully described 4.8.3(a)
4.7.3 Attorney - In - Fact
Buyer hereby irrevocably constitutes and appoints
Seller or its assignees and any fact for the purpose of
carrying out, from time to time, in Seller or its
assignees' discretion, the terms of this Article, to
take any and all appropriate action and to execute any
and all documents and instruments which may be
necessary or desirable to accomplish the purposes of
this Article, and, without limiting the generality of
the foregoing, Buyer hereby gives Seller or its
assignees the power and right, on behalf of Buyer and
at Buyers expense, to do, at any time, or from time to
time, all acts and things which Seller or its assignees
deems necessary to protect its security interest and
rights herein including, but not limited to, the
execution on behalf of Buyer and the filing of this
Agreement or any other agreement, lien, financing
statement or notice required by applicable law in order
to perfect its security interest all as fully and
effectively as Buyer might do.
4.8 Clause 14.1 of the Schedule of Standard Conditions shall be replaced
with:
Payment Terms
-------------
4.8.1 For the first eight Units inducted into the Seller's facilities
for conversion to - 7J specification under this Agreement, the
Buyer will pay the Seller or its assignees the principal amount
of one twenty-fourth (1/24) of the conversion cost for each
such Unit and interest thereon, on the penultimate working day
of the month by wire transfer of immediately available funds
beginning in the month that the subject Unit is despatched by
the Seller. Interest on the principal amount owing for each
shop visit will begin accruing when such Unit is despatched by
the Seller and will accrue at the rate of US Prime as
established by Citicorp from time to time, plus two percent
until full payment is made for each Unit. In any event, for
such
<PAGE>
Units shop visit, all amounts, including principal and interest owed
by the Buyer shall be paid in full no later than 24 months after
such Unit was despatched by Seller.
4.8.2 For Units (other than the eight Units described in Clauses 4.8.1.)
inducted into Seller's facilities for refurbishment under this
agreement, the Seller will submit its charges to the Buyer for
payment, and Buyer shall pay such charges, within 60 days of the
date of despatching of the Unit to the Buyer.
4.8.3 As a condition precedent of Seller's extending the payment terms set
forth in Clauses 4.8.1 and 4.8.2, the following conditions must be
satisfied:
(a) The Buyer shall, at its sole cost and expense and prior to any
work performed by Seller on any Unit, deliver to Seller a
report of an independent title search company, reasonably
acceptable to Seller, showing that the Units inducted into the
Seller's facilities are free and clear of all liens, security
interests, encumbrances or claims or, in the alternative, if a
creditor has a lien, security interest, encumbrance or claim
against such Units. Buyer shall cause such creditor to
subordinate its rights pursuant to an intercreditor Agreement
in form and substance reasonably satisfactory to Seller.
(b) The Seller shall be satisfied in its sole and absolute
discretion that the fair market value of such Units is at
least equal to 150% times the amount expected to be due and
owing to Seller by Buyer under this agreement with respect to
the services performed on such Units.
(c) Buyer shall, at its sole cost and expense and prior to any
work performed by Seller on any Unit execute and file
documents reasonably requested by Seller containing sufficient
legal descriptions of such Units and otherwise in form and
substance necessary to perfect Seller's Security Interest in
such Units.
4.8.4 At Buyer's option, Buyer may request Seller to submit its charges to
the Buyer for payment and the Buyer shall pay such charges, within
30 days of the date of despatching of the Unit to the Buyer. In such
case, the conditions precedent set forth in clause 4.8.3 above are
not required to be met by Buyer if Buyer pays within 30 days of
despatch.
4.9 Clauses 7.1, 7.2, 10.1 and 16.1 of the Schedule of Standard Conditions
shall be replaced by the following:
<PAGE>
4.9.1 Buyer shall Deliver Unit(s) to Seller for Repair pursuant to
this Agreement Free Carrier (FCA) JFK International Airport,
Jamaica, New York, U.S.A (as defined by Incoterms 1990). In
conformance with Incoterms 1990, for purposes of this Clause
4.9 GEAES Ltd. is defined as the Seller and Tower is defined
as the Buyer. Title and risk of loss or damage shall pass to
Seller at time and place of Delivery.
4.9.2 Seller shall Redeliver said Unit(s) to Buyer, Delivered
Duties Unpaid ("DDU") JFK International Airport, Jamaica,
New York, U.S.A. (as defined by Incoterms 1990) utilising
the freight forwarder/carrier of its choice. For purposes of
this definition, GEAES Ltd. shall fulfill the obligations of
Seller; Tower shall fulfill the obligations of Buyer. Title
and risk of loss or damage shall pass to Buyer at time and
place of Redelivery.
4.9.3 Seller shall act as both Importer and Exporter of record for
the United Kingdom: Buyer shall act as both Importer and
Exporter of record for the U.S.A.
4.10 Clause 10.2 of the Schedule of Standard Conditions shall be replaced
by the following:
Parts, Material, labor and associated overhead incorporated into
Buyer's Units, as required in performing Services on Buyer's Units
hereunder, shall be deemed to have been sold to Buyer, and title to
such Parts and Services thereon shall pass to Buyer upon assignment
of such parts, materials, labor and associated overhead to Buyer's
Units. Risk of loss or damage to such parts and work thereon shall
pass to Buyer upon Redelivery to Buyer. Title to and risk of loss of
or damage to any Pooled Parts removed from Buyer's Units, which are
replaced by other Pooled Parts, shall pass to Seller upon removal of
such parts from Buyer's Units. Final acceptance of Repaired Units
shall take place upon Redelivery in accordance with the provisions of
Main Agreement Clause 4.9.2 above.
4.11 Seller shall provide Buyer with a list of vendors providing sub
contract services under this Agreement. Buyer shall grant prior
approval of the vendors, such approval shall not be unreasonably
withheld and shall be based solely on technical requirements. Should
Buyer decline to grant approval for one of Seller's vendors, then
Seller shall compensated for any additional costs incurred.
4.12 Clause 11.1 of the Schedule of Standard Conditions shall be replaced
by the following:
The Seller warrants that if, for any Unit, any defect, failure or
malfunction occurs which is proven to be due to faulty workmanship as
a result of the provision of the Services within 12 months of
Redelivery, or within 5 calendar months or within 2000 flying hours of
installation whichever occurs last, then the Seller shall Repair such
defect, failure or malfunction of that Unit without further charge.
If, during the Repair of that defect, failure or malfunction, any
betterment is included, then the Seller shall invoice the Buyer in
accordance with the terms of Main Agreement Clause 3.
4.13 Buyer and Seller shall agree an input schedule for the Units covered
by the Agreement. In the event
<PAGE>
that Seller is initially unable to meet such requirement, then Seller at
its option may either sub contract the Unit with prior approval by the
Buyer to a vendor to perform the Services under this Agreement or advise
Buyer to seek an alternative vendor for that particular Unit under a
separate agreement between Buyer and the alternative vendor.
4.14 Clause 3.2.3.3 of the Schedule of Standard Conditions shall be replaced by
the following:
Hours and cycles since new or last overhauled as applicable.
<PAGE>
CLAUSE 5 - NOTICES
- ------------------
5.1 All notices to be given hereunder by either party to the other shall
be by telex or facsimile, and confirmed in writing by registered or
recorded mail at the following locations:
GE AIRCRAFT ENGINE SERVICES LIMITED
-----------------------------------
Marketing Director
GE Aircraft Engine Services Limited
Caerphilly Road
Nantgarw
Cardiff
South Glamorgan
CF4 7YJ
United Kingdom
Telex: 498319
SITA: QUKBVBA
FAX: 44(0) 1443 847434
THE BUYER
---------
Chairman
Tower Air, Inc.
Hangar 17
JFK International Airport
Jamaica
New York 11430
U.S.A.
FAX: 718 553 4387
The effective date of any notice given in connection with this
Agreement shall be the date on which it is telexed or sent by
facsimile to the addressee.
<PAGE>
ANNEX A TO
----------
THE MAIN AGREEMENT
------------------
GEAES.TOW-201.001
-----------------
CHECKING LISTS
- --------------
The Checking Lists, referred to at Main Agreement Clauses 3.2 and 3.12 are
attached as Appendices to this Annex.
Appendices:
1. Checking list for JT9D engine
<PAGE>
GE AIRCRAFT ENGINE SERVICES LIMITED
<TABLE>
<CAPTION>
- ------------------------------------
OPERATOR ENGINE & P/P BOOKING IN LIST
- ------------------------------------
W.O.O No. N/R = NOT REQUIRED ENGINE & P/P BOOKING OUT LIST
- ------------------------------------
ENGINE No. N/R = NOT APPLICABLE
- ------------------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 1 OF 6
- -----------------------------------------------------------------------------------------------------------------------------
IPC REF. TYP PART. NO ALT PT No. DESCRIPTION IN REMARKS STAMP OUT REMARKS STAMP
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
24-09-09 AV11A11-41 AV11A1345 3 WAY SOLENOID VALVE
- -----------------------------------------------------------------------------------------------------------------------------
71-20-01 65B90355-3 FRONT CONE BOLTS
- -----------------------------------------------------------------------------------------------------------------------------
71-20-01 65B90355-5 REAR CONE BOLT & SUPPORT
- -----------------------------------------------------------------------------------------------------------------------------
72-31/1-200 676758 INLET CONE (SPINNER)
- -----------------------------------------------------------------------------------------------------------------------------
72-33/1-20 657350 VIB PICK UP & BRKT (FAN CASE)
- -----------------------------------------------------------------------------------------------------------------------------
72-41/10-3 657352 VIB PICK UP & BRKT (DIFFUSER CASE)
- -----------------------------------------------------------------------------------------------------------------------------
72-41/3-10 591317 HP AIR BLEED VALVE
- -----------------------------------------------------------------------------------------------------------------------------
72-53/1-1A 672282 FIRESEAL (4 PARTS)
- -----------------------------------------------------------------------------------------------------------------------------
72-53/1-17 657353 VIB PICK UP BRKT (EX CASE)
- -----------------------------------------------------------------------------------------------------------------------------
ENGINE DATA PLATE
- -----------------------------------------------------------------------------------------------------------------------------
72-61/4-1A 613769 PUMP, SCAVENGE, ANGLE GEARBOX
- -----------------------------------------------------------------------------------------------------------------------------
72-61/13-1A 755190 PUMP, MAIN OIL SCAVENGE
- -----------------------------------------------------------------------------------------------------------------------------
72-61/15-17 755217 PUMP, SCAVENGE No. 3 & 4 BRNG
- -----------------------------------------------------------------------------------------------------------------------------
72-61/12-1A 755184 PUMP, MAIN OIL PRESSURE
- -----------------------------------------------------------------------------------------------------------------------------
73-11/1-11B 589400 PUMP ASSY FUEL ENGINE DRIVEN
- -----------------------------------------------------------------------------------------------------------------------------
73-12/1-1A 743963 FUEL PRESSURE & DUMP VALVE
- -----------------------------------------------------------------------------------------------------------------------------
73-13/1-12 729455 FUEL NOZZLE & SUPPT ASSY (20)
- -----------------------------------------------------------------------------------------------------------------------------
73-14/1-2B 711659 646526 FUEL HEATER
- -----------------------------------------------------------------------------------------------------------------------------
73-14/1-2B A60302B FUEL FILTER DIFF PRES SWITCH
- -----------------------------------------------------------------------------------------------------------------------------
73-14/1-24 A76602K VALVE SOL, AIR S/O FUEL HEATER
- -----------------------------------------------------------------------------------------------------------------------------
73-21/1-6E 759100-1 744800-1 FUEL CONTROL UNIT
- -----------------------------------------------------------------------------------------------------------------------------
75-11/1/1A 2700100D VALVE ANTI-ICING, STATOR VANE
- -----------------------------------------------------------------------------------------------------------------------------
75-21/1-2D 769770 663189 VALVE BREATHER PRESSURIZING
- -----------------------------------------------------------------------------------------------------------------------------
75-31/4-6 747955-2 747955-2 EVC, REAR COMP STATOR
- -----------------------------------------------------------------------------------------------------------------------------
75-31/1-1 720001-4-6 ACTUATOR INT & COMP VANE (3.0 BLEED)
- -----------------------------------------------------------------------------------------------------------------------------
75-31/4-1 719999-1/-3 ACTUATOR REAR COMP VANE (EVC ACT)
- -----------------------------------------------------------------------------------------------------------------------------
75-31/2-3A 677415 VALVE, CYLINDER, BLEED ACT
- -----------------------------------------------------------------------------------------------------------------------------
75-31/15-1 711483 694927 CONTROL ASSY BLEED VALVE UPPER
- -----------------------------------------------------------------------------------------------------------------------------
ISSUE________________ DATE________________ CHECK "IN" SIG_________________ DATE_____________
CHECK "OUT" SIG________________ DATE_____________
</TABLE>
<PAGE>
GE AIRCRAFT ENGINE SERVICES LIMITED
<TABLE>
<CAPTION>
- -------------------------------------
OPERATOR ENGINE & P/P BOOKING IN LIST
- ------------------------------------- ENGINE & P/P BOOKING OUT LIST
W.O.O. No N/R = NOT REQUIRED
- -------------------------------------
ENGINE No. N/A = NOT APPLICABLE
- -------------------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 2 OF 6
- ------------------------------------------------------------------------------------------------------------------------------------
IPC REF. TYP PART NO. ALT PT No. DESCRIPTION IN REMARKS STAMP OUT REMARKS STAMP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
75-31/15-9 711.1S.1 691927 CONTROL ASSY BLEED VALVE LOWER
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/6-1 718702 FUEL FILTER/EVC
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/17-7A A39710K A39709 PRESSURE RATIO BLEED CONTROL VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/8-1 705942 BLEED CONVERTOR
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/1-9 A55201D SURGE DETECTOR CONTROL
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/11-1G 771169 RESTRICTOR PS4 TUBE
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/16-9 426V600B OVERIDE BLEED VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/16-14 449V450-1B 3 WAY VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/17-1 710070 AIR BLEED ACCUMULATOR
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/24-1A A2724133711 BLEED AIR SHUT OFF VALVE (2)
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/24-17 21SN01-89 PRESSURE SWITCH ASSY (2)
- ------------------------------------------------------------------------------------------------------------------------------------
77-21/1-10 THERMOCOUPLE (TT6)
- ------------------------------------------------------------------------------------------------------------------------------------
77-22/1-1 771442 THERMOCOUPLE BOX & CABLE TT6
- ------------------------------------------------------------------------------------------------------------------------------------
77-11/1-1 710.125 PT7 PROBES
- ------------------------------------------------------------------------------------------------------------------------------------
79-11/1-1F 733350 OIL TANK
- ------------------------------------------------------------------------------------------------------------------------------------
79-21/1-8 662492 OIL TANK DRAIN VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
79-21/1-41 684100E FLOW CONTROL THERMOSTAT OIL COOLER
- ------------------------------------------------------------------------------------------------------------------------------------
79-22/1-1 728973 729202 OIL COOLER
- ------------------------------------------------------------------------------------------------------------------------------------
82-21/1-8 715537 WATER INJECTION REGULATOR
- ------------------------------------------------------------------------------------------------------------------------------------
82-22/1-1B 696V300A WATER SIGNAL CHECK VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
705677 CSD QUAD CLAMP
- ------------------------------------------------------------------------------------------------------------------------------------
1584718-1 GEN QUAD CLAMP
- ------------------------------------------------------------------------------------------------------------------------------------
75-31/5-2A 666V100B 656468 BLEED VALVE (ALTAIR) 3.5 VALVE (x3)
- ------------------------------------------------------------------------------------------------------------------------------------
No. 4 BRNG CHIP DETECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
No. 3 BRNG CHIP DETECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & SCAVENGE PUMP CHIP DETECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
INTAKE BLANK
- ------------------------------------------------------------------------------------------------------------------------------------
EXHAUST UNIT BLANK
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ISSUE________ DATE_______ CHECK "IN" SIG_________ DATE___________
CHECK "OUT" SIG________ DATE___________
<PAGE>
GE AIRCRAFT ENGINE SERVICES LIMITED
<TABLE>
<CAPTION>
- ----------------------------------------------------
OPERATOR ENGINE & P/P BOOKING IN LIST
- ----------------------------------------------------
W.O.O. No. N/R = NOT REQUIRED ENGINE & P/P BOOKING OUT LIST
- ----------------------------------------------------
ENGINE No. N/A = NOT APPLICABLE
- ----------------------------------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 3 OF 6
- -------------------------------------------------------------------------------------------------------------------------------
IPC REF. TYP PART NO. ALT PT No. DESCRIPTION IN REMARKS STAMP OUT REMARKS STAMP
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STARTER ERECTION BLANK
- -------------------------------------------------------------------------------------------------------------------------------
HYDRAULIC BLANK
- -------------------------------------------------------------------------------------------------------------------------------
C.D.S. BLANK
- -------------------------------------------------------------------------------------------------------------------------------
GENERATOR BLANK
- -------------------------------------------------------------------------------------------------------------------------------
THRUST REVERSER ACTUATOR BLANK
- -------------------------------------------------------------------------------------------------------------------------------
FUEL MODULE BLANK
- -------------------------------------------------------------------------------------------------------------------------------
MODULES
- -------------------------------------------------------------------------------------------------------------------------------
G 72-31 FAN ROTOR
- -------------------------------------------------------------------------------------------------------------------------------
A 72-32 FRONT COMP ROTOR & STATOR ASSY
- -------------------------------------------------------------------------------------------------------------------------------
H 72-33 FAN CASE
- -------------------------------------------------------------------------------------------------------------------------------
J 72-34 INTERMEDIATE CASE
- -------------------------------------------------------------------------------------------------------------------------------
B 72-35 REAR COMP ROTOR & STATOR ASSY
- -------------------------------------------------------------------------------------------------------------------------------
K 71-11/1-11 DIFFUSER
- -------------------------------------------------------------------------------------------------------------------------------
V 72-11/12 COMBUSTION & 1ST STAGE N.G.V.'S
- -------------------------------------------------------------------------------------------------------------------------------
C 72-51 REAR COMP DRIVE TURBINE ASSY
- -------------------------------------------------------------------------------------------------------------------------------
D 72-52 FRONT COMP DRIVE TURBINE ASSY
- -------------------------------------------------------------------------------------------------------------------------------
L 72-56 TURBINE EXHAUST CASE
- -------------------------------------------------------------------------------------------------------------------------------
E 72-61/1-1 ANGLE GEARBOX
- -------------------------------------------------------------------------------------------------------------------------------
F 72-61/5-18 MAIN GEARBOX
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
AMS SPEC PART No. P/P DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------------------
71.11.030C 65B00722-1 NOSE COWL
- -------------------------------------------------------------------------------------------------------------------------------
78.32010C 65B00731-2 TURBINE T/R SLEEVE
- -------------------------------------------------------------------------------------------------------------------------------
65B97921-54 SWORD FAIRING
- -------------------------------------------------------------------------------------------------------------------------------
78.32040C 65B97800-37 EXHAUST PLUG/TAIL PLUG
- -------------------------------------------------------------------------------------------------------------------------------
SET OF ENGINE MOUNT BOLTS/NUTS
- -------------------------------------------------------------------------------------------------------------------------------
24.11.010C 7051170 CSD
- -------------------------------------------------------------------------------------------------------------------------------
24.21.010C 28B263-13A GENERATOR
- -------------------------------------------------------------------------------------------------------------------------------
ISSUE________ DATE_________ CHECK "IN" SIG__________ DATE_________
CHECK "OUT" SIG_________ DATE_________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GE AIRCRAFT ENGINE SERVICES LIMITED
_____________________________________________
OPERATOR ENGINE & P/P BOOKING IN LIST
- ---------------------------------------------
W.O.O. No. N/R = NOT REQUIRED ENGINE & P/P BOOKING OUT LIST
- ---------------------------------------------
ENGINE No. N/R = NOT APPLICABLE
- ---------------------------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 4 OF 6
- ------------------------------------------------------------------------------------------------------------------------------------
IPC REF. TYP PART. NO. ALT PT No. DESCRIPTION IN REMARKS STAMP OUT REMARKS STAMP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
29.11.010C 350880 65066-06 HYDRAULIC PUMP
- ------------------------------------------------------------------------------------------------------------------------------------
80.11.010C 740179-2 STARTER
- ------------------------------------------------------------------------------------------------------------------------------------
80.11.020C 726574 STARTER SOV
- ------------------------------------------------------------------------------------------------------------------------------------
21SN.11-1B STARTER SOV SWITCH
- ------------------------------------------------------------------------------------------------------------------------------------
78.31.010C 126136-3-2 AIR MOTOR/ACT. PNEU. DRIVE UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
1572T100-3 TALLY VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
77-11-00 3567909-0001 CDX TRANSMITTER (EPR BIAS)
- ------------------------------------------------------------------------------------------------------------------------------------
78.31.020C 898108-2-1 BLOCKER VALVE/REG. SHUT OFF VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
3BA-025-03 RAB SWITCH
- ------------------------------------------------------------------------------------------------------------------------------------
80-025-03 80-025-051 DIRECTIONAL CONTROL VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
78.034.020C R1409M9-1 LOCKOUT ACT/SEQ. MECHANISM
- ------------------------------------------------------------------------------------------------------------------------------------
65B96268-5/9 MIXING BOX
- ------------------------------------------------------------------------------------------------------------------------------------
71-04-25/75 3567403-3001 30A22-1 OIL PRESSURE T/X T422
- ------------------------------------------------------------------------------------------------------------------------------------
71-04-25/75 21SN04-19A/123 OIL PRESSURE SWITCH S142
- ------------------------------------------------------------------------------------------------------------------------------------
71-04-25/78 21SN04-20A OIL DIFF PRESS SWITCH S046
- ------------------------------------------------------------------------------------------------------------------------------------
71-04-25/75 3567407-0101 BREATHER PRESS T/X T426
- ------------------------------------------------------------------------------------------------------------------------------------
370600-4 H.S.V.B
- ------------------------------------------------------------------------------------------------------------------------------------
36.11.050C 73173-6 H.S.B. AIR CONTROL
- ------------------------------------------------------------------------------------------------------------------------------------
129296-1-1 PRESSURE ANTICIPATOR
- ------------------------------------------------------------------------------------------------------------------------------------
71-01-25/88 34402-2A22-1 FUEL PRESSURE SWITCH T494
- ------------------------------------------------------------------------------------------------------------------------------------
73.31.010C 9-112-03 649160 FUEL FLOW TRANSMITTER
- ------------------------------------------------------------------------------------------------------------------------------------
71-04-25/87 34402-123A22-1 FUEL PRESSURE TRANSMITTER T495
- ------------------------------------------------------------------------------------------------------------------------------------
43925 IGNITOR BOX (X2)
- ------------------------------------------------------------------------------------------------------------------------------------
189100 PRE COOLER
- ------------------------------------------------------------------------------------------------------------------------------------
36.12.040C 65B91278-2 (1) UPPER/LOWER OUTFLOW VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
36.11.010C 1BA11215 100670A1 CHECK VALVE/VALVE INTER BLEED
- ------------------------------------------------------------------------------------------------------------------------------------
36.11.020C 224685 PRESSURE RELIEF VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUE____________________ DATE__________________ CHECK "IN" SIG_____________ DATE_____________
CHECK "OUT" SIG____________ DATE_____________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GE AIRCRAFT ENGINE SERVICES LIMITED
_____________________________________________
OPERATOR ENGINE & P/P BOOKING IN LIST
- ---------------------------------------------
W.O.O. No. N/R = NOT REQUIRED ENGINE & P/P BOOKING OUT LIST
- ---------------------------------------------
ENGINE No. N/R = NOT APPLICABLE
- ---------------------------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 5 OF 6
- ------------------------------------------------------------------------------------------------------------------------------------
IPC REF. TYP PART. NO. ALT PT No. DESCRIPTION IN REMARKS STAMP OUT REMARKS STAMP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65B96264-2 THROTTLE QUADRENT
- ------------------------------------------------------------------------------------------------------------------------------------
77.12.010C 7.12.137-2 N1 TACHO TRANSMITTER
- ------------------------------------------------------------------------------------------------------------------------------------
2CA19ADB9 472404 N2 TACHO TRANSMITTER
- ------------------------------------------------------------------------------------------------------------------------------------
78.31.050C 121421-1/3 SCREW JACK (X4)
- ------------------------------------------------------------------------------------------------------------------------------------
P??4??-2 OIL QTY PROBE/OIL QTY INDICATOR
- ------------------------------------------------------------------------------------------------------------------------------------
6303 630300-06 CONDITION MOTOR CONTROL MOTOR
- ------------------------------------------------------------------------------------------------------------------------------------
71.04.25 157460-4 CSD OIL COOLER
- ------------------------------------------------------------------------------------------------------------------------------------
26.11.77 51291-005 FIREWIRE ELEMENT-U.A.
- ------------------------------------------------------------------------------------------------------------------------------------
51291-003 FIREWIRE ELEMENT-U.F.
- ------------------------------------------------------------------------------------------------------------------------------------
51291-002 FIREWIRE ELEMENT-L.F.
- ------------------------------------------------------------------------------------------------------------------------------------
51291-006 FIREWIRE ELEMENT-L.A.
- ------------------------------------------------------------------------------------------------------------------------------------
78.32.51 651198206-2 CASCADE VANES
- ------------------------------------------------------------------------------------------------------------------------------------
1238T100-1 2330-1 3-WAY MANUAL VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
36-11-06-01 65393075-4 11.S.8. AIR CHECK VALVE
- ------------------------------------------------------------------------------------------------------------------------------------
STARTER MOUNTING PAD
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUE____________________ DATE__________________ CHECK "IN" SIG_____________ DATE_____________
CHECK "OUT" SIG____________ DATE_____________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GE AIRCRAFT ENGINE SERVICES LIMITED
<S> <C> <C>
- --------------------------
OPERATOR
- --------------------------
W.O.O. No. N/R = NOT REQUIRED ENGINE & P/P BOOKING IN LIST
- --------------------------
ENGINE No. N/A = NOT APPLICABLE ENGINE & P/P BOOKING OUT LIST
- --------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 6 OF 6
- -------------------------------------------------------------------------------------------------------------------------------
REMARKS - ITEMS NOT RECEIVED (NOT LISTED ON PREVIOUS SHEETS)
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
ISSUE--------------- DATE--------------- CHECK "IN" SIG----------- DATE-----------
CHECK "OUT" SIG---------- DATE-----------
</TABLE>
<PAGE>
GE AIRCRAFT ENGINE SERVICES LIMITED
<TABLE>
<CAPTION>
- ---------------------------------------------
OPERATOR POWER PLANT ELECTRICAL BOOKING IN LIST
- ---------------------------------------------
W.O.O. No. N/R = NOT REQUIRED POWER PLANT ELECTRICAL BOOKING OUT LIST
- ---------------------------------------------
ENGINE: No. N/A = NOT APPLICABLE
- ---------------------------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 1 OF 2
- ------------------------------------------------------------------------------------------------------------------------------------
IPC REF TYP PART NO. ALT PT No. DESCRIPTION IN REMARKS STAMP OUT REMARKS STAMP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
71-04-25 60- 65B90-1225-16 PRESSURE RELIEF VALVE CONDUIT
- ------------------------------------------------------------------------------------------------------------------------------------
65B93043-3 LOWER RACEWAY (EARTHING BKT)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-115A 51291-116 LOWER AFT FIRE ELEMENT - GRAV
- ------------------------------------------------------------------------------------------------------------------------------------
AND ASSOCIATED BRACKETS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-115A 60B00023-89 LOWER AFT FIRE ELEMENT - W. KIDDE
- ------------------------------------------------------------------------------------------------------------------------------------
AND ASSOCIATED BRACKETS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-60C-10 65B90506-4 THERMOCOUPLE RACEWAY
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-60C-7 69B93132-1 69B93132-2 LOWER RACEWAY
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-69 65B93010-4 THERMOCOUPLE HEATSHEILD
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SILICON RUBBER CLAMPS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-18 6233 RIGHT HAND VIBRO
- ------------------------------------------------------------------------------------------------------------------------------------
-10 65B90187-4 CONDUIT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
69B91251-2 FUEL DE-ICING VALVE COVER (TOP)
- ------------------------------------------------------------------------------------------------------------------------------------
69B43158-3 FUEL DE-ICING VALVE COVER (BOT)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
6233 LEFT HAND VIBRO
- ------------------------------------------------------------------------------------------------------------------------------------
65B90442-1 HEATSHIELD
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUE_________________ DATE___________________ CHECK "IN" SIG________________ DATE_______________
CHECK "OUT" SIG______________ DATE_______________
</TABLE>
<PAGE>
GE AIRCRAFT ENGINE SERVICES LIMITED
<TABLE>
<CAPTION>
- ---------------------------------------------
OPERATOR POWER PLANT ELECTRICAL BOOKING IN LIST
- ---------------------------------------------
W.O.O. No. N/R = NOT REQUIRED POWER PLANT ELECTRICAL BOOKING OUT LIST
- ---------------------------------------------
ENGINE: No. N/A = NOT APPLICABLE
- ---------------------------------------------
DATE RECEIVED P & W JT9 ENGINES PAGE 2 OF 2
- ------------------------------------------------------------------------------------------------------------------------------------
IPC REF TYP PART NO. ALT PT No. DESCRIPTION IN REMARKS STAMP OUT REMARKS STAMP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
-50-25 65B93154-2 OIL CONTENTS TRANSMITTER COVER
- ------------------------------------------------------------------------------------------------------------------------------------
-115 51291-003 UPPER FWD FIRE ELEMENT GRAV
- ------------------------------------------------------------------------------------------------------------------------------------
AND ASSOCIATED BRACKETS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-116 60B00023-85 UPPER FWD FIRE ELEMENT - W. KIDDE
- ------------------------------------------------------------------------------------------------------------------------------------
AND ASSOCIATED BRACKETS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-115A 51291-002 LOWER FWD FIRE ELEMENT GRAV
- ------------------------------------------------------------------------------------------------------------------------------------
AND ASSOCIATED BRACKETS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-115A 60B00025-83 472925 LOWER FWD FIRE ELEMENT - W. KIDDE
- ------------------------------------------------------------------------------------------------------------------------------------
AND ASSOCIATED BRACKETS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-60C 765860 EPR TRANSFORMER
- ------------------------------------------------------------------------------------------------------------------------------------
765861 AND BRACKET
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-47 6233 FRONT VIBRO TRANSDUCER
- ------------------------------------------------------------------------------------------------------------------------------------
657454 AND BRACKET
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
71-04-25-40L FRONT FAN SWITCH ASSEMBLY
- ------------------------------------------------------------------------------------------------------------------------------------
6224-5 REAR FAN SWITCH ASSEMBLY
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
65B90297-625 REAR FAN SWITCH RACEWAY
- ------------------------------------------------------------------------------------------------------------------------------------
65B90297-71 BRKT-D15 LOOM TO ?? BIE TRACK
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
-60D 61B41826-D01 FUEL CONTROL UNIT LOOM
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUE_________________ DATE___________________ CHECK "IN" SIG________________ DATE_______________
CHECK "OUT" SIG_______________ DATE_______________
</TABLE>
<PAGE>
ANNEX B TO
----------
THE MAIN AGREEMENT
------------------
GEAS-TOW-201-001
----------------
LIST OF UNITS, WITH TURNROUND TIMES. COVERED BY THIS AGREEMENT
- --------------------------------------------------------------
1. The following units are covered by this Agreement.
2. This list is not exhaustive and can be amended as required and agreed
between both parties.
Description of Unit Price Turnround Time
------------------- --------------- --------------
a) JT90-7 thru -7F for $1,025,000 90 days (plus 10 days for
conversion to -7J round trip transportation)
b) JTOD-7A for $ 906,000 90 days ( plus 10 days for
refurbishment round trip transportation)
Engine Component Turnround times will be as set forth in the Component
Repair Catalogue.
34
<PAGE>
ANNEX C TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
------------------
MODIFICATION CATEGORIES
- -----------------------
Each modification is classified into a category, which relates its priority of
embodiment to its effect on flight safety, and to the degree of Unit disassembly
required for embodiment.
The Appendices to this Annex define these categories for each Unit covered by
this Agreement.
Appendices:
1. Modification categories for JT9D Engine
<PAGE>
APPENDIX 1 TO
-------------
ANNEX C TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
MODIFICATION CLASSIFICATIONS
(ENGINE)
<TABLE>
<CAPTION>
DESCRIPTION GEAES CLASS P & W CLASS
- ----------- ----------- -----------
<S> <C> <C>
MANDATORY - per FAA aircraft legislature M
requirements.
To be embodied at the next hangar or shop visit 5R 4
To be embodied at the next exposure of the affected sub assembly
and/or module. 6R 5
To be embodied at the next exposure of the affected part. 7R 6
To be embodied on replacement when the part requires renewal
because of its condition. 8R N/A
To be embodied when the Seller's stocks of pre-mod parts have
been used up or are no longer available. 9R 7
Also, if the Mod.../
Has been embodied by the manufacturer already on some
aircraft or components. Also described as `Formal' fit. FR
Is a trial fit or evaluation TR
</TABLE>
<PAGE>
ANNEX D TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
BASIC MINIMUM MODIFICATION STANDARD
- -----------------------------------
The basic minimum modification standard, for each Unit covered by this
Agreement, is defined in the Appendices to this Annex.
Appendices:
1. Basic minimum modification standard for JT9D Engine
<PAGE>
APPENDIX 1 TO
-------------
ANNEX D TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
BASIC MINIMUM MODIFICATION STANDARD FOR ...
- -------------------------------------------
In accordance with Schedule Clause 4.1, the following modifications represent
the minimum standard to which the Buyer requires the Unit to be built, subject
to the embodiment priorities defined under the category column.
Modification Category
- ------------ --------
<PAGE>
ANNEX E TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
STATUS OF WORK IN PROGRESS DATA CURRENT AT ...
- -------------------------- -------------------
In accordance with Main Agreement Clause 3.18 here is the status of your work in
progress.
Repair The Seller Part Serial Description Quantity Target
order budget No No despatch
No Ref date
(a) (b) (c) (d) (e) (f) (g)
- --------------------------------------------------------------------------------
1.
2.
3.
4.
5.
<PAGE>
ANNEX F TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
NOTIFICATION OF HIGH COST WORK
- ------------------------------
1. In accordance with Schedule Clause 3.5, the Seller estimates that
Refurbishment or Repair of the following Unit(s) or Part(s) will exceed 70%
of the cost of replacing such Unit(s) or Part(s).
2. Please authorise the Seller to carry out, and charge for, in accordance
with Main Agreement Clause 3, such Refurbishment or Repair.
Part Description Quantity Removed Estimated Buyer's
No from Refurbishment instruction
or Repair
cost
(a) (b) (c) (d) (e) (f)
- --------------------------------------------------------------------------------
1.
2.
3.
4.
5.
<PAGE>
ANNEX G TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
CONCESSIONS
- -----------
The Engineering Concession Form referred to at Schedule Clause 6.2 is attached
as an Appendix to this Annex. Use of this form will only apply where approved by
an applicable FAA DER.
<PAGE>
G. E. AIRCRAFT ENGINE SERVICES LIMITED ANNEX G TO THE
MAIN AGREEMENT
ENGINEERING CONCESSION NUMBER
CONCESSION REGISTRY NUMBER
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
OPERATOR ENGINE TYPE ENG/MODULE/UNIT S.N. CATEGORY HOURS CYCLES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
REASON FOR CONCESSION
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF CONCESSION
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ORIGINATOR'S NAME ORIGINATOR'S SIGNATURE SECTION DATE
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PROPULSION ENGINEER'S COMMENTS: SIGNATURE DATE
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AUTHORISATION SIGNATURE DATE
- ------------------------------------------------------------------------------------------------------------------------
1. ENGINEERING SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------
2. CUSTOMER REPRESENTATIVE
- ------------------------------------------------------------------------------------------------------------------------
3. QUALITY ENGINEERING SIGNATORY
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NOTE: LINES 1 TO 3 MUST BE COMPLETED
FOR MOD ENGINES LINES 2 TO 4 MUST BE COMPLETED
- ------------------------------------------------------------------------------------------------------------------------
LOCAL CONCESSION ISSUED UNDER CAA APPROVAL REFERENCE DA/9341/91
- ------------------------------------------------------------------------------------------------------------------------
IF PART FITTED TO ENGINE/MODULE DIFFERENT FROM ABOVE ENTER DETAILS BELOW
- ------------------------------------------------------------------------------------------------------------------------
ENGINE TYPE FITTED TO ENGINE/MODULE UNIT S. N. DATE
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX H TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
ENGINE HEALTH CHECKS
- --------------------
The engine health checks referred to in Main Agreement Clause 3.4 will be
carried out in accordance with the requirements of the Appendix to this
Annex.
<PAGE>
[LOGO]
GE AIRCRAFT ENGINE SERVICES LIMITED
(ISSUE 1)
SHEET 1 OF 2
HEALTH CHECK SHEET
- ------------------------------------------------------------------------------
OPERATOR ENGINE/MODULE TYPE JT9D
- ------------------------------------------------------------------------------
HOURS SINCE ENGINE/MODULE NUMBER
- ------------------------------------------------------------------------------
CYCLES SINCE W.O.O. NUMBER
- ------------------------------------------------------------------------------
Borescope Inspected Only DATE
------------------
Health Checked Only
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
REF ITEM COMMENTS QTY STATUS ND APPR AUTHN
STAMP STAMP
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 FAN 48 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
2 "A" MODULE CARRY OUT FRONT END ACCEPT ND
VISUAL INSPECTION WITH REJECT
PARTICULAR ATTENTION TO
RUB STRIPS
- -------------------------------------------------------------------------------------------------------------------------
3 HPC5 80 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
4 HPC8 REAR 100 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
5 HPC9 FRONT 110 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
6 HPC11 REAR 104 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
7 HPC12 FRONT 94 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
8 HPC14 REAR 102 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
9 HPC15 FRONT 90 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
10 COMBUSTION ACCEPT ND
CHAMBER REJECT
- -------------------------------------------------------------------------------------------------------------------------
11 NGV ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
12 HPT 1 118 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
13 HPT 2 138 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
14 LPT 3 FRONT 122 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
15 LPT 8 REAR 102 ACCEPT ND
REJECT
- -------------------------------------------------------------------------------------------------------------------------
16 IF MOD STATUS PERMITS, INSPECT INTERMEDIATE "DOG ACCEPT ND
BOX" AT 12 O'CLOCK POSITION FOR EVIDENCE OF OIL REJECT
WETTING. BORESCOPE THROUGH ANTI-ICE HOLE AT 1
O'CLOCK
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
1st Copy (WHITE) ORIGINATOR 3rd Copy (BLUE)INSPECTION RECORDS
2nd Copy (PINK) ENGINEERING
<PAGE>
LOGO
GE AIRCRAFT ENGINE SERVICES LIMITED
(ISSUE 1)
SHEET 2 OF 2
HEALTH CHECK SHEET
- ------------------------------------------------------------------------------
OPERATOR ENGINE/MODULE TYPE JT9D
- ------------------------------------------------------------------------------
HOURS SINCE ENGINE/MODULE NUMBER
- ------------------------------------------------------------------------------
CYCLES SINCE W.O.O. NUMBER
- ------------------------------------------------------------------------------
Borescope Inspected Only DATE
----------------------------
Health Checked Only
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
REF ITEM COMMENTS QTY STATUS ND APPR AUTHN
STAMP STAMP
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
17 BORESCOPE INSPECTION OF STAGE 13 ND
STATOR FOR CIRCUMFERENTIAL CRACKING
ADVISE D.E. IF ANY FOUND
- -----------------------------------------------------------------------------------------------------------------------------
18 REMOVE ALL BORESCOPE PLUGS
- -----------------------------------------------------------------------------------------------------------------------------
19 VISUALLY INSPECT ENGINE LOOM FOR VISUAL
INITIAL P.I.C. INFO ONLY OK
REPLACE
- -----------------------------------------------------------------------------------------------------------------------------
20 DIFFUSER CASE - SB.5591
- -----------------------------------------------------------------------------------------------------------------------------
21 INSPECT ALL MAGNETIC PLUGS ACCEPT
REJECT
- -----------------------------------------------------------------------------------------------------------------------------
22 INSPECT FILTERS. ADVISE D.E. OF ALL ACCEPT
DEFECTS REJECT
- -----------------------------------------------------------------------------------------------------------------------------
23 REMOVE EXHAUST PLUG AND CHECK IF
DETUNER WEIGHT IS MISSING OR LOOSE
SERIAL NO ......................
- -----------------------------------------------------------------------------------------------------------------------------
24 REMOVE EXHAUST SLEEVE, SERIAL NO.......................
- -----------------------------------------------------------------------------------------------------------------------------
25 CARRY OUT REAR AND VISUAL INSPECTION
INCLUDING EX SPARS INNER BOWL.FRONT AND
REAR RAIL
- -----------------------------------------------------------------------------------------------------------------------------
26 LP TURBINE SPIN CHECK ACCEPT
REJECT
- -----------------------------------------------------------------------------------------------------------------------------
27 ENGINE BOOKED IN. SER NO.........................
- -----------------------------------------------------------------------------------------------------------------------------
28 MEASURE AND RECORD FAN CASE RUB STRIP SEGMENT
WEAR
5 O'CLOCK...... 3 O'CLOCK...... 12 O'CLOCK......
- -----------------------------------------------------------------------------------------------------------------------------
29 BOOKED IN BY..............................
- -----------------------------------------------------------------------------------------------------------------------------
30 ALL THE ABOVE HAVE BEEN CERTIFIED, ENDORSED BY ND
APPROPRIATELY AUTHORISED PERSONS AND MEET THE
REQUIREMENTS OF THE ORIGINAL EQUIPMENT
MANUFACTURER (OEM) AND GEAESL
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1st Copy (WHITE) ORIGINATOR 3rd Copy (BLUE) INSPECTION RECORDS
2nd Copy (PINK) ENGINEERING
<PAGE>
ANNEX I TO
----------
THE MAIN AGREEMENT
------------------
GEAES-TOW-201-001
-----------------
GENERAL
- -------
All modifications mandated by Pratt and Whitney Service Bulletins 4525 & 4990
for -7J conversion shall be embodied where applicable. The outline workscope
detailed below further defines the work content agreed between Buyer and Seller
for the purpose of conversion and/or refurbishment of the Units as defined in
the Main Agreement.
For clarification, there follows a definition of the specific terms used in this
Annex I:-
. Refurbishment shall mean the inspection and Repair of the Units in
accordance with the technical workshop specification mutually agreed between
Buyer and Seller.
. C/O/H shall the mean inspection and Repair of the Units in accordance with
the relevant Original Equipment Manufacturer's Overhaul Manual.
. IRAN shall mean on condition inspection and Repair as deemed necessary by the
Seller.
FAN
- ---
. Deblade
. Refurbishment and conversion where necessary of Fan Blades.
. C/O/H of Fan Hub.
. IRAN remainder of module.
FANCASE
- -------
. Re-line Fan rotor path
. IRAN remainder of module
LPC
- ---
. Refurbishment of module
. Conversion to -7J where necessary
INTERMEDIATE CASE
- -----------------
. Refurbishment of intermediate case & sump
. C/O/H of all bearings
. IRAN remainder of module
HPC
- ---
. Refurbishment of module
. New compressor blades to be fitted to all stages
DIFFUSER
- --------
. Full dimensional inspection of diffuser case to Seller's criteria
. Refurbishment of No. 3 bearing area
. IRAN remainder of module
COMBUSTER
- ---------
. Refurbishment of module
. Conversion to -7J where necessary
<PAGE>
. Stage 1 NGV's fitted shall have no more than 1 previous overhaul
HPT
- ---
. Refurbishment of module
. Conversion to-7J where necessary
. New T1 and T2 blades to be fitted in the case of conversion engines
. 10 off new stage 2 NGV's to be fitted at 6 o' clock position
LPT
- ---
. Refurbishment of module
. Conversion to-7J where necessary
EXHAUST CASE
- ------------
. Refurbishment of module including the following:-
- Rejuvenation of exhaust case
- Embody SB 5907 containment shields
GEARBOXES
- ---------
. Refurbishment of modules
. New N2 Tacho bearing to be fitted in main gearbox
QEC
- ---
. IRAN
FUEL SYSTEM ACCESSORIES
- -----------------------
. Refurbishment of each Unit in accordance with agreed Accessory technical
specification
. Conversion to-7J where necessary
OTHER ITEMS
- -----------
. Fitment of 'Walter Kiddie Lug Type' fire detection system
Notes:
(i) Following pass off test engine preservation will be carried out in
accordance with the JT9D Engine manual to cover a 90 day period.
(ii) Material termed 'Used Servicable Material' shall be defined as material
which has been declared servicable per the JT9D Engine Manual & meets the
requirements of the Tower Air Technical Specification.
(iii) This Annex I is intended to provide an overview of the intent of the
workscope agreed between the Buyer and Seller and does not contain the
full technical specification.
<PAGE>
COPIES AND SIGNATURES
- ---------------------
The Agreement is signed in duplicate-and one copy shall be held by each party.
For and on behalf of For and on behalf of
Tower Air, Inc. GE Aircraft Engine Services Ltd.
Signed /s/ MORRIS NACHTOMI Signed /s/ Goerge D. Duncanson
---------------------------- ------------------------------
Name MORRIS NACHTOMI Name George D. Duncanson
------------------------------ --------------------------------
Title CHAIRMAN OF THE BOARD Title MANAGING DIRECTOR.
----------------------------- -------------------------------
Witnessed RAMESH PUNWANI Witnessed /s/ P. H. Jones
------------------------- ---------------------------
Name RAMESH PUNWANI Name P.H. Jones
------------------------------ --------------------------------
Date 30th September 1996 Date 27th September 1996
------------------------------ --------------------------------
<PAGE>
CONTRACT
- --------
SCHEDULE OF STANDARD CONDITIONS
- -------------------------------
CLAUSE 1 - CONFIDENTIALITY AND ASSIGNMENT
- -----------------------------------------
1.1 Unless otherwise agreed, this Agreement and all information including
proprietary information becoming available or coming into the possession or
knowledge of either party by virtue of this Agreement or its performance
shall at all times be treated by the parties hereto as confidential and
shall not be published, disclosed or circulated except (i) in connection
with the performance by the parties hereto of their obligations under this
Agreement or (ii) if such information is at the time of disclosure in the
public domain or (iii) if such information becomes generally available to
third parties by publication or otherwise, through no breach of this
Agreement by the disclosing party or (iv) if such information is or was
lawfully in the possession of the person disclosing the same prior to such
disclosure without legal or contractual restriction on such disclosure or
(v) as required by law.
In the event that a party becomes legally compelled to disclose any
information treated as confidential hereunder, prompt notice of such fact
shall be given to the other party, so such other party may seek an
appropriate remedy to prevent such disclosure and the party compelled to
disclose such information which is in the nature of intellectual property
will not confer any right or licence on the recipient to use the same
otherwise than for the purpose for which it was disclosed.
1.2 Both parties shall ensure that the obligation of confidentiality contained
in this Clause shall be brought to the notice of all employees, servants
and agents engaged upon work in connection with this Agreement.
1.3 The obligations of the parties under this Clause shall survive and continue
after the discontinuance, termination or cancellation of this Agreement or
any part thereof and shall be binding on authorised assignees and
successors in title of the parties hereto.
CLAUSE 2 - DEFINITIONS
- ----------------------
The following words and expressions shall have the meaning hereby assigned to
them. Any other technical words not defined under this Agreement shall have the
same meaning as defined in the world Airline Technical Operations Glossary
published by IATA from time to time.
2.1 Affiliate means, in relation to a party, a company which is its Subsidiary
---------
or holding company, or which is a Subsidiary of any company of which such
party is a Subsidiary, Subsidiary and holding company bearing for the
purpose of this definition the respective meanings accorded to them in
Section 736 of the Companies Act 1985 as amended.
2.2 Accessories means those line replaceable units, which are reworked by the
-----------
Seller, and which are fitted to the Buyer's Powerplant, Engines or Modules.
2.3 AD means Airworthiness Directive.
--
2.4 Agreement means the agreement, between the Seller and the Buyer for the
---------
provision of the Services including the Main Agreement and this Schedule.
2.5 Approved Life means the number of Flying Hours or Flight Cycles as
-------------
appropriate, which a Unit may operate for, as approved by the Buyer or the
appropriate airworthiness regulatory authority, following Refurbishment or
Repair.
2.6 Buyer's Stock Holding means that dedicated area, which is used by the
---------------------
Seller for the storage of the Buyer's serviceable property, or that
property, as the context may require.
2.7 CAA means the Civil Aviation Authority of the United Kingdom of Great
---
Britain and Northern Ireland.
2.8 Checking List means the list referred to in respect of individual Units and
-------------
attached as Annex A to the Main Agreement. The Checking List is used to
record those significant parts and/or Accessories fitted to a Unit on
receipt at, or despatch from the facilities of the Seller or the Buyer.
2.9 DGCA means the Director General of Civil Aviation under whose authority the
----
aircraft operated by the Buyer are registered.
<PAGE>
2.10 Engine means the complete bare Engine but without a QEC.
------
2.11 FAA means the Federal Aviation Administration of the United States of
---
America.
2.12 Flight Cycle means the unit of Unit utilisation which occurs if a Unit is
------------
fitted to an aircraft which completes 1 landing.
2.13 Flying Hours means the time recorded, for each of the Units, from take off
------------
to landing.
2.14 Group A Parts means those major rotating Parts of a Unit which are
-------------
subjected to strict life limitations which must not be exceeded in service.
2.15 Local Representative means that person, appointed by the Buyer, whose
--------------------
responsibilities are defined in Schedule Clause 5.
2.16 Module means a combination of Parts which are replaceable sub-assemblies
------
of the Engine, and which are subject to Repair, modification and
Refurbishment in their own right.
2.17 OWS means the Seller's On Wing Support facilities at Radius Park, London
---
Heathrow Airport, United Kingdom.
2.18 Parts means those items listed in a manufacturer's illustrated parts
-----
catalogues.
2.19 Pooling means the exchange of Parts in the custody of the Seller with
-------
Parts removed from the Buyers Units. A Pooled Part means a Part capable of
such exchange.
2.20 Powerplant means a Unit which includes the Engine and a QEC, which is
----------
suitable for installation on aircraft operated by the Buyer.
2.21 QEC means Quick Engine Change unit and comprises all the Parts, as
---
supplied by the airframe and Engine manufacturer, used to build up a
Powerplant, to the point where that Powerplant is ready to be installed on
an aircraft operated by the Buyer
2.22 Refurbishment means the strip, inspection, Repair or replacement of Parts,
-------------
and the re-assembly and testing, as set out in the appropriate manuals and
Refurbishment schedules for the Unit, as amended from time to time, to
restore the Unit to a serviceable condition.
2.23 Repair means all remedial work necessary to render a Unit serviceable.
------
2.24 Services means all or part of the services, Work, Materials and Parts to
--------
be supplied and managed by or on behalf of the Seller under this Agreement
and generally described in Main Agreement Clause 3.
2.25 Unit means an Engine, Powerplant or Module.
----
CLAUSE 3 - DOCUMENTATION & PROCEDURES
- -------------------------------------
3.1 The Buyer shall give the Seller at least 28 days notice of its intention to
submit a Unit, following a planned removal, to the Seller for the Services
to be provided and shall give as much notice as is possible in respect of
any unplanned removals.
3 2 The Buyer must provide the Seller with the following prior to each Unit
input:
3.2.1 A uniquely numbered Buyer's Repair Order. Such a document will
include, but not be limited to, the following:
3.2.1.1 Description of Unit.
3.2.1.2 Unit part number and serial number.
3.2.1.3 Unit hours and cycles run since new and since last shop
visit.
3.2.1.4 Reason for removal of Unit.
3.2.1.5 Unit and Accessory workscope requirements.
3.2.1.6 Type of release certificate required.
3.2.1.7 Minimum release life standards required.
<PAGE>
3.2.2 Life limited Parts data including the following:
3.2.2.1 Part number.
3.2.2.2 Serial number.
3.2.2.3 Hours and cycles run since new.
3.2.2.4 Hours and cycles run since last shop visit.
3.2.3 Data on all Accessories fitted, including the following:
3.2.3.1 Part number.
3.2.3.2 Serial number.
3.2.3.3 Hours and cycles run since new.
3.2.3.4 Hours and cycles run since the last shop visit.
3.2.3.5 Modification and AD status.
3.2.4 Unit log book, complete with Unit modification and AD
status.
3.2.5 All documentation required in connection with any necessary
customs and other formalities associated with the Units.
3.2.6 Checking List completed prior to despatch from the Buyer.
3.3 The Buyer shall ensure that Units are complete in accordance with the
appropriate Checking List. In the event that any item is found to be
missing or damaged on receipt of the Unit by the Seller, the Seller
shall immediately forward to the Buyer a completed copy of Annex A.
The Buyer shall then agree with the Seller the remedial action
required.
3.4 Each party shall, when requested in writing by a duly authorised
representative, be allowed access to all relevant information
contained in the technical records of the aircraft operated by the
Buyer and any other relevant documents held by the other party.
3.5 Should it be undesirable, in the opinion of the Seller, to carry out
the Buyer's instruction to Refurbish or Repair any Unit or Part,
because the cost of such Refurbishment of Repair is estimated by the
Seller to exceed 70% of the cost of replacing that Unit or Part, then
the Seller shall complete a copy of Annex F, forward that copy to the
Buyer, and seek the Buyer's consent to carry out and charge for such
Refurbishment or Repair.
If the Buyer vetoes such work being undertaken, or the Buyer's consent
is not received within 48 hours of receipt of the Seller's request,
then the Seller shall instead replace such Parts all in accordance
with Main Agreement Clause 3.
CLAUSE 4 - MODIFICATIONS
- ------------------------
4.1 The Buyer shall, on or before the date of signature of this Agreement,
provide the Seller with a basic minimum modification standard for each
unit, and the details of that standard will be defined in Annex D to
the main Agreement.
4.2 Following the provision of the basic minimum modification standard for
the units, and provided that the Seller is given reasonable lead time
to ensure the availability of the tools and materials, the Seller
shall embody all modifications required to bring the units up to that
standard. The Seller shall use all reasonable endeavours to provide
the tools and materials required to bring each Unit up to that
standard in the turnround time defined in Annex B to the main
Agreement.
4.3 The Seller shall embody all modifications categorised "Mandatory" or
"Category 1" by the unit manufacturer or the manufacturer's Accessory
vendors, or categorised AD's by the appropriate Airworthiness
Regulatory Authority.
4.4 Should the Buyer require embodiment of modification not defined in
Annex D to the Main Agreement and provided the Buyer requests the
embodiment of such modifications in a timely manner, the Seller shall
endeavour to embody such modifications provided that tools and
materials are available. The Seller shall endeavour to provide such
tools and materials in a timely manner and shall be entitled to a
reasonable extension of time in which to complete the additional work.
<PAGE>
CLAUSE 5 - TECHNICAL LIAISON
- ----------------------------
5.1 The fullest possible direct liaison, including technical services review
meetings, will take place between representatives of the Buyer and the
Seller, to review the operation of this Agreement. The frequency and
venues of such meetings will be arranged between the parties, who shall
bear their own costs.
5.2 In order to facilitate prompt and efficient liaison between both parties,
the Buyer may appoint a Local Representative who may be stationed at the
Seller's facilities from time to time from any date convenient to the Buyer
after the execution of this Agreement.
5.2.1 The Buyer shall inform the Seller in writing of the identity of
the Local Representative.
5.2.2 The Seller shall extend to the Local Representative every access
that is necessary in relation to this Agreement, to its
facilities where the Services are undertaken.
5.2.3 The Buyer shall ensure that the Local Representative, and any
other of the Buyer's staff who may from time to time visit or be
stationed at the Seller's facilities, conform with all the
Seller's regulations and instructions written or otherwise
displayed. In particular such staff are expected to familiarise
themselves with the fire and emergency building evacuation and
any other safety procedures.
5.2.4 The Buyer shall be responsible for all costs incurred by the
Local Representative, and any other of the Buyer's staff, who may
be based at the Seller's facilities.
5.3 The duties of the Local Representative shall include, but not be limited
to, the following:
5.3.1 Acting as the focal point at the Seller's facilities for all
production and contractual matters concerning the Buyer and
relating to this Agreement.
5.3.2 The provision of technical records, and aircraft maintenance and
operational data.
5.3.3 The provision of technical authority where there is a requirement
to defer work.
5.3.4 The authorisation of additional work.
5.3.5 The provision of disposal instructions for any of the Buyer's
property.
5.3.6 The attendance at technical review meetings where the Buyer's
Units are under discussion.
5.3.7 The validation of invoice charges.
5.3.8 The provision, in accordance with Schedule Clause 3.3. of
agreement on remedial action in the event that any item is found
to be missing or damaged on receipt of any Unit by the Seller.
5.3.9 The provision, in accordance with Schedule Clause 3.5. of
agreement to carry out and charge for work on any Unit or Part
where the cost of such work is estimated by the Seller to exceed
70% of the cost of replacing that Unit or Part or to instruct the
replacement of such Parts.
5.3.10 The provision in accordance with Schedule Clause 6.2. of
instructions in the event that after starting work on a Unit, the
Seller is unable to comply with any technical requirement on that
Unit.
<PAGE>
CLAUSES 6 - STANDARDS
- ---------------------
6.1 The Buyer shall ensure that the appropriate Airworthiness Regulatory
Authority shall grant to the Seller approval (equivalent to the terms of
approval already granted to the Seller by the CAA Reference Number
DAI/9341/91) to carry out the Services. This approval is required before
the date of commencement of the Services.
6.2 In the event that, after starting work on a Unit, the Seller is unable to
comply with any technical requirement on that Unit, but is able to offer a
viable alternative proposal, then the Seller shall complete the Engineering
concession form, a copy of which is attached at Annex G, forward that copy
to the Buyer, and await the Buyer's instructions before proceeding.
CLAUSE 7 - TRANSPORTATION AND DELIVERY REQUIREMENTS
- ---------------------------------------------------
7.1 The Buyer shall deliver each unit, covered by this Agreement, to OWS and,
after redelivery of the Unit to OWS by the Seller shall collect each Unit
from OWS.
7.2 Any costs associated with the transportation and insurance of each Unit
between the Buyer and OWS, and OWS and the Buyer, incurred under this
Agreement, shall be borne by the Buyer who shall also be responsible for
all import charges, duties and any other taxes or other levies imposed on
each Unit at the port of entry and exit or into which the Buyer operates or
intends to operate its aircraft.
7.3 The Buyer shall ensure that each Unit covered by this Agreement is
correctly blanked by approved methods prior to despatch, and satisfactorily
packed in a recognised manner for delivery. In addition, the Buyer shall
ensure that each Unit is mounted in an approved transit stand provided by
the Buyer.
7.4 At the Seller's request, the Buyer shall provide, for the retention by the
Seller, documentation which shall prove, to the satisfaction of HM Customs
and Excise, the import into, or export from, the United Kingdom, of each
unit so that the charges levied by the Seller pursuant to this Agreement
may be relieved of United Kingdom Value Added Tax. Should such
documentation not be provided, the Seller shall invoice and the Buyer shall
pay for any such united Kingdom Value Added Tax incurred by the Seller.
CLAUSE 8 - TURNROUND TIME
- -------------------------
8.1 The Buyer shall use its best endeavors to ensure that each Unit is
delivered to the Seller in accordance with a schedule to be agreed between
the parties hereto from time to time. The Buyer shall provide the Seller
with a programme covering its planned maintenance of the units for at least
6 months ahead. The Buyer shall, as soon as possible, advise the Seller of
any significant variation from that programme and acknowledges that a
significant variation to that programme may adversely affect the Seller's
ability to meet the turnround time defined in Annex B to the Main
Agreement.
8.2 The turnround time shall be deemed to start when either all the
documentation defined in Schedule Clause 3.2 has been received by the
Seller, or when that Unit is delivered by the Buyer to OWS, whichever is
the later. The turnround time shall be deemed to end when that same unit is
delivered by the Seller to OWS. UK public holidays will not be included
when calculating turnround time.
8.3 The Seller shall not be liable for any delay in the Repair or Refurbishment
of any Unit if such a delay is outside the reasonable control of the
Seller. Any such delay shall be disregarded in calculating the achieved
turnround time.
8.4 In the event that the Buyer requires a Unit to be subjected to a special
investigation, then the Seller may extend the turnround time, referred to
herein, to cover this additional requirement.
8.5 In the event that the Seller, following the provision of the Services set
out in Main Agreement Clause 3.7 and after a test bed run, has to input a
Unit again, and providing that the reasons for such input are beyond the
direct control of the Seller and through no fault on the part of the
Seller, the Unit will be deemed a new input in respect of turnround time.
<PAGE>
8.6 The turnround times defined in Annex B to the main Agreement may be
extended by the period of time lost resulting from any delays incurred
awaiting a response from the Buyer for relevant information requested by
the Seller.
8.7 The Seller shall have a lien over any Unit in its possession for any
payment by the Buyer under this Agreement which is overdue.
In the event that the Seller shall exercise any such lien, it shall give
notice thereof to the Buyer and the turnround times defined in Annex B to
the Main Agreement shall be extended by the period of time from the date of
such notice until the lien is extinguished upon receipt of all overdue
payments.
CLAUSE 9 - POOLING
- ------------------
9.1 Parts from the Buyer's Units may be pooled, at the Seller's sole
discretion, with similar Parts in the Seller's custody.
CLAUSE 10 - CUSTODY, CONTROL AND TITLE TRANSFER
- ------------------------------------------------
10.1 The Buyer shall deliver each Unit to OWS free of all charges. Care,
Custody and control shall pass from the Buyer to the Seller an receipt of
each Unit at OWS.
10.2 Within 24 hours from despatch of the Unit from the Seller's facilities,
the Seller shall make each Unit available for collection by the Buyer at
OWS. Parts, Material, labor and associated overhead incorporated into
Buyers Equipment, as required in performing Services an Buyers Equipment
hereunder, shall be deemed to have been sold to Buyer, and title to such
Parts and Services thereon shall pass to Buyer upon assignment of such
parts, materials, labor and associated overhead to Buyer's Equipment Risk
of loss or damage to such parts and work thereon shall pass to Buyer upon
Redelivery to Buyer Title to and risk of loss of or damage to any pans
removed from Buyers Equipment, which are replaced by other parts, shall
pass to Seller upon removal of such parts from Buyer's Equipment Final
acceptance of Redelivered Equipment shall be at Sellers facility.
10.3 Both parties to this Agreement hereby warrant that they each have good
title to each Pooled Part and that each Pooled Part shall pass from the
one party to the other tee from any charge, encumbrance or lien in favour
of any third party.
10.4 Transfer of title of Pooled Parts shall take place simultaneously at the
time of the exchange.
CLAUSE 11 - SELLER AND BUYER WARRANTIES
- ---------------------------------------
11.1 The Seller warrants that if for any Unit any defect, failure or
malfunction occurs which is proven to be due to faulty workmanship as a
result of the provision of the services, within 12 months of being
declared serviceable by the Seller, or within 6 calendar months of 1000
flying hours of installation whichever occurs first, then the Seller
shall Repair such defect failure or malfunction of the Unit without
further charge. If, during the Repair of that defect, failure or
malfunction, any betterment is included then the Seller shall invoice the
Buyer in accordance with the terms of Main Agreement Clause 3.
11.2 The Seller shall have no liability whatsoever in respect of any Unit which
has been assembled, operated or maintained by any party other than the
Seller, its agents or sub-contractors, otherwise than in accordance with
the manufacturers instructions or flight manual, or which has been subject
to any accident, abuse or misapplication, or use in development or
experimental running.
<PAGE>
11.3 This warranty is in substitution for and excludes all otter warranties
express or implied including but not limited to fitness for purpose,
quality, standard of workmanship or otherwise and, save as provided herein,
the Seller shall not be liable in tort, in contract, statute or otherwise
at law to the Buyer at any time for loss of, or damage to, any Units and
Pals, arising out of the installation and subsequent use thereof in any
aircraft or otherwise. The obligation and liability of the Seller under
this warranty shall be in lieu of and shall expressly exclude any other
liability to the Buyer or to any other person for direct, indirect,
incidental or consequential damages (including without limitation loss of
revenue, loss of profits or loss of contracts) regardless of whether any
claim for such damages shall be based upon or in contract, strict
liability, negligence or any other tort and any other such claim is freely
waived by me Buyer.
11.4 The Buyer warrants that if it requires the Seller to undertake a pre-
introduction test run on any Unit, that such Unit shall be in a fit
condition to enable the test run to be undertaken in a safe and proper
manner.
CLAUSE 12 - SELLER'S INTELLECTUAL PROPERTY WARRANTY
- ---------------------------------------------------
12.1 The Seller warrants that the Units, supplied as part of the Services and
the equipment, methods and processes used by the Seller for or in
connection with this Agreement, do not arid will not infringe the
intellectual property rights of any third party including without
limitation letters patent, registered design, unregistered design rights,
copyright, or trademarks and the Seller shall indemnify, hold harmless and
defend the Buyer from and against all claims, actions, proceedings,
demands, damages, liabilities costs, charges and expenses whatsoever
suffered or incurred by the Buyer in connection with or as a result of any
matter which gives rise to a breach by the Seller of the aforesaid
warranty, provided that:.
(a) the Buyer shall promptly notify in writing the Seller of such claim;
and
(b) the Seller shall have sole control over the defence of such claim and
over all negotiations in relation to such claim and in particular the
Buyer shall not accept any liability in relation to such claim or make
any admission in respect thereof without the prior written consent of
the Seller: and
(c) the Buyer shall provide all such documents, information and assistance
and do all such acts and things as the Seller may reasonably require
to assist it in relation to such claim.
However the Seller shall not be liable to the Buyer for any indirect
consequential or financial loss (including loss of revenue, loss of
profits or loss of business opportunity by the Buyer) or any loss of
use of Parts or of the Unit or aircraft in which such Parts may be
incorporated arising as a result of any such claim.
12.2 Without prejudice to the rights of the Buyer the Seller shall use
reasonable endeavours to remedy any breach of its warranty under Schedule
Clause 12.1 at the earliest possible moment either by securing at its own
expense the right for the Buyer to continue use or operation of any Unit,
Module, Accessory or Part by procuring a licence in respect of the rights
infringed or by modifying or replacing at its own expense such Part or
Parts of the Unit, Module or Accessory as is necessary to render them non-
infringing and without any change in quality or performance.
12.3 The warranty stated in Schedule Clause 12.1 is in lieu of all other
intellectual property warranties whatsoever, whether oral, written,
expressed, implied or statutory. Schedule Clauses 12.1 and 12.2 set out the
whole of the Buyers right in respect of breach of the warranty in Schedule
Clause 12.1 and in the particular the Buyer will not be entitled to
terminate the Agreement for breach of this warranty unless the Seller has
in addition broached its indemnification and/or remedial obligations in
Schedule Clauses 12.1 and 12.2 and has failed to effect a cure in
accordance with the provisions of Schedule Clause 12.1.8.
CLAUSE 13 - MANUFACTURER'S WARRANTY
- -----------------------------------
13.1 The Buyer shall advise the manufacturers and vendors of the Units and Parts
an which the Seller shall be carrying out warranty Repairs on behalf of the
Buyer. In addition, the Buyer shall advise such manufacturers and vendors
that all warranty monies receivable, as a result of the services provided
by the Seller, should be paid directly to the Buyer.
<PAGE>
CLAUSE 14 - TERMS OF PAYMENT
- ----------------------------
14.1 The Seller will submit its charges to the Buyer for payment in
accordance with the following procedure:
14.1.1 45% of the estimated cost of the workpackage prior to the
commencement of the Services defined in Main Agreement
Clause 3, for payment within 48 hours of notification of the
sum required.
14.1.2 45% of the estimated cost of the workpackage upon completion
of the Services (but prior to despatch of the Unit) defined
in Main Agreement Clause 3 for payment within 48 hours of
notification of the sum required. Subsequently, the Seller
shall submit, as soon as complete returns are available, a
final invoice for payment within 30 days of despatch from
the Seller of such final invoice.
14.2 The Buyer shall pay, in US Dollars, all sums due to the account of the
Seller at:
Barclays Bank plc
Cardiff Cathedral Road Business Centre
Cardiff West Group of Branches
PO Box 52
Riverside House
31 Cathedral Road
Cardiff CF1 9YX
Bank Sort Code: 20-07-91
Account No: 75363388
14.3 The Seller shall charge the Buyer interest on overdue payments. Such
interest will be charged for each month or part of a month that any
payment is overdue. The interest rate per month to be charged on
overdue payments, r, shall be calculated as follows :
r = R + 2
-
12
where R is the annual interest rate published monthly by the United
Kingdom Clearing Banks.
14.4 All charges stated in this Agreement are exclusive of any tax or duty
that may be payable in respect of the Services. The Buyer assumes full
and exclusive liability for the payment of such taxes or duties
properly payable by the Buyer, should these by levied by the national
fiscal authority of the United Kingdom.
CLAUSE 15 - CHARGE VARIATION
- ----------------------------
15.1 By 1st December of each year, or as soon as possible thereafter, the
Seller shall advise the Buyer of any proposed variation to the
charges. Any such variation shall be based on actual cost increases
incurred by the Seller.
15.2 The parties both agree that any increases or decreases in any taxes
(other than those assessed upon or chargeable by reference to the
income or profit of either party) duties or other levies imposed by
competent Fiscal Authorities upon any charge, matter or thing arising
under this Agreement shall be chargeable to the Buyer from the date
upon which such increases or decreases come into effect.
15.3 The maximum handling charges referred to in Main Agreement Clause 3
will be increased or decreased commensurate with any manufacturer's
percentage price increase or decrease.
CLAUSE 16 - INDEMNITY AND LIABILITY
- -----------------------------------
16.1 Units in transit between the Buyer and OWS and between OWS and the
Buyer, shall be at the sole risk of the Buyer.
<PAGE>
16.2 Save in respect of any liability of the Seller expressly proviced for in
this Agreement and or any liability mandatorily imposed by law, the
Seller, its Affilliates, its agents and sub-contractors and its and their
respective employees (the "Seller Parties") shall not be responsible to
the Buyer for, any and all claims, demands, damages, loss costs and
proceedings of whatsoever nature made, suffered or incurred under or in
connection with this Agreement or the Services supplied by the Seller
pursuant to this Agreement howsoever arising, and of whatsoever nature,
whether in contract, tort, arising under statute or otherwise.
16.3 If any Unit, Part, Pooled Part or material owned by the Buyer, is in the
custody or control of the Seller and is lost, destroyed or damaged,
between the time when the Seller receives it at and later despatches it
from its premises as a result of wilful misconduct or a negligent act or
omission of the Seller, its agents or sub-contractors, then the Seller
shall at its own discretion, take one of the following actions:
16.3.1 Repair any damage free of charge.
16.3.2 Provide a replacement Unit, Part, Pooled Part, or material of
equivalent standard, free of charge,
16.3.3 Pay to the Buyer a sum which, at the time of such loss,
destruction or damage of the Unit, Part, Pooled Part or material
is equal to the latest catalogue price less, in each case, a
reasonable reduction to take into account the age, usage and
condition of the item concerned.
Performance by the Seller of its obligations under this Clause
shall be in full discharge of any liability to the Buyer in
respect of the loss, destruction or damage covered by this Clause.
16.4 The Seller shall indemnify and hold harmless the Buyer from and against
all claims, costs demands and proceedings, whether in contract, tort,
statute or otherwise at law arising or in any way connected with injury to
or death of any of the Indemnified Parties' personnel or subject to
Schedule Clause 11.3 loss of or damage to the Seller's property which may
result from or arise in any manner out of or in relation to the Services
provided under this Agreement and regardless of negligence unless caused
by the wilful misconduct of the Buyer or its employees.
16.5 The Buyer shall indemnify and hold harmless the Indemnified Parties from
and against any and all claims, costs, demands and proceedings, whether in
contract, tort statute or otherwise at law arising out of the death or
personal injury occurring to the Buyer's personnel and those personnel of
its agents and sub-contractors while at the Seller's premises during the
subsistence of this Agreement and regardless of negligence unless such
death or personal injury is caused by the wilful misconduct of the
Indemnified Parties.
16.6 The Seller will not be liable to the Buyer in any event for any indirect
or consequential damage or loss (including without limitation loss of
revenue, loss of profits or loss of business opportunity) regardless of
whether any claim for such damage shall be based upon or in contract,
strict liability, negligence or any other tort and any other such claim is
hereby waived.
16.7 The total liability of the Seller and the Seller Parties on any claim
whether based upon or in contract, strict liability, negligence or any
other tort, arising out of connected with or related to this Agreement
shall in no event exceed the greater of the costs of repairing or
replacing the particular part or Unit in respect of which the claim is
made.
16.8 None of the provisions of this Agreement excluding or restricting
liability of the Seller shall extend to any liability which cannot under
the terms of the Unfair Contract Terms Act 1977 or any other UK statute,
and notwithstanding any agreement between the Buyer and the Seller to the
contrary, be excluded.
<PAGE>
CLAUSE 17 - FORCE MAJEURE
- -------------------------
17.1 If either party is prevented or impeded from performing its obligations
under this Agreement by Force Majeure, or in the event of any Force
Majeure occurring which materially affects either party's ability to
perform this Agreement in whole or in part by its normal means or which
makes doing the same substantially more difficult or expensive it shall
promptly give notice to the other party stating the circumstances
constituting Force Majeure and the extent thereof and the obligations of
the parties shall thereupon be suspended for so long as the circumstances
of Force Majeure may continue and for any further period that the party
affected may reasonably need to recover from such Force Majeure event.
The party prevented or impeded from performing its obligations under
this Agreement by Force Majeure shall use every reasonable effort to
minimise the effects thereof and shall promptly resume performance of its
obligations under this Agreement at the soonest possible moment.
17.1.1 "Force Majeure" shall mean any event or circumstance which is
outside the reasonable control of the party concerned including,
but not limited by reference to, acts of God, hostilities, acts,
decisions, directives, orders or regulations of governments or the
Commission of the European Communities, embargoes, sabotage, civil
disturbance, labour disputes involving complete or partial
stoppage of work or restrictions to normal working practices,
flood, fire, impact, explosion, non-permitted action of the other
party, or its Affiliates, to this Agreement.
17.2 Notwithstanding the terms of Schedule Clause 17.1, in the event of a
labour dispute arising during the period of this Agreement, the Seller
shall endeavour to take the following action in respect of Units which are
either complete or in an almost complete state;
17.2.1 Release to the Buyer, either in advance of, or during, a labour
dispute, complete units in the Sellers possession either before
commencement or after reassembly of the Units;
17.2.2 Use all reasonable endeavours to expedite work on Units that are
almost completed prior to an imminent dispute.
17.3 The Seller shall not be liable for any delay in obtaining customs
clearance from HM Customs and Excise of any item required by the Seller to
perform the Services if such delay is due to circumstances beyond the
reasonable control of the Seller and is not due to its fault or
negligence. If such a delay occurs, the Seller shall promptly advise the
Buyer of the circumstances which gave rise to the said delay.
CLAUSE 18 - TERMINATION
- -----------------------
18.1 Either party may terminate this Agreement forthwith by written notice to
the other at any time if any of the following occur:
18.1.1 The other files a voluntary petition in bankruptcy or insolvency.
18.1.2 Proceedings in bankruptcy or insolvency are instituted against the
other and a's not contested or opposed witnin 30 days thereafter.
18.1.3 A court takes and retains for at least 30 days jurisdiction of the
other or its assets under any reorganisation or insolvency act.
18.1.4 A receiver, administrator, administrative receiver or similar
officer is appointed in respect of the other or of a substantial
proportion of its assets or any event occurs or proceedinos are
taken in respect of such party in any jurisdiction to which it is
subject, which has an effect equivalent to the above events.
18.1.5 The other becomes insolvent or suspends business.
18.1.6 The other makes an assignment for the benefit of its creditors.
18.1.7 The other party commits a substantial breach of this Agreement
which is incapable of remedy.
<PAGE>
18.1.8 If, under the terms of this Agreement, the other party commits a
breach which is capable of being remedied and which shall not have
been remedied within 15 days of the receipt of a notice in writing
requiring the remedy of such default, then the party serving the
notice shall have the right to terminate this Agreement forthwith
by giving a further notice to that effect.
The effective date of such termination shall be the date
contained in the said notice.
18.2 Either party may terminate this Agreement other than under Schedule Clause
18.1 by giving three (3) months written notice to the other and the
effective date of such termination notice shall be the date on which such
notice is sent.
18.3 Any work in progress at the date of termination shall be completed and the
provisions of this Agreement shall continue to apply until all matters
arising in respect thereof have been discharged. Any termination arising
under this Clause shall be without prejudice to any matter or thing
arising before the date of termination.
CLAUSE 19 - NON WAIVER
- ----------------------
19.1 No failure at any time of either party to enforce any provision of this
Agreement shall either constitute a waiver of such provision nor
prejudice the right of such party to enforce such provisions at any
subsequent time.
CLAUSE 20 - ALTERATIONS AND AMENDMENTS TO AGREEMENT
- ---------------------------------------------------
20.1 No alterations, amendments or variations, to the terms and conditions of
this Agreement will be effective unless contained in a written document
signed by an authorized representative of each party.
CLAUSE 21 - APPLICABLE LAW, INVALIDITY AND RESTRICTIVE TRADE PRACTICES ACT
- --------------------------------------------------------------------------
21.1 This Agreement will in all respects be subject to and interpreted in all
respects in accordance with the Laws of England and, in the event of any
dispute, the parties hereto agree to submit to the Jurisdiction of the
High Court of England.
21.2 Invalidity If any term or provision in this Agreement shall be held to
be illegal or unenforceable, in whole or in part, under any enactment or
rule of law, such term or provision or part shall to that extent be deemed
not to form part of this Agreement and the enforceability of the remainder
of this Agreement shall not be affected.
21.3 Restrictive Trade Practices Act If there is any provision of this
Agreement, or of any other agreements to be entered into pursuant hereto
or of any other arrangements of which this Agreement forms part, which
causes or would cause this Agreement or that agreement or arrangement to
be subject to registration under the Restrictive Trade Practices Act 1976
than that provision shall not take effect until the day after particulars
of this Agreement or of that agreement or arrangement (as the case may be)
have been furnished to the Director General of Fair Trading pursuant to
Section 24 of the Act.
CLAUSE 22 - ENTIRE AGREEMENT
- ----------------------------
22.1 This Agreement represents the entire agreement of the parties hereto and
supersedes all previous negotiations, statements or agreements whether
written or oral.
<PAGE>
Exhibit 10.40
Sheet 1
TOWER AIR, INC.
GE PAYMENT PLAN
30-Sep-98
<TABLE>
<CAPTION>
Aug-98 Sep-98 Oct-98 Nov-98 Dec-98 Jan-99
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beg. Balance 27,239 27,239 29,393 30,664 31,944 30,683
Est. Interest 204 220 230 240 230
Fixed Payment (1,500) (1,500) (1,500) (1,500) (1,500)
50% 2nd Engine (850) (850) (850)
Engine Shipments
7J/FF9/013 Lien 2,600
7J/FF9/020 1,700
7A/FF9/016 1,700
7A/FF9/019 1,700
7A/FF9/017 1,700
7A/FF9/018 1,700
7J/FF9/022 1,700
662838
====================================================================================
27,239 29,393 30,664 31,944 30,683 31,113
====================================================================================
<CAPTION>
Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beg. Balance 31,113 29,847 28,571 28,485 26,699 24,899 23,086
Est. Interest 233 224 214 214 200 187
Fixed Payment (1,500) (1,500) (2,000) (2,000) (2,000) (2,000) (2,500)
50% 2nd Engine
Engine Shipments
7J/FF9/013 Lien
7J/FF9/020
7A/FF9/016
7A/FF9/019
7A/FF9/017
7A/FF9/018
7J/FF9/022
662838 1,700
=======================================================================================
29,847 28,571 28,485 26,699 24,899 23,086 20,586
=======================================================================================
Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00
------------------------------------------------------------------------------------
Beg. Balance 20,586 19,786 19,134 18,477 16,116 13,737
Est. Interest 148 144 139 121 103
Fixed Payment (2,500) (2,500) (2,500) (2,500) (2,500) (2,500)
50% 2nd Engine
Engine Shipments
662867 1,700
685945 1,700
662993 1,700
662751 1,700
662798
====================================================================================
19,786 19,134 18,477 16,116 13,737 13,040
====================================================================================
Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00
----------------------------------------------------------------------------
Beg. Balance 13,040 12,338 9,930 7,505 5,061 2,599
Est. Interest 98 93 74 56 38 19
Fixed Payment (2,500) (2,500) (2,500) (2,500) (2,500) (2,500)
50% 2nd Engine
Engine Shipments
662867
685945
662993
662751
662798 1,700
============================================================================
12,338 9,930 7,505 5,061 2,599 118
============================================================================
</TABLE>
Terms:
- $1.5M fixed payment each month beginning 9/98 through 3/99. At Tower's option
if a second engine is to be delivered in a given month then 50% of the repair
bill must be paid before shipment, any additional engine beyond the second
must be paid in full.
- Fixed payment increases to $2M per month beginning 4/99 through 7/99, then
increases again to 2.5M per month. The same multiple delivery requirements
apply.
- All payments are expected by the fifteenth of a given month. If a payment
will come later than the fifteenth then Tower must notify in advance.
- All conditions and agreements are subject to meeting the payment plan.
/s/ Jeffrey Bornstein /s/ Philip R. Brookmeyer
------------------------- --------------------------
GE Engine Services Tower Air
Page 1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,478
<SECURITIES> 2,157
<RECEIVABLES> 36,959
<ALLOWANCES> 1,160
<INVENTORY> 0
<CURRENT-ASSETS> 42,636
<PP&E> 483,870
<DEPRECIATION> 223,732
<TOTAL-ASSETS> 309,794
<CURRENT-LIABILITIES> 156,351
<BONDS> 122,449
0
0
<COMMON> 156
<OTHER-SE> 55,046
<TOTAL-LIABILITY-AND-EQUITY> 309,794
<SALES> 0
<TOTAL-REVENUES> 162,875
<CGS> 0
<TOTAL-COSTS> 138,690
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 637
<INTEREST-EXPENSE> 3,030
<INCOME-PRETAX> 21,925
<INCOME-TAX> 9,865
<INCOME-CONTINUING> 12,060
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,060
<EPS-PRIMARY> 0.79
<EPS-DILUTED> 0.79
</TABLE>
