<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 March 31, 1999
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 April 21, 1999, there were 15,575,424 shares of Common Stock, par value
$.01 per share, outstanding.
- --------------------------------------------------------------------------------
Page 1 of 22 Pages
<PAGE>
TOWER AIR, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of March 31, 1999
and December 31, 1998............................................ 3
Statements of Operations for the three months ended
March 31, 1999 and 1998.......................................... 4
Statements of Cash Flows for the three months ended
March 31, 1999 and 1998.......................................... 5
Notes to Financial Statements.................................... 6
Selected Operating Data.......................................... 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk...................................................... 20
Part II. Other Information................................................ 21
Signatures................................................................. 22
2
<PAGE>
Part I Financial Information
Item 1. Financial Statements
TOWER AIR, INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited) (Note)
-------- --------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,098 $ 1,614
Certificates of deposit, at cost,
which approximates market 2,157 2,157
Receivables, net of allowance for doubtful accounts 42,008 38,626
Prepaid expenses and other current assets 1,813 3,414
-------- --------
Total current assets 49,076 45,811
Property and Equipment, at cost:
Flight equipment 535,720 500,520
Ground property and equipment 34,377 34,067
-------- --------
570,097 534,587
Less accumulated depreciation and amortization 239,885 235,658
-------- --------
330,212 298,929
Other Assets 6,167 6,022
-------- --------
$385,455 $350,762
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 12,088 $ 12,818
Accounts payable 57,455 58,558
Accrued liabilities 43,086 44,329
Air traffic liability 17,176 13,793
Current maturities of long-term debt 70,446 56,701
-------- --------
Total current liabilities 200,251 186,199
Long-Term Debt 116,384 91,932
Deferred Income Taxes 17,886 19,558
Deferred Rent 1,522 1,616
Stockholders' Equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized; none issued -- --
Common stock, $.01 par value;
35,000,000 shares authorized;
15,575,424 issued 156 156
Additional paid-in capital 44,428 44,428
Retained earnings 6,339 8,384
Less treasury stock, at cost (210,000 shares) (1,511) (1,511)
-------- --------
Total stockholders' equity 49,412 51,457
-------- --------
$385,455 $350,762
======== ========
</TABLE>
See accompanying notes to financial statements.
Note: The Balance Sheet at December 31, 1998 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)
Three Months Ended
March 31,
------------------
1999 1998
-------- --------
Operating Revenues:
Scheduled Passenger Service $ 65,644 $ 52,725
Commercial Charter Service 16,810 25,771
Military Charter Service 11,397 13,023
Cargo Service 4,019 3,462
Other 2,793 1,759
-------- --------
Total operating revenues 100,663 96,740
Operating Expenses:
Fuel 16,870 15,506
Flight equipment rentals and insurance 6,730 8,282
Maintenance 6,725 11,699
Crew costs and other 6,191 6,568
Aircraft and traffic servicing 19,641 18,866
Passenger servicing 11,211 12,285
Promotion, sales and commissions 12,578 13,917
General and administrative 5,384 4,852
Depreciation and amortization 14,789 14,120
-------- --------
Total operating expenses 100,119 106,095
-------- --------
Operating Income (Loss) 544 (9,355)
Interest and Other Expenses:
Interest expense 4,306 3,897
Other (income) expense (44) 67
-------- --------
Total other expenses 4,262 3,964
-------- --------
Loss Before Income Taxes (3,718) (13,319)
Income Tax Benefit (1,673) (5,994)
-------- --------
Net Loss $ (2,045) $ (7,325)
========= =========
Basic and Diluted Loss Per Share $ (0.13) $ (0.48)
======== ========
Weighted Average Shares Outstanding 15,365 15,347
======== ========
See accompanying notes to financial statements
4
<PAGE>
TOWER AIR, INC.
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (2,045) $ (7,325)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 14,789 14,120
Provision for doubtful accounts 67 15
Deferred income taxes (1,673) (5,994)
Deferred rent (93) 46
Changes in operating assets and liabilities:
Receivables (3,448) (634)
Income tax receivable -- 3,700
Prepaid expenses and other assets 1,292 (1,953)
Accounts payable and accrued liabilities 1,175 (4,338)
Air traffic liability 3,383 3,971
---------- ----------
Net cash provided by operating activities 13,447 1,608
Cash Flows From Investing Activities:
Purchase of flight equipment (11,285) (11,875)
Purchase of ground property and equipment (310) (162)
Proceeds from sale of flight equipment 4,154 --
Decrease in certificates of deposit -- 250
---------- ----------
Net cash used in investing activities (7,441) (11,787)
Cash Flows From Financing Activities:
Proceeds from borrowings 93,881 121,812
Proceeds stock option -- 134
Principal payments on borrowings (98,267) (113,964)
Other (136) (352)
---------- ----------
Net cash (used in) provided by financing activities (4,522) 7,630
---------- ----------
Net increase (decrease) in cash and cash equivalents 1,484 (2,549)
Cash and cash equivalents at beginning of period 1,614 3,922
---------- ----------
Cash and cash equivalents at end of period $ 3,098 $ 1,373
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 3,545 $ 3,319
Supplemental Schedule of Noncash Investing and
Financing Activities:
Purchase of flight equipment accrued but not paid $ 10,638 $ 7,781
Purchase of flight equipment financed through debt $ 48,988 $ 7,936
</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, 1998. The results of operations for the three months ended March
31, 1999 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 a Loan Agreement which extended the
term of a line of credit with Heller Financial, Inc. (Heller) until September
1999. The line of credit, which was increased from $15.0 million to $20.0
million on April 14, 1999, decreasing to $15.0 million on August 31, 1999 and
thereafter, is further limited to suppressed availability based on the value of
the collateral. As of April 14, 1999, the Company has $19.3 million of
availability based on the value of the collateral at such time. The line of
credit 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 nine 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% (9.25% at December 31, 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
6
<PAGE>
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 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 again 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. On April 14, 1999, the eighth amendment to this Loan Agreement
increased the maximum amount of borrowings under the facility to (i) $20.0
million from April 14, 1999 to May 30, 1999, (ii) $19.0 million from May 31,
1999 to June 29, 1999, (iii) $18.0 million from June 30, 1999 to July 30, 1999,
(iv) $16.0 million from July 31, 1999 to August 30, 1999, and (v) $15.0 million
on August 31, 1999 and thereafter. In addition, under the eighth amendment, the
Company agreed to maintain at all times an amount of excess collateral available
under the facility of $7.0 million, plus an additional $0.5 million for each
additional $1.0 million borrowed above $15.0 million. This eighth amendment also
waived a covenant default relating to defaults of certain covenants. On April
15, 1999, the ninth amendment to the loan agreement between the Company and
Heller further modified the Tangible Net Worth covenant in the loan agreement by
reducing the amounts the Company is required to maintain to $45.0 million from
March 1999 through June 1999 and $50.0 million thereafter through September
1999. As of March 31, 1999, the Company had $12.1 million of obligations
outstanding under the Loan Agreement, with an additional $2.0 million consisting
of letters of credit issued to various suppliers and insurance companies.
In January 1998, the Company entered into a $15.0 million loan agreement with a
commercial financial institution secured by twelve Pratt & Whitney engines, of
which $11.3 million was used to pay the balance remaining on two previous
agreements with the same commercial financial institution. On February 8, 1999,
the aggregate balance of $6.8 million outstanding on this note was paid from the
proceeds of a sale and leaseback transaction with another commercial financial
institution. Under this capitalized sales and leaseback arrangement, the Company
is required to make fixed monthly payments of approximately $0.3 million
consisting of principal and interest at 10.6% through January 2004.
7
<PAGE>
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 originally provided for
interest at an annual rate of 12.0%, increasing to 15% after August 7, 1998.
The Nachtomi Note was amended on August 6, 1998, establishing an annual interest
rate of 12% after August 7, 1998, as well as a new maturity date of April 30,
1999. On April 14, 1999, the Nachtomi Note was amended to extend the maturity
date to January 1, 2000. 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.
From September 1997 through March 1998, the Company entered into a finance
agreement involving the conversion and refurbishment of Pratt & Whitney engines.
In connection with this transaction, eight engines were financed for $38.4
million with interest at prime plus 2%. In September 1998, the lender agreed to
increase the loan to include $4.2 million relating to certain engines previously
overhauled. The loan was restructured and 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 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. Under this restructuring agreement, the Company
was unable to make required payments for January through March 1999 amounting to
$4.5 million. The Company has reached an understanding with the financial
institution whereby this amount will be paid by September 1999.
In July 1998, the Company did not meet the minimum net worth requirements of an
operating lease agreement entered into in connection with a sale and leaseback
transaction, but has obtained a waiver of that provision through July 31, 1999.
In addition, on April 14, 1999, the Company obtained waivers under certain lease
and debt agreements for a covenant default relating to defaults of certain
covenants. The Company obtained agreements with other lessors for deferred or
revised payment terms for approximately $8.1 million of lease and maintenance
reserve payments. As of March 31, 1999, the outstanding amount is approximately
$2.3 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.
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 payment 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.
8
<PAGE>
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
restructured Aircraft Loan and Security Agreements, the Company is required to
pay an aggregate monthly principal payment of $0.5 million plus interest through
March 1999, which will pay off one of the three loans and the remaining two
loans will require a monthly principal and interest payment, commencing April
1999, of $1.2 million and $0.5 million through December 2002 and February 2003,
respectively.
On November 13, 1998, the Company purchased another existing leased aircraft
from a lessor for a purchase price of $21.0 million of which $20.0 million was
financed by the same lessor. The loan is comprised of two notes of $10.0
million each and requires a fixed total monthly payment of $105,000 each
consisting of principal and interest.
On December 31, 1998, the Company purchased three Pratt and Whitney engines from
a vendor for a total purchase price of $8.1 million of which $6.7 million was
financed by the same vendor. The loan, which bears interest at 9.0% per annum,
is for three years and requires a fixed monthly payment of $.2 million
consisting of principal and interest starting February 1, 1999.
On March 2, 1999, the Company purchased an existing leased aircraft for $24.5
million under a capitalized lease arrangement from the existing lessor. The
Company is required to make fixed monthly payments of approximately $0.4 million
consisting of principal and interest at 9.7% through September 2006.
On March 24, 1999, the Company purchased four Pratt & Whitney engines from a
commercial financial institution for a total purchase price of $10.8 million of
which $9.1 million was financed by the same financial institution. The loan,
which bears interest at 10.0% per annum, is for a period of eighteen months and
requires a fixed monthly payment of $0.5 million consisting of principal and
interest starting April 23, 1999.
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.
As of March 31, 1999, the Company had $70.4 million of required principal
payments on long-term debt due within one year.
3. Stockholders' Equity
In an effort to conserve cash, the Company suspended cash dividends on its
Common Stock after the third quarter of 1996.
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
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share, Statement No. 128
replaced the calculation of primary earnings per share and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excluded any dilutive effects of
options, warrants, and convertible securities. Diluted earnings per share is
very similar to the previously reported fully diluted earnings per share. All
earnings per share amounts have been
9
<PAGE>
presented, and where appropriate, restated to conform to Statement No. 128
requirements.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1999 1998
---- ----
(in thousands except for per share data)
<S> <C> <C>
Numerator for basic and diluted earnings per share - loss
available to common stockholders after assumed
conversions (2,045) (7,325)
======================================
Denominator for basic and diluted earnings per share-
adjusted weighted average shares and assumed
conversions 15,365 15,347
======================================
Basic and diluted earnings per share $ (.13) $ (.48)
======================================
</TABLE>
10
<PAGE>
TOWER AIR, INC.
SELECTED OPERATING DATA
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1999 1998
------------------ ---------------
<S> <C> <C>
Scheduled Passenger Service:
Revenue passengers carried
(in thousands) 374 295
Revenue passenger miles
(in thousands) (RPMs) (1) 854,086 755,301
Available seat miles
(in thousands) (ASMs) (2) 1,123,964 994,341
Passenger load factor (3) 76.06% 75.96%
Yield per RPM (4) $ 0.0769 $ 0.0698
Block hours flown (5) 5,577 4,697
Operating expense per ASM (6) $ 0.0549 $ 0.0559
Revenue per block hour (7) $ 11,770 $ 11,225
Variable expense per block $ 8,811 $ 10,124
hour (8)
Commercial Charter Service:
Block hours flown (5) 1,949 3,741
Revenue per block hour (7) $ 8,625 $ 6,889
Variable expense per block $ 5,100 $ 4,082
hour (8)
Military Charter Service:
Block hours flown (5) 1,009 1,106
Revenue per block hour (7) $ 11,295 $ 11,775
Variable expense per block $ 5,600 $ 7,156
hour (8)
Cargo Service:
Block hours flown (5) 763 612
Revenue per block hour (7) $ 5,267 $ 5,657
Variable expense per block $ 2,598 $ 3,314
hour (8)
Total:
Block hours flown (5) 9,298 10,156
Revenue per block hour (7) $ 10,526 $ 9,352
Variable expense per block $ 7,175 $ 7,165
hour (8)
Average hours of daily 8.3 9.3
utilization (9)
Employees (at period-end) 1,640 1,987
Number of aircraft in service
(at period-end) (10) 17 17
</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 the 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.
11
<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 1996.
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. These factors include,
among others, the following: general economic conditions affecting the industry
and the Company; competition within the industry; changes in consumer
preferences; regulatory changes; and political, social and economic conditions
in key markets.
Results of Operations
For the three-month period ended March 31, 1999 (the "1999 First Quarter"), the
Company recorded an operating profit of $0.5 million and a net loss of $2.0
million, or $0.13 per share. This compares with an operating loss of $9.4
million and a net loss of $7.3 million, or $0.48 per share, for the three-month
period ended March 31, 1998 (the "1998 First Quarter"). The decrease in net
loss of $5.3 million for the 1999 First Quarter as compared to the 1998 First
Quarter resulted from increased revenues of $3.9 million, or 4.0% and decreased
operating expenses of $6.0 million, or 5.6% while block hours decreased by 8.4%.
Operating Revenues. The Company's operating revenues for the 1999 First Quarter
increased by $3.9 million, or 4.1%, to $100.7 million compared with operating
revenues of $96.7 million in the 1998 First Quarter.
Scheduled passenger service revenues for the 1999 First Quarter increased $12.9
million, or 24.5%, to $65.6 million from $52.7 million in 1998 First Quarter.
Scheduled passenger traffic (as measured in revenue passenger miles) for the
1999 the First Quarter increased by 13.1%, while capacity increased by 13.0%,
resulting in a small load factor increase to 76.1% compared to 76.0% in the 1998
First Quarter. Higher operating revenues for the 1999 First Quarter were
attributable to a number of factors, including: (i) increased frequencies on
existing routes, (ii) inception of new domestic and international markets, (iii)
a 10.2% increase in yields per RPM and (iv) increased domestic market demand
during the 1999 First Quarter which resulted in an increase of $8.9 million, or
28.3%, in revenue over the 1998 First Quarter.
Commercial charter revenue for the 1999 First Quarter decreased by $9.0 million,
or 34.8%, to $16.8 million from $25.8 million for the 1998 First Quarter,
primarily due to decreased activities in Hajj charter operations from seven
aircraft in 1998 compared to four aircraft in 1999.
12
<PAGE>
Military charter revenue for the 1999 First Quarter decreased by $1.6 million,
or 12.5%, to $11.4 million from $13.0 million for the 1998 First Quarter
primarily due to a temporary two-week suspension of the military contract during
the 1999 First Quarter.
Cargo charter revenue increased by 16.1% from $3.5 million to $4.0 million in
the 1999 First Quarter due to a new Aircraft, Crew, Maintenance and Insurance
(ACMI) agreement with an European airline. The increased revenue was partly
offset by a ground damage incident which occurred on one of the Company's two
B747-200 cargo aircraft on December 1, 1998. This damage was caused during the
fueling of the aircraft as a result of fire in the fuel truck which was owned
and operated by a third party. The repair to the aircraft is covered by
insurance and the Company is also seeking monetary compensation for the loss of
revenue as well as other expenses incurred by the Company in connection with the
loss of service of this aircraft. This aircraft will be back in service during
the 1999 Second Quarter. One of the Company's cargo aircraft has been inoperable
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. The FAA has approved a modification plan and the Company is presently
assessing the cost of such modification program. There is no assurance that such
aircraft will be returned to service.
Operating Expenses. The Company's operating expenses for the 1999 First Quarter
decreased $6.0 million, or 5.6%, to $100.1 million from $106.1 million for the
1998 First Quarter. Operating expenses, excluding fuel, depreciation and
amortization, decreased by 10.5% in the 1999 First Quarter while block hours
decreased by 8.4%. This decrease in operating expenses resulted from lower
rental and maintenance expenses associated with the Company's reduction of
leased engines along with the purchase of two Boeing 747-200 aircraft in the
second half of 1998 from the existing lessors and the conversion of a third
Boeing B747-200 aircraft to a capitalized lease with another existing lessor in
the 1999 First Quarter.
Aircraft fuel expenses for the 1999 First Quarter increased $1.4 million, or
8.8%, to $16.9 million from $15.5 million for the 1998 First Quarter. The
increase in the 1999 First Quarter resulted from a 20.3% increase in consumption
due to a change of business mix whereby the Company, in 1999, is responsible for
fuel cost under a certain charter agreement compared with an ACMI agreement in
1998, partially offset by a 9.6% decrease in the cost of fuel.
Flight equipment rentals and insurance expenses for the 1999 First Quarter
decreased $1.6 million, or 18.7%, to $6.7 million from $8.3 million for the
1998 First Quarter. The decrease was attributable to lower rental associated
with the Company's reduction of leased engines along with the purchase of two
previously leased Boeing 747 aircraft in the second half of 1998 and the
conversion to a capital lease of a third Boeing 747 in the 1999 First Quarter.
13
<PAGE>
Maintenance costs for the 1999 First Quarter decreased $5.0 million, or 42.5%,
to $6.7 million from $11.7 million for the 1998 First Quarter. The decrease was
due primarily to lower maintenance reserves associated with the following
factors: (i) a one-time refund of $1.5 million previously paid by the Company
under the operating lease agreement of a Boeing 747 aircraft as a result of
converting to a capital lease, (ii) the purchase of two Boeing 747 aircraft in
the second half of 1998 and (iii) a reduction in the number of engines leased by
the Company due to availability of its own engines from repair facilities.
Crew costs and other expenses for the 1999 First Quarter decreased $0.4 million,
or 5.7%, to $6.2 million from $6.6 million in the 1998 First Quarter. The
decrease was primarily due to an 8.4% decrease in total block hours flown,
partially offset by increases in pay rates.
Aircraft and traffic servicing expenses for the 1999 First Quarter increased
$0.8 million, or 4.1%, to $19.6 million from $18.9 million for the 1998 First
Quarter. This increase was primarily due to an 18.7% increase in scheduled
service block hours flown. Scheduled service block hours, where the Company is
responsible for all operating expenses, represented 60.0% of total block hours
flown for the 1999 First Quarter compared to 46.2% for the 1998 First Quarter.
Passenger servicing expenses for the 1999 First Quarter decreased $1.1 million,
or 8.7%, to $11.2 million from $12.3 million for the 1998 First Quarter. The
decrease was due to an 8.4% decrease in total block hours flown, resulting in a
lower cabin crew cost, partially offset by higher cost associated with increased
scheduled service block hours as described above.
Promotion, sales and commission expenses for the 1999 First Quarter decreased
$1.3 million, or 9.6%, to $12.6 million from $13.9 million for the 1998 First
Quarter. The decrease was primarily due to a decrease in the average commission
rate to 11.5% in the 1999 First Quarter from 17.4% in the 1998 First Quarter.
General and administrative expenses for the 1999 First Quarter increased $0.5
million, or 11.0%, to $5.4 million from $4.9 million for the 1998 First Quarter.
As a percentage of operating revenue, general and administrative expenses for
the 1999 First Quarter was 5.3% compared to 5.0% for the 1998 First Quarter.
Depreciation and amortization expenses for the 1999 First Quarter increased $0.7
million, or 4.7%, to $14.8 million from $14.1 million for the 1998 First
Quarter. The increase was principally due to the purchase of two Boeing 747
aircraft in the second half of 1998 and capitalized engine overhauls.
Other Expenses and Income. Interest expense for the 1999 First Quarter
increased by $0.4 million, or 10.5%, to $4.3 million from $3.9 million for the
1998 First Quarter. The increase reflects a higher average outstanding debt
balance in the 1999 First Quarter.
14
<PAGE>
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 certificates of deposit at March 31,
1999 and December 31, 1998 were $5.3 million and $3.8 million, respectively.
The Company generated cash from operations for the 1999 and 1998 First Quarters
of $13.4 million and $1.6 million, respectively.
Net cash used in investing activities was $7.4 million for the 1999 First
Quarter compared with $11.8 million for the 1998 First Quarter. The Company's
expenditures for flight equipment were $11.3 million for the 1999 First Quarter
compared with $11.9 million for the 1998 First Quarter. Expenditures for flight
equipment in the 1999 First Quarter included the 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).
The Company has no unused lines of credit and must satisfy all of its working
capital, debt service and capital expenditure requirements from internally
generated funds, from external financing sources or from the sale of assets. In
addition, the Company has no significant unpledged assets and, to the extent
that pledged assets are sold, the applicable financing arrangements generally
require the sale proceeds to be applied to repay the corresponding indebtedness.
As of March 31, 1999, the Company had negative working capital of $151.2 million
compared to negative working capital of $140.4 million as of December 31, 1998.
Historically, the Company has operated with a working capital deficit.
In September 1997, the Company entered into a Loan Agreement which extended the
term of a line of credit with Heller Financial, Inc. (Heller) until September
1999. The line of credit, which was increased from $15.0 million to $20.0
million on April 14, 1999, decreasing to $15.0 million on August 31, 1999 and
thereafter, is further limited to suppressed availability based on the value of
the collateral. As of April 14, 1999, the Company has $19.3 million of
availability based on the value of the collateral at such time. The line of
credit 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.
From time to time during 1998 and the first quarter of 1999, the Company has
been in default under certain provisions of the Loan Agreement. The Company has
entered into amendments with Heller waiving such defaults and is currently in
compliance with such provisions as they have been amended.
15
<PAGE>
Since February 1998, the Company has entered into nine 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% (9.25% at December 31, 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
of the Nachtoml 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 again 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. On April 14, 1999, the
eighth amendment to this Loan Agreement increased the maximum amount of
borrowings under the facility to (i) $20.0 million from April 14, 1999 to May
30, 1999, (ii) $19.0 million from May 31, 1999 to June 29, 1999, (iii) $18.0
million from June 30, 1999 to July 30, 1999, (iv) $16.0 million from July 31,
1999, to August 30, 1999, and (v) $15.0 million on August 31, 1999 and
thereafter. In addition, under the eighth amendment, the Company agreed to
maintain at all times an amount of excess collateral available under the
facility of $7.0 million, plus an additional $0.5 million for each additional
$1.0 million borrowed above $15.0 million. This eighth amendment also waived a
covenant default relating to late payments of excise taxes, which as of April
15, 1999, the Company has paid in full. On April 15, 1999, the ninth amendment
to the loan agreement between the Company and Heller further modified the
Tangible Net Worth covenant in the loan agreement by reducing the amounts the
Company is required to maintain to $45.0 million from March 1999 through June
1999 and $50.0 million thereafter through September 1999.
In January 1998, the Company entered into a $15.0 million loan agreement with a
commercial financial institution secured by twelve Pratt & Whitney engines, of
which $11.3 million was used to pay the balance remaining on two previous
agreements with the same commercial financial institution. On February 8, 1999,
the aggregate balance of $6.8 million outstanding on this note was paid from the
proceeds of a sale and leaseback transaction with another commercial financial
institution. Under this capitalized sales and leaseback arrangement, the Company
is required to make fixed monthly payments of approximately $0.3 million
consisting of principal and interest at 10.6% through January 2004.
16
<PAGE>
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 originally provided for
interest at an annual rate of 12.0%, increasing to 15% after August 7, 1998. The
Nachtomi Note was amended on August 6, 1998, establishing an annual interest
rate of 12% after August 7, 1998, as well as a new maturity date of April 30,
1999. On April 14, 1999, the Nachtomi Note was amended to extend the maturity
date to January 1, 2000. 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.
From September 1997 through March 1998, the Company entered into a finance
agreement involving the conversion and refurbishment of Pratt & Whitney engines.
In connection with this transaction, eight engines were financed for $38.4
million with interest at prime plus 2%. In September 1998, the lender agreed to
increase the loan to include $4.2 million relating to certain engines previously
overhauled. The loan was restructured and 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 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. Under this restructuring agreement, the Company
was unable to make required payments for January through March 1999 amounting to
$4.5 million. The Company has reached an understanding with the financial
institution whereby this amount will be paid by September 1999.
In July 1998, the Company did not meet the minimum net worth requirements of an
operating lease agreement entered into in connection with a sale and leaseback
transaction, but has obtained a waiver of that provision through July 31, 1999.
In addition, on April 14, 1999, the Company obtained waivers under certain lease
and debt agreements for a covenant default relating to the late payment of
excise taxes, which as of April 15, 1999, the Company has paid in full. During
1998, the Company obtained agreements with other lessors for deferred or revised
payment terms for approximately $8.1 million of lease and maintenance reserve
payments. As of March 31, 1999, the outstanding amount is approximately $2.3
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.
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 payment 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.
17
<PAGE>
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 restructured
Aircraft Loan and Security Agreements, the Company is required to pay an
aggregate monthly principal payment of $0.5 million plus interest through March
1999, which will pay off one of the three loans and the remaining two loans will
require a monthly principal and interest payment, commencing April 1999, of $1.2
million and $0.5 million through December 2002 and February 2003, respectively.
On November 13, 1998, the Company purchased another existing leased aircraft
from a lessor for a purchase price of $21.0 million of which $20.0 million was
financed by the same lessor. The loan is comprised of two notes of $10.0 million
each and requires a fixed total monthly payment of $105,000 each consisting of
principal and interest.
On December 31, 1998, the Company purchased three Pratt and Whitney engines from
a vendor for a total purchase price of $8.1 million of which $6.7 million was
financed by the same vendor. The loan, which bears interest at 9.0% per annum,
is for three years and requires a fixed monthly payment of $.2 million
consisting of principal and interest starting February 1, 1999.
On March 2, 1999, the Company purchased an existing leased aircraft for $24.5
million under a capitalized lease arrangement from the existing lessor. The
Company is required to make fixed monthly payments of approximately $0.4 million
consisting of principal and interest at 9.7% through September 2006.
On March 24, 1999, the Company purchased four Pratt & Whitney engines from a
commercial financial institution for a total purchase price of $10.8 million of
which $9.1 million was financed by the same financial institution. The loan,
which bears interest at 10.0% per annum, is for a period of eighteen months and
requires a fixed monthly payment of $0.5 million consisting of principal and
interest starting April 23, 1999.
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 is highly leveraged and has and will continue to have significant
debt service obligations. The Company currently expects that capital
expenditures for 1999 will total approximately $40.0 million, included will be
expenditures for scheduled heavy airframe maintenance and engine overhaul on the
Company's aircraft.
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
18
<PAGE>
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. 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. However, 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.
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 strengthened its MIS Department with the hiring of additional
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 is 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 is 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
19
<PAGE>
business functions can not be carried out in the normal manner upon entering the
next century due to system or supplier failure.
The Company, as an International Air Transport Association (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 and
to assess/promote their Year 2000 preparedness. Working closely with The
Airports Council International, the International Civil Aviation Organization,
(ICAO) and other industry organizations, IATA has developed and piloted a
standard methodology to assess Year 2000 readiness. The project provides
training on how to use the methodology, and tracks 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.
20
<PAGE>
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, 1998 are the following:
The U.S. Federal Court action Leticia Parra, individually and on behalf of all
------------------------------------------------
persons similarly situated v. Tower Air, Inc. was dismissed and the matter was
- ----------------------------------------------
re-filed with similar claims by Plaintiffs in a New York State Court on July 10,
1998. The Company's Motion for Summary Judgment and Motion to Deny Class
Certification were argued on April 28, 1999, and await decision.
The Company has appealed the granting of class certification in Steven Liechtung
----------------
on behalf of himself and all other similarly situated v. Tower Air, Inc.
- ------------------------------------------------------------------------
Item 2. Changes in Securities and Use of Proceeds.
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) 10(44) C.I.T. - Capitalized Leasing Agreement, dated March 2, 1999
10(45) UniCapital Aircraft Engine Group, Inc. Engine Sale Agreement and
Purchase Agreement, dated February 8, 1999
10(46) Heller Financial-Eighth Amendment to Amended & Restated Loan &
Security Agreement, dated April 14, 1999
10(47) Heller Financial-Ninth Amendment to Amended & Restated Loan &
Security Agreement, dated April 15, 1999
(b)Exhibit 27 Financial Data Schedule
21
<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: May 17, 1999 /s/ Morris K. Nachtomi
--------------------------------------
Morris K. Nachtomi
Chief Executive Officer
and Chairman of the Board of Directors
(Principal Executive Officer)
Date: May 17, 1999 /s/ Badar Mir
--------------------------------------
Badar Mir
Vice President-Financial Accounting
(Principal Financial Officer)
22
<PAGE>
EXHIBIT 10(44)
EXECUTION COPY
================================================================================
AMENDMENT NUMBER ELEVEN
AND AGREEMENT
DATED AS OF MARCH 2, 1999
TO
AIRCRAFT LEASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1992
between
C.I.T. LEASING CORPORATION,
as Lessor
and
TOWER AIR, INC.,
as Lessee
Concerning:
One Boeing 747-212B Aircraft
Four Pratt & Whitney JT9D-7J Engines
FAA Registration Number N6186
Manufacturer's Serial Number 21439
================================================================================
<PAGE>
AMENDMENT NUMBER ELEVEN AND AGREEMENT
TO AIRCRAFT LEASE AGREEMENT
THIS AMENDMENT NUMBER ELEVEN AND AGREEMENT dated as of March 2, 1999 (this
"Amendment Number Eleven") to the AIRCRAFT LEASE AGREEMENT dated as of September
30, 1992, as amended, is entered into between C.I.T. LEASING CORPORATION, a
Delaware corporation ("Lessor"), and TOWER AIR, INC., a Delaware corporation
("Lessee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lessor and Lessee are parties to: (i) that certain Aircraft Lease
Agreement dated as of September 30, 1992, as supplemented by the Lease
Supplement, dated October 9, 1992, which documents were recorded as one
instrument by the Federal Aviation Administration ("FAA") on October 19, 1992 as
Conveyance No. H80322; (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.
NN007219; (iii) a letter agreement dated October 31, 1994 ("Letter Agreement
----------------
One"), pursuant to which the parties agreed to extend the Term of the Lease from
- ---
and including November 1, 1994 to and including November 7, 1994; (iv) a letter
agreement dated November 18, 1994 ("Letter Agreement Two"), pursuant to which
--------------------
the parties agreed to extend the Term of the Lease from and including November
1, 1994 to and including January 15, 1995; (v) that certain Amendment Number Two
and Agreement to Aircraft Lease Agreement dated as of January 15, 1995 (the
"Second Amendment"), which document was recorded by the FAA on March 30, 1995 as
----------------
Conveyance No. YY011160; (vi) that certain Amendment Number Three and Agreement
to Aircraft Lease Agreement dated as of May 15, 1995 (the "Third Amendment"),
---------------
which document was recorded by the FAA on June 27, 1995 as Conveyance No.
NN008961; (vii) that certain Amendment Number Four and Agreement to Aircraft
Lease Agreement dated as of February 28, 1996 (the "Fourth Amendment"), which
----------------
document was recorded by the FAA on July 29, 1996 as Conveyance No. HH012382;
(viii) a letter agreement dated September 12, 1996 ("Letter Agreement Three"),
pursuant to which Lessor was granted an early termination option; (ix) that
certain Amendment Number Five and Agreement to Aircraft Lease Agreement dated as
of March 6, 1997 (the "Fifth Amendment"), which document was recorded by the FAA
---------------
on May 12, 1997 as Conveyance No. YY018500; (x) a letter agreement dated June
24, 1997 ("Letter Agreement Four") pursuant to which the parties reached
---------------------
agreement with respect to modification of certain terms and conditions of the
Lease; (xi) that certain Amendment Number Six and Agreement to Aircraft Lease
Agreement dated as of August 29, 1997 (the "Sixth Amendment"), which document
---------------
was recorded by the FAA on March 9, 1998 as Conveyance No.JJ25276; (xii) a
letter agreement dated November 26, 1997 ("Letter Agreement Five") pursuant to
---------------------
which the parties reached agreement with respect to modification of certain
terms and conditions of the Lease, (xiii) that certain Amendment Number Seven
and Agreement to Aircraft Lease Agreement dated as of December 31, 1997 (the
"Seventh Amendment"), which document was recorded by the FAA on May 4, 1998 as
-----------------
Conveyance No. S103867; (xiv) that certain Amendment Number Eight and Agreement
to Aircraft Lease Agreement dated as of January 30, 1998 (the "Eighth
------
Amendment"), which document was recorded by the FAA on October 15, 1998 as
- ---------
Conveyance No. HH020271; (xv) that certain Amendment Number Nine and
1
<PAGE>
Agreement to Aircraft Lease Agreement dated as of April 20, 1998 (the "Ninth
-----
Amendment"), which document was filed with the FAA on January 26, 1999 but has
- ---------
not yet been recorded, and a copy of which is attached hereto as Exhibit B; and
(xvi) that certain Amendment Number Ten and Agreement to Aircraft Lease
Agreement dated as of July 15, 1998 (the "Tenth Amendment"), which document has
---------------
not been filed for recording with FAA, and a copy of which document is attached
hereto as Exhibit C (such Aircraft Lease Agreement, as heretofore amended,
modified and supplemented, hereinafter referred to as the "Lease"); and
WHEREAS, Lessor and Lessee desire to amend the Lease (i) to adjust the Term
of the Lease and the amounts of Basic Rent and Maintenance Reserves to be paid
by Lessee and (ii) to grant to Lessee an option to purchase the Aircraft, as
more particularly set forth below.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
Lessor and Lessee hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein without definition
-----------
shall have the respective meanings set forth in the Lease.
SECTION 2. Amendments to Lease.
-------------------
(a) Amendments to Definitions. Article 1 of the Lease shall be amended by
-------------------------
amending and restating certain defined terms set forth therein, as follows:
"Basic Rent" shall mean the amounts determined pursuant to Exhibit A to
----------
Amendment Number Eleven and, to the extent applicable, Exhibit A to
Amendment Number Ten.
"Rent Payment Date" shall mean the date(s) of each month during the Term
-----------------
(as amended by Amendment Number Eleven) on which a payment of Basic Rent is
due and payable as determined pursuant to Section 3.1 of this Lease, Exhibit
A to Amendment Number Eleven and, to the extent applicable, Exhibit A to
Amendment Number Ten.
and by adding the following new definitions thereto:
"Amendment Number Eleven" shall mean Amendment Number Eleven and
-----------------------
Agreement dated as of March 2, 1999 between Lessor and Lessee.
"Purchase Price" shall have the meaning given such term in Section 3.4
--------------
hereof.
(b) Amendments to Article 3. (i) Section 3.1 of the Lease shall be amended
-----------------------
and restated as follows:
"3.1. Basic Rent. From and after the Rent Payment Date occurring on
----------
March 1, 1999, on each Rent Payment Date, Lessee shall pay to Lessor the
Basic Rent payable
2
<PAGE>
in accordance with Exhibit A to Amendment Number Eleven (and, to the extent
applicable, Exhibit A to Amendment Number Ten)."
(ii) The first sentence of Section 3.2 of the Lease shall be amended and
restated as follows:
"Lessee shall pay to Lessor the Maintenance Reserves pursuant to the terms
of Section 5.7 and Exhibit A to the Amendment (or, to the extent applicable,
Exhibit A to Amendment Number Ten)."
(iii) Section 3.3 of the Lease shall be amended and restated as follows:
"3.3. Term. Except as otherwise provided for herein, the Aircraft
----
shall be leased to Lessee hereunder for a term of eleven (11) years and
seven and 1/2 (7.5) months commencing on the Commencement Date (or a term of
ninety (90) months commencing on March 1, 1999) and ending at 3:00 p.m., New
York City time, on September 1, 2006 (the "Term"). At the expiration or
----
earlier termination of the Term, unless Lessee shall have purchased the
Aircraft pursuant to Section 3.5 hereof, Lessee shall return the Aircraft
and the Aircraft Documents to Lessor in full compliance with the provisions
of this Lease, including, without limitation, the provisions of Section 16
and Exhibit B hereof."
(iv) A new Section 3.5 shall be added to the Lease as follows:
"3.5. Purchase Option. Lessee shall have the option, upon at least
---------------
210 days' and not more than 365 days' irrevocable prior written notice to
Lessor, to purchase the Aircraft on the last Business Day of the Term for a
purchase price equal to Five Hundred Thousand Dollars ($500,000) (the
"Purchase Price"); provided that, on such last Business Day of the Term, no
Default or Event of Default shall have occurred and be continuing hereunder.
Upon payment to Lessor in immediately available funds of the full amount of
the Purchase Price and payment of any other amounts then due hereunder
(including all Rent and all costs and expenses of Lessor in connection with
such purchase), Lessor will transfer to Lessee, without recourse or warranty
(except as to Lessor's title to the Aircraft and the absence of Liens
thereon resulting from Lessor's own acts or from claims against Lessor not
to be paid or indemnified against by Lessee hereunder), all right, title and
interest of Lessor in and to the Aircraft. At the time of such transfer, the
Aircraft will be located in such jurisdiction as may be mutually agreed by
Lessee and Lessor."
(c) Amendments to Article 5. (i) Section 5.3 of the Lease shall be amended
-----------------------
by deleting the parenthetical phrase "(except as provided in paragraph 1(a) of
Exhibit A to the Amendment)" in the third sentence thereof.
(ii) Section 5.5 of the Lease shall be amended and restated as follows:
3
<PAGE>
"5.5. Maintenance. Lessee, at its own expense, shall cause the
-----------
Items of Equipment to be serviced, repaired, overhauled, tested and
maintained promptly and without delay and in compliance with all applicable
Federal Aviation Regulations, including, but not limited to, Part 121
thereof (i) by personnel in accordance with FAA requirements, (ii) in
accordance with an FAA-approved Boeing 747 maintenance program and the
operations and maintenance manuals of the manufacturers thereof (including,
without limitation, an FAA-approved or manufacturer's recommended program
for the prevention and treatment of corrosion), (iii) so as to keep such
Item at all times in as good operating condition and appearance as when
delivered to Lessee hereunder, ordinary wear and tear excepted, (iv) so as
to keep such Item at all times in such operating condition as may be
necessary to cause the airworthiness certificate of such Item to be
maintained in good standing at all times under the applicable rules and
regulations of the Aeronautics Authority and (v) so as to keep the Aircraft
and such Items at all times airworthy and fit for scheduled commercial
passenger service (or, in the event the Aircraft has been converted pursuant
to Section 5.3 hereof, commercial cargo service) in the United States and
each other jurisdiction in which Lessee will operate the Aircraft. Without
limitation of the foregoing, Lessee shall cause, at its expense, all
maintenance Checks to be performed on the Aircraft as they become due, with
no fleet discrimination toward the Aircraft. Any damage, defects or
corrosion discovered during any Check shall be repaired or treated at the
sole expense of Lessee. Lessee shall provide Lessor with ten (10) days prior
notice of scheduled Checks. Lessor shall have the right to have
representatives present during such Checks who shall coordinate with
Lessee's representatives as to the work being performed during such Checks.
Lessee, at its own expense, shall furnish Lessor upon return of the Aircraft
and at such times during the Term as Lessor shall reasonably request, copies
of all records maintained under this Section 5.5 with a certificate signed
by an officer of Lessee affirming that all the maintenance work represented
by such records was performed by a then certified FAA repair station or a
Part 121 air carrier approved to maintain Boeing 747 type aircraft or a
certificate affirming that the maintenance work represented by such records
was performed in accordance with FAA requirements. Lessee, at its own
expense, shall also maintain (in the English language) all records, logs and
other materials required by the Aeronautics Authority to be maintained in
respect of each Item of Equipment, and promptly furnish to Lessor upon
Lessor's request such information as may be required to enable Lessor to
file any reports required to be filed with any Governmental Authority
because of Lessor's ownership of the Aircraft."
(iii) Section 5.7 of the Lease shall be amended and restated as follows:
"5.7 Maintenance Reserves. Lessee agrees to pay to Lessor
--------------------
Maintenance Reserves with respect to the Aircraft during the Term of this
Lease in accordance with Exhibit A to the Amendment (or, to the extent
applicable, Exhibit B to Amendment Number Seven and/or Exhibit A to
Amendment Number Ten); provided, however, that Lessee shall not be obligated
-------- -------
to pay to Lessor Maintenance Reserves (other than
4
<PAGE>
Maintenance Reserves which are payable pursuant to Exhibit A to Amendment
Number Ten) in respect of the portion of the Term from and after February
26, 1999, including Maintenance Reserves which have accrued to and including
the Rent Period ending on February 28, 1999, and, from and after February
26, 1999, Lessor shall not be obligated to pay to Lessee or any third party
(i) any Airframe Reimbursable Expenses, Engine Reimbursable Expenses,
Landing Gear Reimbursable Expenses or APU Reimbursable Expenses, or (ii) any
Excess Amount (as such term is defined in Exhibit F hereto or Exhibit A to
the Amendment, as amended), including, in each case, any such expenses or
amounts which have been incurred or which have accrued either prior to or
after February 26, 1999, and, other than as expressly set forth herein, from
and after February 26, 1999, the terms of Exhibit F hereto and Exhibit A to
the Amendment shall be of no further force or effect. All Maintenance
Reserves shall be applied in accordance with Exhibit A to the Amendment (as
amended); provided, however, that, notwithstanding the provisions of such
Exhibit A to the contrary, any amounts held by Lessor on February 26, 1999
in any Maintenance Reserve shall be applied to pay any outstanding Engine
Reimbursable Expenses submitted by Lessee to Lessor for approval and payment
on or prior to such date in respect of the Engine bearing manufacturer's
serial number 685860 and all excess amounts, if any, remaining in the
Maintenance Reserves after payment of such Engine Reimbursable Expenses
shall be applied by Lessor on such date to the payment of any Basic Rent
and/or Supplemental Rent which is due and payable by Lessee under the Lease
on or prior to March 1, 1999. All excess amounts, if any, remaining in the
Maintenance Reserves after payment of any amounts of Rent that are due and
owing to Lessor on or prior to March 1, 1999 shall, as long as no Default or
Event of Default has occurred and is continuing, be paid to Lessee on
February 26, 1999, provided that if, at the time of payment of such amounts,
a Default or an Event of Default shall have occurred and be continuing
hereunder, all such amounts shall be held by, or on behalf of, Lessor as
security for the obligations of Lessee hereunder, and at Lessor's option,
applied by Lessor toward payment of any of Lessee's obligations hereunder.
At such time as there shall not be continuing any such Default or Event of
Default hereunder, such amounts, to the extent not previously applied, shall
be paid to Lessee."
(iv) Section 5.8 of the Lease shall be amended and restated as follows:
"5.8. Application of Certain Maintenance Reserves. Any Maintenance
-------------------------------------------
Reserves that are due and payable pursuant to Exhibit A to Amendment Number
Ten shall be paid by Lessee to Lessor in accordance with the terms of such
Amendment Number Ten. Upon payment thereof to Lessor, all such Maintenance
Reserves shall be retained by Lessor as Supplemental Rent."
(v) Section 5.9 of the Lease shall be of no further force and effect in
respect of each Rent Period and each Prior Period occurring from and after
February 26, 1999 during the Term.
(vi) The fifth sentence of Section 5.10 of the Lease shall be amended and
restated as
5
<PAGE>
follows:
"Basic Rent shall be payable by Lessee during the CRAF Activation Period and
the CRAF Extension Period in accordance with Exhibit A to Amendment Number
Eleven."
and the eighth sentence of Section 5.10 of the Lease shall be amended and
restated as follows:
"All other terms and provisions of this Lease shall continue in full force
and effect during any such CRAF Activation Period and CRAF Extension Period
and until such time as Lessee has discharged all its obligations under this
Lease, including, but not limited to, the return of the Aircraft in
compliance with the terms of this Lease."
(d) Amendments to Section 9.3. Section 9.3 of the Lease shall be amended
-------------------------
and restated as follows:
"9.3. Alterations, Modifications and Additions. Except as
----------------------------------------
required below or by Section 5.5 hereof, Lessee shall not make any
alteration, modification or addition to the Airframe or any of the Engines
without the prior written consent of Lessor. Lessee will, at Lessee's sole
cost and expense, make such alterations, modifications and additions to the
Airframe, Engines and Parts as may be required from time to time to meet the
applicable mandatory service bulletins of the manufacturer and to accomplish
all Airworthiness Directives which require compliance during the Term of
this Lease. Title to all accessories, equipment, devices, improvements,
modifications, alterations and additions affixed or installed pursuant to
this Section 9.3 shall without further act vest in Lessor and shall be
deemed to constitute a part of the Aircraft and be subject to this Lease."
(e) Amendments to Exhibit B. (i) Paragraph (13) of Exhibit B to the Lease
-----------------------
shall be amended by adding the following sentence at the end of such Paragraph:
"Each Engine shall have a maximum of 5,000 Flight Hours and 1,000 Cycles
accumulated since its most recent Engine restoration shop visit."
(ii) Paragraph (14) of Exhibit B to the Lease shall be amended and restated
as follows:
"(14) All Time Controlled Parts, including, without limitation,
Time Controlled Parts which are categorized as "C" Check and "D" Check tasks
pursuant to Lessee's FAA-approved maintenance program, and Landing Gear
shall have a minimum of fifty percent (50%) remaining of the allowable time
between overhauls, and a minimum of fifty percent (50%) remaining of the
total allowable life in the case of life limited Parts (excluding Engine
life limited Parts)."
(iii) Paragraph (15) of Exhibit B to the Lease shall be amended by adding
the following sentence at the end of such Paragraph:
6
<PAGE>
"The APU shall have been overhauled not more than one (1) calendar year
prior to the Expiration Date."
(iv) Paragraph 20 of Exhibit B to the Lease shall be amended and restated as
follows:
"(20) Upon the expiration or termination of the Lease, the Aircraft
shall have completed a "C" Check (or its equivalent) immediately prior to
return of the Aircraft in accordance with Lessee's FAA-approved maintenance
program, including such structural inspection in accordance with the
"Structural Maintenance Planning Document", which is normally part of the
"C" Check, with all discrepancies permanently repaired. During the
performance of such "C" Check, Lessor shall be entitled to have
representatives present in order to inspect the Aircraft and to verify that
the condition of the Aircraft complies with the requirements set forth
herein. Lessee shall give Lessor not less than ten (10) days' prior written
notice of the commencement date of such "C" Check."
SECTION 3. Maintenance Reserves Allocation. In accordance with the
-------------------------------
amendments to the Lease set forth in this Amendment Number Eleven, Lessor and
Lessee agree as follows:
(a) On February 19, 1999, at the request of Lessee, Lessor paid $2,119,000
from Maintenance Reserves to Lufthansa Airmotive Ireland Limited in respect of
Engine Reimbursable Expenses for the Engine bearing manufacturer's serial no.
685860.
(b) As of February 26, 1999, $1,495,948.89 in the aggregate remained in the
Maintenance Reserves held by Lessor after deduction from Maintenance Reserves of
the amount of $2,119,000 described above, and no other Airframe Reimbursable
Expenses, Engine Reimbursable Expenses, Landing Gear Reimbursable Expenses or
APU Reimbursable Expenses had been submitted by Lessee to Lessor for approval
and payment which remained unpaid.
(c) As of February 26, 1999, the aggregate amount of $600,000, consisting
of (i) Basic Rent in the amount of $300,000 which was due and payable by Lessee
under the Lease on January 1, 1999 and (ii) Basic Rent in the amount of $300,000
which was due and payable by Lessee under the Lease on February 1, 1999, was due
and owing to Lessor under the Lease.
(d) As of March 1, 1999, the aggregate amount of $791,973.60, consisting of
(i) Basic Rent in the amount of $380,000 and (ii) $411,973.60 payable pursuant
to Exhibit A to Amendment Number Ten, would be due and payable by Lessee to
Lessor under the Lease (assuming for purposes of clause (i) that Section 2(b)(i)
hereof has become effective).
(e) On February 26, 1999, from the Maintenance Reserves amount of
$1,495,948.89 Lessor shall have deducted and retained, as Basic Rent or
Supplemental Rent, as the case may be, the aggregate amount of $1,391,973.60 and
shall have remitted the remaining balance of the Maintenance Reserves in the
amount of $103,975.29 to Lessee by wire transfer of immediately available funds
to
7
<PAGE>
the account of Tower Air, Inc., Account No.: 080-022-162, at The Chase Manhattan
Bank, 6509 Bay Parkway, Brooklyn, New York, ABA No.: 021-000-021. Lessor and
Lessee hereby ratify, confirm and approve all such actions which were effected
on February 26, 1999. Lessor agrees to hold in escrow pending the effectiveness
of Section 2(b)(i) hereof the amount of $80,000 constituting the excess of the
Basic Rent that would be owed by Lessee to Lessor on March 1, 1999 upon the
effectiveness of such Section 2(b)(i) over the Basic Rent that is owed by Lessee
to Lessor on March 1, 1999 without taking into account such Section 2(b)(i).
Upon the effectiveness of such Section 2(b)(i), such amount shall be
automatically deemed released from escrow and may be retained by Lessor.
SECTION 4. Miscellaneous.
-------------
(a) Lessee's Representations and Warranties. On and as of the applicable
---------------------------------------
effective date(s) described in Section 4(h) hereof, Lessee hereby represents and
warrants to Lessor each of the following:
(i) the execution, delivery and performance by Lessee of this Amendment
Number Eleven have been duly authorized by all necessary corporate action and,
when executed and delivered, this Amendment Number Eleven will constitute the
legal, valid and binding and enforceable obligation of Lessee except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting the rights of creditors
generally; (ii) the representations and warranties of Lessee contained in
Section 4.2 of the Lease are true and correct on and as of such date(s) as
though made on and as of such date(s) (except, with respect to the
representation set forth in Section 4.2(f) thereof, as provided in the letter
dated February 24, 1999 of Hewes, Gelband, Lambert & Dann, P.C. addressed to
Lessor), and all authorizations and approvals of, giving of notice to, and
filings and recordings with, all regulatory bodies and authorities which may be
conditions to the validity or enforceability of this Amendment Number Eleven or
Lessee's performance of the terms hereof have been duly accomplished; and (iii)
no Default or Event of Default has occurred and is continuing under the Lease,
as amended hereby.
(b) Further Assurances. Each of Lessor and Lessee hereby agrees from time
------------------
to time to do and perform such other and further acts and execute and deliver
any and all such other instruments as may be required by law or reasonably
requested by the other party to establish, maintain or protect the rights and
remedies of the requesting party or to carry out and effect the intent and
purposes of this Amendment Number Eleven, including, without limitation, to
effect the filings contemplated by Section 4(h)(ii) hereof.
(c) Counterparts. This Amendment Number Eleven may be executed in any number
------------
of counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute but one and the same instrument. To
the extent, if any, that this Amendment Number Eleven constitutes chattel paper
(as such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest in this Amendment Number Eleven
may be created through the transfer or possession of any counterpart other than
the counterpart which has been marked "Original"
8
<PAGE>
on the signature page thereof.
(d) Lease to Continue in Full Force and Effect. Except as otherwise
------------------------------------------
expressly modified herein, the Lease, as heretofore amended, modified and
supplemented, remains unchanged and is in full force and effect. All references
in the Lease to "this Lease", "this Amended and Restated Lease", "hereto",
"hereof", "hereunder" or words of like import referring to the Lease shall mean
the Lease as amended by the Amendment, Letter Agreement One, Letter Agreement
Two, Amendment Number Two, Amendment Number Three, Amendment Number Four, Letter
Agreement Three, Amendment Number Five, Letter Agreement Four, Amendment Number
Six, Letter Agreement Five, Amendment Number Seven, Amendment Number Eight,
Amendment Number Nine, Amendment Number Ten and this Amendment Number Eleven.
(e) Headings. The headings of the sections and paragraphs of this
--------
Amendment Number Eleven have been inserted for convenience of reference only and
shall in no way affect or otherwise modify any of the terms and provisions
hereof.
(f) Transaction Costs. Each of Lessor and Lessee agrees to pay its own
-----------------
costs and expenses incurred in connection with the preparation, execution and
delivery of this Amendment Number Eleven and any other documents delivered in
connection herewith, including without limitation, the fees, expenses and
disbursements of its legal counsel.
(g) GOVERNING LAW. THIS AMENDMENT NUMBER ELEVEN SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
(h) Effectiveness of Amendments and Agreements. Notwithstanding the date
------------------------------------------
of this Amendment Number Eleven or any other provision herein to the contrary,
the amendments and other agreements described herein shall become effective and
shall be deemed effective as follows:
(i) each of the agreements set forth in Section 3 hereof shall become and be
deemed effective on and as of February 26, 1999; and
(ii) each of the amendments set forth in Section 2 hereof shall become
effective upon the later to occur of (A) March 2, 1999 and (B) the due filing
with the FAA of fully executed counterparts of this Amendment Number Eleven and
an Aircraft Registration Application on AC Form 8050-1 executed by Lessee in
respect of the Aircraft, and, upon such effectiveness, shall be deemed to be
effective as of the respective dates and for the respective periods during the
Term expressly provided in such amendments, or if no such dates or periods are
expressly provided, then such amendments shall be deemed to be effective as of
the effective date specified in this clause (ii).
(i) Taxes. Lessor and Lessee agree that, notwithstanding clause (iii) of
-----
Section 10.1 of the Lease or any other provision to the contrary, Lessee's
indemnification obligations under Article 10 of the Lease shall apply to the
transactions contemplated by this Amendment Number Eleven.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Number
Eleven to be duly executed by their respective officers thereunto duly
authorized as of the date first above written.
C.I.T. LEASING CORPORATION
By: /s/ Leo Sheer
-------------------------
Title: Senior Vice President
----------------------
TOWER AIR, INC.
By: /s/ Morris K. Nachtomi
-------------------------
Title: Chairman/CEO
----------------------
10
<PAGE>
Exhibit 10 (45)
EXECUTION COPY
ENGINE SECURITY AGREEMENT
-------------------------
TOWER AIR, INC., a Delaware corporation (the "Debtor"), for valuable
consideration, the receipt of which hereby is acknowledged, hereby transfers,
assigns and pledges to UNICAPITAL AIRCRAFT ENGINE GROUP, INC., a Delaware
corporation (the "Secured Party"), and grants to the Secured Party a security
interest in the following collateral, wherever located, now existing and
hereafter arising or coming into existence (the "Collateral"):
(a) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial number
685780, which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted parts,
equipment and repairs now or hereafter placed upon such property, whether
because of necessary repairs or otherwise;
(b) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial number
662412, which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted parts,
equipment and repairs now or hereafter placed upon such property, whether
because of necessary repairs or otherwise;
(c) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial number
662792, which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted parts,
equipment and repairs now or hereafter placed upon such property, whether
because of necessary repairs or otherwise;
(d) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial number
686101, which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted parts,
equipment and repairs now or hereafter placed upon such property, whether
because of necessary repairs or otherwise; and
(e) The proceeds and products of the foregoing in whatever form the
same may be, for the purpose of securing the payment to the Secured Party and
the performance by the Debtor of the following ("Obligations"): the obligations,
covenants and duties owing to the Secured Party from the Debtor under the
Aircraft Engine Purchase Agreement, dated as of February 8, 1999, between the
Debtor and the Secured Party, including the Secured Party's obligations under
the Promissory Note (the "Note") attached as Exhibit A thereto, as whether now
existing or hereafter arising.
The Debtor further warrants to and agrees with the Secured Party as
follows:
1
<PAGE>
1. Preservation of Collateral. The Debtor will keep the Collateral in good
--------------------------
order and repair at all times, will use same with reasonable care and caution,
will not part with ownership thereof and will give representatives of the
Secured Party access thereto at all reasonable times upon reasonable notice to
the Debtor. The Debtor will not part with possession of the Collateral nor
lease or hire out same without the written consent of the Secured Party which
shall not unreasonably be withheld (provided, that so long as no Event of
Default is continuing, the Debtor, without the written consent of the Secured
Party, may, subject and subordinate in all respects to this Agreement and the
Secured Party's rights hereunder, (i) sublease the Collateral to any affiliate
of the Debtor; (ii) subject the Collateral to normal interchange or pooling
agreements with responsible air carriers entered into by the Debtor in the
ordinary course of business; and (iii) deliver possession of the Collateral to a
Federal Aviation Administration-approved maintenance facility for testing,
service, repair, maintenance or overhaul work). The Debtor will not knowingly
use, or permit the Collateral to be used, in violation of any federal, state,
county or municipal law or regulation or for any unlawful purpose whatsoever.
2. Insurance.
---------
2.1 The Debtor will keep the Collateral insured in respect of both
ground and flight risk under its fleet policy on terms and conditions
substantially similar to those in effect on the date hereof. All such insurance
policies will name the Secured Party as an additional insured and, where
applicable, as loss payee under a loss payable endorsement satisfactory to thc
Secured Party. The Debtor will deliver to the Secured Party certificates
representing such insurance policies upon the execution hereof. All amounts
payable in settlement of insurance losses not constituting a total loss shall be
used to repair, replace or restore the Collateral. If any Event of Default
shall then be continuing, all amounts payable in settlement of a total loss may
be applied, at the Secured Party's option, to the Obligations in the order
determined by the Secured Party.
2.2 The Debtor will at its expense carry or cause to be carried
public liability (including, without limitation, contractual liability and
passenger legal liability), payable in U.S. dollars, with respect to the any
airframe upon which any item of Collateral is installed (i) in amounts, of the
type and covering the risks reasonably acceptable to the Secured Party, but in
no event shall the amount of such insurance be less than that which at the time
is customarily carried with respect to similar aircraft by corporations engaged
in the same or similar business and similarly situated with the Debtor, and (ii)
with insurers of recognized international responsibility reasonably satisfactory
to the Secured Party.
2.3 Any policies of insurance required pursuant to either paragraph
2.2 or 2.3 above shall: (i) name the Secured Party as an additional named
insured, but without the Secured Party being thereby liable for payment of
premiums; (ii) provide that in respect of the interest of the Secured Party in
such policies the insurance shall not be invalidated by any action or inaction
of the
2
<PAGE>
Debtor and shall insure the interest of the Secured Party regardless of any
breach or violation by the Debtor of any warranty, declaration or condition
contained in such policies; and (iii) provide that if such insurance is
canceled, such cancellation shall not be effective as to the Secured Party for
thirty (30) days after receipt by the Secured Party of written notice from the
insurers of such cancellation.
2.4 On or prior to the date hereof and annually thereafter on or
prior to the anniversary of the date hereof, the Debtor will furnish to the
Secured Party a report signed by a firm of independent aircraft insurance
brokers, appointed by the Debtor and acceptable to the Secured Party, describing
in reasonable detail the insurance then carried and maintained on or with
respect to the Collateral and stating that in the opinion of such firm such
insurance complies with the terms of this Section 2 and is adequate to protect
the interests of the Debtor and the Secured Party. The Debtor will cause such
firm to advise the Secured Party in writing (i) promptly of any default in the
payment of any premium and of any other act or omission on the part of the
Debtor of which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Collateral and (ii) at
least 30 days prior to the expiration or termination date of any insurance
carried and maintained on the Collateral hereunder if such insurance has not
been renewed by such date in accordance with the terms hereof
3. Payment of Expenses by the Secured Party. At its option, if the Debtor
----------------------------------------
fails to do so, the Secured Party may discharge taxes, liens, security interests
or such other encumbrances as may attach to the Collateral, may pay for the
insurance on the Collateral specified in Section 2 hereof and may pay for the
maintenance, appraisal or reappraisal, and preservation of the Collateral, as
determined by the Secured Party to be reasonably necessary. The Debtor will
reimburse the Secured Party on demand for any payment so made or any expense
incurred by the Secured Party pursuant to the foregoing authorization, and the
Collateral also will secure any advances or payments so made or expenses so
incurred by the Secured Party.
4. Representations, Warranties and Covenants. The Debtor represents,
-----------------------------------------
warrants and covenants to the Secured Party that: (a) the Debtor is the sole and
lawful owner of the Collateral and has not made any prior sale, pledge,
encumbrance, assignment or other disposition of any of the Collateral, and the
same is free from all encumbrances and rights of setoff of any kind (except for
liens for taxes not yet due and payable and statutory and common law liens of
mechanics, workmen and materialmen incurred in the ordinary course of business
for sums not yet due and payable ("Permitted Encumbrances")); (b) except as
herein provided, the Debtor will not hereafter without the prior written consent
of the Secured Party sell, pledge, encumber, assign or otherwise dispose of any
of the Collateral or permit any right of setoff, lien or security interest to
exist thereon except for Permitted Encumbrances and except to the Secured Party;
(c) the Debtor will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein.
3
<PAGE>
5. Financing Statements; Documents. At the request of the Secured Party,
-------------------------------
the Debtor will join with the Secured Party in executing financing statements
pursuant to the Uniform Commercial Code and/or any documents required or
permitted by the United States Department of Transportation, Federal Aviation
Administration, in form satisfactory to the Secured Party and will pay the cost
of filing such documents in all public offices where filing is deemed necessary
or desirable by the Secured Party. The Debtor will execute and deliver to the
Secured Party from time to time such supplemental assignments or other
instruments as the Secured Party may require for the purpose of confirming the
Secured Party's interest in the Collateral. The Debtor hereby authorizes the
Secured Party to execute and file on behalf of the Debtor all financing
statements and documents deemed necessary or appropriate to perfect the Secured
Party's interest in the Collateral.
6. Default.
-------
6.1 Upon the occurrence of any Event of Default (as defined in the
Note) and the lapse of any notice or cure period provided in such Note with
respect to such default, the Secured Party is authorized in its discretion to
declare the Note immediately due and payable without demand or notice to the
Debtor and may exercise any one or more of the rights and remedies granted
pursuant to this Agreement or given to a secured party under the Uniform
Commercial Code as in effect in the State of New York (irrespective of whether
the Uniform Commercial Code applies to the Collateral), including but not
limited to the right to take possession and sell, lease or otherwise dispose of
the Collateral and, at its option, operate, use or exercise any rights of
ownership pertaining to the Collateral as the Secured Party deems necessary to
preserve the value and receive the benefits of the Collateral. Upon the
occurrence of an Event of Default, and so long as the same shall be continuing,
the Secured Party may, so far as the Debtor can give authority therefor, enter
upon any premises on which the Collateral or any part thereof may be situated
and take possession of and remove the same therefrom. The Secured Party may
require the Debtor to make the Collateral available to the Secured Party at a
place to be designated by the Secured Party that is reasonably convenient to
both parties. The Debtor waives all claims for damages by reason of any
seizure, repossession, retention, use or sale of the Collateral under the terms
of this Agreement, except to the extent caused by the Secured Party's willful
misconduct or gross negligence.
6.2 The net proceeds arising from the disposition of the Collateral
after deducting reasonable expenses incurred by the Secured Party in connection
therewith will be applied to the Obligations in the order determined by the
Secured Party. If any excess remains after the discharge of all of the
Obligations, the same will be paid to the Debtor. If after exhausting all of
the Collateral, there should be a deficiency, the Debtor will be liable therefor
to the Secured Party, provided, however, that nothing contained herein will
obligate the Secured Party to proceed
4
<PAGE>
against the Collateral prior to making a claim against the Debtor or any other
party obligated under the Obligations or prior to proceeding against any other
collateral for the Obligations.
6.3 Whenever notice is required by law to be sent by the Secured
Party to the Debtor of any sale, lease or other disposition of the Collateral,
ten days written notice sent to the Debtor's address set forth below will be
reasonable.
6.4 If any demand is made at any time upon the Secured Party for the
repayment or recovery of any amount received by it in payment or on account of
any of the Obligations and if the Secured Party repays all or any part of such
amount, the Debtor will be and remain liable for the amounts so repaid or
recovered to the same extent as if never originally received by the Secured
Party.
7. Event of Loss. If an Event of Loss (as defined below) shall occur, the
-------------
Debtor will forthwith notify the Secured Party thereof in writing and will, not
later than 60 days after the occurrence of such Event of Loss, prepay to the
Secured Party the aggregate unpaid principal amount of Note, together with
interest on such aggregate principal amount accrued to the date of prepayment
and any other amounts owing by the Debtor under the Obligations. For purposes
hereof, the term "Event of Loss" shall mean any of the following events with
respect to any item of Collateral: (i) loss of such item of Collateral or of the
use thereof due to theft, disappearance, destruction, damage beyond repair or
rendition of such property permanently unfit for normal use for any reason; (ii)
any damage to such item of Collateral which results in an insurance settlement
with respect to such item of Collateral on the basis of a total loss,
constructive loss or agreed loss; (iii) the condemnation, confiscation or
seizure of, or requisition of title to or use of, such item of Collateral by
private persons or governmental or purported governmental authority (de facto or
de jure); (iv) as a result of any rule, regulation, order or other action by the
Federal Aviation Administration (of the United States of America or any other
country at any time having jurisdiction) or other governmental body having
jurisdiction, the use of such item of Collateral in the normal course of
interstate air transportation shall have been prohibited for a period of two (2)
consecutive months; or (v) the inability, for any reason whatsoever, of the
Secured Party to obtain possession of any item of Collateral within thirty (30)
days of delivery of notice to the Secured Party of the occurrence of an Event of
Default under the Note.
8. Rights of Secured Party; Power of Attorney. The Debtor hereby
------------------------------------------
irrevocably constitutes and appoints the Secured Party and any officer thereof,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Debtor or in
its name, from time to time in the Secured Party's discretion for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to
5
<PAGE>
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, the Debtor hereby gives the Secured Party the power and right,
on behalf of the Debtor, after an Event of Default shall have occurred and so
long as the same shall be continuing, and without notice to or assent by the
Debtor, to do the following:
8.1 to receive payment of, endorse, and receipt for, any and all
monies, claims and other amounts due and to become due at any time in respect of
or arising out of the Collateral;
8.2 to commence and prosecute any suits, actions or proceeding at law
or in equity in any court of competent jurisdiction to collect any of the
Collateral and to enforce any other right in respect of the Collateral;
8.3 to settle, compromise or adjust any suit, action or proceeding
described above, and, in connection therewith, to give such discharges or
releases as the Secured Party may deem appropriate; and
8.4 generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though the Secured Party were the absolute owner thereof for all purposes,
and to do, at the Secured Party's option, at any time, or from time to time, all
acts and things which the Secured Party deems necessary to protect or preserve
the Collateral and the Secured Party's security interest and rights therein in
order to effect the intent of this Agreement, all as fully and effectively as
the Debtor might do.
The Debtor hereby ratifies all that such attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest will be irrevocable and shall terminate only upon payment in full of
the Obligations and the termination of this Agreement. The powers conferred
upon the Secured Party hereunder are solely to protect the Secured Party's
interests in the Collateral and will not impose any duty upon it to exercise any
such powers. The Secured Party will have no obligation to preserve any rights
of any third parties in the Collateral. The Secured Party will be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
will be responsible to the Debtor for any action taken or omitted to be taken in
good faith or in reliance on the advice of counsel except for its own gross
negligence or willful misconduct.
9. Miscellaneous.
-------------
9.1 Fees and Expenses. The Debtor will promptly (and in any event
-----------------
within 30 days after its receipt of an invoice or statement therefor) pay all
costs and expenses (including, without limitation, reasonable fees and
disbursements of counsel) suffered or incurred by the Secured Party in
connection
6
<PAGE>
with its enforcement of the payment and performance of the Obligations or any
other sum due to it under this Agreement, or any of its other rights hereunder
or thereunder. The provisions of this Section shall survive the payment of the
Obligations and the termination of this Agreement.
9.2 Right of Set-Off. In addition to any rights now or hereafter
----------------
granted under applicable law or otherwise and not by way of limitation of any
such rights, upon the occurrence of any Event of Default and so long as the same
shall be continuing, the Secured Party is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any kind
to the Debtor or to any other person, and such notice herein hereby expressly
waived, to set off and to apply any and all deposits (general or special) and
any other indebtedness at any time held or owing by the Secured Party to or for
the credit or the account of the Debtor, including the Maintenance Reserves (as
defined in the Obligations) against and on account of the obligations and
liabilities of the Debtor to the Secured Party under this Agreement or the
Obligations, including, without limitation, all other claims of any nature or
description arising out of or connected with this Agreement, the Obligations or
any other Security Document, whether or not the Secured Party shall have made
any demand therefor and although said obligations, liabilities or claims, or any
of them, shall be contingent or unmatured.
7
<PAGE>
9.3 Notices. All notices, requests, reports and other communications
-------
pursuant to this Agreement shall be in writing, delivered by hand or commercial
messenger service or sent by facsimile confirmed on the same business day by
telephone and certified mail, return receipt requested, addressed as follows:
(a) If to Debtor: Tower Air, Inc.
Hangar 17
J.F.K. International Airport
Jamaica, NY 11430
Attention: William Cain
Fax: (718) 553-4387
Telephone: (718) 553-4300
with a copy to: Hewes Gelband Lambert & Dann
1000 Potomac St. NW
Suite 300
Washington, D.C. 20007
Attention: Stephen L. Gelband, Esq.
Fax: (202) 333-0871
Telephone: (202) 337-6200
(b) If to Secured Party: UniCapital Aircraft Engine Group, Inc.
79 Glover Avenue
Norwalk, CT 06850
Attention: Mr. Randy Fiorenza
Fax: (203) 847-9612
Telephone: (203) 847-1401
with a copy to: Greenberg, Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Kenneth C. Hoffman, Esq.
Facsimile: 305-579-0717
Telephone: 305-579-0809
Any notice, request, report or communication hereunder shall be deemed to have
been given on the day on which it is delivered by hand or such commercial
messenger service to such party at its address specified above, or, if sent by
facsimile confirmed on the same business day by telephone and certified mail,
return receipt requested, on the third business day after such confirmation is
deposited in the mail, postage prepaid. Any party may change the person or
address to whom or which notices, requests, reports and communications are to be
given hereunder, by notice duly given hereunder; provided, however that any such
-------- --------
notice shall be deemed to have been given hereunder only when actually received
by the party to which it is addressed.
8
<PAGE>
9.4 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the Secured Party and the Debtor and their respective
successors and assigns, except that the Debtor may not assign its rights and
obligations hereunder without the prior written consent of the Secured Party,
and any purported assignment or delegation without such consent shall be void.
9.5 No Waiver: Remedies Cumulative. No failure or delay on the part
------------------------------
of the Secured Party in exercising any right, power or privilege hereunder or
under any other Security Document and no course of dealing between the Debtor
and the Secured Party shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Security Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Secured Party would otherwise have. No notice to
or demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Party to any other or further action in any
circumstances without notice or demand.
9.6 Construction; Governing Law; Consent to Jurisdiction.
----------------------------------------------------
(a) The headings used in this Agreement are for convenience
only and shall not be deemed to constitute a part hereof. All uses herein of the
masculine gender or of singular or plural terms shall be deemed to include uses
of the feminine or neuter gender or plural or singular terms, as the context may
require. This Agreement, the Security Documents and all other documents and
instruments executed and delivered in connection herewith and therewith, shall
be governed by, and construed and interpreted in accordance with, the laws of
the State of New York.
(b) The Debtor irrevocably consents that any legal action or
proceeding against it under, arising out of or in any manner relating to this
Agreement, the Obligations or any other Security Document may be brought in any
court of the State of New York or in the United States District Court for the
Southern District of New York. The Debtor, by the execution and delivery of this
Agreement, expressly and irrevocably assents and submits to the personal
jurisdiction of any of such courts in any such action or proceeding. The Debtor
further irrevocably consents to the service of any complaint, summons, notice or
other process relating to any such action or proceeding by delivery thereof to
it by hand or by mail in the manner provided for in Section 9.3 hereof. The
Debtor hereby expressly and irrevocably waives any claim or defense in any such
action or proceeding based on any alleged lack of personal jurisdiction,
improper venue or forum non conveniens or any similar basis. The Debtor shall
--------------------
not be entitled in any such action or proceeding to assert any defense given or
allowed under the laws of
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any state other than the State of New York. Nothing in this Section 9.6 shall
affect or impair in any manner or to any extent the right otherwise proceed
against the Debtor in any jurisdiction or to serve process in any manner
permitted by law. The Debtor and the Secured Party waive their right to trial by
jury in any litigation in any court with respect to, in connection with, or
arising out of, this Agreement, the Obligations, the Security Documents, or any
instrument or document delivered pursuant to this Agreement, or the validity,
protection, interpretation, collection or enforcement thereof.
9.7 Amendment or Waiver. This Agreement may not be amended, changed,
-------------------
waived, discharged or terminated without the written consent of the Secured
Party and the Debtor.
9.8 Survival of Agreement and Representations. All agreements,
-----------------------------------------
representations and warranties made herein shall survive the delivery of this
Agreement.
9.9 Severability. The provisions of this Agreement are severable,
------------
and if any clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision in this Agreement in any
jurisdiction. Each of the covenants, agreements and conditions contained in
this Agreement is independent and compliance by the Debtor with any of them
shall not excuse non-compliance by the Debtor with any other. The Debtor shall
not take any action the effect of which shall constitute a breach or violation
of any provision of this Agreement.
9.10 Termination; Release. Upon payment in full of the Obligations,
--------------------
this Agreement, all liabilities and obligations of the Debtor hereunder, and all
rights and interests of the Secured Party herein shall terminate, and the
Secured Party, at the request of the Debtor, shall promptly execute and deliver
to the Debtor a release and any other proper instruments (including UCC-3
termination statements and any termination statements required to be filed with
the United States Department of Transportation, Federal Aviation Administration,
if applicable) acknowledging termination of this Agreement.
9.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Debtor and the Secured Party.
9.12 Liability of the Secured Party. The Debtor hereby agrees that
------------------------------
the Secured Party will not be chargeable for any negligence, mistake, act or
omission of any employee, accountant, examiner, agent or attorney employed by
the
10
<PAGE>
Secured Party (except for the willful misconduct of any person, corporation,
partnership or other entity employed by the Secured Party) in making
examinations, investigations or collections, or otherwise in perfecting,
maintaining, protecting or realizing upon any lien or security interest or any
other interest in the Collateral or other security for the Obligations.
(continued on signature page)
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of March 24, 1999.
TOWER AIR, INC.
By:_____________________________________
Name: William Cain
Title: Senior Vice President - Engineering and
Maintenance
UNICAPITAL AIRCRAFT ENGINE
GROUP, INC.
By:_____________________________________
Name: Randall P. Fiorenza
Title: President and Chief Operating
Officer
12
<PAGE>
EXECUTION COPY
AIRCRAFT ENGINE PURCHASE AGREEMENT
This AIRCRAFT ENGINE PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of February 8, 1999, between UNICAPITAL AIRCRAFT ENGINE GROUP,
INC., a Delaware corporation ("Seller"), and TOWER AIR, INC., a Delaware
corporation ("Purchaser").
1. SUBJECT MATTER OF PURCHASE
A. Subject to the terms and provisions of this Agreement, Seller hereby
agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from
Seller, the following aircraft equipment (collectively, the "Equipment," and
each individually, an "Engine"):
(1) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 685780, in serviceable condition with a current FAA Part 121 tag
attached, with all equipment installed thereon as of the Delivery Date
(including, without limitation, a full 747-200 QEC kit), and with all pertinent
engine logs, records and historical information, including back to birth records
on life limited parts in accordance with FAR 121.380.
(2) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 662412, in serviceable condition with a current FAA Part 121 tag
attached, with all equipment installed thereon as of the Delivery Date
(including, without limitation, a full 747-200 QEC kit), and with all pertinent
engine logs, records and historical information, including back to birth records
on life limited parts in accordance with FAR 121.380.
(3) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 662792, in serviceable condition with a current FAA Part 121 tag
attached, with all equipment installed thereon as of the Delivery Date
(including, without limitation, a full 747-200 QEC kit), and with all pertinent
engine logs, records and historical information, including back to birth records
on life limited parts in accordance with FAR 121.380.
(4) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 686101, in serviceable condition with a current FAA Part 121 tag
attached, with all equipment installed thereon as of the Delivery Date
(including, without limitation, a full 747-200 QEC kit), and with all pertinent
engine logs, records and historical information, including back to birth records
on life limited parts in accordance with FAR 121.380.
B. Seller shall have the right, in its sole discretion, upon not less than
three business days' notice to Purchaser prior to the Delivery Date (as defined
herein), to substitute for any or all of the Engines specified in Article 1A
hereof, a comparable Pratt & Whitney JT9D-7J engine owned by Seller, in
serviceable condition with a current FAA Part 121 tag attached (a "Substitute
Engine"), and Purchaser hereby agrees to purchase such Substitute Engine from
Seller in lieu of any of the Engines specified in Article 1A hereof; provided,
however, that if the aggregate hours flown by the Engines (including any
Substitute Engines) purchased hereunder since last shop exceeds 5,000 hours as
of the Delivery Date (the "Maximum Hours"), then Seller shall provide Purchaser
with a credit against the Purchase Price (the "Use Credit") of an aggregate
amount equal to $225 per hour flown in excess of the Maximum Hours. Unless the
context otherwise requires, the term "Engine" or "Engines" as used in this
Agreement shall include any Substitute Engine purchased pursuant to this Article
1B.
<PAGE>
2. PURCHASE PRICE AND PAYMENT
A. The purchase price for the Equipment (the "Purchase Price") shall be
Ten Million Seven Hundred Fifty Thousand Dollars (US$10,750,000).
B. Upon execution of this Agreement, Purchaser shall make an initial
payment to Seller in an amount equal to One Million Six Hundred Twelve Thousand
Five Hundred Dollars (US$1,612,500) (the "Initial Payment") by wire transfer of
immediately available funds to the following account:
Nationsbank, N.A.
ABA No. 111000012
Account No.: 3751075750
For Final Credit To: UniCapital Aircraft Engine Group, Inc.
C. On the Delivery Date, Purchaser shall:
(1) Deliver to the order of Seller, as a condition precedent to Seller's
obligations hereunder, an executed Promissory Note (the "Note") in the form of
Exhibit A in an amount equal to the Purchase price less the Initial Payment and
- ---------
the Use Credit, if applicable; and
(2) Deliver to the Seller an executed Engine Security Agreement (the
"Security Agreement") in the form of Exhibit B.
---------
3. DELIVERY OF THE EQUIPMENT AND TRANSFER OF TITLE
A. Delivery of all of the Equipment will be made to Purchaser on a
mutually agreed date, on or before March 1, 1999. For purposes of this
Agreement, the term "Delivery Date" shall mean the date on which Seller delivers
to Purchaser Bills of Sale conveying title to the Equipment in accordance with
the terms of this Agreement.
B. On the Delivery Date, Seller shall execute and deliver to Purchaser a
Bill of Sale for each item of the Equipment in the form of Exhibit C.
---------
Concurrently with Seller's delivery of the Bills of Sale to Purchaser, title to
the Equipment, and all risk of loss or damage to the Equipment, shall pass from
Seller to Purchaser.
C. On the Delivery Date, Seller shall deliver the Equipment to Purchaser
F.O.B. J.F.K. International Airport.
D. On the Delivery Date, concurrently with the payment of the Purchase
Price, Purchaser will execute and deliver to Seller an Equipment Delivery
Receipt for each item of the Equipment in the form of Exhibit D.
---------
E. All of the available records relating to the Equipment will be provided
to Purchaser on or immediately following the Delivery Date.
F. Seller's obligations pursuant to this Agreement are subject to the
following conditions:
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<PAGE>
(1) Purchaser shall have delivered to Seller on or prior to the Delivery
Date a certificate of insurance and Broker's Letter of Undertaking evidencing
compliance with the provisions of Section 2 of the Security Agreement concerning
insurance of the Engines;
(2) Purchaser shall have delivered to Seller on or prior to the Delivery
Date a certificate executed by an officer of Purchaser attaching reasonable
evidence that all action and authorizations, corporate and otherwise, of
Purchaser necessary to enter into and perform its obligations under this
Purchase Agreement, the Note and the Security Agreement have been obtained and
are in full force and effect and including a certificate of incumbency showing
and certifying the signatures of those officers of Purchaser authorized to
execute, on behalf of Purchaser, this Agreement, the Note and the Security
Agreement and all other documents or instruments to be executed and delivered by
Purchaser hereunder or in connection with the transactions contemplated hereby;
and
(3) On or prior to the Delivery Date, the Security Agreement shall have
been filed with the Federal Aviation Administration ("FAA").
4. EQUIPMENT RECORDS
Seller shall, at Seller's sole cost and expense, deliver to Purchaser, on
the Delivery Date, all documents and technical records relating to the Equipment
(the "Engine Records"). The Engine Records shall be in English, shall have been
maintained in accordance with FAA requirements and shall be delivered in up-to-
date status, including appropriate FAA approvals, with substantiation data, for
modifications and/or repairs, compliance with airworthiness directives issued by
the FAA ("AD's") and supporting documentation, serviceable tags and last shop
visit reports for all rotable components and traceability records for life-
limited parts so as to establish back-to-birth traceability for such parts.
Seller acknowledges that this Agreement and the purchase of Equipment hereunder
is contingent upon Purchaser's receipt and acceptance of all Engine Records in
accordance with the requirements of this Article 4.
5. CONDITION OF THE EQUIPMENT; PURCHASER'S INSPECTION; DISCLAIMER
A. On the Delivery Date, the Equipment will be delivered by Seller to
Purchaser in its then "AS IS WHERE IS" condition, with all faults accepted
(except as to title).
B. Purchaser acknowledges that it has had access to the Equipment and all
records pertaining thereto by Purchaser's duly authorized technical
representative to determine that the Equipment is acceptable to Purchaser and in
the condition for delivery required by this Agreement. Purchaser acknowledges
that it is relying on its own inspection and knowledge of the Equipment and not
on any inspection or representation of Seller.
C. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
UNCONDITIONALLY AGREES THAT, AS BETWEEN PURCHASER AND SELLER, THE EQUIPMENT AND
EACH PART THEREOF IS TO BE SOLD AND PURCHASED IN AN "AS IS, WHERE IS" CONDITION
ON THE DELIVERY DATE, WITHOUT ANY REPRESENTATION, WARRANTY, COVENANT OR
GUARANTEE OF ANY KIND BEING MADE OR GIVEN BY SELLER, ITS SERVANTS OR AGENTS,
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, OTHER THAN AS EXPRESSLY SET
FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
SELLER SPECIFICALLY DISCLAIMS AND PURCHASER WAIVES AND AGREES THAT SELLER HAS
NOT MADE NOR SHALL BE
-3-
<PAGE>
DEEMED TO HAVE MADE, AND EXCLUDES HEREFROM ANY REPRESENTATION, WARRANTY,
COVENANT OR GUARANTEE, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT,
INCLUDING BUT NOT LIMITED TO (1) ANY IMPLIED WARRANTY OF MERCHANTABILITY OF
FITNESS, (2) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE, (3) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
IN TORT, WHETHER OR NOT ARISING FROM SELLER'S NEGLIGENCE, ACTUAL OR IMPUTED, AND
(4) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO
THE EQUIPMENT, FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO THE EQUIPMENT,
FOR ANY LIABILITY OF PURCHASER TO ANY THIRD PARTY, OR FOR ANY OTHER DIRECT,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
D. SELLER MAKES NO REPRESENTATIONS AS TO WHAT USE OR APPLICATION MAY BE
MADE OF THE EQUIPMENT OR ANY PART THEREOF IN THE CONDITION IN WHICH IT WILL BE
DELIVERED, AND PURCHASER ASSUMES ALL RESPONSIBILITY FOR SUCH REPAIR, OVERHAUL,
ALTERATION OR MODIFICATION AS MAY BE NECESSARY FOR THE USES TO WHICH THE
EQUIPMENT MAY BE PUT BY PURCHASER OR ANY CUSTOMER OF PURCHASER.
E. Purchaser agrees that, from and after the Delivery Date, Seller shall
not be liable for, and Purchaser hereby releases Seller from, any liability,
claim, loss, damage or expense of any kind or nature caused directly or
indirectly by the Equipment or any part thereof, by any inadequacy of the
Equipment or any part thereof for any purpose or any deficiency or defect
therein, by the use or performance of the Equipment, by any maintenance,
service, repairs, overhauls or modifications to the Equipment, by any
interruption or loss of service or use of the Equipment or by any loss of
business or other consequential damage or any other damage whatsoever, howsoever
caused; provided, that the release by Purchaser of Seller pursuant to this
Article 5E shall not apply to any such liability, claim, loss, damage or expense
which arises as a result of Seller's breach of any express warranty,
representation or obligation of Seller hereunder.
6. REPRESENTATIONS AND WARRANTIES
A. Seller hereby represents and warrants to Purchaser that:
(1) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the power
and authority to enter into this Agreement and perform its obligations
hereunder.
(2) No authorization, approval, consent, license or order of, or
registration with, or the giving of notice to any government entity or
third party is required for the valid authorization, execution,
delivery and performance by Seller of this Agreement, other than any
such authorization, approval, consent, license, order, registration,
notice or action as has been duly obtained, given or taken prior to
the Delivery Date.
(3) This Agreement has been duly authorized, executed and delivered by
Seller and is a valid, enforceable and binding obligation of Seller,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the rights of
creditors generally, and except as enforceability may be
-4-
<PAGE>
subject to the application of equitable principles in any proceeding,
legal or equitable.
(4) The execution and delivery of this Agreement, the consummation by
Seller of the transactions contemplated herein and compliance by
Seller with the terms and provisions hereof do not and will not
contravene any law applicable to Seller, or result in any breach of or
constitute any default under any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, or other agreement or instrument to which Seller is
a party or by which Seller or its properties or assets may be bound or
affected.
(5) On the Delivery Date, Seller shall have and convey to Purchaser good
and marketable title to the Equipment, free and clear of any and all
mortgages, pledges, liens, charges, security interests, leases, claims
or other encumbrances of any kind or nature whatsoever.
(6) To the best of Seller's knowledge, none of the Equipment has been
subjected to extreme heat or stress (including, without limitation,
such as would result from an accident or fire) and none of the
Equipment has had an uncontained failure.
B. Purchaser hereby represents and warrants to Seller that:
(1) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has the
power and authority to enter into this Agreement and perform its
obligations hereunder.
(2) No authorization, approval, consent, license or order of, or
registration with, or the giving of notice to any government entity or
third party is required for the valid authorization, execution,
delivery and performance by Purchaser of this Agreement.
(3) This Agreement has been duly authorized, executed and delivered by
Purchaser and is a valid, enforceable and binding obligation of
Purchaser, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally, and except as enforceability may be
subject to the application of equitable principles in any proceeding,
legal or equitable.
(4) The execution and delivery of this Agreement, the consummation by
Purchaser of the transactions contemplated herein and compliance by
Purchaser with the terms and provisions hereof do not and will not
contravene any law applicable to Purchaser, or result in any breach of
or constitute any default under any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, or other agreement or instrument to which Purchaser
is a party or by which Purchaser or its properties or assets may be
bound or affected.
7. TAXES AND INDEMNIFICATION
A. Purchaser and Seller shall cooperate and use reasonable efforts to
minimize or avoid the imposition of any sales or other taxes on the sale,
delivery and transfer of title to the Equipment. Notwithstanding the foregoing,
Seller agrees to pay promptly when due, and will indemnify and hold
-5-
<PAGE>
Purchaser harmless from any and all fees (including, without limitation,
license, registration and recording fees and assessments), taxes (including,
without limitation, gross receipts, income, sales, rental, use, turnover, value
added, property (tangible or intangible), excise and stamp 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 (except taxes levied or assessed
against Purchaser based upon gross receipts or net income or taxes imposed upon
Purchaser for the privilege of doing business or exercising a franchise) arising
out of the sale, purchase and delivery of the Equipment, in any manner levied,
assessed or imposed by any government or subdivision or agency thereof having
jurisdiction.
B. Purchaser hereby agrees to indemnify, protect, save and keep harmless
Seller and Seller's officers, directors, employees, agents, affiliates,
successors and assigns (each, an "Indemnitee") from and against, and on written
demand to pay, or to reimburse each Indemnitee for the payment of, any and all
liabilities, obligations, losses, damages, penalties, claims (including, without
limitation, claims arising out of negligence or involving strict liability in
tort), suits, actions, costs, expenses and disbursements (including, without
limitation, reasonable legal fees, costs and related expenses), of whatsoever
kind and nature ("Expenses") imposed on, incurred by or asserted against any
Indemnitee after the Delivery Date relating to or arising directly or indirectly
out of or in any way connected with the ownership, possession, control, use,
operation, sale, leasing or other application or disposition of the Equipment or
any part thereof or interest therein after the Delivery Date, whether by
Purchaser, Purchaser's customer or any other person; provided, however, that
such Expenses are not judicially determined to have been attributable to such
Indemnitee's gross negligence or willful misconduct or the breach by Seller of
any express warranty, representation or obligation of Seller hereunder. The
obligations contained in this Article 7B. shall survive the sale and delivery of
the Equipment hereunder and are expressly made for the benefit of, and shall be
enforceable by, Seller and each other Indemnitee entitled thereto.
8. NOTICES
All notices required or permitted hereunder shall be in writing and shall
be delivered in person or sent by telecopier, courier service or facsimile
(confirmed by telephone in the case of notice by facsimile) or any other
customary means of communication, and any such notice shall be effective when
delivered. Notices shall be addressed to the parties as follows (or to such
other places and numbers as either party directs in writing to the other party):
-6-
<PAGE>
Seller Purchaser
- ------ ---------
UniCapital Aircraft Engine Group, Inc. Tower Air, Inc.
79 Glover Avenue Hangar 17
Norwalk, CT 06850 J.F.K. International Airport
Attn: Mr. Randy Fiorenza Jamaica, NY 11430
Fax: (203) 847-9612 Attn: William Cain
Telephone: (203) 847-1401 Fax: (718) 553-4387
Telephone: (718) 553-4300
with a copy to: with a copy to:
Kenneth C. Hoffman, Esq. Stephen L. Gelband, Esq.
Greenberg Traurig, P.A. Hewes Gelband Lambert & Dann
1221 Brickell Avenue 1000 Potomac St. NW
Miami, Florida 33131 Suite 300
Fax: (305) 579-0717 Washington, D.C. 20007
Telephone: (305) 579-0809 Fax: (202) 333-0871
Telephone: (202) 337-6200
9. NO BROKERS
Both parties acknowledge that there are no brokerage commissions to be paid
with respect to the purchase and sale of the Equipment, and each party agrees to
indemnify and hold the other harmless from and against any and all claims,
suits, damages, costs, expenses, including attorneys' fees, asserted by agents
or other third parties for any commission or compensation based on the sale of
the Equipment, if such claim, suit, damage, costs or expense arises out of any
action or alleged actions by the indemnifying party, its employees, officers or
agents.
10. ASSIGNMENT OF WARRANTY
To the extent any warranties relating to the Equipment are assignable,
Seller hereby assigns to Purchaser, effective on the Delivery Date as of the
delivery to and acceptance of the Equipment by Purchaser, all of Seller's rights
under such warranties and Seller's rights with respect to warranties or other
obligations of entities which have performed maintenance, service, repair,
overhaul or testing thereon. Seller agrees to execute such documents as may be
reasonably necessary to evidence the assignment hereby made or contemplated.
11. LOSS OR DAMAGE PRIOR TO DELIVERY
A. In the event of damage to any of the Equipment following the execution
hereof and prior to the Delivery Date, Purchaser shall have the right to delay
the Delivery Date for a reasonable period of time (but not beyond March 31,
1999, or such later date as is mutually agreed) to ensure to Purchaser's
satisfaction that the Equipment will be repaired and restored to the condition
required by this Agreement; and if such damage delays delivery of any of the
Equipment beyond March 31, 1999 (or such later date as is mutually agreed),
Purchaser or Seller shall have the right to terminate this Agreement by giving
written notice to the other, and upon such termination all rights and
obligations of both parties hereunder shall be discharged automatically without
further act or deed.
B. In the event of total loss or destruction of any of the Equipment
following the execution hereof and prior to the Delivery Date, either Purchaser
or Seller shall have the right to terminate the Agreement by giving written
notice to the other, and upon such termination all rights
-7-
<PAGE>
and obligations of both parties hereunder shall be discharged automatically
without further act or deed.
12. APPLICABLE LAW AND JURISDICTION
This Agreement shall, in all respects, be governed by and construed in
accordance with the laws of the State of New York, United States of America,
without giving effect to the conflict of laws principles thereof.
13. MISCELLANEOUS
A. All warranties and representations made by either party shall survive
the closing of the transaction contemplated herein and the delivery of the
Equipment.
B. Whether or not the transactions contemplated hereby shall be
consummated, each of Purchaser and Seller agrees to pay its own out-of-pocket
expenses, including attorney's fees, incurred in connection with the
preparation, negotiation and execution of this Agreement and any other documents
required in connection herewith and the transactions contemplated hereby.
C. This Agreement is a confidential document between Purchaser and Seller
and, except as provided by applicable law or with the prior written consent of
the other party, which consent shall not be unreasonably withheld, neither
Purchaser nor Seller will disclose the terms of this Agreement to third parties,
other than to its auditors, legal and technical advisors or lenders.
D. This Agreement constitutes the entire agreement between Seller and
Purchaser in relation to the purchase and sale of the Equipment and supersedes
all previous proposals, agreements and other written and oral communications in
relation thereto. Purchaser and Buyer acknowledge and agree that there have been
no representations, warranties, promises, guarantees or agreements, express or
implied, made by either party in connection with the transactions contemplated
hereby, except as set forth herein. This Agreement may only be amended or
modified by a writing executed by Buyer and Seller.
E. This Agreement shall be binding on, and inure to the benefit of, the
parties hereto and their successors and assigns. Except as set forth
immediately below, neither this Agreement, nor any of Purchaser's or Seller's
rights and interests hereunder, may be assigned without the express prior
written consent of the other party hereto.
F. The rights of the parties hereunder are cumulative, not exclusive, may
be exercised as often as each party considers appropriate and are in addition to
its rights under general law. The rights of one party against the other party
shall not be deemed waived or amended except by an express waiver or amendment
in writing. Any failure to exercise or any delay in exercising any of such
rights will not operate as a waiver or amendment of that or any other such
right; any defective or partial exercise of any such rights will not preclude
any other or further exercise of that or any other such right; and no act or
course of conduct or negotiation on a party's part or on its behalf will in any
way preclude such party from exercising any such right or constitute a
suspension or any amendment of any such right.
G. Any provision herein which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or rendering unenforceable such provision in any other
-8-
<PAGE>
jurisdiction. To the extent permitted by applicable law, Seller and Purchaser
hereby waive any provision of law which renders any provision hereof prohibited
or unenforceable in any respect.
H. This Agreement may be executed in any number of identical counterparts,
all of which together will be deemed to be one and the same instrument.
Delivery of an executed counterpart of this Agreement by facsimile will be
deemed effective as delivery of an originally executed counterpart. Any party
delivering an executed counterpart of this Agreement by facsimile will also
deliver an originally executed counterpart; provided the failure of any party to
deliver an originally executed counterpart of this Agreement will not affect the
validity or effectiveness of this Agreement.
(continued on signature page)
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first shown above.
UNICAPITAL AIRCRAFT ENGINE GROUP, INC. TOWER AIR, INC.
BY:___________________________________ BY:________________________________
NAME: Randall P. Fiorenza NAME: William Cain
TITLE: President and Chief Operating TITLE: Senior Vice President -
Officer Engineering and Maintenance
-10-
<PAGE>
EXECUTION COPY
ENGINE SECURITY AGREEMENT
-------------------------
ENGINE SECURITY AGREEMENT (the "Agreement") dated as of February 8, 1999,
between TOWER AIR, INC., a Delaware corporation (the "Debtor"), and UNICAPITAL
AIRCRAFT ENGINE GROUP, INC., a Delaware corporation (the "Secured Party").
WHEREAS, pursuant to an Engine Lease and Option Agreement dated as of the
date hereof (the "Lease Agreement")(capitalized terms used herein and not
defined shall have the meanings set forth in the Lease Agreement), between the
Secured Party (as lessor) and the Debtor (as lessee of the Engines), the Debtor
(i) has leased the Engines from the Secured Party and (ii) has acquired the
option to purchase the Engines from the Secured Party under certain
circumstances; and
WHEREAS, the Debtor has agreed to secure its obligations under the Lease
Agreement by granting to the Secured Party a Lien on its interest in the Engines
and by granting to the Secured Party a Lien on and security interest in its
rights under the Lease Agreement and on certain other property and rights; and
WHEREAS, the Debtor is executing and delivering this Agreement in order to
create in favor of the Secured Party a valid and perfected security interest in
the property described herein, which security interest shall secure (i) the
prompt indefeasible payment of any indebtedness or obligation of the Debtor
evidenced by or arising under the Lease Agreement and this Agreement and (ii)
the timely and faithful performance and observance by the Debtor of all the
agreements, promises and covenants undertaken by it in the Lease Agreement and
this Agreement; and
WHEREAS, this Agreement relates to the Engines more specifically described
below and is being filed for recordation on the date hereof with the Federal
Aviation Administration;
NOW, THEREFORE, in order to (a) induce the Secured Party to enter into the
Lease Agreement and (b) secure the prompt payment of all indebtedness of the
Debtor under the Lease Agreement and this Agreement and the performance and
observance of the agreements and covenants of the Debtor under the Lease
Agreement and this Agreement, the Debtor and the Secured Party hereby agree as
follows:
1. Granting of Security Interest. The Debtor does hereby transfer,
------------------------------
convey, mortgage, hypothecate, assign and grant a security interest to the
Secured Party, subject to no prior interest of any Person whatsoever, in the
Debtor's interest in the following collateral, wherever located, now existing
and hereafter arising or coming into existence (the "Collateral"):
<PAGE>
(a) Pratt & Whitney JT9D-7Q engine bearing manufacturer's serial number 702083,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(b) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial number 686106,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(c) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial number 662751,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(d) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial number 662749,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(e) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial number 662550,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(f) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial number 662498,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(g) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial number 662338,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(h) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial number 662323,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts,
<PAGE>
equipment and repairs now or hereafter placed upon such property, whether
because of necessary repairs or otherwise;
(i) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial number 662270,
which has 750 or more rated takeoff horsepower, together with all
attachments, additions and accessions thereto, and added and substituted
parts, equipment and repairs now or hereafter placed upon such property,
whether because of necessary repairs or otherwise;
(j) all proceeds from the sale or other disposition of, all proceeds of
insurance due to the Debtor on, and all proceeds of any requisition for
title or use due to the Debtor with respect to, any of the properties
described in clauses (a) through (i) above;
(k) all technical documents, manuals, log books and records that relate to the
Collateral and all the Debtor's right, title and interest, present and
future, therein and thereto;
(l) all the Debtor's right, title and interest in any lease of the Collateral
(including, without limitation, the right to receive all amounts of basic
rent, supplemental rent, stipulated loss value, insurance proceeds,
requisition, indemnity and other payments of any kind provided under the
Lease Agreement and any and all rights to amend, waive, modify and give
notices, approvals and consents), all other rights and property included
therein together with all payments, including without limitation all rent,
damages, expenses, indemnities and other amounts due to the Debtor (or any
person claiming by, through or under the Debtor) thereunder;
(m) all rents, issues, profits, revenues and other income of the property
intended, subjected or required to be subjected to the lien of this
Agreement, and all of the estate, right, title and interest of every nature
whatsoever of the Debtor in and to the same and every part thereof; and
(n) The proceeds and products of the foregoing in whatever form the same may
be,
for the purpose of securing the payment to the Secured Party and the performance
by the Debtor of the following ("Obligations"): the obligations, covenants and
duties owing to the Secured Party from the Debtor under the Lease Agreement, as
whether now existing or hereafter arising.
2. Representations, Warranties and Covenants.
-----------------------------------------
2.1 The Debtor represents and warrants to the Secured Party that all
things have been done to make this Agreement and the Lease Agreement, when
executed by the Debtor, the legal, valid and binding obligation of the Debtor
enforceable against the Debtor in accordance with their respective terms, except
as
<PAGE>
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and, to the extent
that certain remedies require or may require enforcement by a court of equity,
by such principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity) as a court having jurisdiction
may impose.
2.2 The Debtor represents, warrants and covenants to the Secured
Party that the Debtor (a) has not made any prior sale, pledge, encumbrance,
assignment or other disposition of the Debtor's interest in any of the
Collateral, and the same is free from all encumbrances and rights of setoff of
any kind (except for liens for taxes not yet due and payable and statutory and
common law liens of mechanics, workmen and materialmen incurred in the ordinary
course of business for sums not yet due and payable ("Permitted Encumbrances"));
(b) except as herein provided, the Debtor will not hereafter without the prior
written consent of the Secured Party sell, pledge, encumber, assign or otherwise
dispose of the Debtor's interest in any of the Collateral or permit any right of
setoff, lien or security interest to exist thereon except for Permitted
Encumbrances and except to the Secured Party; (c) the Debtor will defend its
interest in the Collateral against all claims and demands of all persons at any
time claiming the same or any interest therein.
2.3 The Debtor represents, warrants and covenants to the Secured
Party that so long as this Agreement remains in effect the Debtor shall duly
observe and perform all of its obligations under the Lease Agreement and pay to
the Secured Party all amounts due and owing hereunder and under the provisions
of the Lease Agreement. All covenants of the Debtor contained in the Lease
Agreement, including, without limitation, the obligations of the Debtor to (a)
make payments of Rent and Maintenance Reserves to the Secured Party pursuant to
Section 3 thereof; (b) service, inspect, test, maintain, overhaul and repair
each Engine pursuant to Section 6 thereof; (c) preserve and protect the Secured
Party's rights in the Engines, maintain possession of the Engines and certain
other related obligations pursuant to Section 7 thereof; and (d) maintain
insurance on the Engines pursuant to Section 9 thereof, are specifically
incorporated herein and made a part hereof.
3. Payment of Expenses by the Secured Party. At its option, if the Debtor
----------------------------------------
fails to do so, the Secured Party may discharge taxes, liens, security interests
or such other encumbrances as may attach to the Collateral, may pay for the
insurance on the Collateral specified in Section 9 of the Lease Agreement and
may pay for the maintenance, appraisal or reappraisal, and preservation of the
Collateral, as determined by the Secured Party to be reasonably necessary. The
Debtor will reimburse the Secured Party on demand for any payment so made or any
expense incurred by the Secured Party pursuant to the foregoing authorization,
and the Collateral also will secure any advances or payments so made or expenses
so incurred by the Secured Party.
<PAGE>
4. Financing Statements; Documents. At the request of the Secured Party,
-------------------------------
the Debtor will join with the Secured Party in executing financing statements
pursuant to the Uniform Commercial Code and/or any documents required or
permitted by the United States Department of Transportation, Federal Aviation
Administration, in form satisfactory to the Secured Party and will pay the cost
of filing such documents in all public offices where filing is deemed necessary
or desirable by the Secured Party. The Debtor will execute and deliver to the
Secured Party from time to time such supplemental assignments or other
instruments as the Secured Party may require for the purpose of confirming the
Secured Party's interest in the Collateral. The Debtor hereby authorizes the
Secured Party to execute and file on behalf of the Debtor all financing
statements and documents deemed necessary or appropriate to perfect the Secured
Party's interest in the Collateral.
5. Default.
-------
5.1 Upon the occurrence of any Event of Default (as defined in the
Lease Agreement) and the lapse of any notice or cure period provided in the
Lease Agreement with respect to such default, the Secured Party may exercise any
one or more of the rights and remedies granted pursuant to this Agreement or
given to a secured party under the Uniform Commercial Code as in effect in the
State of New York (irrespective of whether the Uniform Commercial Code applies
to the Collateral), including but not limited to the right to take possession
and sell, lease or otherwise dispose of the Collateral and, at its option,
operate, use or exercise any rights of ownership pertaining to the Collateral as
the Secured Party deems necessary to preserve the value and receive the benefits
of the Collateral. Upon the occurrence of an Event of Default, and so long as
the same shall be continuing, the Secured Party may, so far as the Debtor can
give authority therefor, enter upon any premises on which the Collateral or any
part thereof may be situated and take possession of and remove the same
therefrom. The Secured Party may require the Debtor to make the Collateral
available to the Secured Party at a place to be designated by the Secured Party
that is reasonably convenient to both parties. The Debtor waives all claims for
damages by reason of any seizure, repossession, retention, use or sale of the
Collateral under the terms of this Agreement, except to the extent caused by the
Secured Party's willful misconduct or gross negligence.
5.2 The net proceeds arising from the disposition of the Collateral
after deducting reasonable expenses incurred by the Secured Party in connection
therewith will be applied to the Obligations in the order determined by the
Secured Party. If after exhausting all of the Collateral, there should be a
deficiency, the Debtor will be liable therefor to the Secured Party, provided,
however, that nothing contained herein will obligate the Secured Party to
proceed against the Collateral prior to making a claim against the Debtor or any
other party obligated under the Obligations or prior to proceeding against any
other collateral for the Obligations.
<PAGE>
5.3 Whenever notice is required by law to be sent by the Secured
Party to the Debtor of any sale, lease or other disposition of the Collateral,
ten days written notice sent to the Debtor's address set forth below will be
reasonable.
5.4 If any demand is made at any time upon the Secured Party for the
repayment or recovery of any amount received by it in payment or on account of
any of the Obligations and if the Secured Party repays all or any part of such
amount, the Debtor will be and remain liable for the amounts so repaid or
recovered to the same extent as if never originally received by the Secured
Party.
6. Event of Loss. If an Event of Loss (as defined in the Lease Agreement)
-------------
shall occur, the Debtor will forthwith notify the Secured Party thereof in
writing and will, not later than 60 days after the occurrence of such Event of
Loss, pay to the Secured Party the Stipulated Loss Value (as defined in the
Lease Agreement).
7. Rights of Secured Party; Power of Attorney. The Debtor hereby
------------------------------------------
irrevocably constitutes and appoints the Secured Party and any officer thereof,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Debtor or in
its name, from time to time in the Secured Party's discretion for the purpose of
carrying out the terms of this Agreement, 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 Agreement and, without limiting the
generality of the foregoing, the Debtor hereby gives the Secured Party the power
and right, on behalf of the Debtor, after an Event of Default shall have
occurred and so long as the same shall be continuing, and without notice to or
assent by the Debtor, to do the following:
7.1 to receive payment of, endorse, and receipt for, any and all
monies, claims and other amounts due and to become due at any time in respect of
or arising out of the Collateral;
7.2 to commence and prosecute any suits, actions or proceeding at law
or in equity in any court of competent jurisdiction to collect any of the
Collateral and to enforce any other right in respect of the Collateral;
7.3 to settle, compromise or adjust any suit, action or proceeding
described above, and, in connection therewith, to give such discharges or
releases as the Secured Party may deem appropriate; and
7.4 generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral without regard to any
interest the Debtor may have in the Collateral pursuant to the Lease Agreement
for all purposes, and to do, at the Secured Party's option, at any time, or from
time to time, all acts and things which the Secured Party deems necessary to
protect or
<PAGE>
preserve the Collateral and the Secured Party's security interest and rights
therein in order to effect the intent of this Agreement, all as fully and
effectively as the Debtor might do.
The Debtor hereby ratifies all that such attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest will be irrevocable and shall terminate only upon payment in full of
the Obligations and the termination of this Agreement. The powers conferred
upon the Secured Party hereunder are solely to protect the Secured Party's
interests in the Collateral and will not impose any duty upon it to exercise any
such powers. The Secured Party will have no obligation to preserve any rights
of any third parties in the Collateral. The Secured Party will be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
will be responsible to the Debtor for any action taken or omitted to be taken in
good faith or in reliance on the advice of counsel except for its own gross
negligence or willful misconduct.
8. Miscellaneous.
-------------
8.1 Fees and Expenses. The Debtor will promptly (and in any event
-----------------
within 30 days after its receipt of an invoice or statement therefor) pay all
costs and expenses (including, without limitation, reasonable fees and
disbursements of counsel) suffered or incurred by the Secured Party in
connection with its enforcement of the payment and performance of the
Obligations or any other sum due to it under this Agreement, or any of its other
rights hereunder or thereunder. The provisions of this Section shall survive
the payment of the Obligations and the termination of this Agreement.
8.2 Right of Set-Off. In addition to any rights now or hereafter
----------------
granted under applicable law or otherwise and not by way of limitation of any
such rights, upon the occurrence of any Event of Default and so long as the same
shall be continuing, the Secured Party is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any kind
to the Debtor or to any other person, and such notice herein hereby expressly
waived, to set off and to apply any and all deposits (general or special) and
any other indebtedness at any time held or owing by the Secured Party to or for
the credit or the account of the Debtor, including the Maintenance Reserves (as
defined in the Lease Agreement) against and on account of the obligations and
liabilities of the Debtor to the Secured Party under this Agreement or the
Obligations, including, without limitation, all other claims of any nature or
description arising out of or connected with this Agreement, the Obligations or
any other Security Document, whether or not the Secured Party shall have made
any demand therefor and although said obligations, liabilities or claims, or any
of them, shall be contingent or unmatured.
<PAGE>
8.3 Notices. All notices, requests, reports and other communications
-------
pursuant to this Agreement shall be in writing, delivered by hand or commercial
messenger service or sent by facsimile confirmed on the same business day by
telephone and certified mail, return receipt requested, addressed as follows:
(a) If to Debtor: Tower Air, Inc.
Hangar 17
J.F.K. International Airport
Jamaica, NY 11430
Attention: William Cain
Fax: (718) 553-4387
Telephone: (718) 553-4300
with a copy to: Hewes Gelband Lambert & Dann
1000 Potomac St. NW
Suite 300
Washington, D.C. 20007
Attention: Stephen L. Gelband, Esq.
Fax: (202) 333-0871
Telephone: (202) 337-6200
(b) If to Secured Party: UniCapital Aircraft Engine Group, Inc.
79 Glover Avenue
Norwalk, CT 06850
Attention: Mr. Randy Fiorenza
Fax: (203) 847-9612
Telephone: (203) 847-1401
with a copy to: Greenberg, Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Kenneth C. Hoffman, Esq.
Facsimile: 305-579-0717
Telephone: 305-579-0809
Any notice, request, report or communication hereunder shall be deemed to have
been given on the day on which it is delivered by hand or such commercial
messenger service to such party at its address specified above, or, if sent by
facsimile confirmed on the same business day by telephone and certified mail,
return receipt requested, on the third business day after such confirmation is
deposited in the mail, postage prepaid. Any party may change the person or
address to whom or which notices, requests, reports and communications are to be
given hereunder, by notice duly given hereunder; provided, however that any such
-------- --------
<PAGE>
notice shall be deemed to have been given hereunder only when actually received
by the party to which it is addressed.
8.4 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the Secured Party and the Debtor and their respective
successors and assigns, except that the Debtor may not assign its rights and
obligations hereunder without the prior written consent of the Secured Party,
and any purported assignment or delegation without such consent shall be void.
8.5 No Waiver: Remedies Cumulative. No failure or delay on the part
------------------------------
of the Secured Party in exercising any right, power or privilege hereunder or
under any other Security Document and no course of dealing between the Debtor
and the Secured Party shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Security Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Secured Party would otherwise have. No notice to
or demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Party to any other or further action in any
circumstances without notice or demand.
8.6 Construction; Governing Law; Consent to Jurisdiction.
----------------------------------------------------
(a) The headings used in this Agreement are for convenience only and shall not
be deemed to constitute a part hereof. All uses herein of the masculine
gender or of singular or plural terms shall be deemed to include uses of
the feminine or neuter gender or plural or singular terms, as the context
may require. This Agreement, the Security Documents and all other
documents and instruments executed and delivered in connection herewith and
therewith, shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
(b) The Debtor irrevocably consents that any legal action or proceeding against
it under, arising out of or in any manner relating to this Agreement, the
Obligations or any other Security Document may be brought in any court of
the State of New York or in the United States District Court for the
Southern District of New York. The Debtor, by the execution and delivery
of this Agreement, expressly and irrevocably assents and submits to the
personal jurisdiction of any of such courts in any such action or
proceeding. The Debtor further irrevocably consents to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to it by hand or by mail in the manner
provided for in Section 9.3 hereof. The Debtor hereby expressly and
irrevocably waives any claim or defense in any such action or
<PAGE>
proceeding based on any alleged lack of personal jurisdiction, improper
venue or forum non conveniens or any similar basis. The Debtor shall
----- --- ----------
not be entitled in any such action or proceeding to assert any defense
given or allowed under the laws of any state other than the State of New
York. Nothing in this Section 9.6 shall affect or impair in any manner or
to any extent the right otherwise proceed against the Debtor in any
jurisdiction or to serve process in any manner permitted by law. The Debtor
and the Secured Party waive their right to trial by jury in any litigation
in any court with respect to, in connection with, or arising out of, this
Agreement, the Obligations, the Security Documents, or any instrument or
document delivered pursuant to this Agreement, or the validity, protection,
interpretation, collection or enforcement thereof.
8.7 Amendment or Waiver. This Agreement may not be amended, changed,
-------------------
waived, discharged or terminated without the written consent of the Secured
Party and the Debtor.
8.8 Survival of Agreement and Representations. All agreements,
-----------------------------------------
representations and warranties made herein shall survive the delivery of this
Agreement.
8.9 Severability. The provisions of this Agreement are severable,
------------
and if any clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision in this Agreement in any
jurisdiction. Each of the covenants, agreements and conditions contained in
this Agreement is independent and compliance by the Debtor with any of them
shall not excuse non-compliance by the Debtor with any other. The Debtor shall
not take any action the effect of which shall constitute a breach or violation
of any provision of this Agreement.
8.10 Termination; Release. Upon payment in full of the Obligations,
--------------------
this Agreement, all liabilities and obligations of the Debtor hereunder, and all
rights and interests of the Secured Party herein shall terminate, and the
Secured Party, at the request of the Debtor, shall promptly execute and deliver
to the Debtor a release and any other proper instruments (including UCC-3
termination statements and any termination statements required to be filed with
the United States Department of Transportation, Federal Aviation Administration,
if applicable) acknowledging termination of this Agreement.
8.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Debtor and the Secured Party.
<PAGE>
8.12 Liability of the Secured Party. The Debtor hereby agrees that
------------------------------
the Secured Party will not be chargeable for any negligence, mistake, act or
omission of any employee, accountant, examiner, agent or attorney employed by
the Secured Party (except for the willful misconduct of any person, corporation,
partnership or other entity employed by the Secured Party) in making
examinations, investigations or collections, or otherwise in perfecting,
maintaining, protecting or realizing upon any lien or security interest or any
other interest in the Collateral or other security for the Obligations.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Engine Security Agreement as of
date first shown above.
TOWER AIR, INC.
By:
----------------------------------------
Name: William Cain
Title: Senior Vice President - Engineering and
Maintenance
UNICAPITAL AIRCRAFT ENGINE
GROUP, INC.
By:
----------------------------------------
Name: Randall P. Fiorenza
Title: President and Chief Operating Officer
<PAGE>
EXHIBIT 10.45
AIRCRAFT ENGINE PURCHASE AGREEMENT
This AIRCRAFT ENGINE PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of February 8, 1999, between TOWER AIR, INC., a Delaware
corporation ("Seller"), and UNICAPITAL AIRCRAFT ENGINE GROUP, INC., a Delaware
corporation ("Purchaser").
1. SUBJECT MATTER OF PURCHASE
A. Subject to the terms and provisions of this Agreement, Seller hereby
agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from
Seller, the following aircraft equipment (collectively, the "Equipment"):
(1) one (1) Pratt & Whitney JT9D-7Q engine bearing manufacturer's serial
number 702083, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-200 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
(2) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 686106, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-200 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
(3) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 662751, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-200 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
(4) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662749, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-100 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
(5) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662550, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-100 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
(6) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662498, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-100 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
<PAGE>
(7) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662338, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-100 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
(8) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 662323, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-200 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
(9) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662270, in its as removed condition, with all equipment installed thereon
as of the date of inspection of such engine by Purchaser (including, without
limitation, a full 747-100 QEC), and with all pertinent engine logs, records and
historical information, including back to birth records on life limited parts.
B. Purchaser and Seller hereby agree that on the Delivery Date (as
hereinafter defined) Purchaser shall lease the Equipment to Seller pursuant to a
lease agreement substantially in the form of Annex I hereto (the "Lease").
-------
2. PURCHASE PRICE AND PAYMENT
A. The purchase price for the Equipment (the "Purchase Price") shall be
Thirteen Million Dollars (US$13,000,000).
B. On the Delivery Date, Purchaser shall pay Seller an amount equal to the
Purchase Price by wire transfer of immediately available funds to the following
account:
The Chase Manhattan Bank
ABA No. 021-000-021
For Credit To: Tower Air
Account No.: 080-022-162
3. DELIVERY OF THE EQUIPMENT AND TRANSFER OF TITLE
A. Delivery of all of the Equipment will be made to Purchaser on a
mutually agreed date, on or before February 8, 1999. For purposes of this
Agreement, the term "Delivery Date" shall mean the date on which Seller delivers
to Purchaser Bills of Sale conveying good and marketable title to the Equipment,
free and clear of any and all mortgages, pledges, liens, charges, security
interests, leases, claims or other encumbrances of any kind or nature
whatsoever, other than the Lease, in accordance with the terms of this
Agreement.
B. On the Delivery Date, Seller shall execute and deliver to Purchaser a
Bill of Sale for each item of the Equipment in the form of Exhibit A.
---------
Concurrently with Seller's delivery of the Bills of Sale to Purchaser, title to
the Equipment, and all risk of loss or damage to the Equipment, shall pass from
Seller to Purchaser.
-2-
<PAGE>
C. On the Delivery Date, Seller shall deliver each Engine to Purchaser at
such location on Seller's routes as may be identified by Seller. Prior to
Seller's delivery of each Engine to Purchaser hereunder, Purchaser and Seller
will confirm the location(s) of each Engine on the Delivery Date and Purchaser
and Seller shall cooperate with one another to ensure that the sale and delivery
of each Engine hereunder will occur at times when each such Engine is at such
location as will not result in the imposition of any tax on Purchaser or Seller.
D. On the Delivery Date, concurrently with the payment of the Purchase
Price, Purchaser will execute and deliver to Seller an Equipment Delivery
Receipt for each item of the Equipment in the form of Exhibit B.
---------
E. All of the available records relating to the Equipment will be provided
to Purchaser on or immediately following the Delivery Date; provided, that the
Seller may retain possession of the records in accordance with the terms of the
Lease.
F. Purchaser's obligations pursuant to this Agreement are subject to the
following conditions:
(1) On or prior to the Delivery Date, Seller and Purchaser shall have
executed and delivered the Lease;
(2) On or prior to the Delivery Date, Seller and Purchaser shall have
executed and delivered a Security Agreement substantially in the form of Annex
-----
II hereto (the "Security Agreement") and such Security Agreement shall have been
- --
filed with the Federal Aviation Administration ("FAA");
(3) On or prior to the Delivery Date, Seller shall have delivered to
Purchaser a certificate of insurance, naming Purchaser as sole loss payee with
respect to the Engines and as an additional insured on Seller's liability
insurance policies, and a broker's letter of undertaking in respect of the
insurance required to be provided and maintained by Seller pursuant to the
Lease;
(4) Seller shall have delivered to Purchaser on or prior to the Delivery
Date a certificate executed by an officer of Seller attaching reasonable
evidence that all action and authorizations, corporate and otherwise, of Seller
necessary to enter into and perform its obligations under this Purchase
Agreement, the Lease and the Security Agreement have been obtained and are in
full force and effect and including a certificate of incumbency showing and
certifying the signatures of those officers of Seller authorized to execute, on
behalf of Seller, this Agreement, the Lease and the Security Agreement and all
other documents or instruments to be executed and delivered by Seller hereunder
or in connection with the transactions contemplated hereby; and
(5) On or prior to the Delivery Date, Seller shall have delivered to
Purchaser the consent of Heller Financial, Inc. to the transactions contemplated
hereby pursuant to that certain Amended and Restated Loan and Security
Agreement, dated September 1, 1997 and all amendments thereto, in form
reasonably satisfactory to counsel to Purchaser.
4. EQUIPMENT RECORDS
Seller shall, at Seller's sole cost and expense, deliver to Purchaser, on
the expiration date of the Lease in accordance with its terms, all documents and
technical records relating to the Equipment (the "Engine Records"). The Engine
Records shall be in English, shall have been
-3-
<PAGE>
maintained in accordance with FAA requirements and shall be delivered in up-to-
date status, including appropriate FAA approvals, with substantiation data, for
modifications and/or repairs, compliance with airworthiness directives issued by
the FAA ("AD's") and supporting documentation, serviceable tags and last shop
visit reports for all rotable components and traceability records for life-
limited parts so as to establish back-to-birth traceability for such parts.
Seller acknowledges that this Agreement and the purchase of Equipment hereunder
is contingent upon Purchaser's receipt and acceptance of all Engine Records in
accordance with the requirements of this Article 4.
5. CONDITION OF THE EQUIPMENT; PURCHASER'S INSPECTION; DISCLAIMER
A. On the Delivery Date, the Equipment will be delivered by Seller to
Purchaser in its then "AS IS WHERE IS" condition, with all faults accepted
(except as to title).
B. Purchaser acknowledges that it has had access to the Equipment and all
records pertaining thereto by Purchaser's duly authorized technical
representative to determine that the Equipment is acceptable to Purchaser and in
the condition for delivery required by this Agreement. Purchaser acknowledges
that it is relying on its own inspection and knowledge of the Equipment and not
on any inspection or representation of Seller.
C. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
UNCONDITIONALLY AGREES THAT, AS BETWEEN PURCHASER AND SELLER, THE EQUIPMENT AND
EACH PART THEREOF IS TO BE SOLD AND PURCHASED IN AN "AS IS, WHERE IS" CONDITION
ON THE DELIVERY DATE, WITHOUT ANY REPRESENTATION, WARRANTY, COVENANT OR
GUARANTEE OF ANY KIND BEING MADE OR GIVEN BY SELLER, ITS SERVANTS OR AGENTS,
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, OTHER THAN AS EXPRESSLY SET
FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
SELLER SPECIFICALLY DISCLAIMS AND PURCHASER WAIVES AND AGREES THAT SELLER HAS
NOT MADE NOR SHALL BE DEEMED TO HAVE MADE, AND EXCLUDES HEREFROM ANY
REPRESENTATION, WARRANTY, COVENANT OR GUARANTEE, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, INCLUDING BUT NOT LIMITED TO (1) ANY IMPLIED WARRANTY
OF MERCHANTABILITY OF FITNESS, (2) ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, (3) ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR NOT ARISING FROM SELLER'S NEGLIGENCE,
ACTUAL OR IMPUTED, AND (4) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR
LOSS OF OR DAMAGE TO THE EQUIPMENT, FOR LOSS OF USE, REVENUE OR PROFIT WITH
RESPECT TO THE EQUIPMENT, FOR ANY LIABILITY OF PURCHASER TO ANY THIRD PARTY, OR
FOR ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
D. SELLER MAKES NO REPRESENTATIONS AS TO WHAT USE OR APPLICATION MAY BE
MADE OF THE EQUIPMENT OR ANY PART THEREOF IN THE CONDITION IN WHICH IT WILL BE
DELIVERED, AND PURCHASER ASSUMES ALL RESPONSIBILITY FOR SUCH REPAIR, OVERHAUL,
ALTERATION OR MODIFICATION AS MAY BE NECESSARY FOR THE USES TO WHICH THE
EQUIPMENT MAY BE PUT BY PURCHASER OR ANY CUSTOMER OF PURCHASER.
-4-
<PAGE>
E. Purchaser agrees that, from and after the Delivery Date, Seller shall
not be liable for, and Purchaser hereby releases Seller from, any liability,
claim, loss, damage or expense of any kind or nature caused directly or
indirectly by the Equipment or any part thereof, by any inadequacy of the
Equipment or any part thereof for any purpose or any deficiency or defect
therein, by the use or performance of the Equipment, by any maintenance,
service, repairs, overhauls or modifications to the Equipment, by any
interruption or loss of service or use of the Equipment or by any loss of
business or other consequential damage or any other damage whatsoever, howsoever
caused; provided, that the release by Purchaser of Seller pursuant to this
Article 5E shall not apply to any such liability, claim, loss, damage or expense
which arises as a result of Seller's breach of any express warranty,
representation or obligation of Seller hereunder.
6. REPRESENTATIONS AND WARRANTIES
A. Seller hereby represents and warrants to Purchaser that:
(1) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the power
and authority to enter into this Agreement and perform its obligations
hereunder.
(2) No authorization, approval, consent, license or order of, or
registration with, or the giving of notice to any government entity or
third party is required for the valid authorization, execution,
delivery and performance by Seller of this Agreement, other than any
such authorization, approval, consent, license, order, registration,
notice or action as has been duly obtained, given or taken prior to
the Delivery Date.
(3) This Agreement has been duly authorized, executed and delivered by
Seller and is a valid, enforceable and binding obligation of Seller,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the rights of
creditors generally, and except as enforceability may be subject to
the application of equitable principles in any proceeding, legal or
equitable.
(4) The execution and delivery of this Agreement, the consummation by
Seller of the transactions contemplated herein and compliance by
Seller with the terms and provisions hereof do not and will not
contravene any law applicable to Seller, or result in any breach of or
constitute any default under any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, or other agreement or instrument to which Seller is
a party or by which Seller or its properties or assets may be bound or
affected.
(5) On the Delivery Date, Seller shall have and convey to Purchaser good
and marketable title to the Equipment, free and clear of any and all
mortgages, pledges, liens, charges, security interests, leases, claims
or other encumbrances of any kind or nature whatsoever.
(6) To the best of Seller's knowledge, none of the Equipment has been
subjected to extreme heat or stress (including, without limitation,
such as would result from an accident or fire) and none of the
Equipment has had an uncontained failure.
B. Purchaser hereby represents and warrants to Seller that:
-5-
<PAGE>
(1) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has the
power and authority to enter into this Agreement and perform its
obligations hereunder.
(2) No authorization, approval, consent, license or order of, or
registration with, or the giving of notice to any government entity or
third party is required for the valid authorization, execution,
delivery and performance by Purchaser of this Agreement.
(3) This Agreement has been duly authorized, executed and delivered by
Purchaser and is a valid, enforceable and binding obligation of
Purchaser, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally, and except as enforceability may be
subject to the application of equitable principles in any proceeding,
legal or equitable.
(4) The execution and delivery of this Agreement, the consummation by
Purchaser of the transactions contemplated herein and compliance by
Purchaser with the terms and provisions hereof do not and will not
contravene any law applicable to Purchaser, or result in any breach of
or constitute any default under any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, or other agreement or instrument to which Purchaser
is a party or by which Purchaser or its properties or assets may be
bound or affected.
7. TAXES AND INDEMNIFICATION
A. Purchaser and Seller shall cooperate and use reasonable efforts to
minimize or avoid the imposition of any sales or other taxes on the sale,
delivery and transfer of title to the Equipment. Notwithstanding the foregoing,
Seller agrees to pay promptly when due, and will indemnify and hold Purchaser
harmless from any and all fees (including, without limitation, license,
registration and recording fees and assessments), taxes (including, without
limitation, gross receipts, income, sales, rental, use, turnover, value added,
property (tangible or intangible), excise and stamp 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 (except taxes levied or assessed against Purchaser
based upon gross receipts or net income or taxes imposed upon Purchaser for the
privilege of doing business or exercising a franchise) arising out of the sale,
purchase and delivery of the Equipment, in any manner levied, assessed or
imposed by any government or subdivision or agency thereof having jurisdiction.
B. Purchaser hereby agrees to indemnify, protect, save and keep harmless
Seller and Seller's officers, directors, employees, agents, affiliates,
successors and assigns (each, an "Indemnitee") from and against, and on written
demand to pay, or to reimburse each Indemnitee for the payment of, any and all
liabilities, obligations, losses, damages, penalties, claims (including, without
limitation, claims arising out of negligence or involving strict liability in
tort), suits, actions, costs, expenses and disbursements (including, without
limitation, reasonable legal fees, costs and related expenses), of whatsoever
kind and nature ("Expenses") imposed on, incurred by or asserted against any
Indemnitee after the Delivery Date relating to or arising directly or indirectly
out of or in any way connected with the ownership, possession, control, use,
operation, sale, leasing or other application or disposition of the Equipment or
any part thereof or interest therein after the Delivery Date, whether by
Purchaser, Purchaser's customer or any other person; provided, however, that
such
-6-
<PAGE>
Expenses are not judicially determined to have been attributable to such
Indemnitee's gross negligence or willful misconduct or the breach by Seller of
any express warranty, representation or obligation of Seller hereunder. The
obligations contained in this Article 7B. shall survive the sale and delivery of
the Equipment hereunder and are expressly made for the benefit of, and shall be
enforceable by, Seller and each other Indemnitee entitled thereto.
8. NOTICES
All notices required or permitted hereunder shall be in writing and shall
be delivered in person or sent by telecopier, courier service or facsimile
(confirmed by telephone in the case of notice by facsimile) or any other
customary means of communication, and any such notice shall be effective when
delivered. Notices shall be addressed to the parties as follows (or to such
other places and numbers as either party directs in writing to the other party):
Seller Purchaser
------ ---------
Tower Air, Inc. Unicapital Aircraft Engine Group, Inc.
Hangar 17 79 Glover Avenue
J.F.K. International Airport Norwalk, CT 06850
Jamaica, NY 11430 Attn: Mr. Randy Fiorenza
Attn: William Cain Fax: (203) 847-9612
Fax: (718) 553-4387 Telephone: (203) 847-1401
Telephone: (718) 553-4300
with a copy to: with a copy to:
Stephen L. Gelband, Esq. Kenneth C. Hoffman, Esq.
Hewes Gelband Lambert & Dann Greenberg Traurig, P.A.
1000 Potomac St. NW 1221 Brickell Avenue
Suite 300 Miami, Florida 33131
Washington, D.C. 20007 Fax: (305) 579-0717
Fax: (202) 333-0871 Telephone: (305) 579-0809
Telephone: (202) 337-6200
9. NO BROKERS
Both parties acknowledge that there are no brokerage commissions to be paid
with respect to the purchase and sale of the Equipment, and each party agrees to
indemnify and hold the other harmless from and against any and all claims,
suits, damages, costs, expenses, including attorneys' fees, asserted by agents
or other third parties for any commission or compensation based on the sale of
the Equipment, if such claim, suit, damage, costs or expense arises out of any
action or alleged actions by the indemnifying party, its employees, officers or
agents.
10. ASSIGNMENT OF WARRANTY
To the extent any warranties relating to the Equipment are assignable,
Seller hereby assigns to Purchaser, effective on the Delivery Date as of the
delivery to and acceptance of the Equipment by Purchaser, all of Seller's rights
under such warranties and Seller's rights with respect to warranties or other
obligations of entities which have performed maintenance, service, repair,
overhaul or testing thereon. Seller agrees to execute such documents as may be
reasonably necessary to evidence the assignment hereby made or contemplated.
-7-
<PAGE>
11. LOSS OR DAMAGE PRIOR TO DELIVERY
A. In the event of damage to any of the Equipment following the execution
hereof and prior to the Delivery Date, Purchaser shall have the right to delay
the Delivery Date for a reasonable period of time (but not beyond March 31,
1999, or such later date as is mutually agreed) to ensure to Purchaser's
satisfaction that the Equipment will be repaired and restored to the condition
required by this Agreement; and if such damage delays delivery of any of the
Equipment beyond March 31, 1999 (or such later date as is mutually agreed),
Purchaser or Seller shall have the right to terminate this Agreement by giving
written notice to the other, and upon such termination all rights and
obligations of both parties hereunder shall be discharged automatically without
further act or deed.
B. In the event of total loss or destruction of any of the Equipment
following the execution hereof and prior to the Delivery Date, either Purchaser
or Seller shall have the right to terminate the Agreement by giving written
notice to the other, and upon such termination all rights and obligations of
both parties hereunder shall be discharged automatically without further act or
deed.
12. APPLICABLE LAW AND JURISDICTION
This Agreement shall, in all respects, be governed by and construed in
accordance with the laws of the State of New York, United States of America,
without giving effect to the conflict of laws principles thereof.
13. MISCELLANEOUS
A. All warranties and representations made by either party shall survive
the closing of the transaction contemplated herein and the delivery of the
Equipment.
B. Whether or not the transactions contemplated hereby shall be
consummated, each of Purchaser and Seller agrees to pay its own out-of-pocket
expenses, including attorney's fees, incurred in connection with the
preparation, negotiation and execution of this Agreement and any other documents
required in connection herewith and the transactions contemplated hereby.
C. This Agreement is a confidential document between Purchaser and Seller
and, except as provided by applicable law or with the prior written consent of
the other party, which consent shall not be unreasonably withheld, neither
Purchaser nor Seller will disclose the terms of this Agreement to third parties,
other than to its auditors, legal and technical advisors or lenders.
D. This Agreement constitutes the entire agreement between Seller and
Purchaser in relation to the purchase and sale of the Equipment and supersedes
all previous proposals, agreements and other written and oral communications in
relation thereto. Purchaser and Buyer acknowledge and agree that there have been
no representations, warranties, promises, guarantees or agreements, express or
implied, made by either party in connection with the transactions contemplated
hereby, except as set forth herein. This Agreement may only be amended or
modified by a writing executed by Buyer and Seller.
E. This Agreement shall be binding on, and inure to the benefit of, the
parties hereto and their successors and assigns. Except as set forth
immediately below, neither this Agreement, nor any of Purchaser's or Seller's
rights and interests hereunder, may be assigned without the express prior
written consent of the other party hereto.
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<PAGE>
F. The rights of the parties hereunder are cumulative, not exclusive, may
be exercised as often as each party considers appropriate and are in addition to
its rights under general law. The rights of one party against the other party
shall not be deemed waived or amended except by an express waiver or amendment
in writing. Any failure to exercise or any delay in exercising any of such
rights will not operate as a waiver or amendment of that or any other such
right; any defective or partial exercise of any such rights will not preclude
any other or further exercise of that or any other such right; and no act or
course of conduct or negotiation on a party's part or on its behalf will in any
way preclude such party from exercising any such right or constitute a
suspension or any amendment of any such right.
G. Any provision herein which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or rendering unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, Seller and Purchaser
hereby waive any provision of law which renders any provision hereof prohibited
or unenforceable in any respect.
H. This Agreement may be executed in any number of identical counterparts,
all of which together will be deemed to be one and the same instrument.
Delivery of an executed counterpart of this Agreement by facsimile will be
deemed effective as delivery of an originally executed counterpart. Any party
delivering an executed counterpart of this Agreement by facsimile will also
deliver an originally executed counterpart; provided the failure of any party to
deliver an originally executed counterpart of this Agreement will not affect the
validity or effectiveness of this Agreement.
(continued on signature page)
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first shown above.
TOWER AIR, INC. UNICAPITAL AIRCRAFT ENGINE GROUP, INC.
BY: BY:
------------------------------- -------------------------------
NAME: William Cain NAME: Randall P. Fiorenza
TITLE: Senior Vice President - TITLE: President and Chief Operating
Engineering and Maintenance Officer
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<PAGE>
ANNEX I
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FORM OF LEASE
<PAGE>
ANNEX II
--------
FORM OF SECURITY AGREEMENT
-12-
<PAGE>
EXECUTION COPY
PROMISSORY NOTE
U.S.$9,137,500 March 24, 1999
FOR VALUE RECEIVED, TOWER AIR, INC., a Delaware corporation (the
"Borrower"), by this promissory note (the "Note") irrevocably and
unconditionally promises to pay to the order of UNICAPITAL CORPORATION, a
Delaware corporation, or any assignee of this Note or any successor or assignee
thereof (the "Holder"), the principal sum of NINE MILLION ONE HUNDRED THIRTY
SEVEN THOUSAND FIVE HUNDRED DOLLARS (US$9,137,500) payable in eighteen (18)
consecutive equal monthly installments of principal and interest due on the same
day of each month of each year until maturity beginning on April 23, 1999;
provided, however, that the final installment of principal and interest payable
hereunder shall be in the amount of all of the remaining and then outstanding
principal balance of this Note, together with interest accrued thereon.
The unpaid principal amount from time to time outstanding shall bear
interest from the date of this Note at the fixed rate of interest of ten percent
(10%) per annum. Any principal, interest or any other amount hereunder which is
not paid when due (whether as stated, by acceleration or otherwise) shall, to
the full extent permitted by law, thereafter bear interest at the rate of twelve
percent (12%) per annum from the date such amount shall have become due and
payable up to the date the same shall be paid. Interest shall be computed on the
basis of a 360 day year consisting of 12 months of 30 days each. Anything in
this Note to the contrary notwithstanding, the Holder shall not be permitted to
charge or receive, and the Borrower shall not be obligated to pay, interest in
excess of the maximum rate from time to time permitted by applicable law.
All payments to be made hereunder by the Borrower shall be made without
set-off, deduction, counterclaim or withholding whatsoever, in United States
dollars in same day funds not later than 3:00 p.m., New York time, on the due
date, by wire transfer of immediately available funds to NationsBank, N.A., ABA
No. 111000012, Account No. 3751028367, For Final Credit To: UniCapital
Corporation, or to such other account as the Holder may from time to time
designate, in writing, to the Borrower. Whenever any payment hereunder shall be
stated to be due on a day that is not a Working Day, such payment shall be made
on, and interest shall be payable to, the succeeding Working Day unless the
succeeding Working Day shall fall in the succeeding calendar month, in which
event such payment shall be made on the preceding Working Day. "Working Day"
shall mean a day on which dealings in currencies and exchange between banks may
be carried on in New York, New York.
The Borrower agrees to indemnify the Holder for, and hold the Holder
harmless from, any present or future claim or liability for any registration
charge or any stamp, excise or other similar taxes and any penalties or interest
with respect thereto, which may be imposed by any jurisdiction in connection
with this Note or enforcement hereof.
<PAGE>
The Borrower hereby represents and warrants that: (a) the Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has full power, authority and legal right to execute, deliver
and perform this Note, and has taken all necessary corporate and other action to
authorize the execution, delivery and performance of this Note on the terms and
conditions hereof; (b) this Note constitutes the legal, valid and binding
obligation of the Borrower enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws affecting the rights of creditors generally, and
except as enforceability may be subject to the application of equitable
principles in any proceeding, legal or equitable; (c) the execution, delivery
and performance by the Borrower of this Note will not violate the charter,
bylaws or other corporate rules of the Borrower or any provision of law or
regulation or of any judgment, order or decree of any court, arbitrator or
governmental authority or of any agreement of any nature whatsoever, binding
upon the Borrower or its assets; (d) no consent or exemption is required in
connection with the execution, delivery, performance (including payment as
specified in the fourth paragraph of this Note), validity or enforceability of
this Note; (e) no Event of Default (as defined herein) has occurred and is
continuing; (f) the obligations of the Borrower under this Note rank at least
pari passu (in priority of payment, security and otherwise) with all other
unsecured pecuniary obligations of whatsoever nature (including contingent
obligations) of the Borrower outstanding as of the date hereof; (g) except as
set forth on the schedule provided to UniCapital Aircraft Engine Group, Inc.
(formerly United States Turbine Engine Corporation), a wholly owned subsidiary
of the Holder, on December 28, 1998, no litigation, arbitration or
administrative proceeding of or before any court, arbitrator or governmental
authority is pending or, to the knowledge of the Borrower, threatened (i) with
respect to any aspect of this Note or (ii) affecting the Borrower or any of its
assets, which, if adversely determined, would have a material adverse effect on
the business, prospects or financial condition of the Borrower; (h) all tax
returns required to be filed by the Borrower have been filed and all taxes
payable by the Borrower have been paid, except those being contested in good
faith by appropriate proceedings for which adequate reserves have been provided
on its books; and (i) this Note is issued to evidence the financing of 85% of
the Purchase Price (as defined in that certain Engine Purchase Agreement dated
as of February 8, 1999, between the Borrower and UniCapital Aircraft Engine
Group, Inc., a wholly owned subsidiary of the Holder).
If any of the following events (each, an "Event of Default") occurs: (a)
the Borrower fails to pay when due any principal of or interest on this Note or
any other amount payable hereunder and such failure is not remedied within 3
Working Days; or (b) the Borrower fails to make any payment when due on any
pecuniary obligation(s) (other than this Note) of any nature whatsoever
(including, without limitation, contingent obligations), (x) owed to UniCapital
Corporation or an affiliate of UniCapital Corporation or (y) which pecuniary
obligation(s) exceed US$5,000,000 (or the equivalent in one or more other
currencies) individually or in the aggregate, or defaults in performance of any
agreement under which any such obligation is created, or any other event shall
occur or condition exist, if the effect of such default or other event or
condition is to cause such obligation to become, or to permit holders of such
obligation, or a trustee on their behalf, to declare such obligation, due prior
to its normal maturity, provided, however, that if the Borrower is contesting in
good faith the amount of any such obligation and has set aside adequate
reserves, such failure to pay shall not be deemed to constitute an Event of
-2-
<PAGE>
Default hereunder during the pendency of such contest; or (c) the Borrower
becomes insolvent or unable to pay its debts as they mature, or consents to the
appointment of a custodian, trustee, intervenor or receiver for it or a
substantial part of its property, or any such custodian, trustee, intervenor or
receiver is appointed, or bankruptcy, dissolution, reorganization, intervention,
arrangement or liquidation proceedings (or proceedings similar in purpose or
effect) are instituted (i) by the Borrower or (ii) against the Borrower and are
not dismissed within sixty (60) days; or (d) any governmental consent or
exemption necessary to enable the Borrower to comply with or perform its
obligations under this Note is revoked, withdrawn or withheld, or otherwise
fails to be issued or remain in full force and effect; or (e) a warrant of
attachment or execution or similar process against any substantial part of the
assets of the Borrower is issued; or (f) any representation or warranty made by
the Borrower in this Note proves to have been incorrect when made; or (g) there
occurs a material adverse change in the business, prospects or financial
condition of the Borrower; or (h) the Borrower fails to perform or observe any
covenant or other term contained in this Note and such failure, if capable of
remedy, is not remedied within 15 days after its receipt of written notice of
such failure to perform or observe from the Holder; then, and in any such event,
the Holder may, by notice of default given to the Borrower, declare unpaid
principal, accrued interest and all other amounts payable under this Note to be
immediately due and payable without presentment, demand, protest or other notice
of any kind, each of which is hereby expressly waived by the Borrower. The
Borrower hereby agrees that, so long as any principal, interest or any other
amount remains outstanding and unpaid under this Note, the Borrower shall notify
the Holder promptly by telephone, confirmed in writing, or in writing, upon the
occurrence of any Event of Default.
The Borrower agrees to pay all the Holder's costs and out pocket
expenses (including, without limitation, reasonable fees and disbursements of
counsel including, without limitation, the allocated cost of in house counsel)
arising in connection with the enforcement of, and preservation of rights under,
this Note.
The Borrower agrees to indemnify the Holder for, and to hold the Holder
harmless from, any loss or expense which the Holder may sustain or incur as a
consequence of (i) default by the Borrower in payment when due of any principal
of or interest on this Note or (ii) the making of any payment or prepayment
hereunder on a day or in an amount other than the dates and amounts specified in
this Note.
No action or omission by the Holder shall constitute a waiver of any
rights or remedies of the Holder hereunder. Such rights and remedies are
cumulative and not exclusive of any rights or remedies provided by law. Payment
of principal of and interest on this Note shall not discharge the Borrower's
obligation with respect to any other amount payable hereunder. In connection
with any assignment by the Holder of this Note and the loan evidenced hereby,
the Borrower hereby agrees promptly to execute and deliver such documents and
instruments, and to take such further action as may be reasonably requested by
the Holder or such assignee to further evidence, or in connection with, such
assignment, including, without limitation, the giving by the Borrower of any
notice to any regulatory authority or others deemed necessary or advisable by
the Holder or such assignee in its sole discretion. The Holder shall have all
the rights and benefits of this Note as if it were the original Holder hereof.
-3-
<PAGE>
Unless otherwise specified, all notices and other communications under
the Note shall be in writing and shall be deemed made (i) if by hand or courier
service, when delivered or (ii) if by mail or facsimile, when sent, addressed as
follows or at such other address as may be designated by written notice:
Tower Air, Inc.
Hangar 17
J.F.K. International Airport
Jamaica, NY 11430
Attn: William Cain
Fax: (718) 553-4387
with a copy to:
Stephen L. Gelband, Esq.
Hewes Gelband Lambert & Dann
1000 Potomac St. NW
Suite 300
Washington, D.C. 20007
Fax: (202) 333-0871
UniCapital Corporation
10800 Biscayne Boulevard
Suite 300
Miami, Florida 33161
Attn: Mr. Stuart Cauff
Fax: (305) 899-5050
The Borrower hereby irrevocably: (a) submits in any legal proceeding
relating to this Note to the non exclusive jurisdiction of any state or United
States court of competent jurisdiction sitting in the State of New York and
agrees to suit being brought in any such court, as the Holder may elect; (b)
waives and agrees not to claim (i) any objection that it may now or hereafter
have to the venue of any such proceeding in any such court or that such
proceeding was brought in an inconvenient court and (ii) immunity (whether
characterized as sovereign immunity or otherwise) from suit, from the
jurisdiction of any court, from attachment prior to or in aid of execution of, a
judgment, or from execution of a judgment; (c) agrees to service of process in
any such legal proceeding by mailing of copies thereof (by registered or
certified mail) postage prepaid, to the Borrower at its address set forth above
or such other address of which the Holder shall have been notified in writing;
(d) agrees that nothing herein shall affect the Holder's right to effect service
of process in any other manner permitted by law, and that the Holder shall have
the right to bring any legal proceedings (including a proceeding for enforcement
of a judgment entered by any of the aforementioned courts) against the Borrower
in any other court or jurisdiction in accordance with applicable law; and (g)
WAIVES TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING.
-4-
<PAGE>
THIS NOTE SHALL BE A CONTRACT UNDER, AND BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
TOWER AIR, INC.
By:
-----------------------------------------------
Name: William Cain
Title: Senior Vice President Engineering
and Maintenance
-5-
<PAGE>
EXECUTION COPY
ENGINE LEASE AND OPTION AGREEMENT
DATED AS OF
FEBRUARY 8, 1999
BETWEEN
UNICAPITAL AIRCRAFT ENGINE GROUP, INC.,
AS LESSOR,
AND
TOWER AIR, INC.,
AS LESSEE
One (1) Pratt & Whitney JT9D-7Q Engine,
Manufacturer's Serial No. 702083
Three (3) Pratt & Whitney JT9D-7J Engines,
Manufacturer's Serial Nos. 686106, 662751 and 662323
Five (5) Pratt & Whitney JT9D-7A Engines,
Manufacturer's Serial Nos. 662749, 662550, 662498, 662338 and 662270
<PAGE>
Table of Contents
Page
1. Definitions....................................................... 2
2. Term; Delivery of Engines......................................... 5
(a) Term......................................................... 5
(b) Lease Supplement............................................. 5
3. Rent and Other Payments; Purchase Option.......................... 5
(a) Basic Rent................................................... 5
(b) Maintenance Reserves......................................... 5
(c) Supplemental Rent............................................ 6
(d) Manner of Payment............................................ 6
(e) Late Payments................................................ 6
(f) No Setoff, Counterclaim, etc................................. 7
(g) Purchase Option.............................................. 8
(h) Security Deposit............................................. 9
4. LESSEE Deliveries................................................. 9
5. Disclaimer; Manufacturer and Vendor Warranties....................10
(a) Disclaimer by LESSOR.........................................10
(b) Manufacturer and Vendor Warranties...........................10
6. Maintenance; Replacement and Pooling of Parts; Alterations and
Modifications.....................................................11
(a) Maintenance..................................................11
(b) Replacement of Parts.........................................11
(c) Pooling of Parts.............................................12
(d) Alterations and Modifications................................12
7. Title; Liens; Operation and Possession............................12
(a) Title........................................................12
(b) Liens........................................................12
(c) Operation....................................................13
(d) Possession...................................................13
(e) Identification Plate.........................................14
(f) Inspections..................................................14
8. Loss, Destruction, Requisition, etc...............................15
(a) Event of Loss with Respect to an Engine......................15
(i)
<PAGE>
(b) Application of Payments from Governmental Authorities........15
(c) Requisition for Use of the Engine............................15
9. Insurance.........................................................15
(a) Liability....................................................15
(b) Property Damage Insurance....................................16
(c) Terms of Insurance...........................................16
(d) Application of Insurance.....................................16
(e) Reports......................................................17
(f) Failure to Insure............................................17
(g) Additional Insurance.........................................17
(h) Continuation of Liability Insurance..........................17
10. Return of Engine..................................................17
(a) Redelivery upon Termination..................................17
(b) Condition of Engine..........................................18
(c) Engine Documentation.........................................19
(d) Service Bulletin Kits........................................19
11. Representations and Warranties of LESSEE..........................19
12. Indemnification...................................................21
(a) General Indemnity and Expenses...............................21
(b) General Tax Indemnity........................................22
(c) Calculation of Tax Indemnity Payments........................23
(d) Reports......................................................23
(e) Payment......................................................23
(f) Survival.....................................................23
13. Assignment........................................................24
(a) No Assignment by LESSEE......................................24
(b) Assignment by LESSOR.........................................24
14. Events of Default; Remedies.......................................24
(a) Events of Default............................................24
(b) Remedies.....................................................25
15. Notices...........................................................27
16. Governing Law and Jurisdiction....................................28
(a) Governing Law................................................28
(b) Jurisdiction; Service of Process.............................28
(c) Waiver of Immunity...........................................29
(ii)
<PAGE>
17. Miscellaneous.....................................................29
(a) Entire Agreement.............................................29
(b) English Language.............................................29
(c) LESSOR's Right to Perform for LESSEE.........................29
(d) Application of Payments During Existence of Default..........30
(e) Quiet Enjoyment..............................................30
(f) Expenses.....................................................30
(g) Further Assurances...........................................30
(h) Invalidity of any Provision..................................30
(i) Headings.....................................................30
(j) Third Party Beneficiaries....................................30
Schedule 1: Basic Rent
Schedule 2: Stipulated Loss Values
Schedule 3: Option Exercise Prices
Exhibit A: Form of Lease Supplement
Exhibit B: Form of Return Acceptance Receipt
Exhibit C: Form of Identification Plate
Exhibit D: Form of Bill of Sale
(iii)
<PAGE>
This ENGINE LEASE AND OPTION AGREEMENT, is made and entered into as of
February 8, 1999, between UNICAPITAL AIRCRAFT ENGINE GROUP, INC., a Delaware
corporation ("LESSOR"), and TOWER AIR, INC., a Delaware corporation ("LESSEE").
The subject matter of this Lease is the following aircraft equipment
(collectively, the "Engines," and each individually, an "Engine") and the Engine
documentation set forth on Attachment 1 to the applicable Lease Supplement (as
defined herein):
(1) one (1) Pratt & Whitney JT9D-7Q engine bearing manufacturer's serial
number 702083 ("Engine 702083"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine;
(2) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 686106 ("Engine 686106"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine;
(3) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 662751 ("Engine 662751"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine;
(4) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662749 ("Engine 662749"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine;
(5) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662550 ("Engine 662550"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine;
(6) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662498 ("Engine 662498"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine;
-1-
<PAGE>
(7) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662338 ("Engine 662338"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine;
(8) one (1) Pratt & Whitney JT9D-7J engine bearing manufacturer's serial
number 662323 ("Engine 662323"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine; and
(9) one (1) Pratt & Whitney JT9D-7A engine bearing manufacturer's serial
number 662270 ("Engine 662270"), which has 750 or more rated takeoff horsepower,
together with any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long as title thereto shall remain
vested in LESSOR in accordance with the terms of Section 6(c) after removal from
------------
any such Engine.
In consideration of and subject to the mutual covenants, terms and
conditions contained in this Lease, LESSOR and LESSEE agree as follows:
1. Definitions.
-----------
(a) Unless the context otherwise requires the following terms shall
have the following meanings for all purposes of this Lease and shall be equally
applicable both to the singular and plural forms of the terms defined. Any
agreement defined below shall include each amendment, modification and
supplement thereto and waiver thereof in effect from time to time.
"Basic Rent" for each Engine shall mean the rent payable to LESSOR for
----------
such Engine pursuant to Section 3(a) hereof in the amount set forth opposite
------------
such Engine on Schedule 1 attached hereto.
----------
"Business Day" shall mean any day not a Saturday, Sunday or legal holiday
------------
in the State of New York on which banks are open for business in New York City.
"Default" shall mean any event that, with the passage of time or the giving
-------
of notice or both, would become an Event of Default.
"Delivery Date" shall mean the date on which the Engines are delivered by
-------------
LESSOR to LESSEE for lease hereunder.
"Dollars" and "US$" shall mean lawful currency of the United States of
------- ---
America.
"Event of Loss" with respect to any Engine shall mean any of the following
-------------
events: (i) loss of such Engine or the use thereof due to theft, disappearance,
destruction, damage beyond repair or rendition of such Engine permanently unfit
for normal use for any reason whatsoever;
-2-
<PAGE>
(ii) any damage to such Engine that results in the receipt of insurance proceeds
with respect to such property on the basis of a total loss; (iii) the
condemnation, confiscation or seizure of, or requisition of title to, such
property by any authority, or a requisition for use of such property, either (x)
by any authority other than a Government Entity of the United States, or (y) by
a Government Entity of the United States if for a stated or actual period in
excess of the remaining Term; (iv) as a result of any rule, regulation, order or
other action by the FAA, or other governmental body having jurisdiction thereof,
the use of such Engine in the normal course of air transportation shall have
been prohibited for a period of six consecutive months; or (v) the inability for
any reason of LESSOR to obtain possession of such Engine within 15 days after
this Lease shall have been declared to be in default pursuant to Section 14,
----------
free and clear of all Liens (other than LESSOR's Liens); or (vi) the operation
or location of the Engine, while under requisition by a Government Entity of the
United States, in any area excluded from coverage (because of such requisition
or otherwise) by any insurance policy in effect required by the terms of
Section 9, if LESSEE shall be unable to obtain from such Government Entity an
- ---------
indemnity in lieu thereof, in substance acceptable to LESSOR, with a mechanism
for payment not materially less favorable than that of Section 9.
---------
"FAA" shall mean the United States Federal Aviation Administration and any
---
successor agency thereto.
"Flight Hour" shall mean each hour or part thereof elapsing from the moment
-----------
the wheels of the airframe on which an Engine is then installed leave the ground
on takeoff until the wheels of such airframe touch the ground on landing
following such flight. For purposes of all calculations under this Lease
measured in Flight Hours, such hours, including fractions thereof, shall be
measured to two decimal places.
"Government Entity" means (i) any national, state or local government, (ii)
-----------------
any board, commission, department, division, instrumentality, court, agency or
political subdivision of any entity described in (i) above, however constituted,
and (iii) any association, organization or institution of which any entity
described in (i) or (ii) above is a member or to whose jurisdiction any thereof
is subject or in whose activities any thereof is a participant.
"Insured Value" shall mean in respect of any Engine an amount equal to 110%
-------------
of the Stipulated Loss Value of such Engine.
"Lease," "this Lease Agreement," "this Lease," "this Agreement," "herein,"
-----
"hereunder," "hereby," or other like words shall mean this Lease as originally
executed or as modified, amended or supplemented pursuant to the applicable
provisions hereof.
"Lease Supplement" shall mean each Lease Supplement, substantially in the
----------------
form on Exhibit A hereto, to be entered into on the Delivery Date between LESSOR
---------
and LESSEE for the purpose of leasing each Engine under and pursuant to the
terms of this Lease Agreement.
"LESSOR Lien" shall mean any Lien arising as a result of (i) claims against
-----------
LESSOR not related to the transactions contemplated by this Lease, (ii) Taxes
imposed against LESSOR that are not indemnified against by LESSEE pursuant to
Section 12(b) or (iii) claims against
- -------------
-3-
<PAGE>
LESSOR arising out of the transfer of all or any part of its interest in any
Engine, other than by reason of the occurrence of an Event of Loss or following
an Event of Default.
"Lien" shall mean any mortgage, pledge, lien, charge, encumbrance, lease,
----
exercise of rights, security interest or claim of any nature whatsoever.
"Manufacturer" shall mean Pratt & Whitney.
------------
"Option Exercise Date" shall mean any of the dates set forth on Schedule 3
--------------------
hereto on which LESSEE exercises or is deemed to have exercised the Purchase
Option in accordance with Section 3(g) hereof.
"Option Price" shall mean the amount set forth on Schedule 3 hereto under
------------
the heading "Option Price" opposite the Option Exercise Date on which the
Purchase Option is to be exercised.
"Parts" shall mean any and all appliances, parts, avionics, attachments,
-----
accessions, instruments, appurtenances, accessories, furnishings and other
equipment of whatever nature attached to or incorporated in any Engine.
"Payment Date" shall mean the Delivery Date and the same day of the month
------------
as the Delivery Date in each calendar month after such date during the Term or,
if there shall be no such numerically corresponding date in any such succeeding
calendar month, the last day of such month.
"Person" shall mean an individual, corporation, partnership, joint venture,
------
trust, unincorporated organization or any other juridical entity, or a
Government Entity.
"Post-Default Rate" shall mean a rate per annum equal to twelve percent
-----------------
(12%) on the basis of the actual number of days elapsed over a 360-day year.
"Rent" shall mean Basic Rent and Supplemental Rent.
----
"Stipulated Loss Value" shall mean in respect of any Engine, the amount set
---------------------
forth opposite such Engine on Schedule 2 attached hereto..
----------
"Supplemental Rent" shall mean all amounts, sums, monies, indebtedness,
-----------------
liabilities and obligations (other than Basic Rent) that LESSEE assumes, agrees
or otherwise becomes liable to pay to LESSOR or others hereunder or under any
other document or agreement entered into in connection herewith or with the
transactions contemplated hereby and thereby including, without limitation,
payments of Maintenance Reserves, Stipulated Loss Value and any interest payable
with respect to payments pursuant to Section 3(e).
------------
"Tax" or "Taxes" shall mean any and all fees, taxes (including, without
--- -----
limitation, gross receipts, income, sales, rental, use, turnover, value added,
property (tangible or intangible), excise and stamp taxes, levies, imposts,
duties, charges, assessments or withholdings of any
-4-
<PAGE>
nature whatsoever, together with any and all penalties, fines, additions to tax
and interest thereon or computed by reference thereto.
(b) The following terms are defined in the Sections referenced below:
Term Section
---------------------- --------------------------
Additional Insureds 9(c)
Engines Preamble
Event of Default 13(a)
Expenses 11(a)
Indemnitee 11(a)
Maintenance Program 6(a)
Maintenance Reserves 3(b)
Permitted Lien 7(b)
Purchase Option 3(g)
Security Deposit 8(a)
Taxing Authority 11(b)
Term 2(a)
2. Term; Delivery of Engines.
-------------------------
(a) Term. The term of this Lease (the "Term") shall commence on the
---- ----
Delivery Date and end, unless earlier terminated pursuant to the provisions of
this Lease, five (5) years after the Delivery Date (the "Term").
----
(b) Lease Supplement. On the Delivery Date, LESSEE shall execute and
----------------
deliver to LESSOR a Lease Supplement for each Engine, dated as of the Delivery
Date, with respect to the acceptance of such Engine and Engine documentation for
lease hereunder.
3. Rent and Other Payments; Purchase Option.
----------------------------------------
(a) Basic Rent. LESSEE agrees to pay to LESSOR the Basic Rent with
----------
respect to each Engine, monthly in advance, on each Payment Date.
(b) Maintenance Reserves.
--------------------
(i) Lessee shall pay Lessor, as Supplemental Rent for use of each
Engine during the Term, within ten (10) days following the last day of each
calendar month during the Term, an amount ("Maintenance Reserves") equal to
--------------------
the sum of (A) with respect to Engine 702083, Engine 686106, Engine 662751
and Engine 662323 an amount determined by multiplying the number of Flight
Hours of operation of such Engines during the immediately preceding month
times Two Hundred and Twenty Five Dollars (US$225); plus (B) with respect
to Engine 662749, Engine 662550, Engine 662498, Engine 662338 and Engine
662270, an amount determined by multiplying the number of Flight Hours of
operation of such Engines during the immediately preceding month times One
Hundred and Ninety Dollars (US$190). The Maintenance Reserves shall bear
simple interest at a rate equal to ten percent (10%) per annum. All
interest
-5-
<PAGE>
accrued in respect of the Maintenance Reserves shall be kept and held by
LESSOR as additional Maintenance Reserves and subject to the same
conditions of return as if it had been paid by LESSEE as Maintenance
Reserves.
(ii) The Lessee shall be entitled to reimbursement from the
Maintenance Reserves paid by LESSEE with respect to an Engine for LESSEE's
actual costs (without mark-up) incurred with respect to off-wing heavy
maintenance of such Engine, including any costs associated with replacement
of life limited parts, but excluding the cost of any repairs or maintenance
required due to accidents, abuse, misuse, mishandling, faulty maintenance,
foreign object damage, elective part replacement or any insured event
(collectively, "Non-Reimbursable Repairs"); provided, that, LESSEE shall be
entitled to reimbursement from the Maintenance Reserves for any maintenance
for ordinary wear and tear performed contemporaneously with such Non-
Reimbursable Repairs. Such reimbursement shall be made within fifteen (15)
Business Days after presentation to LESSOR of appropriate written evidence
of such expenses (which shall include a copy of an invoice from an FAA-
approved maintenance facility indicating that the maintenance has been
completed and identifying those engine maintenance tasks accomplished and
the labor and material breakdown thereof, and a receipt from the
maintenance facility for payment of the invoice, or at least such amount
thereof as shall exceed the portion of the Maintenance Reserves available
to LESSEE hereunder); provided, that (i) the amount reimbursed to LESSEE
--------
with respect to any Engine shall not exceed the amount of the Maintenance
Reserves paid by LESSEE (plus interest accrued pursuant to clause (i) of
this Section 3(b)) with respect to such Engine and not previously
-----------
disbursed, and (ii) in no event shall LESSEE be entitled to reimbursement
for any expenses related to removal or installation of an Engine for
maintenance or any other shipping or transportation expenses. To the
extent that any amount reimbursable hereunder has not been paid by LESSEE,
such amount shall be paid directly to the maintenance facility which
performed the services for which reimbursement is sought.
(c) Supplemental Rent. LESSEE also agrees promptly to pay to LESSOR,
-----------------
or to whomsoever shall be entitled thereto, any and all Supplemental Rent, as
the same shall become due and owing, and in the event of any failure on the part
of LESSEE to pay any Supplemental Rent, LESSOR shall have all rights, powers and
remedies provided for herein or by law or equity or otherwise in the case of
nonpayment of Basic Rent.
(d) Manner of Payment. All payments of Rent shall be made directly to
-----------------
LESSOR in Dollars in same day funds not later than 3:00 p.m., New York City
time, on the date when due by wire transfer of immediately available funds to
Nationsbank, N.A., ABA No. 111000012, Account No: 3751075750, For Final Credit
To: UniCapital Aircraft Engine Group, Inc.; provided, however, that in the event
that any payment should be due on a day that is not a Business Day then such
payment shall be made on the Business Day immediately preceding such day without
any deduction or credit for early payment.
(e) Late Payments. As to any (i) amount due under this Lease that is
-------------
not paid when due as herein provided or (ii) advance made by LESSOR of any
amount required to be paid
-6-
<PAGE>
by LESSEE as herein provided and not so paid by LESSEE, LESSEE shall pay to
LESSOR at the time of payment thereof, as Supplemental Rent, interest thereon at
the Post-Default Rate, from either the due date thereof (as to amounts referred
to in clause (i)) or the date of the advance by LESSOR (as to amounts referred
to in clause (ii)), as the case may be, to the date such late payment is paid in
full.
(f) No Setoff, Counterclaim, etc. Notwithstanding anything to the
----------------------------
contrary herein, LESSEE's obligations and liabilities to pay all amounts payable
hereunder shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right that LESSEE may have against LESSOR or any
other Person for any reason whatsoever, (ii) any defect in the title,
airworthiness, condition, design, operation or fitness for use of or any damage
to or loss or destruction of, an Engine or any Part thereof or any interruption
or cessation in the use or possession of any Part thereof by LESSEE for any
reason whatsoever, (iii) any insolvency, bankruptcy, reorganization or similar
proceedings by or against LESSEE or any other Person, (iv) the disaffirmance or
rejection of this Lease by LESSOR or any trustee in bankruptcy (or similar
party) for LESSOR, (v) claims against the Manufacturer or manufacturers of an
Engine or any Part or component thereof, (vi) enforceability or lack of
enforceability of any of the terms or conditions of this Lease, (vii) breach by
LESSOR of any warranty, express or implied, with regard to an Engine or any Part
thereof, including, without limitation, merchantability or fitness for any
purpose or use relating to or otherwise made or alleged to be made by LESSOR to
LESSEE or any of its agents, representatives or employees with regard to an
Engine or any Part thereof, (viii) any right, claim, demand, bill, action or
suit whatsoever by or against or on the part of LESSEE against LESSOR,
including, without limitation, whether arising out of legal action or otherwise
(x) at law or in equity, (y) whether affirmative, negative or defensive in
nature for or on account of the legality, enforceability, validity or other
infirmity as to (A) any of the terms or conditions of this Lease, (B) any
express or implied warranty as to an Engine or any Part thereof or (C) arising
out of or as a result of any contract, agreement, assignment or transaction
between LESSOR and LESSEE whether direct or indirect, written or oral, or (ix)
any other circumstances, happening or event whatsoever, whether or not similar
to any of the foregoing which but for this provision might have the effect of
terminating this Lease, it being the intention of the LESSOR and LESSEE that all
Rent and other amounts payable by LESSEE hereunder shall be payable in all
events unless the obligation to pay the same shall be terminated pursuant to the
express provisions of this Lease. LESSEE hereby waives, to the fullest extent
permitted by applicable law any and all rights it may now have or that at any
time hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express terms
hereof. Each payment of Rent made by LESSEE shall be final as to LESSOR and
LESSEE, and LESSEE will not seek to recover all or any part of any such payment
of Rent from LESSOR or its successors or assigns for any reason whatsoever.
Nothing in this Section 3(f) shall be construed to limit LESSEE's right to seek
a recovery of any payment of Rent or any other amount which is not due and
payable hereunder, or to limit LESSEE's rights and remedies to pursue, in a
court of law or otherwise, any claim it may have against LESSOR on account of
any failure of LESSOR to perform its obligations hereunder or in connection
herewith.
-7-
<PAGE>
(g) Purchase Option.
---------------
(i) Provided that no Event of Default shall have occurred and be
continuing either at the time of LESSEE's notice or on such Option Exercise
Date, LESSEE shall have the option, upon not less than thirty (30) days'
prior irrevocable written notice to LESSOR specifying a proposed Option
Exercise Date, to terminate this Lease and purchase the Engines (the
"Purchase Option"). In the event that LESSEE shall have not exercised its
---------------
right to terminate this Lease and purchase the Engines prior to the last
Option Exercise Date (i.e., February 8, 2004) then, LESSEE shall be
required to exercise, and the Purchase Option shall be deemed exercised by
LESSEE, on such last Option Exercise Date. In the event that the sum of
(1) the Maintenance Reserves paid by LESSEE and not previously disbursed,
plus (2) any Security Deposit received by LESSOR pursuant to section 3(h)
hereof, plus (3) all accrued interest accrued thereon pursuant to clause
(i) of Section 3(b) or Section 3(h), as applicable (together, the "Option
----------- ------------ ------
Amount"), equals or exceeds the Option Price of the Engines on an Option
------
Exercise Date, each of the LESSEE and the LESSOR shall have the option,
upon not less than thirty (30) days' prior irrevocable written notice to
the other, to declare the Purchase Option to be deemed exercised by LESSEE.
Upon any exercise or deemed exercise by LESSEE of the Purchase Option, on
the Option Exercise Date specified in LESSEE's notice of exercise or on the
Option Exercise Date on which the Purchase Option is deemed to have been
exercised, as the case may be, (i) LESSEE shall acquire the Engines from
LESSOR by paying, as the purchase price therefor, the Option Price of the
Engines as of the Option Exercise Date (as set forth on Schedule 3 hereto),
less the Option Amount, plus any Rent then due and unpaid under this Lease
(including any payment of Basic Rent due on the Option Exercise Date) and
(ii) LESSOR shall transfer to LESSEE all of LESSOR's right, title and
interest in and to the Engines, "as is, where is" and without recourse or
warranty (except as to title to the Engines and the absence of LESSOR's
Liens thereon) and shall execute and deliver to LESSEE a Bill of Sale in
the form attached hereto as Exhibit D and such other documents or
---------
instruments as LESSEE shall reasonable request to evidence (on the public
record or otherwise) such transfer. Upon the sale of the Engines as
contemplated by this Section 3(g), the obligation of LESSEE to pay Rent
shall cease and the Term shall end, effective as of the date of such sale.
(ii) Upon any exercise or deemed exercise by LESSEE of the
Purchase Option, all obligations of the LESSOR to make disbursements to
LESSEE from the Maintenance Reserves, including without limitation pursuant
to any request for reimbursement made by LESSEE prior to the date of
LESSEE's exercise or deemed exercise of the Purchase Option shall terminate
as of the applicable Option Exercise Date; and any portion of the
Maintenance Reserves or Security Deposit not applied toward the payment of
the Option Price of the Engines as of the applicable Option Exercise Date
shall be applied first, so much of such amounts as shall be required to
-----
reimburse or pay LESSOR for any Rent due and payable hereunder shall be
retained by LESSOR for its own account; and second, the balance, if any,
------
shall be paid to LESSEE.
-8-
<PAGE>
(h) Security Deposit. Any amount paid to LESSOR as a Security
----------------
Deposit pursuant to Section 8(a) or Section 8(b) hereof shall be held by LESSOR
------------ ------------
during the Term as security for the full and punctual performance by LESSEE of
all of its obligations hereunder. During the Term, the Security Deposit shall be
for LESSOR's sole and exclusive use and may be commingled by LESSOR with other
funds. LESSOR may, but shall not be obligated to, apply the Security Deposit, in
whole or in part for the payment of any Rent and any other amount owing from
time to time by LESSEE hereunder, or utilize the Security Deposit in whole or in
part to perform any of LESSEE's obligations hereunder or otherwise remedy any
Default, without prejudice to any other remedy of LESSOR. LESSEE shall not
attempt to subject the Security Deposit to any Lien or to assign any interest
therein to any Person. LESSOR shall be entitled to the remedy of offset against
and application of the Security Deposit, without any prior notice to or demand
against LESSEE (except to the extent otherwise required by applicable law), all
of which are hereby waived. If LESSOR uses or applies all or a portion of the
Security Deposit, such application shall not be deemed a cure of any Default,
and LESSEE shall, within three (3) Business Days after LESSOR's demand therefor,
deposit with LESSOR in immediately available funds an amount sufficient to
restore the Security Deposit to its total amount immediately prior to such
application. Within fifteen (15) Business Days after redelivery of the Engines
to LESSOR by LESSEE in conformity with the provisions of Section 10 hereof, and
----------
provided LESSEE has paid in full of all amounts owing by LESSEE hereunder and
performed all of its obligations hereunder, LESSOR will return to LESSEE the
Security Deposit, less any amounts applied by LESSOR and not replenished by
LESSEE. Any amounts held by LESSOR as a Security Deposit shall bear simple
interest at a rate equal to ten percent (10%) per annum. All interest accrued in
respect of the Security Deposit shall be kept and held by LESSOR as additional
security hereunder and, subject to the same conditions of return as if it had
been part of the Security Deposit.
4. LESSEE Deliveries. LESSEE shall deliver the following to LESSOR, on or
-----------------
before the Delivery Date:
(a) Executed copies of this Lease and a Lease Supplement in the form
of Exhibit A hereto covering each Engine and effective as of the Delivery Date.
---------
(b) The first Basic Rent payment for each Engine.
(c) An insurer's or broker's certificate in form and substance
acceptable to LESSOR as to the due compliance by LESSEE with the insurance
provisions of Section 9.
---------
(d) Certificate of LESSEE's Secretary with respect to the resolutions
of the Board of Directors of LESSEE authorizing the execution, delivery and
performance by LESSEE of this Lease and all other documents and certificates
contemplated hereby to be executed on behalf of LESSEE, and the authority and
signatures of the persons authorized to execute and deliver such documents on
behalf of LESSEE.
(e) LESSOR have received evidence satisfactory to it that that certain
Engine Security Agreement dated as of the date hereof, between LESSEE, as
debtor, and LESSOR, as
-9-
<PAGE>
secured party, shall have been duly filed for recordation with the FAA, and
LESSEE shall have executed (as debtor) and delivered to LESSOR one or more
precautionary Uniform Commercial Code financing statements or similar statements
for filing in such places in the United States as, in LESSOR's opinion, are
necessary or desirable.
(f) LESSOR shall have received a favorable opinion of LESSEE's
independent counsel, in form and substance satisfactory to LESSOR, as to such
matters as LESSOR may reasonably request.
(g) No Event of Loss shall have occurred with respect to any Engine.
5. Disclaimer; Manufacturer and Vendor Warranties.
----------------------------------------------
(a) Disclaimer by LESSOR. LESSOR HEREBY EXPRESSLY DISCLAIMS ANY
--------------------
WARRANTY EITHER EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) RELATING TO
THE CAPACITY, AGE, QUALITY, DESCRIPTION, STATE, CONDITION, DESIGN, CONSTRUCTION,
USE, OPERATION, OR PERFORMANCE OF THE ENGINES OR THE SUITABILITY OF AN ENGINE OR
ITS FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO ITS AIRWORTHINESS. LESSOR SHALL
HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM, LOSS OR DAMAGE WHATSOEVER INCLUDING,
BUT NOT LIMITED TO, INCIDENTAL OR CONSEQUENTIAL DAMAGES, CAUSED OR ALLEGED TO BE
CAUSED DIRECTLY OR INDIRECTLY BY ANY ENGINE OR PARTS, OR BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY INCIDENT WHATSOEVER IN
CONNECTION THEREWITH ARISING IN STRICT LIABILITY, NEGLIGENCE, GROSS NEGLIGENCE
OR OTHERWISE, OR IN ANY ACTION RELATED TO OR ARISING OUT OF THIS LEASE OR ANY
OTHER DOCUMENT AND WHETHER INVOLVING PERSONAL INJURY, PROPERTY DAMAGE OR
OTHERWISE. LESSEE HEREBY WAIVES AS BETWEEN ITSELF, LESSOR AND ANY PERSON
CLAIMING BY, THROUGH OR UNDER LESSOR, ALL ITS RIGHTS, EXPRESS OR IMPLIED
(WHETHER STATUTORY OR OTHERWISE), AGAINST LESSOR OR ANY OTHER SUCH PERSON IN AND
TO THE ENGINES RELATING TO THE CAPACITY, AGE, QUALITY, DESCRIPTION, STATE,
CONDITION, DESIGN, CONSTRUCTION, USE, OPERATION OR PERFORMANCE OF THE ENGINES
AND THE LEASING THEREOF BY LESSOR TO LESSEE, OR TO THE MERCHANTABILITY OR
SUITABILITY OF THE ENGINES OR ITS FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO
ITS AIRWORTHINESS.
(b) Manufacturer and Vendor Warranties. LESSOR hereby assigns to
----------------------------------
LESSEE during the Term (so long as no Event of Default is continuing) all
assignable warranties given by the Manufacturer and other vendors with respect
to the Engines. To the extent that any warranty given by the Manufacturer or
others with respect to the Engines are not assignable or otherwise made
available to LESSEE, LESSOR agrees, at its option, either (i) to authorize
LESSEE to take such action to enforce such warranty in the name of LESSOR as
LESSEE sees fit or (ii) to exert reasonable efforts at LESSEE's request and
expense to enforce any such warranties for the benefit of LESSEE. Effective on
the return of the Engines or the termination
-10-
<PAGE>
of this Lease, whichever is earlier, LESSEE hereby assigns any remaining
warranties, and any claims thereunder, to LESSOR or its designee.
6. Maintenance; Replacement and Pooling of Parts; Alterations and
--------------------------------------------------------------
Modifications.
- -------------
(a) Maintenance. During the Term, LESSEE shall, at its sole cost and
-----------
expense, service, inspect, test, maintain, overhaul and repair each Engine and
all of the Parts in accordance with an FAA approved maintenance and inspection
program (the "Maintenance Program") and in conformity with the rules and
-------------------
regulations of the FAA, (A) so as to keep the Engines in as good condition
(operating and otherwise), appearance and repair as when delivered to LESSEE
hereunder, ordinary wear and tear excepted; provided that each Engine must be
returned to Lessor in serviceable condition at the end of the Term in accordance
with Section 10 hereof, and (B) in the same manner and with the same care as
----------
used by LESSEE with respect to similar engines owned or operated by LESSEE. All
such service, inspection, maintenance, modification, repair and overhaul shall
be performed or caused to be performed in accordance with applicable FAA
requirements and under the Maintenance Program, and shall be accomplished in
accordance with applicable service, inspection, maintenance, modification,
repair and overhaul manuals and bulletins published by the Manufacturer or the
manufacturers of Parts installed on the Engine.
(b) Replacement of Parts. LESSEE, at its own cost and expense, will
--------------------
promptly replace all Parts that may from time to time be incorporated or
installed in or attached to an Engine and that may 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,
LESSEE may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use; provided that LESSEE will, at its own cost
and expense, replace such Parts as promptly as possible. All replacement Parts
shall be free and clear of all Liens (except Permitted Liens and pooling
arrangements permitted by Section 6(c)) and shall be in as good operating
------------
condition as, in similar modification and service bulletin accomplishment status
as, shall be fully interchangeable as to form, fit and function and shall have a
value and utility at least equal to, the Parts replaced (assuming such replaced
Parts were in the condition and repair required to be maintained by the terms
hereof). All Parts at any time removed from any Engine shall remain subject to
this Lease, no matter where located, until such time as such Parts shall be
replaced by Parts that have been incorporated or installed in or attached to
such Engine and that meet the requirements for replaced Parts specified above.
Immediately upon any replacement Part becoming incorporated or installed in or
attached to an Engine as above provided, without further act, (i) title to the
replaced Part shall there upon vest in LESSEE, free and clear of all rights of
LESSOR and shall no longer be deemed a Part hereunder provided, however, that in
the case of any Part that is replaced by a replacement Part subject to a pooling
arrangement, title to such replaced Part shall not vest in LESSEE until LESSEE
has complied with Section 6(c), (ii) title to such replacement Part shall vest
------------
in LESSOR and such replacement Part shall thereupon become subject to this Lease
(subject only to a pooling arrangement to the extent permitted by Section
-------
-11-
<PAGE>
6(c)) and (iii) such replacement Part shall be deemed part of such Engine for
- -----
all purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to such Engine.
(c) Pooling of Parts. Any Part removed from an Engine as provided in
----------------
Section 6(b) may be subjected by LESSEE to a normal pooling arrangement
- ------------
customary in the airline industry entered into in the ordinary course of
LESSEE's business with financially and operationally responsible air carriers;
provided, that the Part replacing such removed Part shall be incorporated or
installed in or attached to such Engine in accordance with Section 6(b) as
------------
promptly as possible after the removal of such removed Part. In addition, any
replacement Part when incorporated or installed in or attached to any Engine in
accordance with Section 6(b) may be owned by a financially and operationally
------------
responsible air carrier subject to such a normal pooling arrangement; provided
that LESSEE, at its expense as promptly thereafter as possible, either (i)
causes such replacement Part to become subject to this Lease in accordance with
Section 6(b) by LESSEE acquiring title thereto for the benefit of LESSOR free
- ------------
and clear of all Liens other than Permitted Liens or (ii) replaces such
replacement Part by incorporating or installing in or attaching to such Engine a
further replacement Part owned by LESSEE free and clear of all Liens other than
Permitted Liens and by causing such further replacement Part to become subject
hereto in accordance with Section 6(b).
------------
(d) Alterations and Modifications. LESSEE, at its own expense, will
-----------------------------
make such alterations and modifications to the Engines as may be required from
time to time to meet the standards of the FAA or other governmental authority
having jurisdiction and as required to conform to Manufacturers' service
bulletins. LESSEE shall not make other alterations or modifications to the
Engines without LESSOR's prior written consent. To the extent the alterations or
modifications made pursuant to this Section 6(d) are made in connection with
------------
off-wing heavy maintenance of an Engine, LESSEE shall be entitled to
reimbursement from the Maintenance Reserves therefor pursuant to
Section 3(b)(ii).
- ----------------
7. Title; Liens; Operation and Possession.
--------------------------------------
(a) Title. Until LESSEE has exercised the Purchase Option and
-----
purchased the Engines in accordance with the terms hereof, (i) title to the
Engines shall remain solely and exclusively vested in LESSOR and (ii) LESSEE
shall have no right, title or interest in the Engines except the right to use
the Engines as provided herein. LESSEE shall, at LESSEE's sole cost, from time
to time do or cause to be done all acts and things then required by law or by
practice, custom or understanding or as LESSOR may reasonably request to
protect, preserve and perfect LESSOR's rights and interests in the Engines and
this Lease in any jurisdiction into or over which LESSEE may operate the Engines
or to which LESSEE or the Engines is or may become subject.
(b) Liens. LESSEE will not directly or indirectly create, incur,
-----
assume or suffer to exist any Lien on or with respect to any Engine, title
thereto or any Part or interest therein or in this Lease except (i) the
respective rights of LESSOR and LESSEE as herein provided, (ii) the rights of
others under agreements or arrangements to the extent expressly permitted by the
terms of Section 6(c), (iii) LESSOR Liens, (iv) Liens for Taxes either not yet
------------
-12-
<PAGE>
due or being contested in good faith (and for the payment of which adequate
reserves have been provided) by appropriate proceedings diligently pursued so
long as such proceedings do not involve any danger of the sale, forfeiture or
loss of any Engine or any Part or interest therein, and (v) materialmen's,
mechanics', workmen's, repairmen's, employees' or other like Liens arising in
the ordinary course of business for amounts the payment of which is either not
yet delinquent or is being contested in good faith (and for the payment of which
adequate reserves have been provided) by appropriate proceedings diligently
pursued so long as such proceedings do not involve any danger of the sale,
forfeiture or loss of any Engine or any Part or interest therein (each of the
Liens referred to in clauses (i) to (v) being herein referred to as "Permitted
---------
Liens"). LESSEE will, at its own expense, take such action as may be necessary
- -----
duly to discharge any such Lien not excepted above if the same shall arise at
any time. LESSEE hereby further agrees that no mechanics' or similar Lien for
any labor, services or materials supplied by LESSEE shall attach to or otherwise
affect any Engine or any Part and LESSEE hereby irrevocably waives disclaims and
releases any such Lien.
(c) Operation. LESSEE shall not operate or locate any Engine, or
---------
suffer any Engine to be operated or located, (i) in violation of any applicable
law, (ii) in any area excluded from coverage by any insurance required by the
terms of Section 9, except in the case of a requisition by a Government Entity
---------
of the United States where LESSEE obtains indemnity in lieu of such insurance
from such Government Entity against the risks and in the amounts required by
Section 9 covering such areas or (iv) in any recognized or, in LESSOR's
- ---------
judgment, threatened area of hostility (including the United States, if it
becomes an area of hostility) without LESSOR's written consent and unless fully
covered to LESSOR's satisfaction by war risk, confiscation and hijacking
insurance, or unless such Engine is operated or used under contract with a
Government Entity of the United States under which contract such Government
Entity assumes liability for any damage, loss, destruction or failure to return
possession of such Engine at the end of the term of such contract and for injury
to Persons or damage to property of others. LESSEE shall not install or permit
any Engine to be installed on any airframe not owned or leased by LESSEE or on
any airframe owned or leased by LESSEE unless and for so long as no Lien will
attach to such Engine by virtue or otherwise as a result of such installation
without LESSOR's prior written consent. LESSEE agrees that the Engines shall be
used primarily in the United States.
(d) Possession. LESSEE will not sublease or otherwise in any
----------
manner deliver, transfer or relinquish possession of any Engine; provided, that,
so long as no Default or Event of Default is continuing, and so long as the
action to be taken shall not deprive LESSOR of its interest in such Engine,
LESSEE may, from time to time, take any of the following actions:
(i) subject an Engine to interchange, pooling or similar
agreements or arrangements normal or customary in the industry, and entered
into by LESSEE in the ordinary course of its business with financially and
operationally responsible air carriers, a responsible operator of repair
facilities, or the Manufacturer; provided, that the identification plate
required by Section 7(e) hereof shall remain on such Engine and if LESSOR's
interest in such Engine shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss and
LESSEE shall comply with Section 8(a) in respect thereof;
------------
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<PAGE>
(ii) deliver possession of an Engine to the Manufacturer or to
any FAA-approved maintenance facility for testing, service, repair,
maintenance or overhaul work or for alterations or modifications in or
additions to such Engine to the extent required or permitted by the terms
of Section 6(d); or
------------
(iii) sublease an Engine for a term (including extensions and
renewals) which does not extend beyond the end of the Term to any air
carrier that is an affiliate of LESSEE and not the subject of any
bankruptcy, insolvency or reorganization proceeding.
LESSEE shall give written notice to LESSOR of any sublease under clause
(iii) of this Section 7(d) specifying the sublessee and the term of the
------------
sublease. Any permitted sublease shall (1) require the maintenance, insurance
and operation of such Engine to be in accordance with the provisions of this
Lease, (2) require the sublessee to keep such Engine free and clear of Liens
other than Permitted Liens, (3) prohibit further transfer of such Engine to or
possession thereof by any third Person other than to the extent permitted by
Section 7(d)(ii), (4) expressly prohibit any further sublease of such Engine by
- ----------------
such sublessee, (5) be made expressly subject and subordinate to this Lease
including, without limitation, LESSOR's rights to repossession pursuant to
Section 14 and to avoid such sublease upon a default thereunder or an Event of
- ----------
Default hereunder and (6) require the sublessee, at LESSEE or such sublessee's
sole expense, to do or cause to be done all acts and things then required by law
or by practice, custom or understanding or as LESSOR may request to protect,
preserve and perfect LESSOR's rights and interests in such Engine and this Lease
in any jurisdiction into or over which such sublessee may operate such Engine or
to which such sublessee is subject.
No transfer or relinquishment of possession of an Engine permitted under
this Section 7(d) shall in any way discharge or diminish any of LESSEE's
------------
obligations hereunder, or constitute a waiver of any of LESSOR's rights and
remedies hereunder. Notwithstanding any transfer or relinquishment of
possession permitted under this Section 7(d), LESSEE shall remain primarily
------------
liable hereunder for the performance of all of the terms of this Lease to the
same extent as if any such transfer or relinquishment of possession had not
occurred.
(e) Identification Plate. LESSEE shall affix and at all times
--------------------
maintain on each Engine a fireproof identification plate containing the legend
set forth on Exhibit C hereto or any other legend requested by LESSOR. LESSEE
shall promptly replace any such nameplate that becomes illegible, lost, damaged
or destroyed for any reason.
(f) Inspections. LESSEE shall furnish LESSOR such information
-----------
concerning the location, condition, use and operation of each Engine as LESSOR
may reasonably request. LESSEE shall give LESSOR reasonable prior notice of the
anticipated date of any major maintenance checks, in order to enable LESSOR to
inspect the Engines (should it choose to do so) at the time and place such major
checks occur. LESSOR shall be entitled to have its technical representatives
present during any major maintenance checks. On reasonable notice, LESSOR and/or
its authorized agents or representatives shall have the right to inspect the
Engines and Engine documentation and/or make copies of the Engine documentation.
LESSOR shall have no duty to make any such inspection and shall not incur any
liability or obligation by
-14-
<PAGE>
reason of making or not making any such inspection or by reason of any reports
it receives or any reviews it may make of the Engine records.
8. Loss, Destruction, Requisition, etc. During the Term, LESSEE shall bear
------------------------------------
the entire risk of loss of or damage to the Engines. Accordingly:
(a) Event of Loss with Respect to an Engine. Upon an Event of Loss
---------------------------------------
with respect to an Engine, LESSEE shall give LESSOR written notice within three
(3) Business Days of such Event of Loss. On or before the earlier to occur of
(x) the actual receipt by LESSEE of insurance proceeds in respect of such Event
of Loss and (y) the sixtieth (60th) day after the date of such Event of Loss,
LESSEE shall pay to LESSOR in immediately available funds the Stipulated Loss
Value of such Engine, whereupon such proceeds shall be held by the LESSOR as a
security deposit (the "Security Deposit"), subject to the provisions of Section
----------------
3(h) hereof.
(b) Application of Payments from Governmental. Any payments (other
-----------------------------------------
than insurance proceeds the Authorities application of which is provided for in
Section 9) received by LESSOR or by LESSEE from a Government Entity or other
- ---------
Person with respect to an Event of Loss resulting from the condemnation,
confiscation, theft or seizure of, or requisition of title to or use of, an
Engine, other than a requisition for use by a Government Entity of the United
States not constituting an Event of Loss, shall be paid to or retained by LESSOR
as a Security Deposit, subject to the provisions of Section 3(h).
------------
(c) Requisition for Use of the Engine. In the event of the
---------------------------------
requisition for use by a Government Entity of the United States of an Engine
during the Term under circumstances not constituting an Event of Loss, LESSEE
shall notify LESSOR of such requisition and all of LESSEE's obligations under
this Lease with respect to such Engine shall continue to the same extent as if
such requisition had not occurred. All payments received by LESSOR or LESSEE
from such Government Entity for the use of any Engine shall be paid over to, or
retained by, LESSOR and applied in reduction of LESSEE's obligations hereunder.
9. Insurance.
---------
(a) Liability. LESSEE, at its sole cost and expense, shall maintain
---------
or cause to be maintained throughout the Term and until the return of the
Engines to LESSOR in such condition as is required under Section 10 hereof,
----------
public liability (including, without limitation, aircraft third-party, baggage,
cargo, contractual and passenger legal liability including war risks), property
damage liability insurance with respect to any aircraft on which any Engine is
installed and general airline third party legal liability (including products
liability insurance) with insurers of recognized responsibility and good repute
specializing in aviation insurance in the leading international markets, in form
and in amounts satisfactory to Lessor and Lender at least equal to the greater
of (a) Five Hundred Million Dollars (US$500,000,000) per occurrence subject to
no deductible except deductibles as to baggage and cargo that are standard in
the airline industry in respect of carriers operating in the countries in which
LESSEE operates and (b) the greater of (i) the amount of such insurance
customarily carried with respect to engines similar to such Engines and the
aircraft on which such Engine is at any time installed by corporations engaged
in the
-15-
<PAGE>
same or similar business as LESSEE and (ii) the amount of such insurance
carried by LESSEE applicable to other aircraft of similar type in LESSEE's
fleet.
(b) Property Damage Insurance. LESSEE, at its own expense, shall
-------------------------
maintain or cause to be maintained throughout the Term all-risk (including,
without limitation, fire, transit and extended coverage) insurance, war-risk
insurance and political risk insurance (including nationalization,
expropriation, confiscation and similar perils) (to the extent available), with
respect to the Engine, whether or not installed on an airframe in an amount not
less than the Insured Value.
(c) Terms of Insurance.
------------------
(i) Any policies carried in accordance with Section 9 covering
---------
the Engines and any policies taken out in substitution or replacement for
any such policies shall: (A) insure the interests of, and name as
additional insureds, each Indemnitee (the "Additional Insureds") and
-------------------
provide that the Additional Insureds bear no liability for the payment of
premiums; (B) be made payable to LESSOR as "loss payee" (except that
proceeds with respect to loss or damage of less than $150,000 shall be
payable to LESSEE subject to the last sentence of Section 9(d)); (C)
------------
provide that if there is any material adverse alteration or cancellation of
the insurance, such alteration or cancellation shall not be effective as to
the Additional Insureds for thirty (30) days (with respect to war risk
insurance seven (7) days or such lesser period as may be customarily
available) after notice is given by the underwriters; (D) provide that in
respect of the interest of LESSOR and each other Additional Insured in such
policies, such insurance shall not be invalidated by any action or inaction
of LESSEE or any other Person and shall insure LESSOR's and the Additional
Insureds' interests, regardless of any breach or violation by LESSEE or any
other Person of any warranties declarations or conditions contained in such
policies; and (E) shall contain a waiver by the insurers of all rights of
subrogation against LESSOR.
(ii) All amounts payable under policies carried in accordance
with this Section 9 shall be paid in Dollars in the United States, except
---------
with respect to claims made by third parties in another currency or if
prohibited by law.
(d) Application of Insurance. All insurance or indemnity payments
------------------------
received as the result of an Event of Loss with respect to an Engine will be
applied in the following order of priority: (i) first, to reimburse LESSOR for
-----
costs and expenses incident to such Event of Loss; (ii) second, to LESSOR in the
------
amount required to be paid by LESSEE pursuant to Section 8(a), which amount
------------
shall be applied in reduction of LESSEE's obligation to pay such amount if not
already paid by LESSEE or, to the extent such amount has been paid by LESSEE, to
LESSEE to reimburse LESSEE for its payment thereof and (iii) third, to LESSEE
-----
the balance, if any, of such payment. The insurance payments with respect to any
property damage or loss not constituting an Event of Loss with respect to an
Engine will be paid to LESSEE and applied by LESSEE in payment for repairs to or
replacement of property in accordance with the terms of Section 6(c) against
------------
evidence satisfactory to LESSOR that such repairs and replacement have been
made, or,
-16-
<PAGE>
if such repairs or replacement have already been paid for by LESSEE, to
reimburse LESSEE therefor, and any balance remaining after compliance with such
Section with respect to such loss shall be paid to LESSOR.
(e) Reports. On or before the Delivery Date, LESSEE will furnish or
-------
cause to be furnished to LESSOR a report signed by a firm of independent
aircraft insurance brokers, stating the opinion of such firm that the insurance
then carried and maintained on the Engines complies with the terms hereof.
LESSEE will cause such firm to advise LESSOR and each other Additional Insured
in writing promptly of any default in the payment of any premium, of any other
act or omission on the part of LESSEE of which such firm has knowledge that
might invalidate or render unenforceable, in whole or in part, any insurance on
the Engines and of each claim made by LESSEE in respect of the Engines. Prior to
the expiration or on or prior to the termination date of any insurance required
hereunder, LESSEE will provide LESSOR with telex or fax confirmation from
LESSEE's insurance brokers of that certificate of insurance evidencing the
replacement of such insurance will be issued on the termination date of the
prior certificate. Within seven (7) days after such renewal, LESSEE will furnish
its brokers' certificates of insurance to LESSOR.
(f) Failure to Insure. In the event that LESSEE shall fail to
-----------------
maintain or cause to be maintained insurance as herein provided, LESSOR may, at
its option, but without liability to LESSEE for failure to do so, provide such
insurance and, in such event, LESSEE shall, upon written demand, reimburse
LESSOR for the cost thereof as Supplemental Rent.
(g) Additional Insurance. Nothing contained in this Lease shall
--------------------
prevent LESSOR or LESSEE, each at its own expense and for its exclusive benefit,
from carrying insurance covering the Engines in addition to the insurance
required under this Section 9; provided, that no such additional insurance shall
prejudice the insurances required hereunder or the recovery by LESSEE or LESSOR
thereunder. The insurance payments for any property damage loss covered by any
such additional insurance shall be paid directly to the party carrying such
insurance.
(h) Continuation of Liability Insurance. If LESSEE exercises the
-----------------------------------
Purchase Option and purchases the Engines, then LESSEE shall continue to cause
the Indemnitees to be named as additional insureds under LESSEE's or the Engines
operators' aviation and airline general third party liability insurance for a
period of two (2) years after the Option Exercise Date (with respect to claims
arising as a result of LESSEE's use or operation of the Engines during the
Term).
10. Return of Engine. The provisions of this Section 10 shall apply to
---------------- ----------
any return of the Engines to LESSOR upon termination of this Lease (including,
without limitation, such return resulting from an Event of Default); provided,
that if this Lease is terminated pursuant to Section 14, any action that is
----------
required to be taken by Lessee prior to the return of the Engines shall be taken
immediately after the return of the Engines.
(a) Redelivery upon Termination. On the date of termination of
---------------------------
this Lease, LESSEE shall at its own expense return the Engines to LESSOR in
Norwalk, Connecticut. At
-17-
<PAGE>
the time of return of each Engine to LESSOR, LESSOR and LESSEE shall execute a
Return Acceptance Receipt in substantially the form of Exhibit B hereto. Upon
---------
delivery to Lessor:
(i) All outstanding airworthiness directives, mandatory service
bulletins and instructions issued by the FAA affecting the Engines and
requiring compliance (either by means of repetitive inspections,
modifications or terminating action) prior to the return date of the Engine
to LESSOR shall have been complied with on a terminating action basis (if
terminating action is available). In the event LESSEE has obtained a
waiver, deviation, dispensation or extension from the FAA and/or any other
aviation authority from having to comply with any such mandatory orders,
directives and instructions, LESSEE shall, irrespective of such waiver,
deviation, dispensation or extension comply on a terminating action basis
with all such mandatory orders, directives and instructions covered by such
waiver, deviation, dispensation or extension prior to return of the Engines
to LESSOR;
(ii) All outstanding deferred maintenance items shall have been
cleared on a terminating action basis; and
(iii) No special or unique Manufacturer or FAA inspection or
check requirements which are specific to any Engine (as opposed to all
aircraft or engines of their types) and which shall have arisen during the
Term hereof will exist with respect to any Engine and its parts, components
and systems.
(b) Condition of Engine. At the time of redelivery, the Engines
-------------------
shall meet the following conditions:
(i) Each Engine shall be free and clear of all encumbrances and
liens other than Lessor Liens;
(ii) Each Engine shall have a full (compressor and turbine
section) video borescope inspection and a full performance test cell run
performed by LESSEE at the time of LESSOR's ground inspection provided for
in Section 7(f), and satisfactory evidence shall be provided to LESSOR
------------
reflecting the correction of any discrepancies found during such
inspection;
(iii) Each Engine shall have affixed to it a current serviceable
tag pursuant to U.S. FAA requirements;
(iv) Prior to returning the Engines to LESSOR F.O.B. Norwalk,
Connecticut, LESSEE will prepare each Engine for shipment by (i) capping
and plugging all openings of the Engine; (ii) preserving the Engine for
ninety (90) days or more storage; (iii) completely covering the Engine; and
(iv) otherwise preparing the Engine for shipment in accordance with the
Manufacturer's specifications/recommendations. Any trucks used for
shipment of an Engine will be equipped with air ride or air cushion
trailers. On any given shipment, such truck will be dedicated to Engines
belonging solely to LESSOR; except that additional items may be transported
on the truck, provided that
-18-
<PAGE>
(a) the Engines may be off-loaded at the redelivery location without
disturbing any of the additional items and (b) LESSOR will not handle or
reposition any of the additional items on the truck; and
(v) If the Engine is a JT9D that has been operated during the
Term and is subject to the requirements of AD #86-11-04 (Diffuser Case Rear
Rail Inspection, SB 5591-R4, as amended), LESSEE will return such Engine
with at least fifty (50) cycles remaining until the next Diffuser Case Rear
Rail Inspection.
(c) Engine Documentation. LESSEE shall return to LESSOR at the
--------------------
time the Engines are returned to LESSOR, all of the Engine records documents,
manuals and data provided to LESSEE by LESSOR prior to, on or after the Delivery
Date, updated and maintained by LESSEE through the date of return of the
Engines. In addition, LESSEE shall also provide LESSOR at the time the Engines
are returned to LESSOR with all records, documents, manuals, authorizations,
drawings and data, in each case in the English language, that were developed or
caused to be developed by LESSEE and/or required by the appropriate governmental
agency having jurisdiction updated and maintained by LESSEE for the Engines
through the date of return of such Engine. Any such Engine documentation not
already owned by LESSOR, when delivered to LESSOR pursuant to this Section
-------
10(c), shall thereupon become the property of LESSOR.
(d) Service Bulletin Kits. All vendor and manufacturer's service
---------------------
bulletin kits ordered and received by LESSEE for any Engine but not installed
therein shall be returned with the Engines. Title to such kits shall pass to
LESSOR concurrently with the delivery of the Engines to LESSOR.
11. Representations and Warranties of LESSEE. LESSEE represents and
----------------------------------------
warrants to LESSOR as follows:
(a) LESSEE (i) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, (ii) has
full corporate power and authority and legal right to own its properties and to
carry on its business as presently conducted and to perform its obligations
under this Lease, (iii) is the holder of an air carrier certificate duly issued
pursuant to the Federal Aviation Act and such certificate is in full force and
effect, and (iv) holds all material licenses, certificates and permits from all
Government Entities of the United States and other jurisdictions necessary for
the conduct of its business as now conducted and for the operation of the
Engines.
(b) The execution, delivery and performance of this Lease and each
Lease Supplement has been duly authorized by all necessary corporate action of
LESSEE, and does not and will not (i) result in the violation of the provisions
of the charter documents or bylaws of LESSEE as in effect on the date hereof,
(ii) require stockholder approval or approval or consent of any trustee or
holders of any indebtedness of LESSEE, except such approvals which have been
obtained and are in full force and effect, (iii) contravene any law, rule or
regulation or any order of any Government Entity binding on Lessee, and (iv)
conflict with or result in a breach of any terms or provisions of or constitute
a default under, or result in or require the creation or
-19-
<PAGE>
imposition of any Lien upon any material property or assets of LESSEE under, any
material indenture, mortgage or other agreement or instrument as in effect on
the date hereof to which LESSEE is a party or by which it or any of its property
is bound, or any applicable law, rule or regulation, judgment, order or decree
of any Government Entity or court having jurisdiction over LESSEE or any of its
properties.
(c) This Lease and each Lease Supplement constitutes the legal, valid
and binding obligation of LESSEE, enforceable against LESSEE in accordance with
its terms except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and, to the extent that certain remedies require or may require
enforcement by a court of equity, by such principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity)
as a court having jurisdiction may impose.
(d) There are no suits or proceedings pending or, to LESSEE's
knowledge, threatened in any court or before any Government Entity against or
affecting LESSEE that would, if adversely determined, (i) prevent or adversely
affect LESSEE's ability to perform its obligations under this Lease or (ii)
materially adversely affect the financial condition or operations of LESSEE and
its consolidated subsidiaries, taken as a whole, except as otherwise set forth
on the schedule provided to LESSOR on December 28, 1998.
(e) The chief executive office (as such term is used in Article 9 of
the Uniform Commercial Code) of LESSEE and the office where LESSEE will keep its
corporate records concerning the Engine is located in the State of New York.
Lessee will notify Lessor thirty (30) days in advance of moving either such
office to another location.
(f) LESSEE has not retained or employed any broker, finder or
financial advisor to act on its behalf in connection with its lease of the
Engines and has not authorized any broker, finder or financial advisor retained
or employed by any other person so to act.
(g) There is no Tax, levy, impost, deduction, charge or withholding
imposed by the State of New York or any Taxing Authority thereof or therein
either (i) on or by virtue of the execution or delivery of this Lease or (ii) on
any payment made or to be made by LESSEE under this Lease.
(h) The obligations of LESSEE under this Lease rank at least pari
passu in right of payment with all other unsecured obligations of LESSEE, with
the exception of such obligations as are mandatorily preferred by law.
(i) LESSEE will give notice to LESSOR promptly upon obtaining actual
knowledge of any Default or Event of Default; and
(j) LESSEE acknowledges that it is the intention of LESSOR that LESSOR
shall be entitled to the benefits of Title 11 U.S.C. (S) 1110 and any similar or
analogous provisions of any successor statute ("Section 1110") with respect to
the Engines and this Lease, and LESSEE shall not oppose any motion, petition or
application filed by LESSOR with any
-20-
<PAGE>
bankruptcy court having jurisdiction over LESSEE whereby LESSOR seeks recovery
of possession of the Engines under Section 1110 unless LESSEE shall have
complied with the requirements of Section 1110 to be fulfilled in order to
entitle LESSEE to continue use and possession of the Engines hereunder.
(k) Without having obtained the prior written consent of LESSOR,
LESSEE will not consolidate with or merge into, or sell or lease in one
transaction or a series of transactions all or substantially all of its assets
to, another corporation or other entity unless such other corporation or entity
is engaged in the airline business, the net worth of the corporation resulting
from such merger or consolidation or corporation or other entity to which such
sale or lease is made would be at least equal to the net worth of LESSEE at the
date hereof, such corporation or other entity assumes all of LESSEE's
obligations under this Lease in a manner and by documents and agreements
satisfactory to LESSOR in its sole discretion, such corporation or other entity
immediately subsequent to such merger, consolidation, lease or sale is not in
default hereunder and if LESSOR receives an opinion satisfactory to it, of
counsel satisfactory to it, as to such assumption and documentation.
12. Indemnification.
---------------
(a) General Indemnity and Expenses. LESSEE hereby assumes
------------------------------
liability for, and hereby agrees to, indemnify, protect, save and keep harmless
LESSOR and its agents, officers, directors, employees, successors and permitted
assigns (each of the foregoing and their respective agents, officers, directors,
employees, successors and assigns being hereinafter referred to as an
"Indemnitee" and any reference herein to an Indemnitee shall include its
- -----------
respective agents, officers, directors, employees, successors and permitted
assigns) from and against, and on written demand to pay, or to reimburse each
Indemnitee for the payment of, as the case may be, any and all liabilities,
obligations, losses, damages, penalties, claims, suits, actions, costs, expenses
and disbursements, including without limitation legal fees and expenses, of
whatsoever kind and nature (collectively, "Expenses") imposed on, incurred by or
--------
asserted against any Indemnitee relating to or arising out of (A) this Lease,
any payments made pursuant hereto or the exercise of rights or remedies
hereunder, (B) the Engines and any Part thereof, whether or not arising out of
the ownership, design, fitness for use, merchantability, airworthiness,
delivery, nondelivery, sublease, presence, storage, modification, replacement,
alteration, maintenance, inspection, repair, possession, repossession after an
Event of Default, use, operation, condition, return, exportation, importation,
transfer or other application or disposition thereof (including, in each case
and without limitation, latent or other defects, whether or not discoverable),
any claim for patent, trademark or copyright infringement, any claim based on
strict or absolute liability, statutory liability or tort and any liability for
any injury to or death of any person or loss of or damage to any property and
(C) any breach of, noncompliance with or misrepresentation made or deemed made
in, under or in connection with this Lease; provided, that LESSEE shall not be
required to indemnify any Indemnitee for: (1) Expenses which would not have
occurred but for the gross negligence or willful misconduct of such Indemnitee;
(2) Expenses which would not have occurred but for the existence of a Lien which
LESSEE is not responsible for discharging under this Lease; or (3) Expenses
arising from
-21-
<PAGE>
the transfer (other than in connection with an Event of Default or Event of
Loss) of any interest in the Engines or the Lease by LESSOR.
Any payment or indemnity pursuant to this Section 12(a) shall include the
-------------
amount, if any, necessary to hold each Indemnitee harmless on a net after-tax
basis from all Taxes required to be paid by such recipient with respect to such
payment or indemnity under laws, rules or regulations of any Government Entity
or Taxing Authority. If any Indemnitee is entitled to a permanent tax benefit
(whether by way of deduction, credit or otherwise) not taken into account
pursuant to the preceding sentence as a result of the matter indemnified against
under this Section 12(a), such Indemnitee shall promptly pay to LESSEE, after
-------------
such permanent tax benefit is realized but not before LESSEE shall have made all
payments theretofore due to such Indemnitee under this Agreement and any other
agreement in respect of the Engines, an amount that, after subtraction of any
further tax savings to which such Indemnitee is entitled as a result of the
payment thereof, is equal to the amount of such permanent tax benefit; provided,
however, that such Indemnitee shall not be obligated to make any payment to
LESSEE pursuant to this sentence so long as a Default or Event of Default shall
have occurred and be continuing or any Rent then due and owing shall not have
been paid.
If any Indemnitee shall have knowledge of any claim or liability required
to be indemnified against under this Section 12(a), such Indemnitee shall give
-------------
reasonably prompt written notice thereof to LESSEE, but the failure of such
Indemnitee so to notify LESSEE shall not relieve LESSEE from any liability that
it would otherwise have to such Indemnitee hereunder except to the extent that
LESSEE's rights respecting any defense thereto are irrevocably and materially
impaired directly and solely as a result of such failure. LESSEE shall be
obligated to each Indemnitee under this Section 12(a) irrespective of whether
-------------
any Indemnitee shall also be indemnified with respect to the same matter under
any other agreement, and each Indemnitee may proceed directly against LESSEE
under this Section 12(a) without first resorting to any such other rights of
-------------
indemnification. Upon the indefeasible payment in full of any indemnities due
and owing under this Section 12(a), LESSEE shall be subrogated to any right of
-------------
the Indemnitee in respect of the matter against which indemnity has been given.
(b) General Tax Indemnity. LESSEE agrees that each payment of Rent
---------------------
or any amount payable hereunder shall be free of all withholdings of any nature
whatsoever, and in the event that any withholding is required, LESSEE shall pay
an additional amount of Rent such that after the deduction of all amounts
required to be withheld, the net amount of Rent actually and indefeasibly
received by each Indemnitee or the net amount that is actually received by
LESSOR, as the case may be, will equal the amount of Rent or any such amount
payable hereunder or such other amount, as the case may be, that would be due
absent such withholding. LESSEE hereby agrees to indemnify and hold harmless
from and against, and on written demand, to pay or reimburse each Indemnitee for
the payment of, as the case may be, any and all Taxes imposed upon or asserted
against any Indemnitee or the Engines or any Part thereof or interest therein,
or this Lease, or the rentals received under this Lease, by any federal, state
or local government or other taxing authority in the United States, in any
territory or possession thereof or by any foreign government or any political
subdivision or taxing authority thereof or therein (the foregoing being referred
to herein individually as a "Taxing Authority" and
----------------
-22-
<PAGE>
collectively as "Taxing Authorities") upon or with respect to (i) the delivery,
------------------
transport, insuring, ownership, possession, repossession, operation, use,
presence, condition, maintenance, repair, return, sale, storage, redelivery,
manufacture, subleasing, modification, importation, transfer of title,
exportation or other application or disposition of, or the imposition of any
Lien (other than a LESSOR Lien) on the Engines or any Part thereof or interest
therein, (ii) payments of Basic Rent or Supplemental Rent payable pursuant to
this Lease, (iii) the Engines or any Part thereof or any interest therein or the
applicability of this Lease to the Engines or any Part thereof or any interest
therein or (iv) otherwise with respect to or in connection with the transactions
effected under this Lease. The provisions of this Section 12(b) shall not apply
-------------
to Taxes which are based upon, or measured by, LESSOR's net income.
(c) Calculation of Tax Indemnity Payments. Any payment that LESSEE
-------------------------------------
is required to make to or for the account of an Indemnitee with respect to any
Tax that is subject to indemnification under Section 12(b) shall include the
-------------
amount necessary to hold such Indemnitee harmless on a net after-tax basis from
the net amount of all Taxes required to be paid by such Indemnitee as the result
of such payment pursuant to the laws of any Taxing Authority. The amounts of
any payments to be made pursuant to Section 12(b) shall be calculated by the
-------------
Indemnitee entitled to such payments and such calculation shall be conclusive
and binding on LESSEE, absent manifest error.
(d) Reports. If any report, return or statement is required to be
-------
filed with respect to any Tax that is subject to indemnification under Section
-------
12(b), LESSEE shall timely file the same, except for any such report, return or
- -----
statement that a Indemnitee has notified LESSEE that it intends to file. LESSEE
shall either file such report, return or statement so as to show the ownership
of the Engines in LESSOR and send a copy of such report, return or statement to
LESSOR or, where LESSEE is not so permitted to file in the name of LESSOR, shall
notify LESSOR of such requirement and cooperate reasonably with LESSOR with
respect thereto. Each Indemnitee shall promptly forward to LESSEE any notice,
bill or advice received by it concerning any Tax.
(e) Payment. Unless otherwise requested by the appropriate
-------
Indemnitee, LESSEE shall pay when due any Tax for which it is liable pursuant to
Section 12(b) directly to the appropriate Taxing Authority, or, upon written
- -------------
demand, shall reimburse the appropriate Indemnitee for the payment of any such
Tax made by such Indemnitee. Within 30 days after the date of each payment by
LESSEE of any Tax referred to in the preceding sentence, LESSEE shall furnish
the appropriate Indemnitee evidence of payment of such Tax acceptable to such
Indemnitee. LESSEE shall also cause to be furnished, promptly upon request,
such data as any Indemnitee may reasonably require from LESSEE to enable such
Indemnitee to comply with the requirements of any Taxing Authority in respect of
any Tax referred to in Section 12(b).
-------------
(f) Survival. The obligations contained in this Section 12 shall
-------- ----------
survive the termination of this Lease, to the extent they have accrued, or
relate to events that have occurred, on or before the date of such termination;
provided that obligations arising as a result of the occurrence of a Default or
an Event of Default shall in any event, without limiting the foregoing, survive
until payment in full and performance of all obligations owing to each
Indemnitee under
-23-
<PAGE>
the foregoing agreements and all other agreements referred to herein or
contemplated hereby. The obligations of LESSEE in respect of all such
indemnities, obligations, adjustments and payments are expressly made for the
benefit of, and shall be enforceable by, each Indemnitee entitled thereto at the
option of such Indemnitee without declaring this Lease to be in default or
taking any other action hereunder.
13. Assignment.
----------
(a) No Assignment by LESSEE. EXCEPT AS OTHERWISE EXPRESSLY
-----------------------
PROVIDED HEREIN, LESSEE SHALL NOT ASSIGN OR OTHERWISE TRANSFER IN ANY MANNER ANY
OF ITS RIGHTS OR INTERESTS WITH RESPECT TO THIS LEASE, THE ENGINES OR ANY PART
THEREOF.
(b) Assignment by LESSOR. LESSOR may assign at any time and from
--------------------
time to time all or any part of its right, title and interest in and to this
Lease or the Engine. The terms and provisions of this Lease shall be binding
upon and inure to the benefit of LESSOR and its successors and assigns.
14. Events of Default; Remedies.
---------------------------
(a) Events of Default. The occurrence of any of the following
-----------------
events shall constitute an "Event of Default" (whether any such event shall be
----------------
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) and
each such Event of Default shall be deemed to exist and continue so long as it
shall not have been remedied:
(i) LESSEE shall fail to make any payment of Rent within three
(3) Business Days after the same shall have become due and payable;
(ii) LESSEE shall fail to carry and maintain insurance on or with
respect to the Engines in accordance with Section 9;
---------
(iii) LESSEE shall fail to perform or observe any other
covenant, term, condition or agreement to be performed or observed by it
hereunder and such failure shall continue unremedied for a period of
fifteen (15) days after written notice thereof to LESSEE;
(iv) any representation or warranty made by LESSEE herein shall
at any time prove to have been false or incorrect at the time made;
(v) LESSEE shall fail to make any payment when due on any
pecuniary obligation(s) (other than this Lease) of any nature whatsoever
(including, without limitation, contingent obligations), (a) owed to LESSOR
or an affiliate of LESSOR or (b) which pecuniary obligation(s) exceed
US$5,000,000 (or the equivalent in one or more other currencies)
individually or in the aggregate, or defaults in performance
-24-
<PAGE>
of any agreement under which any such obligation is created, or any other
event shall occur or condition exist, if the effect of such default or
other event or condition is to cause such obligation to become, or to
permit holders of such obligation, or a trustee on their behalf, to declare
such obligation, due prior to its normal maturity, provided, however, that
if LESSEE is contesting in good faith the amount of any such obligation and
has set aside adequate reserves, such failure to pay shall not be deemed to
constitute an Event of Default hereunder during the pendency of such
contest;
(vi) LESSEE shall (A) voluntarily commence any proceeding or file
any petition seeking relief under any applicable bankruptcy, insolvency,
liquidation or similar law now or hereafter in effect, (B) consent to the
institution of, or fail to contravene in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (C) apply for or
consent to the appointment of a receiver, trustee, custodian sequestrator
or similar official for itself or for a substantial part of its property or
assets, (D) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (E) make a general assignment for
the benefit of creditors, (F) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (G) take corporate
action for the purpose of effecting any of the foregoing;
(vii) an involuntary proceeding shall be commenced or for
involuntary petition shall be filed in a court of competent jurisdiction
seeking (A) relief in respect of LESSEE, or of a substantial part of the
property or assets of LESSEE under any applicable bankruptcy, insolvency,
receivership or similar law, (B) the appointment of a receiver, trustee,
custodian, sequestrator or similar official for LESSEE or for a substantial
part of the property of LESSEE or (C) the winding-up or liquidation of
LESSEE; and such proceeding or petition shall continue undismissed for
sixty (60) days or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect for thirty (30) days;
(viii) final judgment for the payment of money in excess of
US$1,000,000 (or the equivalent in another currency) shall be rendered
against LESSEE and the same shall remain undischarged for a period of ten
(10) days during which execution of such judgment shall not be effectively
stayed or bonded in a manner satisfactory to LESSOR;
(ix) possession of any Engine shall be transferred to another
Person, other than in accordance with the express provisions of Section
-------
7(d); and/or
----
(x) a material adverse change occurs in the business, prospects
or financial condition of LESSEE.
(b) Remedies. Upon the occurrence of any Event of Default and at
--------
any time thereafter so long as the same shall be continuing, LESSOR may, at its
option, declare this Lease to be in default by notice to LESSEE; and at any time
thereafter, so long as LESSEE shall not have remedied all outstanding Events of
Default before LESSOR shall have commenced to exercise its rights or remedies
hereunder, LESSOR may exercise one or more of the following
-25-
<PAGE>
rights and remedies with respect to the Engines as LESSOR in its sole discretion
shall elect, to the extent permitted by, and subject to compliance with any
mandatory requirements of, applicable law then in effect:
(i) cause LESSEE, upon the written demand of LESSOR and at
LESSEE's expense, to return promptly, and LESSEE shall return promptly (and
in no event later than two days after such demand), the Engines to LESSOR
or its order in the manner and condition required by, and otherwise in
accordance with, Section 10 as if the Engines were being returned at the
----------
end of the Term, or LESSOR, at its option, may enter upon the premises
where the Engines is located and take immediate possession of and remove
the same;
(ii) hold, use, operate, keep idle or lease to others the
Engines, with or without taking possession thereof as LESSOR in its sole
discretion may determine, free and clear of any rights of LESSEE and
without any duty to account to LESSEE with respect to such action or
inaction or for any proceeds with respect thereto, except that LESSEE's
obligation to pay Basic Rent for any periods in respect of the Engines
accruing after LESSEE shall have been deprived of possession of the Engines
pursuant to this Section 14 shall be reduced by the net proceeds, if any,
----------
received by LESSOR from leasing the Engines to any Person other than LESSEE
for the same periods or any portions thereof;
(iii) LESSOR may exercise any other right or remedy that may be
available to it under applicable law or proceed by appropriate court action
to enforce the terms hereof or to recover damages for the breach or to
rescind this Lease;
(iv) LESSOR may terminate this Lease; and/or
(v) whether or not LESSOR shall have exercised, or shall
thereafter at any time exercise, any of its rights under clauses (i), (ii),
(iii) or (iv) above, LESSOR, by written notice to LESSEE specifying a
payment date not earlier than five (5) Business Days after the date of such
notice, may terminate this Lease and demand that LESSEE pay to LESSOR and
LESSEE shall pay to LESSOR, on the payment date specified in such notice,
as liquidated damages for loss of a bargain and not as a penalty, the sum
of: (A) any unpaid Basic Rent due for periods ending on or prior to the
payment date specified in such notice and any unpaid Supplemental Rent due
on or prior to such payment date, plus (B) in lieu of the Basic Rent due on
Payment Dates occurring after the Payment Due Date, an amount equal to the
aggregate unpaid Basic Rent which would otherwise have accrued over the
remainder of the Term but for the Event of Default. The amounts specified
in such notice shall bear interest at the Post-Default Rate from the
payment date specified in such notice until payment is made.
In addition, LESSEE shall be liable, for any and all unpaid Basic Rent then
due and Supplemental Rent then due hereunder before or during or after the
exercise of any of the foregoing remedies and for all legal fees and other costs
and expenses incurred by LESSOR by reason of the occurrence of any Event of
Default or the exercise of LESSOR's remedies with
-26-
<PAGE>
respect thereto, including all costs and expenses incurred in connection with
the return of all or any part of the Engines in accordance with Section 10 or
----------
this Section 14 or in storing or maintaining the Engines or any part thereof or
----------
placing the same in the condition and airworthiness required by Section 10.
----------
Except as otherwise expressly provided above, no remedy referred to herein
is intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to herein or otherwise available to LESSOR at law or in
equity, and the exercise or beginning of exercise by LESSOR of any one or more
of such remedies shall not preclude the simultaneous or later exercise by LESSOR
of any or all such other remedies; provided, that LESSOR may recover only once
from each element of damages sustained and, provided further, that the preceding
proviso shall not be deemed to require proof of damages actually sustained in
the case of liquidated damages provided for herein. No express or implied
waiver by LESSOR of any Default or Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Default or Event of
Default. To the extent permitted by law, LESSEE hereby waives any rights now or
hereafter conferred by statute or otherwise (A) that may require LESSOR to lease
or otherwise use or dispose of the Engines or any part thereof in mitigation of
LESSOR's damages as set forth in this Section 14, (B) that may confer any right
----------
to prior notice or judicial hearing in connection with LESSOR's taking
possession or disposing of the Engines including, without limitation, any and
all prior notice and hearing for any prejudgment remedy or remedies and any such
right that LESSEE might otherwise have under applicable law, (C) except as
provided in this Section 14, that impose any requirements as to the time, place
----------
or terms of lease other disposition or other requirements with respect to the
enforcement of LESSOR's rights and remedies hereunder, (D) all rights of
redemption, appraisement, valuation, stay, extension or moratorium now or
hereafter in effect under applicable law that may have the effect of delaying
the enforcement of this Lease or the absolute lease or other disposition of the
Engine, or (E) that may otherwise limit or modify any of LESSOR's rights or
remedies hereunder. The failure or delay of LESSOR in exercising any right or
remedy granted it hereunder upon any occurrence of any of the contingencies set
forth herein shall not constitute a waiver of any such right or remedy upon the
continuation or recurrence of any such contingencies or similar contingencies
and any single or partial exercise hereunder of any particular right or remedy
of LESSOR shall not exhaust the same or constitute a waiver of any other right
provided herein.
15. Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be delivered in person or sent by telecopier, international
courier service or letter (mailed certified and return receipt requested),
addressed to the parties as follows:
if to LESSOR: UniCapital Aircraft Engine Group, Inc.
79 Glover Avenue
Norwalk, CT 06850
Attention: Mr. Randy Fiorenza
Fax: (203) 847-9612
Telephone: (203) 847-1401
-27-
<PAGE>
with a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Kenneth C. Hoffman, Esq.
Facsimile: 305-579-0717
Telephone: 305-579-0809
if to LESSEE: Tower Air, Inc.
Hangar 17
J.F.K. International Airport
Jamaica, NY 11430
Attention: William Cain
Fax: (718) 553-4387
Telephone: (718) 553-4300
with a copy to: Hewes Gelband Lambert & Dann
1000 Potomac St. NW
Suite 300
Washington, D.C. 20007
Attention: Steven L. Gelband, Esq.
Fax: (202) 333-0871
Telephone: (202) 337-6200
or at such other address as LESSEE or LESSOR shall from time to time designate
in writing to the other. In the case of a notice delivered in person or sent by
telecopier or international courier, notice will be deemed received upon actual
receipt. In the case of a mailed letter, notice will be deemed received on the
tenth (10th) Business Day after deposit in the mail, with proper postage for
registered or certified first-class mail prepaid.
16. Governing Law and Jurisdiction.
------------------------------
(a) Governing Law. This Lease shall in all respects be governed
-------------
by, and construed in accordance with, the internal laws of the State of New
York, inclusive of all matters of construction, validity and performance.
(b) Jurisdiction; Service of Process. Each of LESSEE and LESSOR
--------------------------------
hereby irrevocably submits to the jurisdiction of any State or federal court
sitting in New York State in any action or proceeding arising out of or relating
to this Agreement, and each of LESSEE and LESSOR hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such state court or, to the extent permitted by law, in such federal court.
Each of LESSEE and LESSOR hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. Each of LESSEE and LESSOR irrevocably consents to
the service of any and all process in any such action or proceeding by the
mailing of copies of such process to it at its address specified in Section 15.
----------
LESSEE agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner
-28-
<PAGE>
provided by law. Nothing in this Section 16(b) shall affect the right of any
-------------
other party to serve legal process in any other manner permitted by law or
affect the right of any other party to bring any action or proceeding against
LESSEE, or its respective properties in the courts of other jurisdictions.
LESSEE AND LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR
RELATING TO THIS LEASE.
(c) Waiver of Immunity. To the extent that LESSEE has or hereafter
------------------
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, LESSEE hereby irrevocably waives such immunity in respect of
its obligations under this Agreement and all other documents and agreements
relating to the Engines and the transactions referred to or contemplated herein.
17. Miscellaneous.
-------------
(a) Entire Agreement. This Lease constitutes the entire agreement
----------------
between the parties concerning the subject matter hereof, and supersedes all
previous proposals, agreements, understandings, negotiations and other written
and oral communications in relation hereto. NO TERM OR PROVISION OF THIS LEASE
MAY BE CHANGED, WAIVED, DISCHARGED OR TERMINATED, EXCEPT BY AN INSTRUMENT IN
WRITING SIGNED BY A DULY AUTHORIZED REPRESENTATIVE OF THE PARTY AGAINST WHICH
THE ENFORCEMENT OF THE CHANGE, WAIVER, DISCHARGE OR TERMINATION IS SOUGHT. This
Lease shall constitute an agreement of lease, and nothing herein shall be
construed as conveying to LESSEE any right, title or interest in the Engines or
any Part except as a lessee only.
(b) English Language. All notices, communications, reports,
----------------
opinions and other documents given under this Lease shall be in the English
language, or shall be accompanied by a certified copy of an English translation
thereof, and the English-language version of this Lease and other documents
contemplated hereunder shall govern all questions of compliance, construction
and interpretation with respect thereto.
(c) LESSOR's Right to Perform for LESSEE. If LESSEE fails to make
------------------------------------
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, LESSOR may itself make such
payment or perform or comply with such agreement, and the amount of such payment
and the amount of any expenses of LESSOR incurred in connection with such
payment or the performance of or compliance with such agreement, as the case may
be, shall be deemed Supplemental Rent payable by LESSEE upon demand; provided,
however, that no such payment, performance or compliance by LESSOR shall (i) be
deemed to have satisfied the obligation of LESSEE to make such payment or to
perform or comply with such agreement, as the case may be, unless and until
LESSEE shall have paid all such Supplemental Rent payable pursuant to this
section by reason of such failure or (ii) be deemed a waiver of LESSOR's rights
and remedies against LESSEE hereunder.
-29-
<PAGE>
(d) Application of Payments During Existence of Default. Any
---------------------------------------------------
amount referred to herein that is payable to LESSEE shall not be paid to LESSEE,
or if it has been previously paid directly to LESSEE, shall not be retained by
LESSEE, if at the time of such payment a Default or Event of Default shall have
occurred and be continuing, but shall be paid to and held by LESSOR as security
for and may be applied to the obligations of LESSEE under this Lease and, at
such time as LESSOR shall receive evidence in form and substance satisfactory to
it that there is not continuing any such Default or Event of Default, all such
amounts in excess of amounts so paid on obligations of LESSEE shall be paid to
LESSEE.
(e) Quiet Enjoyment. LESSOR covenants that, if and so long as no
---------------
Default or Event of Default shall have occurred and be continuing, LESSEE shall
quietly enjoy the Engines without interference by LESSOR or any Person lawfully
claiming by or through LESSOR.
(f) Expenses. LESSEE agrees to reimburse LESSOR for LESSOR's out-
--------
of-pocket costs and expenses, including attorney's fees, incurred in connection
with the preparation, negotiation and delivery of any amendments, modifications
or waivers required by this Lease or requested by LESSEE (or resulting from any
requests of LESSEE) hereunder.
(g) Further Assurances. LESSEE will promptly and duly execute and
------------------
deliver to LESSOR such further documents and assurances and take such further
action as LESSOR may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
LESSOR hereunder.
(h) Invalidity of any Provision. Any provision of this Lease 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the fullest
extent permitted by applicable law, LESSEE hereby waives any provision of law
that renders any provision hereof prohibited or unenforceable in any respect.
(i) Headings. All section and paragraph headings and captions are
--------
purely for convenience of reference only and shall not modify, define, expand,
limit or otherwise affect any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease.
(j) Third Party Beneficiaries. LESSEE recognizes that this Lease
-------------------------
confers certain rights and interests on the Indemnitees. Notwithstanding that
the Indemnitees are not parties to this Lease, the Indemnitees are intended
third party beneficiaries of such rights and interests and LESSOR hereby
acknowledges that the Indemnitees may enforce such rights and interests
directly, as if they were parties to this Lease.
(Continued on Signature Page)
-30-
<PAGE>
IN WITNESS WHEREOF, LESSOR and LESSEE have each caused this Agreement to be
duly executed as of the day and year first above written.
UNICAPITAL AIRCRAFT ENGINE GROUP, INC.
By:______________________________________________
Name: Randall P. Fiorenza
Title: President and Chief Operating Officer
TOWER AIR, INC.
By:______________________________________________
Name: William Cain
Title: Senior Vice President - Engineering and
Maintenance
-31-
<PAGE>
SCHEDULE 1
----------
BASIC RENT
----------
Engine Basic Rent
- ------ ----------
Engine 702083......................................... $57,946.49
Engine 686106......................................... $31,607.17
Engine 662751......................................... $21,071.45
Engine 662749......................................... $26,339.31
Engine 662550......................................... $10,535.72
Engine 662498......................................... $26,339.31
Engine 662338......................................... $36,875.04
Engine 662323......................................... $52,678.62
Engine 662270......................................... $10,535.73
Schedule 1-1
<PAGE>
SCHEDULE 2
----------
STIPULATED LOSS VALUES
----------------------
Engine Stipulated Loss Value
- ------ ---------------------
Engine 702083....................................... $2,750,000
Engine 686106....................................... $1,500,000
Engine 662751....................................... $1,000,000
Engine 662749....................................... $1,250,000
Engine 662550....................................... $ 500,000
Engine 662498....................................... $1,250,000
Engine 662338....................................... $1,750,000
Engine 662323....................................... $2,500,000
Engine 662270....................................... $ 500,000
Schedule 2-1
<PAGE>
SCHEDULE 3
----------
OPTION EXERCISE PRICES
----------------------
The amount of the Option Exercise Price as of any date shall mean the
amount of Dollars computed with reference to the date of payment in accordance
with the attached table (amounts assume that all Rent due on or prior to the
relevant Option Exercise Date has been paid to LESSOR):
Option Exercise Date Option Exercise Price
- ------------------------------ ------------------------------
March 8, 1999 $12,726,071.16
April 8, 1999 $12,558,192.91
May 8, 1999 $12,388,915.68
June 8, 1999 $12,218,227.80
July 8, 1999 $12,046,117.52
August 8, 1999 $11,872,572.98
September 8, 1999 $11,697,582.25
October 8, 1999 $11,521,133.26
November 8, 1999 $11,343,213.86
December 8, 1999 $11,163,811.80
January 8, 2000 $10,982,914.73
February 8, 2000 $10,800,510.18
March 8, 2000 $10,616,585.59
April 8, 2000 $10,431,128.30
May 8, 2000 $10,244,125.53
June 8, 2000 $10,055,564.40
July 8, 2000 $9,865,431.92
August 8, 2000 $9,673,715.01
September 8, 2000 $9,480,400.46
October 8, 2000 $9,285,474.96
November 8, 2000 $9,088,925.08
December 8, 2000 $8,890,737.28
January 8, 2001 $8,690,897.92
Schedule 3-1
<PAGE>
Option Exercise Date Option Exercise Price
- ------------------------------ ------------------------------
February 8, 2001 $8,489,393.23
March 8, 2001 $8,286,209.33
April 8, 2001 $8,081,332.23
May 8, 2001 $7,874,747.83
June 8, 2001 $7,666,441.88
July 8, 2001 $7,456,400.06
August 8, 2001 $7,244,607.89
September 8, 2001 $7,031,050.78
October 8, 2001 $6,815,714.03
November 8, 2001 $6,598,582.81
December 8, 2001 $6,379,642.16
January 8, 2002 $6,158,877.00
February 8, 2002 $5,936,272.13
March 8, 2002 $5,711,812.22
April 8, 2002 $5,485,481.82
May 8, 2002 $5,257,265.32
June 8, 2002 $5,027,147.02
July 8, 2002 $4,795,111.07
August 8, 2002 $4,561,141.49
September 8, 2002 $4,325,222.16
October 8, 2002 $4,087,336.84
November 8, 2002 $3,847,469.14
December 8, 2002 $3,605,602.54
January 8, 2003 $3,361,720.39
February 8, 2003 $3,115,805.89
March 8, 2003 $2,867,842.10
April 8, 2003 $2,617,811.93
May 8, 2003 $2,365,698.19
June 8, 2003 $2,111,483.50
July 8, 2003 $1,855,150.36
August 8, 2003 $1,596,681.11
September 8, 2003 $1,336,057.95
October 8, 2003 $1,073,262.93
November 8, 2003 $808,277.95
December 8, 2003 $541,084.76
January 8, 2004 $271,664.96
February 8, 2004 $1.00
Schedule 3-2
<PAGE>
Exhibit 10 (46)
EIGHTH AMENDMENT TO THE AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS EIGHTH AMENDMENT TO THE AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT dated April 14, 1999 (this "Amendment") is between TOWER AIR, INC., a
Delaware corporation ("Borrower"), the financial institutions listed on the
signature page hereof (collectively, the "Lenders") and HELLER FINANCIAL, INC.,
a Delaware corporation (in its individual capacity, "Heller"), for itself as a
Lender and as Agent ("Agent").
WITNESSETH:
----------
WHEREAS, Agent, Lenders and Borrower are parties to a certain Amended
and Restated Loan and Security Agreement dated as of September 1, 1997 and all
amendments thereto (collectively, the "Loan Agreement"); and
WHEREAS, the parties desire to amend the Loan Agreement subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Capitalized terms used in this Amendment,
-----------
unless otherwise defined herein, shall have the meaning ascribed to such terms
in the Loan Agreement.
SECTION 2. Amendment of the Loan Agreement. The Loan Agreement is
-------------------------------
hereby amended as follows:
(a) Section 2.1 is amended by deleting subsection 2.1(A) in its
entirety and inserting the following in lieu thereof:
2.1 Revolving Loan. Subject to the terms and conditions of this
--------------
Agreement and in reliance upon the representations and warranties of the
Borrower and the other Loan Parties set forth herein and in the other Loan
Documents, each Lender severally agrees to lend to Borrower, from time to time,
its Pro Rata Share of each Revolving Advance. From and after the Closing Date
through the Termination Date, the aggregate amount of all Revolving Loan
<PAGE>
Commitments shall not exceed the following amounts during the following periods:
(i) from and after April 14, 1999, to and including May 30, 1999, Twenty Million
Dollars ($20,000,000); (ii) on and after May 31, 1999, to and including June 29,
1999, Nineteen Million Dollars ($19,000,000); (iii) on and after June 30, 1999,
to and including July 30, 1999, Eighteen Million Dollars ($18,000,000); (iii) on
and after July 31, 1999, to and including August 30, 1999, Sixteen Million
Dollars ($16,000,000); and (iv) on and after August 31, 1999, Fifteen Million
Dollars ($15,000,000), each as reduced by subsection 2.4(B). Amounts borrowed
under this subsection 2.1(A) may be repaid and reborrowed at any time prior to
the earlier of (i) the termination of the Revolving Loan commitment pursuant to
subsection 8.3 or (ii) the Termination Date. Except as otherwise provided
herein no Lender shall have any obligation to make an advance under this
subsection 2.1(A) to the extent such advance would cause the Revolving Loan
(after giving effect to any immediate application of the proceeds thereof) to
exceed the Maximum Revolving Loan Amount.
(b) Section 5 is amended by deleting subsection 5.16 in its entirety
and inserting the following in lieu thereof:
5.16 Suppressed Availability. Borrower shall maintain, at all times,
-----------------------
Suppressed Availability in an amount of Seven Million Dollars ($7,000,000), plus
an additional Five Hundred Thousand Dollars ($500,000) of Suppressed
Availability for each additional One Million Dollars ($1,000,000) borrowed above
Fifteen Million Dollars ($15,000,000).
SECTION 3. Conditions Precedent to Effectiveness. The parties hereto
-------------------------------------
agree that this Amendment shall not become effective unless and until the
following conditions have been met:
(a) Fee. Agent shall have received Three Hundred Thousand Dollars
---
($300,000) in immediately available funds as an amendment fee, which shall be
due, fully earned and payable upon the execution hereof and which Agent shall
charge to the Revolving Loan on the date hereof.
(b) Secretary's Certificate. Agent shall have received a certificate
-----------------------
of the secretary of Borrower, which certificate shall be in form and substance
satisfactory to Agent, having attached thereto duly authorized resolutions of
the Board of Directors of the Borrower with respect to the transactions
contemplated hereby.
(c) No Default. No event shall have occurred and be continuing that
----------
constitutes or would constitute, with the giving of notice or the passage of
time or both, an Event of Default.
(d) There shall have occurred no material adverse change in the
business operations, financial condition, profits or prospects of Borrower, or
in the Collateral;
<PAGE>
(e) Borrower shall have executed and delivered such other documents
and instruments as Lender may require.
(f) 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 Lender and its legal counsel.
SECTION 4. Expenses. Whether or not the transaction contemplated by
--------
this Amendment shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Agent and each of the Lenders in
connection with any matters contemplated by or arising out of this Amendment or
the other Loan Documents including the following, and all such fees, costs and
expenses shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) fees, costs and expenses (including attorneys' fees, allocated
costs of internal counsel and fees of environmental consultants, accountants and
other professionals retained by Agent) incurred in connection with the
examination, review, due diligence investigation, documentation and closing of
the financing arrangement evidenced by this Amendment and the other Loan
Documents; and (b) fees, costs and expenses (including attorneys' fees,
allocated costs of internal counsel and fees of environmental consultants,
accountants and other professionals retained by Agent) incurred in connection
with the review, negotiation, preparation, documentation, execution,
syndication, and administration of this Amendment and the other Loan Documents,
the Loans, and any amendments, waivers, consents, forbearances and other
modifications relating thereto or any subordination or intercreditor agreements.
SECTION 5. Waiver. Pursuant to Section 5.9 of the Loan Agreement,
------
failure by Borrower to pay in a timely manner all taxes due is an Event of
Default. Borrower has advised Agent that Borrower has failed to pay certain
excise taxes for the periods December 31, 1998, January 31, 1999 and February
28, 1999. Borrower has requested a waiver from Agent and Agent hereby waives
its rights under the Loan Agreement in connection with the occurrence of such
Event of Default. The continued effectiveness of this waiver is specifically
conditioned upon (a) Borrower's payment of all excise taxes which are due in
full on or by April 15, 1999 and (b) Borrower providing proof thereof in form
reasonably acceptable to Agent no later than April 20, 1999.
SECTION 6. Corporate Action. The execution, deliver, and performance
----------------
of the 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.
SECTION 7. Ratification; References to Loan Agreement. The terms and
------------------------------------------
provisions of this Amendment shall modify and supersede all inconsistent terms
and provisions of the Loan Agreement. Except as amended hereby, the Loan
Agreement continues and shall remain in full force and effect in all respects.
From and after the date of this Amendment, each and every reference in the Loan
Agreement to "this Loan Agreement," "this Agreement,"
<PAGE>
"herein," "hereof" or similar words and phrases or any word or phrase referring
to a section or provision of the Loan Agreement is deemed for all purposes to be
a reference to the Loan Agreement or such section or provision as amended
pursuant to this Amendment.
SECTION 8. Severability; Headings; Amendment. Any provision of this
---------------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. No term or
provision of this Amendment may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Borrower, Agent and
Requisite Lenders. The section headings in this Amendment are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof.
SECTION 9. Counterparts; Effectiveness. This Amendment may be
---------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Amendment shall become effective upon the
execution of a counterpart hereof by each of the parties hereto. Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be as effective as delivery of a manually executed counterpart thereof.
SECTION 10. References. Any reference to the Agreement contained in
----------
any notice, request, certificate, or other document executed concurrently with
or after the execution and delivery of this Amendment shall be deemed to include
this Amendment unless the context shall otherwise require.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Fourth
Amendment to Loan and Security Agreement to be duly executed on the date first
above written.
TOWER AIR, INC.,
Borrower
By: /s/ Morris K. Nachtomi
-------------------------------------------
Chairman, President and Chief Executive officer
HELLER FINANCIAL, INC.,
Agent and Lender
By: /s/ Anthony Vizgirda,
--------------------
Anthony Vizgirda, Vice President
<PAGE>
EXHIBIT 10.47
NINTH AMENDMENT TO THE AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS NINTH AMENDMENT TO THE AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT dated April 15, 1999 (this "Amendment") is between TOWER AIR, INC., a
Delaware corporation ("Borrower"), the financial institutions listed on the
signature page hereof (collectively, the "Lenders") and HELLER FINANCIAL, INC.,
a Delaware corporation (in its individual capacity, "Heller"), for itself as a
Lender and as Agent ("Agent").
WITNESSETH:
----------
WHEREAS, Agent, Lenders and Borrower are parties to a certain Amended
and Restated Loan and Security Agreement dated as of September 1, 1997 and all
amendments thereto (collectively, the "Loan Agreement"); and
WHEREAS, the parties desire to amend the Loan Agreement subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Capitalized terms used in this Amendment,
-----------
unless otherwise defined herein, shall have the meaning ascribed to such terms
in the Loan Agreement.
SECTION 2. Amendment of the Loan Agreement. The Loan Agreement is
-------------------------------
hereby amended as follows:
Section 6 is amended by deleting subsection 6.1 in its entirety,
effective as of March 31, 1999, and inserting the following in lieu thereof;
<PAGE>
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:
Period Amount
------ ------
March 1999 - June 1999 $45,000,000
July 1999 and each month thereafter $50,000,000
SECTION 3. Conditions Precedent to Effectiveness. The parties hereto
-------------------------------------
agree that this Amendment shall not become effective unless and until the
following conditions have been met:
(a) Fee. Agent shall have received Twenty Five Thousand Dollars
---
($25,000) in immediately available funds as an amendment fee, which shall be
due, fully earned and payable upon the execution hereof and which Agent shall
charge to the Revolving Loan on the date hereof.
(b) No Default. No event shall have occurred and be continuing that
----------
constitutes or would constitute, with the giving of notice or the passage of
time or both, an Event of Default.
(c) There shall have occurred no material adverse change in the
business operations, financial condition, profits or prospects of Borrower, or
in the Collateral;
(d) Borrower shall have executed and delivered such other documents
and instruments as Lender may require.
(e) 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 Lender and its legal counsel.
SECTION 4. Expenses. Whether or not the transaction contemplated by
--------
this Amendment shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Agent and each of the Lenders in
connection with any matters contemplated by or arising out of this Amendment or
the other Loan Documents including the following, and all such fees, costs and
expenses shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) fees, costs and expenses (including attorneys' fees, allocated
costs of internal counsel and fees of environmental consultants, accountants and
other professionals retained by Agent) incurred in connection with the
examination, review, due diligence investigation, documentation and closing of
the financing arrangement evidenced by this Amendment and the other Loan
Documents; and (b) fees, costs and expenses (including attorneys' fees,
allocated costs of internal counsel and fees of environmental consultants,
accountants and other professionals retained by Agent) incurred in connection
with the review, negotiation, preparation, documentation, execution,
syndication, and administration of this
<PAGE>
Amendment and the other Loan Documents, the Loans, and any amendments, waivers,
consents, forbearances and other modifications relating thereto or any
subordination or intercreditor agreements.
SECTION 5. Corporate Action. The execution, deliver, and performance
----------------
of the 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.
SECTION 6. Ratification; References to Loan Agreement. The terms and
------------------------------------------
provisions of this Amendment shall modify and supersede all inconsistent terms
and provisions of the Loan Agreement. Except as amended hereby, the Loan
Agreement continues and shall remain in full force and effect in all respects.
From and after the date of this Amendment, each and every reference in the Loan
Agreement to "this Loan Agreement," "this Agreement," "herein," "hereof" or
similar words and phrases or any word or phrase referring to a section or
provision of the Loan Agreement is deemed for all purposes to be a reference to
the Loan Agreement or such section or provision as amended pursuant to this
Amendment.
SECTION 7. Severability; Headings; Amendment. Any provision of this
---------------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. No term or
provision of this Amendment may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Borrower, Agent and
Requisite Lenders. The section headings in this Amendment are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof.
SECTION 8. Counterparts; Effectiveness. This Amendment may be
---------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Amendment shall become effective upon the
execution of a counterpart hereof by each of the parties hereto. Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be as effective as delivery of a manually executed counterpart thereof.
SECTION 9. References. Any reference to the Agreement contained in
----------
any notice, request, certificate, or other document executed concurrently with
or after the execution and delivery of this Amendment shall be deemed to include
this Amendment unless the context shall otherwise require.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Fourth
Amendment to Loan and Security Agreement to be duly executed on the date first
above written.
TOWER AIR, INC.,
Borrower
By: /s/ Morris K. Nachtomi
------------------------------
Chairman, President and Chief Executive officer
HELLER FINANCIAL, INC.,
Agent and Lender
By: /s/ Anthony Vizgirda,
------------------------------
Anthony Vizgirda, Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-Q for the quarter ended March 31,
1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,098
<SECURITIES> 2,157
<RECEIVABLES> 43,631
<ALLOWANCES> 1,623
<INVENTORY> 0
<CURRENT-ASSETS> 49,076
<PP&E> 570,097
<DEPRECIATION> 239,885
<TOTAL-ASSETS> 385,455
<CURRENT-LIABILITIES> 200,251
<BONDS> 186,830
0
0
<COMMON> 156
<OTHER-SE> 49,256
<TOTAL-LIABILITY-AND-EQUITY> 385,455
<SALES> 0
<TOTAL-REVENUES> 100,663
<CGS> 0
<TOTAL-COSTS> 100,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67
<INTEREST-EXPENSE> 4,306
<INCOME-PRETAX> (3,718)
<INCOME-TAX> (1,673)
<INCOME-CONTINUING> (2,045)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,045)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
