<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
______________
For the fiscal year ended: December 31, 1993 Commission File Number 1-5351
WORLDCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3040585
(State of incorporation) (I.R.S. Employer Identification Number)
13873 Park Center Road, Suite 490, Herndon, VA 22071
(Address of Principal Executive Offices)
(703) 834-9200
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock par value New York Stock Exchange
$1.00 per share
Securities registered pursuant to Section 12(g) of the Act: NONE
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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- ----------
State by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the Common Stock held by non-affiliates of the
registrant on March 24, 1994, was approximately $85,821,336.
The number of shares of the registrant's Common Stock outstanding on March 24,
1994 was 15,194,819.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of WorldCorp, Inc.'s Notice of Annual Stockholder's Meeting and Proxy
Statement, to be filed within 120 days after the end of the registrant's fiscal
year, are incorporated into Part III of this Report.
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1
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WORLDCORP, INC.
1993 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
- ------ ----
<C> <S> <C>
Item 1. Business....................................... 3
Item 2. Properties..................................... 8
Item 3. Legal Proceedings.............................. 8
Item 4. Submission of Matters to a Vote of Security
Holders........................................ 8
PART II
- -------
Item 5. Market for Registrant's Common Stock and
Related Security Holder Matters................ 9
Item 6. Selected Financial Data........................ 10
Item 7. Management's Discussion and Analysis of
Financial Condition and
Results of Operations.......................... 11
Item 8. Financial Statements and Supplementary Data.... 21
Item 9. Changes in and Disagreements with Accountants
on Accounting
and Financial Disclosure....................... 46
PART III
- --------
Item 10. Directors and Executive Officers of the
Registrant..................................... 46
Item 11. Executive Compensation......................... 47
Item 12. Security Ownership of Certain Beneficial
Owners and Management.......................... 47
Item 13. Certain Relationships and Related Transactions. 47
PART IV
- --------
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................... 48
</TABLE>
2
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PART I
ITEM 1. BUSINESS
- -----------------
WorldCorp, Inc., a Delaware corporation ("WorldCorp" or the "Company"), was
organized in March 1987 to serve as the holding company for World Airways, Inc.,
a Delaware corporation ("World Airways"), which was organized in March 1948 and
is the predecessor to the Company. Currently, WorldCorp operates in two
business areas: air transportation services and transaction processing.
WorldCorp's air transportation subsidiary, World Airways, was a wholly-owned
subsidiary in 1993. In February 1994, the Company sold 24.9% of its ownership
to MHS Berhad, a Malaysian aviation company. World Airways is a leading
worldwide provider of air transportation for commercial and government
customers. In March 1987, WorldCorp acquired Key Airlines, Incorporated, a
Delaware corporation ("KeyAir"), which was subsequently sold on October 23,
1992. WorldCorp's transaction processing business consists of its ownership
interest in US Order, Inc. ("US Order") and WorldGames. US Order, a
developmental stage company, has developed a patented order and payment system
("ScanFone(R)") which facilitates the purchase of goods and services from the
home. In December 1993, US Order completed a $12.0 million private equity
placement. As a result of this transaction, WorldCorp currently owns 46% of the
voting stock of US Order. WorldCorp has an option through December 15, 1994 to
purchase additional shares of the capital stock of US Order for consideration
equal to $5.0 million which, if exercised, would increase its voting ownership
percentage to 79%. WorldGames, a wholly-owned subsidiary, is the sole licensee
of ScanFone(R) technology for applications in the gaming industry. The
principal executive offices of WorldCorp are located at Washington Dulles
International Airport in The Hallmark Building, 13873 Park Center Road, Herndon,
Virginia 22071. WorldCorp's telephone number is (703) 834-9200.
Airline Operations
- ------------------
World Airways is a certificated air carrier, operations of which are
limited to the air transportation industry ("Airline Operations"). Airline
Operations accounted for 100% of the Company's operating revenue and operating
income in 1986 through 1991. In 1992 and 1993, revenue from other business
areas represented less than 1% of the Company's total operating revenues. World
Airways provides supplemental air transportation to major international
airlines, freight forwarders, small package shippers, international vacation
tour operators and the U.S. government. World Airways' customers purchase the
use of the entire aircraft and then sell either passenger seats or cargo space
directly to their customers. World Airways' customers assume the risk of
filling the aircraft with passengers or cargo.
World Airways uses quick-change passenger/cargo convertible aircraft to
target different seasonal peaks throughout the year and to respond rapidly to
demands for supplemental airlift which arise on short notice, such as Operation
Desert Storm. World Airways' fleet of DC10-30 and MD-11 aircraft appeal to
customers who desire long-range, non-stop, international service. Some of World
Airways' competitors fly shorter-range aircraft which must make inconvenient and
time-consuming refueling and technical stops.
World Airways uses specialized operating techniques in pursuit of its
strategic objective to maintain consistently high levels of on-time reliability.
For example, World Airways implements programs that are designed to maintain
World Airways' aircraft to exacting standards, is converting its fleet to new,
state-of-the-art MD-11 aircraft, and extensively trains all flight and technical
personnel and carries maintenance representatives and extensive spare parts kits
on board its aircraft.
On October 30, 1993, WorldCorp, World Airways, and MHS Berhad ("MHS")
entered into a stock purchase agreement (the "Stock Purchase Agreement")
pursuant to which MHS, subject to satisfactory completion of its due diligence
investigations, agreed to purchase 24.9% of World Airways' common stock. At the
time of the signing of the Stock Purchase Agreement, World Airways was a wholly
owned subsidiary of WorldCorp. On February 28, 1994, WorldCorp, World Airways,
and MHS concluded the transaction according to the terms described above.
MHS recently announced that it will acquire 32% of Malaysian Airline System
Berhad ("MAS"), the flag carrier of Malaysia. MAS is one of World Airways'
largest commercial customers.
3
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Transaction Processing
- ----------------------
US Order is a provider of interactive transaction services to the home and
the only company with a screen-based telephone that is fully operational with a
broad menu of available services. Transaction services are currently offered via
screen-based telephones, although the Company expects to offer its bill pay
services via personal computers and touch tone telephones using audio response
units in 1994. Longer term, the Company plans to develop the capability to
support services offered via interactive cable, video games control units, and
personal digital assistants. Services currently offered by US Order include
bank account inquiry, funds transfer, bill payment, catalog shopping, home
delivery of groceries and restaurant meals, and enhanced telephone services.
The Company generates revenues through the monthly fees charged to customers for
its screen-based telephone ("ScanFone(R)") and transaction services used, as
well as the fees paid to the Company by service providers.
US Order's Regional Bell Operating Company (RBOC) strategy has evolved from
a joint marketing relationship to a value-added reseller relationship for the
RBOC's enhanced caller services such as Caller ID. This evolution has taken
place as a result of the RBOC's increased focus on video and cable television
interactivity. In particular the video focus by Bell Atlantic led to the
termination of the Bell Atlantic joint marketing agreement with US Order in
March 1994 as Bell Atlantic consolidated its efforts in the video arena.
Because screen-based telephones greatly improve the ease of use of enhanced
telephone services such as Caller ID, strategic relationships with RBOCs are
developing along this track.
US Order's product offering to financial institutions have expanded in
1994. In addition to pursuing joint marketing alliances, US Order will also
provide bill payment services to financial institutions through existing Audio
Response Units, commonly known as touch tone or telephone banking services. The
company is currently negotiating agreements with several major banks to offer
these services in 1994.
US Order is also expanding its direct sales of screen-based telephones and
interactive services to consumers. In October 1993, US Order announced its next
generation screen-based telephone, PhonePlus /TM/, which it expects to have
available to consumers in the third quarter of 1994. As in the cellular
telephone industry, the price of the telephone will be related to the length and
type of service contract the consumer chooses.
On February 3, 1992, the US Patent and Trademark Office ("PTO") issued an
order granting a request to reexamine US Order's patent based on a previously
issued patent to a third party. On April 3, 1993, the PTO completed its
reexamination and approved the amended claims of US Order's patent. Other claims
of patent infringement have also been asserted or threatened against US Order.
Although US Order and its counsel believe that US Order has substantial defenses
to any claim of infringement, there can be no assurances that US Order would
prevail in any such proceedings. In addition, upon the occurrence of certain
events such as the bankruptcy of US Order, an investor of the company receives a
fully paid, non exclusive worldwide license to certain of US Order's licensed
technology.
In December 1993, US Order underwent a private equity placement with
financial and strategic partners. As a result of this transaction, WorldCorp
owns 46% of the capital stock of US Order. WorldCorp has an option to purchase
all of the remaining shares of common stock of US Order, which, if exercised,
would increase its ownership percentage to 79%.
Aviation Fuel
- -------------
The Company's source of aviation fuel is primarily from major oil
companies, under annual delivery contracts, at often frequented commercial
locations, and from United States military organizations at military bases.
More than one supplier is under contract at several locations. Although the
crisis in the Persian Gulf resulted in substantially higher fuel prices during
the third and fourth quarters of 1990 and the first quarter of 1991, the Company
has experienced no difficulty purchasing fuel during the past three years and
does not expect availability to be a problem in the foreseeable future. The
availability and price of aviation fuels remains subject to the various
unpredictable economic and market factors that affect the supply of all
petroleum products.
Most of the air transportation contracts held by World Airways provide for
either customer supplied fuel or a pass-through of fuel price changes. Although
rapidly escalating fuel costs may cause a decrease in the overall
4
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level of activity in the industry, the Company does not anticipate that any
future industry-wide energy problems would have a substantial adverse effect
upon the profitability of Airline Operations.
Seasonality
- -----------
The contract air carrier transportation business is significantly affected
by seasonal factors. Typically, Airline Operations experience lower levels of
utilization during the first quarter as demand for passenger and cargo services
are lower relative to other times of the year. During the first quarter of
1991, the Company experienced unusually high demand due to operations in support
of Operation Desert Storm for the United States Air Mobility Command ("AMC").
Airline Operations generally experience higher levels of utilization in the
second and third quarters due to demand for commercial passenger service
including the annual Hadj pilgrimage. Fourth quarter utilization generally
depends upon the overall world economic climate, global trade patterns and the
resulting demand for air cargo services. Airline Operations experienced soft
demand and weak yields in worldwide cargo and passenger markets in the fourth
quarters of 1993, 1992, and 1991. The quarterly financial data is contained in
Note 19 "Unaudited Quarterly Results" of the Company's Notes to Consolidated
Financial Statements in Item 8.
Customers
- ---------
Significant customers of WorldCorp's Airline Operations are AMC, MAS, and
P.T. Garuda Indonesia ("Garuda"). The loss of any of these customers or a
substantial reduction in business from any of these sources, if not replaced,
would have a material adverse effect on the Company.
AMC has awarded contracts to World Airways since 1956. World Airways'
current annual contract with AMC will expire in September 1994. The minimum
contract amount for 1994 of $20.4 million is a 68% increase over 1993, and will
be augmented by further expansion business. Expansion business totalled 161% of
the minimum contract amount for 1993 and 53% for 1992. World Airways cannot
determine how any future cuts in military spending may affect future operations
with AMC.
World Airways has provided service to MAS since 1981, transporting
passengers for the annual Hadj pilgrimage as well as providing aircraft for
integration into MAS' scheduled passenger and cargo operations. The current MAS
contract, which was entered into in 1992, expires in 1996. In 1992, the
government of Malaysia instructed the Malaysian Hadj Board (which in turn
instructed MAS) to competitively rebid the contract for the 1993 Hadj. MAS rebid
the contract for the 1993 Hadj and World Airways was again selected to provide
1993 Hadj service to MAS. World Airways' management believes that its contract
with MAS through 1996 is a legally binding obligation. MHS Berhad, which
recently acquired 24.9% of World Airways, is in the process of acquiring 32% of
MAS from the Malaysian government.
World Airways has provided service to Garuda since 1988 under an annual
contract. World Airways will provide six aircraft for the 1994 Garuda Hadj
operations. In addition, World Airways has provided aircraft for Garuda's cargo
operations.
The information regarding major customers and foreign revenue is contained
in Note 15 "Segment Information" of the Company's Notes to Consolidated
Financial Statements in Item 8.
Information concerning classification of products within the air
transportation industry comprising 10% or more of the Company's consolidated
operating revenues is presented in the following table (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1993 1992 1991
------- ------ ------
<S> <C> <C> <C>
Contract Revenue - Passenger $171.6 $149.7 $196.7
Contract Revenue - Cargo 28.9 45.5 80.5
</TABLE>
5
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Competition
- -----------
The Company's Airline Operations compete to varying degrees for commercial
contract revenue with other air carriers and, indirectly, suppliers of surface
transportation. The Company believes that the basis for competition is price,
availability of scheduled passenger air transportation to a destination, speed
of delivery for cargo, and performance characteristics of aircraft. In
addition, other competitors could choose to enter contract flight services at
any time, thereby significantly increasing competition.
The allocation of military air transportation contracts by AMC is based
upon the number and type of aircraft a carrier, alone and/or through joint
venture, makes available to the Civil Reserve Air Fleet ("CRAF"). An increase
by other air carriers in their commitment of aircraft to the CRAF, a reduction
in the number of aircraft controlled by the Company, a reduction of AMC's air
transportation requirements or federal appropriations for such purpose, the
failure to renew joint venture arrangements, or a change in AMC's policy
concerning the method of awarding AMC contracts, among other things, could
adversely affect the amount of AMC contracts, if any, which are awarded in
future years.
US Order has developed a patented, automated ordering system with
residential and commercial applications. Residential services include banking,
grocery shopping, telephone services, mail-order catalog shopping, and take-out
food and flower ordering, among others. US Order's Scanfone(R) system is a
screen-based telephone which is currently the lowest cost means of providing
home shopping and bill paying. US Order believes that the basis for competition
is price, ease of use of equipment, state-of-the-art equipment, availability of
services, and customer acceptance and satisfaction. US Order is one of the
first companies to enter this market and believes that this provides a distinct
competitive advantage. However, other companies are attempting to enter the
home transaction services market using similar types of systems, principally
AT&T, Northern Telecom and Philips. As demonstrated by the number of potential
competitors, US Order expects competition for this service to increase in the
future.
Regulatory Matters
- ------------------
All certificated air carriers, including the Company's Airline Operations,
are subject to regulation by the Federal Aviation Administration (the "FAA")
under the Federal Aviation Act of 1958, as amended (collectively the "Federal
Aviation Act"). Generally, the FAA has regulatory jurisdiction over flight
operations, including equipment, personnel, maintenance, and other safety
matters. To assure compliance with its operational standards, the FAA requires
air carriers to obtain operating, airworthiness and other certificates, which
may be suspended or revoked for cause. The FAA also conducts safety audits and
has the power to impose fines and other sanctions for violations of airline
safety regulations. Under the Act, the Department of Transportation has
jurisdiction over certain aviation matters such as antitrust concerns (mergers,
acquisitions and unfair competitive practices), accounts and records, and
international routes and fares. Additionally, foreign governments assert
jurisdiction over air routes and fares to and from the United States, airport
operation rights and facilities access.
Airline Operations must comply with FAA noise standard regulations
promulgated under the Federal Aviation Act, as amended by the Noise Control Act
of 1972 and the Quiet Communities Act of 1978, and with Environmental Protection
Agency engine emissions regulations promulgated under the Clean Air Act of 1970,
as amended. In addition, certain of the operations of World Airways are subject
to laws and regulations relating to the disposal of hazardous wastes.
Certain airport operations have adopted local regulations which, among
other things, impose curfews and noise abatement regulations.
By virtue of the extensive use of radio and other communications facilities
in its Airline Operations, the Company is also subject to the Federal
Communications Act of 1934, as amended.
Labor Relations in the air transport industry are generally regulated under
the Federal Railway Labor Act, as amended, which vests certain regulatory powers
in the National Mediation Board with respect to disputes between airlines and
labor unions arising under collective bargaining agreements. Airlines
certificated prior to October 24, 1978, including the Company's Airline
Operations, are also subject to regulations issued by the Department of Labor
which implements the statutory preferential hiring rights granted by the Airline
Deregulation Act of 1978 to certain airline employees who have been furloughed
or terminated.
6
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The Company's Airline Operations are also subject to regulations of the
Department of Defense whenever flights are conducted for the military, as well
as other regulations which all U.S. corporations experience as a result of doing
business pursuant to state and federal legal requirements.
Employees
- ---------
At March 24, 1994, the Company and its subsidiaries employed approximately
675 persons. Airline Operations provide various employee benefits customary in
the air transportation industry. Approximately 368, or 54.5%, of the employees
are covered by collective bargaining agreements with various labor unions. The
following table presents additional information concerning Airline Operations'
labor agreements.
<TABLE>
<CAPTION>
Approximate Number Date Contract
of Active Employees Amendable
------------------- ---------------------
<S> <C> <C>
International Brotherhood of Teamsters
World Airways' Cockpit Crewmembers 188 July 30, 1992 /(1)/
World Airways' Flight Attendants 169 July 30, 1992 /(1)/
Transport Workers Union
World Airways' Dispatchers 11 June 30, 1993 /(1)/
</TABLE>
(1) As of March 24, 1994 the contract has not been amended.
On June 17, 1987, World Airways and the International Brotherhood of
Teamsters ("Teamsters") executed a five-year agreement on behalf of the World
Airways' cockpit crewmembers, which was ratified on July 30, 1987. On July 16,
1987, World Airways and the Teamsters executed a five-year agreement on behalf
of the World Airways' flight attendants, which was ratified on August 5, 1987.
Both contracts expired in July 1992 and since that time the cockpit crewmembers
and flight attendants have been employed under the terms of their prior contract
pursuant to the provisions of the Railway Labor Act. The Company is currently
in active negotiations with the Teamsters concerning renewal of the contracts
for the cockpit crewmembers and flight attendants. On December 11, 1992, World
Airways and the Teamsters jointly requested the assistance of a federal mediator
to facilitate negotiations between World Airways and its cockpit crewmembers.
The outcome of the negotiations cannot be determined at this time.
The agreements between World Airways and the Teamsters, on behalf of both
groups, incorporate letters of agreement which require World Airways to give
notice to the Teamsters of any acquisition or merger and would require World
Airways and any successor of World Airways, among other things, to provide
severance pay for employees furloughed within eighteen months of such
acquisition or merger when such furlough results from the merger. The
agreements also make provision for integration of seniority lists if World
Airways' operations are merged with another air carrier.
On February 21, 1990, World Airways and the Transport Workers Union
executed a three and one-half year contract on behalf of the World Airways'
Dispatchers, which was ratified on February 27, 1990. As of March 24, 1994 this
contract has not been amended.
7
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ITEM 2. PROPERTIES
- -------------------
Flight Equipment
At December 31, 1993, Airline Operations' aggregate operating fleet
consisted of nine leased aircraft as follows:
<TABLE>
<CAPTION>
Capacity Total(b)
----------------------------------- ------
Passenger/(a)/ Cargo (Tons)
------------------- --------------
<S> <C> <C> <C>
McDonnell Douglas MD-11 409 -- 4
McDonnell Douglas DC10-10F/(c)/ -- 70 1
McDonnell Douglas DC10-30CF 354 75 4
----
TOTAL 9
====
</TABLE>
Notes
-----
(a) Based on standard operating configurations. Other configurations are
occasionally used.
(b) The terms of the leases expire between 1994 and 2004.
(c) This aircraft is currently operated under an hourly utilization lease.
Ground Facilities
WorldCorp, World Airways, and US Order lease office space located near
Washington Dulles International Airport which houses its corporate headquarters
and substantially all of the administrative employees of the airline and
transaction processing operations.
Airline Operations lease additional office and warehouse space for their
principal ground facilities in Wilmington, Delaware; Philadelphia, Pennsylvania;
Kuala Lumpur, Malaysia; Yakota, Japan; and Frankfurt, Germany. Additional small
office and maintenance material storage space are leased at often frequented
airports to provide administrative and maintenance support for commercial and
military contracts.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
For a description of the Company's current legal proceedings, see Note 17,
"Commitments and Contingencies" of the Company's Notes to Consolidated Financial
Statements in Item 8.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 1993.
8
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK & RELATED SECURITY HOLDER
- -----------------------------------------------------------------------
MATTERS
-------
The Company's common stock is traded on the New York Stock Exchange. The
high and low closing sales prices of the Company's common stock, as reported on
the New York Stock Exchange for each quarter in the last two fiscal years, are
as follows:
<TABLE>
<CAPTION>
Common Stock
-------------------
High Low
---- ---
<S> <C> <C>
1993
Fourth Quarter $ 7 $ 3 3/8
Third Quarter 6 7/8 2 3/4
Second Quarter 5 7/8 4 5/8
First Quarter 6 5/8 4 5/8
1992
Fourth Quarter $ 7 1/2 $ 4 7/8
Third Quarter 8 5 7/8
Second Quarter 10 7/8 6 1/4
First Quarter 12 5/8 9 7/8
</TABLE>
In March 1992, the Company filed with the Securities and Exchange
Commission ("SEC") a registration statement on Form S-3 registering $60.0 to
$90.0 million of Convertible Subordinated Debentures due 2004 (the
"Debentures"). On May 26, 1992, $65.0 million of the Debentures were issued. The
Debentures are convertible into WorldCorp common stock at $11.06 per share and
bear an annual interest rate of 7%. Semi-annual interest payments are due on May
15 and November 15.
The Company did not declare any cash dividends in 1993 or 1992 and does not
plan to do so in the foreseeable future. The Indenture governing the Company's
Debentures and 13 7/8% Subordinated Notes due 1997 in certain circumstances may
restrict the Company from paying dividends or making other distributions on its
common stock.
The approximate number of shareholders of record at March 24, 1994 is
2,869.
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ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
WORLDCORP, INC. AND SUBSIDIARIES
Selected Financial Data
(in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
- ----------------------
Operating revenues $202,716 $200,410 $280,292 $310,897 $223,842
Operating expenses 225,524 237,265 266,863 293,632 201,690
Operating income (loss) (22,808) (36,855) 13,429 17,265 22,152
Earnings (loss) from continuing
operations before income taxes,
minority interest, extraordinary
item and change in accounting
principle (33,697) (44,692) 7,311 (9,686) 11,612
Earnings (loss) from continuing
operations before extraordinary item
and change in accounting principle (30,945) (42,891) 6,830 (9,911) 11,073
Extraordinary gain (loss) on acquisition
of debt, net -- (3,253) 3,535 6,056 --
Change in accounting principle -- (1,973) -- -- --
Net earnings (loss) (30,945) (48,117) 10,365 (3,855) 11,073
Primary earnings per share:
Continuing operations $ (2.12) $ (3.02) $ 0.46 $ (0.76) $ 0.75
Gain (loss) from acquisition of debt -- (0.23) 0.24 0.46 --
Change in accounting principle -- (0.14) -- -- --
Net earnings (loss) (2.12) (3.39) 0.70 (0.30) 0.75
Fully diluted earnings (loss) per share:
Continuing operations $ (2.12) (3.02) 0.42 (0.76) 0.69
Gain (loss) from acquisition of debt -- (0.23) 0.22 0.46 --
Change in accounting principle -- (0.14) -- -- --
Net earnings (loss) (2.12) (3.39) 0.64 (0.30) 0.69
FINANCIAL POSITION:
- -------------------
Cash and short-term investments $ 17,584 $ 14,769 $ 29,147 $ 30,041 $ 36,090
Total assets 97,119 93,346 138,966 197,000 200,250
Long-term obligations including
current maturities 129,049 104,192 94,167 154,513 178,718
Common stockholders' deficit (101,073) (76,362) (30,363) (46,635) (43,995)
Dividends -- -- -- -- --
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations presented below relates to the operations of WorldCorp, Inc. ("the
Company") as reflected in its consolidated financial statements. These
statements primarily include the accounts of the contract flight operations of
World Airways, Inc. ("World Airways") and Key Airlines, Incorporated ("KeyAir")
until October 23, 1992 when WorldCorp sold 100% of KeyAir. WorldCorp also has an
ownership interest in US Order, Inc. ("US Order"), a developmental stage
company, which has developed a patented order and payment system ("ScanFone(R)")
which facilitates the purchase of goods and services from the home. On July 1,
1992, the Company increased its ownership to 51%. In December 1993, US Order
completed a $12.0 million private equity placement. As a result of this
transaction, WorldCorp currently owns 46% of the voting stock of US Order.
WorldCorp has an option through December 15, 1994, to purchase additional shares
of the capital stock of US Order for consideration equal to $5.0 million, which
if exercised, would increase its voting ownership percentage to 79%. US
Order's results of operations are consolidated in the accompanying financial
statements for the period subsequent to July 1, 1992.
GENERAL
In 1993, WorldCorp operated in two business areas: air transportation
services and transaction processing. WorldCorp's air transportation subsidiary,
World Airways, is a leading worldwide provider of air transportation for
commercial and government customers. WorldCorp's transaction processing
business consists of its 46% ownership of the voting stock of US Order and 100%
ownership of WorldGames. US Order develops and sells patented, automated
ordering systems with residential and commercial applications. WorldGames is
the sole licensee of ScanFone(R) technology for applications in the gaming
industry.
World Airways was a wholly-owned subsidiary of the Company in 1993. In
February 1994, the Company sold 24.9% of its ownership to MHS Berhad, a
Malaysian aviation company (see "Liquidity and Capital Resources").
AIR TRANSPORTATION SERVICES
- ---------------------------
World Airways is a contract air carrier that charges customers based on a
block hour basis rather than a per seat or per pound basis as do scheduled
passenger carriers or overnight express carriers. A "block hour" is defined as
the elapsed time computed from the moment the aircraft moves at its point of
origin to the time it comes to rest at its destination. Fluctuations in flight
revenues are not necessarily indicative of true growth because of shifts in the
mix between full service contracts and basic contracts. Under the terms of full
service contracts, World Airways is responsible for all costs associated with
operating these contracts and receives a higher rate per hour. Under the terms
of basic contracts, World Airways provides only certain services associated with
the contract including aircraft, crews, insurance, and maintenance. World
Airways typically charges a lower rate per hour for basic contracts since the
customer is responsible for other operating costs. For this reason, it is
important to measure pure growth through block hours flown rather than actual
revenues earned. Typically, U.S. military contracts are full service contracts
where the rate paid is set annually and consists of all flying costs, including
fuel and ground handling of the aircraft and cargo. World Airways, as a matter
of policy, includes fuel cost adjustment mechanisms in full service contracts,
thus minimizing the risk of fuel price volatility to World Airways.
Customers
- ---------
World Airways' business relies heavily on its U.S. Air Mobility Command
("AMC"), Malaysian Airline System Berhad ("MAS") and P.T. Garuda Indonesia
("Garuda") contracts, which provided 24%, 17% and 21%, respectively, of
consolidated revenues in 1993, and 19%, 16%, and 16%, respectively, of total
block hours. During 1992, AMC, MAS, and Garuda contracts provided 41%, 24%, and
13%, respectively, of consolidated revenues, and 31%, 29%, and 11%,
respectively, of total block hours. The loss of any of these contracts or a
substantial reduction in business from any of these contracts, if not replaced,
would have a material adverse effect on the Company's revenues and financial
condition.
AMC has awarded contracts to World Airways since 1956. World Airways' current
annual contract with AMC will expire in September 1994. The minimum contract
amount for 1994 of $20.4 million is a 68% increase over
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<PAGE>
1993, and will be augmented by further expansion business. Expansion business
totalled 161% of the minimum contract amount for 1993 and 53% for 1992. World
Airways cannot determine how any future cuts in military spending may affect
future operations with AMC.
World Airways has provided service to MAS since 1981, transporting passengers
for the annual Hadj pilgrimage as well as providing aircraft for integration
into MAS' scheduled passenger and cargo operations. The current MAS contract,
which was entered into in 1992, expires in 1996. In 1992, the government of
Malaysia instructed the Malaysian Hadj Board (which in turn instructed MAS) to
competitively rebid the contract for the 1993 Hadj. MAS rebid the contract for
the 1993 Hadj and World Airways was again selected to provide 1993 Hadj service
to MAS. World Airways' management believes that its contract with MAS through
1996 is a legally binding obligation. MHS Berhad, which recently acquired 24.9%
of World Airways, is in the process of acquiring 32% of MAS from the Malaysian
government.
World Airways has provided service to Garuda since 1988 under an annual
contract. World Airways will provide six aircraft for the 1994 Garuda Hadj
operations. In addition, World Airways has provided aircraft for Garuda's cargo
operations.
TRANSACTION PROCESSING SERVICES
- -------------------------------
US Order is a leading provider of interactive transaction services to the home
and the only company with a screen-based telephone that is fully operational
with a broad menu of available services. Transaction services are currently
offered via screen-based telephones, although the Company expects to offer its
bill pay services via personal computers and touch tone telephones using audio
response units in 1994. Longer term, the Company plans to develop the
capability to support services offered via interactive cable, video games
control units, and personal digital assistants. Services currently offered by
US Order include bank account inquiry, funds transfer, bill payment, catalog
shopping, home delivery of groceries and restaurant meals, and enhanced
telephone services. Future services are expected to encompass a greatly
expanded set of applications. The Company generates revenues through the
monthly fees charged to customers for its screen-based telephone ("ScanFone(R)")
and transaction services used, as well as the fees paid to the Company by
service providers.
RESULTS OF OPERATIONS
1993 COMPARED WITH 1992
- -----------------------
Operating Revenue
- -----------------
In 1993, operating revenues increased $2.3 million (1%) to $202.7 million
primarily due to an increase in block hours flown. Block hours increased five
percent to 23,462 in 1993 from 22,263 in 1992. Due to peak airlift requirements
of World Airways' customers for the 1992 Hadj pilgrimage, certain flights were
subcontracted to other carriers which resulted in $11.5 million of revenue in
1992 with no corresponding block hours flown. This was not necessary in 1993.
This increase was partially offset by a five percent decrease in revenue per
block hour to $8,589 in 1993 from $8,996 in 1992. Block hours under full
service contracts were 85% of total block hours in 1993 and 84% in 1992.
Aircraft capacity, the number of days that the Company's aircraft are
available for service (including days in maintenance), increased to 8.8
available aircraft per day in 1993 from 7.2 in 1992. This increase was offset
by a 13% decrease in daily aircraft utilization to 7.3 hours from 8.4 hours.
Aircraft utilization is measured by the total block hours that the Company's
aircraft were in use divided by the number of days that the aircraft were
available for service (including days in maintenance). Included in other
revenues in 1992 is $4.1 million related to settlements of contract claims from
AMC.
Operating Expenses
- ------------------
Flight costs increased $10.6 million (20%) due to costs associated with the
integration of MD-11 aircraft (see "Capital Plans"). The Company maintained the
maximum number of crews available during the first six months of 1993 in order
to support intensive crewmember training for the MD-11 aircraft while
maintaining the previous year's
12
<PAGE>
level of flight operations. This resulted in higher crew costs than normal
given the low level of utilization during the first quarter of 1993.
Maintenance costs decreased by $5.8 million (17%) due to lower maintenance
costs for new MD-11 aircraft and lower engine overhaul repair expense for the
DC10-30 fleet. Maintenance cost per block hour was $1,222 in 1993 compared with
$1,548 in 1992. The reduced maintenance costs are due, in part, to guarantees
and warranties received from the engine and aircraft manufacturers of the MD-11
aircraft. Because the MD-11 is a relatively new aircraft, cost experience on
the maintenance of the aircraft is unavailable. Therefore, the Company is, in
part, relying on manufacturers' guidelines to estimate future maintenance costs
on the MD-11 aircraft.
Aircraft costs increased by $17.1 million (49%) in 1993. This increase was
primarily due to a $20.5 million increase in rent cost associated with the
delivery of four MD-11 aircraft during March and April 1993. In July 1993, two
DC10-30 aircraft were returned to their lessors, resulting in a $1.5 million
early termination payment of which $1.1 million was expensed in 1993. Partially
offsetting these increases was a reduction of $5.4 million in rent costs
associated with the return of the two DC10 aircraft and short-term aircraft
leases not required in 1993.
Fuel costs increased by $2.9 million (8%) due to the increase in block hours
flown and a small increase in fuel prices paid per gallon.
Flight operations subcontracted to other carriers decreased by $10.3 million
(89%). In 1992, World Airways subcontracted a portion of its AMC contract award
in order to redeploy one of its aircraft for commercial passenger flying. This
was not necessary in 1993.
Depreciation and amortization increased $0.4 million (7%) due to the purchase
of spare parts for MD-11 aircraft integrated into the fleet in 1993.
Selling and administrative costs increased $2.2 million (12%) primarily as a
result of a $0.9 million settlement associated with the return of a DC10-30
aircraft, increased legal fees, and the formation of World Flight Crew Services,
a new subsidiary of WorldCorp.
Loss on Sale of Key Airlines
- ----------------------------
On October 23, 1992, WorldCorp sold 100% of the outstanding common stock of
KeyAir. Loss on sale of KeyAir in 1993 primarily consists of the write-off of a
$0.3 million uncollateralized line of credit and $0.3 million drawdown of a
letter of credit.
Transaction Processing-US Order
- -------------------------------
On July 1, 1992, the Company purchased an incremental 6% of the preferred
stock of US Order for $1.0 million which increased the Company's ownership in US
Order to 51%. Accordingly, US Order's results of operations are consolidated in
the accompanying financial statements beginning on July 1, 1992. In December
1993, US Order completed a $12.0 million private equity placement. Following
this transaction, WorldCorp owns 46% of the voting stock of US Order. WorldCorp
has an option through December 15, 1994 to purchase additional shares of the
voting stock of US Order for consideration equal to $5.0 million, which would
increase its ownership of the voting stock to 79%. The accompanying statements
of operations include 59% of the results of operations of US Order beginning
December 1993. This 59% is based on liquidation preferences. In 1993, the
Company recorded $9.2 million of losses (net of minority interest) relating to
US Order, compared to $2.4 million of losses in 1992. This $6.8 million
increase resulted primarily from an increase in overhead costs associated with
expanded research and development and the writedown of an older generation of
terminal components.
Non-Operating Items
- -------------------
Interest income decreased as a result of lower investment balances and lower
interest rates in 1993. Interest expense decreased $0.1 million in 1993 as a
result of partially replacing the 13 7/8% Subordinated Notes ("the Notes") with
the 7% convertible debentures (the "Debentures") and lower debt balances.
Offsetting these decreases was interest associated with MD-11 rotables
financing, aircraft rent deferrals, and a bank line of credit.
13
<PAGE>
1992 COMPARED WITH 1991
- -----------------------
Operating Revenue
- -----------------
On October 23, 1992, WorldCorp sold 100% of the outstanding common shares of
its wholly-owned subsidiary, KeyAir, to Savannah Aviation Group ("SAG").
Accordingly, KeyAir's net loss for the period January 1, 1992 through October
23, 1992 is reflected in the accompanying financial statements under the caption
"Loss from operation of Key Airlines". The Consolidated Statement of Operations
for 1991 has not been reclassified to conform with the 1992 presentation. The
following consolidated financial information presents 1991 results of operations
of KeyAir in a manner consistent with the 1992 presentation.
<TABLE>
<CAPTION>
(Unaudited)
Year ended December 31
------------------------
(Pro Forma)
1992 1991
---------- ------------
<S> <C> <C>
Operating revenues
Contract flight operations $183,705 $223,735
Flight operations subcontracted
to other carriers 11,499 1,253
Other 5,170 1,687
Transaction processing-US Order 36 --
-------- --------
Total operating revenues 200,410 226,675
-------- --------
Operating expenses
Flight 52,302 55,254
Maintenance 34,458 45,496
Aircraft costs 35,135 34,731
Fuel 37,811 51,743
Flight operations subcontracted
to other carriers 11,612 1,115
Depreciation and amortization 5,872 4,924
Selling and administrative 18,725 20,161
Loss (income) from operation of Key Airlines 6,041 (178)
Loss on sale of Key Airlines 31,416 --
Transaction processing-US Order 3,893 --
-------- --------
Total operating expenses 237,265 213,246
-------- --------
Operating income (loss) $(36,855) $ 13,429
-------- --------
</TABLE>
This financial information is presented to facilitate a comparative
analysis of the ongoing operations of the Company and is used as the basis for
Management's Discussion and Analysis of Financial Condition and Results of
Operations presented below.
In 1992, revenue decreased $26.3 million (12%) to $200.4 million. Block
hours decreased 13% from 25,570 in 1991 to 22,263 in 1992. Due to peak airlift
requirements of World Airways' customers for the 1992 Hadj pilgrimage, certain
flights were subcontracted to other carriers which resulted in $11.5 million of
revenue in 1992 with no corresponding block hours flown. Excluding this
revenue, operating revenue decreased $36.5 million. This decrease is due to a
shift from military flying in support of Operation Desert Storm in 1991 to
commercial passenger flying at lower revenue rates in 1992. Revenue also
decreased as a result of a shift to more basic contracts in 1992. Full service
block hours represented 84% of total DC10 block hours in 1992 compared with 92%
of DC10 block hours in 1991. In addition, revenue decreased as a result of
lower block hour rates received for full service contracts in 1992. Included in
other revenues in 1992 is $4.1 million related to settlements of contract claims
from the AMC.
World Airways' block hour decrease is primarily due to a decrease in
aircraft utilization. Aircraft utilization is measured by the total block hours
that the Company's aircraft were in use divided by the number of days that the
14
<PAGE>
aircraft were available for service including days in maintenance. World
Airways' aircraft utilization decreased 13% from 9.6 hours per day in 1991 to
8.4 hours per day in 1992.
World Airways' DC10 aircraft capacity remained essentially the same in 1992
as compared with 1991. Aircraft capacity is defined as the number of days that
the Company's aircraft are available for service including days in maintenance.
In 1991, World Airways operated four DC10-10 aircraft under various lease terms
and one DC10-30 aircraft under a short-term lease. The four DC10-10 aircraft
were returned to their lessors at various times in 1991 and 1992. These
aircraft were replaced with two DC10-30 passenger aircraft integrated into World
Airways' fleet in April 1992. Also, two DC10-30 passenger aircraft were
operated under short-term leases beginning in May 1992 to meet peak airlift
requirements of World Airways' customers for the 1992 Hadj pilgrimage. These
factors combined to create a 1% decrease in DC10 aircraft capacity in 1992.
Operating Expenses
- ------------------
Flight costs decreased $3.0 million. This decrease is due to lower
variable costs associated with the 13% decrease in DC10 block hours flown and a
shift to more basic contracts in 1992.
Maintenance costs decreased $11.0 million. This decrease is primarily due
to ongoing cost control efforts (specifically, material, component repair costs
and parts rental charges), and the return to their lessors of four DC10-10
aircraft which, historically, have been more costly to maintain. World Airways
maintenance costs also decreased as a result of the 13% decrease in DC10 block
hours flown. Total World Airways maintenance expense was $1,548 per block hour
in 1992 compared to $1,779 per block hour in 1991.
Aircraft costs increased $0.4 million. DC10 aircraft rent decreased $0.3
million primarily due to the replacement of four DC10-10 and one DC10-30
aircraft with four DC10-30 aircraft. Aircraft hull insurance increased $0.7
million as a result of increases in insured values due to replacing DC10-10
aircraft with DC10-30 aircraft and increases in insurance rates charged.
Depreciation expense increased $0.9 million primarily as a result of adding
leasehold improvements and rotables relating to two DC10-30 aircraft integrated
into World Airways' fleet in April 1992.
Fuel costs decreased $13.9 million as a result of the 13% decrease in DC10
block hours flown and the decrease in fuel costs since the end of the Persian
Gulf War.
Due to peak airlift requirements of World Airways' customers for the 1992
Hadj pilgrimage, certain other flights were subcontracted to other carriers
which resulted in expenses of $11.6 million.
Selling and administrative costs decreased $1.4 million primarily due to
the World Airways' Profit Sharing Bonus Plan (the "Plan") expense being included
in flight costs in 1992 and included in selling and administrative costs in
1991. Through 1991, payments under the Plan were first made to individuals who
were entitled to repayment of wage concessions from December 1, 1982 through
January 31, 1985. With the payment of the 1991 Plan expense amount, all wage
concession amounts have been repaid. Beginning in 1992, amounts expensed
pursuant to the Plan are for profit sharing and are paid to current employees,
primarily crewmembers.
Loss (Income) From Operation of Key Airlines
- --------------------------------------------
Operating results of Key Airlines decreased to a loss of $6.0 million in
1992 from income of $0.2 million in 1991. This is partially due to ten months
of activity in 1992 compared with twelve months of activity in 1991. This $6.2
million decrease is primarily attributable to a 10% decrease in block hours
flown combined with a 20% decrease in revenue yield per block hour. KeyAir's
revenue decreased $15.0 million in 1992. In 1991, KeyAir's customers consisted
of tour operators and the U.S. military which typically guaranteed payment for
blocks of seats or for the full aircraft on a point-to-point basis. In 1992,
KeyAir operated its Caribbean Connection service based on a hub and spoke system
and sold tickets to individual passengers directly, through travel agencies, or
through tour operators. As a result, in 1992, KeyAir experienced an overall
increase in expenses directly attributable to this new type of flying. For
example, expenses associated with KeyAir's headquarters in Savannah, Georgia
increased, and advertising expense, credit card and bank fees, travel agent
commissions, and reservations systems costs all increased in 1992 or were not
incurred in 1991.
15
<PAGE>
Loss on Sale of Key Airlines
- ----------------------------
Loss on sale of Key Airlines consists principally of the non-cash write-
down of the B727 aircraft and related rotables to estimated net realizable
values and the write-off of the remaining goodwill associated with the purchase
of KeyAir in 1987.
Transaction Processing - US Order
- ---------------------------------
On July 1, 1992, the Company purchased an incremental 6% of the preferred
stock of US Order, a transaction processing company, for $1.0 million which
increased the Company's ownership in US Order to 51%. Accordingly, US Order's
results of operations are consolidated in the accompanying financial statements
for the period subsequent to July 1, 1992. For the six months ended December
31, 1992, US Order incurred operating costs of $4.0 million. To date, US Order
has generated limited revenue through the rental of ScanFones(R) and transaction
processing fees.
Non-Operating Items
- -------------------
Interest expense decreased primarily as a result of the redemption of $48.8
million of 13 7/8% Subordinated Notes (the "Notes") partially offset by the
issuance of $65.0 million of 7% Convertible Debentures (the "Debentures") in May
1992. Interest expense also decreased as a result of the settlement, in January
1992, of World Airways' litigation with the State of California Franchise Tax
Board, decreases in variable interest rates, the payoff of World Airways' short-
term line of credit for most of the year, and the paydown of B727-100 aircraft
debt. Interest income decreased as a result of lower investment balances held
in 1992 and lower interest rates. In 1992, the gain on investments consists
primarily of a $1.1 million gain on sales of bonds and the termination of an
interest rate swap agreement, reduced by a $0.9 million loss from WorldCorp's
equity investment in US Order. During the first six months of 1992, WorldCorp's
investment in US Order was recorded using the equity method of accounting.
Accordingly, WorldCorp's share of US Order's losses were recorded as a loss on
investments. In 1991, loss on investments primarily result from the sale of
high-yield securities held in the Company's investment portfolio. In 1992,
$48.8 million of the face value of the Notes were repurchased at a loss of $3.3
million. In 1991, $10.3 million of the Notes were repurchased at an average of
60% of face value resulting in a gain of $3.5 million.
During the fourth quarter of 1991, World Airways settled litigation with
the State of California Franchise Tax Board (the "Board") concerning assessments
of deficiencies in state franchise taxes for the years 1973-75 and 1978. The
Board had asserted a total tax deficiency of approximately $2.4 million and
accrued interest of approximately $5.9 million. World Airways settled this case
with the Board and reversed a previously recorded liability which resulted in a
non-operating gain of $5.5 million, net of legal expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's air transportation subsidiary operates in a very challenging
business environment. The combination of a generally weak economy, reduced
military spending, and the depressed state of the airline industry and the
economy has adversely affected the Company's operating performance. The Company
is highly leveraged primarily due to losses sustained by World Airways'
scheduled operations between 1979 and 1986, debt restructurings in 1984 and
1987, and losses the Company incurred in 1990, 1992, and 1993. The Company has
historically financed its working capital and capital expenditure requirements
out of cash flow from operating activities, secured borrowings, and other
financings from banks and other lenders.
Cash Flows from Operating Activities
- ------------------------------------
During 1993, operating activities used $8.6 million compared to $17.5
million in the prior year. Excluding the non-cash loss on the sale of KeyAir in
1992, losses in 1993 were $14.2 million higher than 1992. The increased losses
were offset by the deferral of certain aircraft rental payments, an increase in
accounts payable and a decrease in accounts receivable. Accounts receivable
decreased due to lower levels of military flying in the fourth quarter of 1993.
16
<PAGE>
Cash Flows from Investing Activities
- ------------------------------------
Cash flows from investing activities used $14.6 million in 1993 as compared
to $4.4 million in 1992 resulting primarily from the purchase of spare parts for
the MD-11 aircraft in 1993, partially offset by proceeds received from the
disposal of DC10 and B727 rotable spare parts.
Cash Flows from Financing Activities
- ------------------------------------
In 1993, financing activities provided $26.4 million compared to providing
$12.9 million in the prior year. In 1992, the Company received $62.9 million
from the sale of the Debentures and used $47.1 million of these proceeds to
repurchase the 13 7/8% Notes. In 1993, the Company financed $19.1 million of
spare parts related to the integration of the MD-11 aircraft, and entered into a
$20.0 million credit facility. The Company made debt payments of approximately
$28.7 million in 1993 compared to $10.3 million in 1992. This $18.4 million
increase primarily relates to the repayment of the Company's two bank lines of
credit. The US Order private placement (see "Financing Developments") and the
exercise of options and warrants of the Company provided $8.4 million in 1993.
Capital Plans
- -------------
World Airways plans to exit higher cost DC10 aircraft and ultimately
standardize its fleet around the MD-11 aircraft. In October 1992 and January
1993, World Airways signed a series of agreements to lease seven new MD-11
aircraft for initial lease terms of two to five years. As of March 25, 1994,
World Airways has taken delivery of four passenger MD-11 aircraft and is
scheduled to take delivery of one freighter MD-11 in April 1994, and two
convertible MD-11s in 1995. Two of the passenger MD-11 aircraft replaced the
two passenger DC10-30 aircraft which were integrated into World Airways' fleet
in April 1992 and returned to McDonnell Douglas in July 1993. The delivery of
the convertible MD-11s is expected to occur approximately six months after the
end of the lease in 1994 of three DC10-30 convertibles.
World Airways made $20.7 million of capital expenditures and cash deposits
for MD-11 integration in 1993, of which $19.1 was financed. World Airways
estimates that its required capital expenditures for MD-11 integration will be
approximately $7.3 million in 1994 and $9.8 million in 1995. As of December 31,
1993, the Company holds approximately $14.7 million of aircraft spare parts and
transaction processing terminals currently available for sale. The Company
anticipates proceeds from the sale of these assets to be approximately $7.5
million in 1994.
US Order's working capital and capital expenditure requirements for 1994
are expected to be approximately $8.0 million. As of December 31, 1993,
WorldCorp had invested $18.1 million of funds in US Order. US Order is
currently seeking a private equity placement for up to $8.0 million with
financial and strategic partners. However, there can be no assurance that such
financing will be obtained. WorldCorp does not plan to provide additional
financing to US Order in 1994.
On December 7, 1993, World Airways entered into a $20.0 million revolving
line of credit borrowing arrangement. This credit facility is collateralized by
aircraft spare parts and certain receivables. $4.4 million of these proceeds
were used to repay the outstanding balance on the $5.0 million revolving line of
credit borrowing arrangement which expired in 1993.
Financing Developments
- ----------------------
In its most recent Form 10-Q filing, the Company stated management would
take several steps to add to its cash reserves. As of this date, the Company has
closed certain transactions and executed agreements covering other transactions
which, in aggregate, have significantly increased the cash reserves of
WorldCorp, World Airways, and US Order.
First, on October 30, 1993, WorldCorp, Inc., World Airways, Inc., and MHS
Berhad entered into a Stock Purchase Agreement (the "Stock Purchase Agreement")
pursuant to which MHS, subject to satisfactory completion of its due diligence
investigations, agreed to purchase 24.9% of World Airways' common stock for
$27.4 million in cash. Under this Agreement, World Airways would receive upon
closing (the "Closing") $12.4 million to fund its working capital requirements.
The remaining $15.0 million (less a $2.7 million deposit received in December
17
<PAGE>
1993) would be paid to WorldCorp to add to its cash reserves. At the time of
the signing of the Stock Purchase Agreement, World Airways was a wholly-owned
subsidiary of WorldCorp. On February 28, 1994, WorldCorp, World Airways, and
MHS concluded the transaction according to the terms described above. As a
result of this transaction, WorldCorp will recognize a gain of approximately
$27.0 million in the first quarter of 1994.
Second, World Airways finalized an agreement with a financial institution
for a $20.0 million credit facility collateralized by certain receivables and
spare parts. This agreement contains certain covenants related to World
Airways' financial condition and operating results. Approximately $10.8 million
of the proceeds from this transaction were used to retire existing obligations.
The balance was added to cash reserves. As of March 24, 1994, $0.8 million of
the $8.0 million portion of the credit facility collateralized by receivables
was utilized.
Third, on November 8, 1993, World Airways completed negotiations for $14.7
million of lease payment deferrals and related financings for eight of its nine
aircraft in 1993. The ninth aircraft was returned to the lessor in October
1993. Additionally, World Airways received a permanent reduction in the lease
rate for one DC10 aircraft, the only DC10 that will remain on long-term lease
after September 1994. In 1993, $6.6 million of the deferrals were repaid. The
remaining deferrals are scheduled to be repaid beginning in the second quarter
of 1994, and bear interest at rates ranging from 7% to 12%.
Fourth, in December 1993, US Order completed a private equity placement
with financial and strategic partners for $12.0 million, of which WorldCorp
invested $1.7 million. As a result of this transaction, WorldCorp owns 46% of
the voting stock of US Order. WorldCorp has an option through December 15,
1994, to purchase additional shares of capital stock of US Order for
consideration equal to $5.0 million, which if exercised, would increase its
ownership percentage of the voting stock to 79%. US Order is currently seeking
a private equity placement for up to $8.0 million with other financial and
strategic partners.
Fifth, in October and November 1993, the Company received $2.6 million of
new equity investment through a series of warrant exercises by Ganz Capital
Management.
Finally, WorldCorp is seeking to place privately two securities of US Order
that it currently holds: a $3.5 million increasing rate note with warrants in
US Order, and $7.5 million of non-convertible preferred stock with warrants in
US Order. No assurances can be made that the Company will be successful in
placing these securities.
The Company believes that the combination of the financings consummated to
date and the operating and additional financing plans described above will be
sufficient to allow the Company to meet its operating and capital requirements
during 1994.
BUSINESS TRENDS
The Company is highly leveraged primarily due to losses sustained by World
Airways' scheduled operations between 1979 and 1986, debt restructurings in 1984
and 1987 and losses the Company incurred in 1990, 1992, and 1993. In addition,
the Company incurred substantial debt and operating lease commitments during
1993 in connection with acquiring MD-11 aircraft and related spare parts. As a
result, in the second half of 1993, the Company took several steps to improve
its liquidity, including: negotiating rent deferrals on eight aircraft and the
early return to the lessor of another aircraft, arranging a $20.0 million
accounts receivable and aircraft parts financing, and consummating the sale of
24.9% of World Airways.
The Company's air transportation business is highly seasonal. Typically,
World Airways experiences reduced demand during the first quarter for passenger
and cargo services relative to other times of the year. World Airways generally
experiences stronger results in the second and third quarters due to demand for
commercial passenger services including the annual Hadj pilgrimage. Fourth
quarter results depend upon the overall world economic climate and global trade
patterns.
Since the end of the Persian Gulf War, soft demand and weakening yields
have adversely effected worldwide cargo and passenger markets. In management's
view, block hours flown are a critical indicator of the airline's profitability.
In order for World Airways to achieve positive operating results and meet its
requirements under certain financing agreements, it will be necessary to
increase block hours flown from 1993 levels. In response, World
18
<PAGE>
Airways has significantly increased its worldwide sales and marketing presence
by 1) selling 24.9% of its equity to MHS Berhad solidifying a marketing alliance
with a leading aviation company in Malaysia, 2) recruiting three active outside
board members with experience in worldwide aviation and travel services, and 3)
increasing its internal sales and marketing staff from two to seven executives.
These actions were taken with the objective of increasing World Airways' flying
levels. The fourth quarter of 1993 was the first recent quarter where flying
level trends turned positive, increasing by 40% over the prior year's fourth
quarter. Also, in the first quarter of 1994, management expects flying levels
to be up more than 20% compared to 1993 levels. Management believes that
positive trends will continue for the second and third quarters. Fourth quarter
1994 flying levels will largely depend upon global trade demand for cargo and
the placement of at least two MD-11 passenger aircraft under longer-term
contracts.
On February 28, 1994, WorldCorp, World Airways, and MHS concluded the 24.9%
sale of World Airways' common stock for $27.4 million in cash. WorldCorp will
recognize a gain of approximately $27.0 million from this transaction in the
first quarter of 1994. The Company has an objective to replicate a similar
investment with strategic partners in Latin America.
US Order is a provider of interactive transaction processing services to
the home and the only company with a screen-based telephone that is fully
operational with a broad menu of available services. US Order, however, is a
development stage company and expects to continue to incur losses in 1994 and
has significant working capital and capital expenditure requirements for 1994
(see "Liquidity and Capital Resources" and "Capital Plans").
US Order's Regional Bell Operating Company (RBOC) strategy has evolved from
a joint marketing relationship to a value-added reseller relationship for the
RBOC's enhanced caller services such as Caller ID. This evolution has taken
place as a result of the RBOC's increased focus on video and cable television
interactivity. In particular the video focus by Bell Atlantic led to the
termination of the Bell Atlantic joint marketing agreement with US Order in
March 1994 as Bell Atlantic consolidated its efforts in the video arena.
Because screen-based telephones greatly improve the ease of use of enhanced
telephone services such as Caller ID, strategic relationships with RBOCs are
developing along this track.
US Order's product offering to financial institutions have expanded in
1994. In addition to pursuing joint marketing alliances, US Order will also
provide bill payment services to financial institutions through existing Audio
Response Units, commonly known as touch tone or telephone banking services. The
company is currently negotiating agreements with several major banks to offer
these services in 1994. Later in 1994, US Order expects to offer similar "back
end" bill payment support via personal computers.
US Order is also significantly expanding its direct sales of screen-based
telephones and interactive services to consumers. In October 1993, US Order
announced its next generation screen-based telephone, PhonePlus /TM/, which it
expects to have available to consumers in the third quarter of 1994. As in the
cellular telephone industry, the price of the telephone will be related to the
length and type of service contract the consumer chooses.
OTHER MATTERS
On August 11, 1992, WorldCorp, World Airways, and certain other commercial
paper customers of Washington Bancorporation ("WBC") were served with a
complaint by WBC as debtor-in-possession by and through the Committee of
Unsecured Creditors of WBC (the "Committee"). The complaint arises from
investment proceeds totaling $6.8 million received by WorldCorp and World
Airways from WBC in May 1990 in connection with the maturity of WBC commercial
paper. The Committee seeks to recover this amount on the grounds that these
payments constituted voidable preferences and/or fraudulent conveyances under
the Federal Bankruptcy Code and under applicable state law. On June 9, 1993,
the Company filed a motion to dismiss this litigation and intends to vigorously
contest the claim. No assurances can be given of the eventual outcome of this
litigation.
World Airways' cockpit and flight attendant crewmembers are covered by
collective bargaining agreements which expired in July 1992. World Airways is
currently in negotiations with the International Brotherhood of Teamsters
("Teamsters") to develop new agreements for cockpit and flight attendant
crewmembers. World Airways and the Teamsters jointly requested the assistance
of a federal mediator to facilitate negotiations between World Airways and its
cockpit crewmembers. The outcome of the negotiations cannot be determined at
this time.
19
<PAGE>
WorldCorp has never paid any cash dividends and does not plan to do so in
the foreseeable future. Both the 13 7/8% Subordinated Notes Indenture and the
indenture pursuant to which the Debentures were issued (the "Indentures")
restrict the Company's ability to pay dividends or make other distributions on
its common stock. In addition, the Indentures originally restricted the ability
of World Airways to pay dividends other than to the Company. In 1994, however,
the Company received approval from the holders of the Indentures to allow World
Airways to pay dividends to parties other than the Company.
The $20 million credit facility also contains restrictions on World
Airways' ability to pay dividends. Under this agreement, World Airways cannot
declare, pay, or make any dividend or distribution in excess of the lesser of
$4.5 million or 50% of net income for the previous six months. In addition,
World Airways must have a cash balance of at least $7.5 million immediately
after giving effect to such dividend.
All of the funds from operations are generated by the Company's
subsidiaries. The ability of the Company and its subsidiaries to pay principal
and interest on their respective short and long-term obligations is
substantially dependent upon the payment to the Company of dividends, interest
or other charges by its subsidiaries and upon funds generated by the operations
of the subsidiaries.
As of December 31, 1993, the Company had net operating loss carryforwards,
investment tax credit carryforwards, and alternative minimum tax credit
carryforwards of $137.2 million, $9.6 million, and $2.2 million, respectively
(the "Carryforwards"). The availability of net operating loss and tax credit
carryforwards to reduce the Company's future federal income tax liability is
subject to limitations under the Internal Revenue Code of 1986, as amended (the
"Code"). Generally, these limitations restrict availability of net operating
loss and tax credit carryforwards upon an ownership change. In August 1991, the
Company experienced an ownership change, and the use of $72.6 million of net
operating loss carryforwards available to the Company from losses generated
prior to the ownership change, plus the tax credit carryforwards described
above, are limited to approximately $6.3 million annually (the "Limitation").
As a result of the transaction with MHS in February 1994, however, the
Carryforwards will be split into two components: those generated solely by
World Airways, and those generated by the remaining entities of the controlled
group. As a result, approximately $84.8 million of the consolidated net
operating loss carryforward will no longer be available to offset federal
taxable income reflected on future consolidated tax returns. Instead, the $84.8
million will be available to World Airways on a separate company basis (subject
to the Limitation). World Airways will also retain sole use of the $9.6 million
investment tax credit carryforward and the $2.2 million alternative minimum tax
credit carryforward to reduce its future federal income tax liability, subject
to limitations under the Code.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------
1993 1992
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents, including $3,171
restricted cash in 1993 and $542 in 1992 (Note 17) $16,916 $13,759
Restricted short-term investments (Notes 5 and 17) 668 1,010
Trade accounts receivable, less allowance for doubtful
accounts of $311 in 1993 and $15 in 1992 (Note 9) 8,476 9,263
Other receivables (Note 5) 5,109 9,022
Prepaid expenses and other current assets (Note 16) 3,476 4,119
Assets held for sale (Notes 3 and 7) 6,000 --
------- -------
Total current assets 40,645 37,173
------- -------
ASSETS HELD FOR SALE (Notes 3 and 7) 8,660 7,326
EQUIPMENT AND PROPERTY (Notes 8 and 10)
Flight and other equipment 35,547 48,958
Equipment under capital leases 13,675 3,543
------- -------
49,222 52,501
Less accumulated depreciation and amortization 16,171 20,159
------- -------
Net equipment and property 33,051 32,342
------- -------
LONG-TERM OPERATING DEPOSITS (Note 10) 10,028 6,203
OTHER ASSETS AND DEFERRED CHARGES (Note 6) 4,735 4,881
INTANGIBLE ASSETS (Notes 3 and 16)
Net of accumulated amortization of $298 in 1992 -- 5,421
------- -------
TOTAL ASSETS $97,119 $93,346
======= =======
</TABLE>
(Continued)
21
<PAGE>
WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
(in thousands except share data)
(Continued)
<TABLE>
<CAPTION>
December 31,
------------------------
1993 1992
---- -----
<S> <C> <C>
CURRENT LIABILITIES
Note payable to bank (Note 9) $ 7,069 $ 9,300
Current maturities of long-term obligations (Note
10) 10,448 8,651
Deferred aircraft rent (Note 10) 6,295 --
Accounts payable 11,064 11,418
Unearned revenue 4,456 1,196
Accrued maintenance in excess of reserves paid 14,732 7,481
Accrued salaries and wages (Note 16) 7,252 5,011
Accrued interest 2,224 1,957
Accrued taxes 955 1,352
--------- ---------
Total current liabilities 64,495 46,366
--------- ---------
LONG-TERM OBLIGATIONS, NET (Note 10)
Subordinated convertible debt 65,000 65,000
Subordinated notes, net 24,926 24,912
Deferred aircraft rent, net of current portion 1,850 --
Equipment financing and other long-term obligations 26,825 5,629
--------- ---------
Total long-term obligations, net 118,601 95,541
--------- ---------
OTHER LIABILITIES
Deferred gain from sale leaseback transactions, net
of
accumulated amortization of $30,395 in 1993 and
$25,808 in 1992 (Note 8) 10,322 14,620
Accrued postretirement benefits (Note 13) 2,250 2,137
Accrued maintenance in excess of reserves paid 2,080 8,181
Other 444 1,980
--------- ---------
Total other liabilities 15,096 26,918
--------- ---------
TOTAL LIABILITIES 198,192 168,825
--------- ---------
MINORITY INTEREST (Note 16) -- 883
COMMON STOCKHOLDERS' DEFICIT (Notes 10, 11, 12, 16,
and 18)
Common stock, $1 par value, (60,000,000 shares
authorized, 15,224,076 shares issued and 15,161,491
shares outstanding at December 31, 1993 and
14,261,403 shares issued and 14,198,818 shares
outstanding at December 31, 1992) 15,224 14,261
Additional paid-in capital 34,071 29,160
Retained deficit (148,114) (117,169)
ESOP guaranteed bank loan (Notes 10 and 13) (1,914) (2,274)
Treasury stock, at cost (340) (340)
--------- ---------
TOTAL COMMON STOCKHOLDERS' DEFICIT (101,073) (76,362)
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 2, 10, 13, 15,
and 17)
TOTAL LIABILITIES AND COMMON STOCKHOLDERS'
DEFICIT $ 97,119 $ 93,346
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
22
<PAGE>
WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
<TABLE>
<CAPTION>
December 31,
---------------------------------
OPERATING REVENUES 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Contract flight operations $199,276 $183,705 $275,679
Flight operations subcontracted to other
carriers 1,221 11,499 1,486
Other 1,314 5,170 3,127
Transaction processing - US Order 905 36 --
-------- -------- --------
Total operating revenues 202,716 200,410 280,292
-------- -------- --------
OPERATING EXPENSES
Flight 62,880 52,302 75,262
Maintenance 28,667 34,458 55,462
Aircraft costs 52,187 35,135 36,761
Fuel 40,697 37,811 65,561
Flight operations subcontracted to other
carriers 1,312 11,612 1,157
Depreciation and amortization 6,275 5,872 7,605
Selling and administrative 20,932 18,725 25,055
Loss from operation of Key Airlines
(Note 3) -- 6,041 --
Loss on sale of Key Airlines (Note 3) 833 31,416 --
Transaction processing - US Order 11,741 3,893 --
-------- -------- --------
Total operating expenses 225,524 237,265 266,863
-------- -------- --------
OPERATING INCOME (LOSS) (22,808) (36,855) 13,429
-------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense (Notes 9 and 10) (11,179) (11,243) (14,710)
Interest income (Note 5) 730 3,996 4,956
Gain (loss) on investments, net 5 126 (1,582)
Gain on tax settlement (Note 14) -- -- 5,486
Other, net (445) (716) (268)
-------- -------- --------
Total other expense (10,889) (7,837) (6,118)
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES,
MINORITY INTEREST, EXTRAORDINARY ITEM
AND CHANGE IN ACCOUNTING PRINCIPLE (33,697) (44,692) 7,311
INCOME TAX EXPENSE (Note 14) 117 28 481
MINORITY INTEREST (Note 16) 2,869 1,829 --
-------- -------- --------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM
AND CHANGE IN ACCOUNTING PRINCIPLE (30,945) (42,891) 6,830
EXTRAORDINARY ITEM
Gain (loss) on acquisition of debt (less
applicable income taxes of $152 in 1991)
(Notes 4 and 10) -- (3,253) 3,535
-------- -------- --------
EARNINGS (LOSS) BEFORE CHANGE IN
ACCOUNTING PRINCIPLE (30,945) (46,144) 10,365
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
Accumulated benefit obligation of
postretirement benefits (Note 13) -- (1,973) --
-------- -------- --------
NET EARNINGS (LOSS) $(30,945) $(48,117) $ 10,365
======== ======== ========
(Continued)
</TABLE>
23
<PAGE>
WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
December 31,
--------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE
Primary:
Earnings (loss) before extraordinary item
and change in accounting principle $(2.12) $(3.02) $0.46
Extraordinary item -- (0.23) 0.24
Cumulative effect of change in accounting
principle -- (0.14) --
------- ------- ------
Net earnings (loss) $(2.12) $(3.39) $0.70
======= ======= ======
Fully diluted:
Earnings (loss) before extraordinary item
and change in accounting principle $ * $ * $0.42
Extraordinary item * * 0.22
Cumulative effect of change in accounting
principle * * --
------- ------- ------
Net earnings (loss) $ * $ * $0.64
======= ======= ======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
Primary 14,590,265 14,175,065 14,907,311
============ ============ ============
Fully diluted 14,590,265 14,175,065 16,246,828
============ ============ ============
</TABLE>
* Fully diluted earnings per share are anti-dilutive.
See accompanying Notes to Consolidated Financial Statements
24
<PAGE>
WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON STOCKHOLDERS' DEFICIT
Years ended December 31, 1993, 1992 and 1991
(in thousands except share data)
<TABLE>
<CAPTION>
Employee
Stock Owner- Total
Additional ship Plan Treasury Common
Common Paid-in Retained Guaranteed Stock, Stockholders'
Stock Capital Deficit Bank Loan at cost Deficit
------ ---------- -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1990 $13,033 $23,149 $ (79,417) $(3,060) $(340) $ (46,635)
Exercise of 974,202 options
and warrants 977 4,307 -- -- -- 5,284
Employee Stock Ownership Plan
guaranteed bank loan -- -- -- 360 -- 360
Other -- 263 -- -- -- 263
Net earnings -- -- 10,365 -- -- 10,365
--------- ------- ---------- -------- -------- ---------
BALANCE AT
DECEMBER 31, 1991 $14,010 $27,719 $ (69,052) $(2,700) $(340) $ (30,363)
Exercise of 251,591 options
and warrants 251 1,246 -- -- -- 1,497
Employee Stock Ownership Plan
guaranteed bank loan -- -- -- 426 -- 426
Other -- 195 -- -- -- 195
Net loss -- -- (48,117) -- -- (48,117)
--------- ------- ---------- -------- -------- ---------
BALANCE AT
DECEMBER 31, 1992 $14,261 $29,160 $(117,169) $(2,274) $(340) $ (76,362)
Exercise of 954,875 options
and warrants 963 3,921 -- -- -- 4,884
Employee Stock Ownership Plan
guaranteed bank loan -- -- -- 360 -- 360
Sale of equity by US Order -- 847 -- -- -- 847
Other -- 143 -- -- -- 143
Net loss -- -- (30,945) -- -- (30,945)
--------- ------- ---------- -------- -------- ---------
BALANCE AT
DECEMBER 31, 1993 $15,224 $34,071 $(148,114) $(1,914) $(340) $(101,073)
========= ======= ========== ======== ======== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
25
<PAGE>
WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------------
1993 1992 1991
--------- ---------- ----------
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR (See Note 4) $ 13,759 $ 22,841 $ 22,999
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) (30,945) (48,117) 10,365
Adjustments to reconcile net earnings
(loss) to cash provided (used) by
operating activities:
Depreciation and amortization 6,275 9,205 9,956
Deferred gain recognition (4,587) (4,558) (4,530)
Deferred aircraft rent payments, net 8,145 -- --
Loss on sale of Key Airlines -- 31,416 --
Extraordinary item -- 3,253 (3,535)
Loss on investments -- 1,161 1,582
Minority interest in loss of subsidiary (2,869) (1,829) --
Cumulative effect of change in
accounting principle -- 1,973 --
(Gain) loss on sale of equipment and
property (154) 160 (176)
Gain on tax settlement -- -- (5,486)
Writedown of assets held for sale 1,778 -- --
Other 1,446 -- 391
Changes in certain assets and liabilities
net of effects of non-cash transactions:
Decrease (increase) in accounts
receivable 2,802 (2,630) 18,874
Increase in deposits, prepaid expenses
and other assets (1,113) (5,481) (1,705)
(Decrease) increase in accounts payable,
accrued expenses and other liabilities 10,605 (2,087) (2,538)
-------- -------- --------
Net cash provided (used) by operating
activities (8,617) (17,534) 23,198
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale and leaseback of
aircraft and engine -- -- 10,154
Additions to equipment and property (23,402) (8,551) (4,029)
Proceeds from disposal of equipment and
property 5,425 1,721 355
Purchase of investments (210) (250) (9,050)
Increase in equity investment in US Order -- (1,800) --
Loan to US Order prior to purchase of
majority interest -- (1,250) --
Purchase of majority interest in US Order -- 28 --
Proceeds from sales of short-term
investments, net 3,552 7,428 4,107
Other -- (1,771) --
-------- -------- --------
Net cash provided (used) by investing
activities (14,635) (4,445) 1,537
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt 47,249 72,178 --
Repayment of debt (28,663) (10,325) (23,427)
Redemption and open market acquisitions of
debt -- (50,453) (6,393)
Proceeds from stock transactions 4,884 1,497 4,927
Proceeds from sale of equity by subsidiary 3,500 -- --
Debt issuance costs (561) -- --
-------- -------- --------
Net cash provided (used) by financing
activities 26,409 12,897 (24,893)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,157 (9,082) (158)
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF YEAR (See Note 4) $ 16,916 $ 13,759 $ 22,841
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
26
<PAGE>
WORLDCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
A. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
WorldCorp, Inc. ("WorldCorp" or the "Company"), its wholly-owned subsidiaries:
World Airways, Inc., ("World Airways") (see Note 18); Key Airlines,
Incorporated ("KeyAir") (see Note 3); WorldCorp Leasing, Inc.; WorldCorp
Leasing II, Inc.; WorldCorp Services, Inc.; World Airways Cargo, Inc.;
WorldCorp Investments, Inc.; World Flight Crew Services, Inc.; and a 46%
ownership interest in the voting stock in US Order, Inc. ("US Order"). All
significant intercompany balances have been eliminated.
B. Financial Statement Reclassifications
Certain items in prior year financial statements included herein have been
reclassified to conform to 1993 financial statement presentation.
C. Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid investments purchased with an original maturity of ninety days or less to
be cash equivalents.
D. Revenue Recognition
Contract flight operations and transaction processing revenues are recognized
as the services are provided.
E. Net Earnings (Loss) Per Common Share
Primary earnings (loss) per common share have been computed by dividing
earnings (loss) by the weighted average number of common and common equivalent
shares outstanding. Common equivalent shares include warrants and options.
Fully diluted earnings per common and common equivalent shares including
convertible debt, have not been presented where the results are anti-dilutive.
F. Investments
Short-term investments are carried at the lower of aggregate cost or market
value.
Interest to be paid or received on notional principal amounts associated with
interest rate swap agreements are measured as interest rates change and are
recorded ratably over the life of the agreement.
G. Equipment and Property
Equipment and property are stated at cost or if acquired under capital leases,
at the present value of the minimum lease payments. Engine overhauls and major
airframe maintenance and repairs are charged to operating expense on an accrual
basis. Modifications performed in response to Airworthiness Directives issued
by the Federal Aviation Administration are capitalized at cost.
Provisions for depreciation and amortization of equipment and property are
computed over estimated useful lives by the straight-line method, with estimated
residual values of 0 - 15%. Estimated useful lives of equipment and property
are as follows:
DC10 and MD11 flight equipment 15-16 years
Other equipment and property 3-10 years
H. Assets Held for Sale
Assets held for sale are recorded at the lower of cost or estimated net
realizable value.
I. Intangible Assets
The excess cost of the Company's investment in US Order over the fair value of
the Company's share of US Order's net assets at the date of acquisition is being
amortized over 17 years using the straight-line method.
27
<PAGE>
J. Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," ("FAS
#109"). Under the asset and liability method of FAS #109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under FAS #109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Effective January 1, 1992, the Company adopted FAS #109 which did not result
in any cumulative adjustment to the accompanying consolidated financial
statements.
K. Postretirement Benefits Other Than Pensions
World Airways' cockpit crewmembers and eligible dependents are covered under
postretirement health care benefits to age 65. Effective January 1, 1992, World
Airways adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS
#106"). The Company elected to immediately recognize the cumulative effect of
the change in accounting for postretirement benefits of $2.0 million. The
Company funds the benefit costs on a pay-as-you-go (cash) basis.
L. Transactions in Subsidiaries' Stock
Gains or losses realized in connection with the sale of stock by a subsidiary
are recognized in income by the Company.
2. OPERATING ENVIRONMENT
The Company is highly leveraged primarily due to losses sustained by World
Airways' scheduled operations between 1979 and 1986, debt restructurings in 1984
and 1987 and losses the Company incurred in 1990, 1992, and 1993. In addition,
the Company incurred substantial debt and operating lease commitments during
1993 in connection with acquiring MD-11 aircraft and related spare parts. As a
result, in the second half of 1993, the Company took several steps to improve
its liquidity, including: negotiating rent deferrals on eight aircraft and the
early return to the lessor of another aircraft, arranging a $20.0 million
accounts receivable and aircraft parts financing, and consummating the sale of
24.9% of World Airways.
The Company's air transportation business is highly seasonal. Typically,
World Airways experiences reduced demand during the first quarter for passenger
and cargo services relative to other times of the year. World Airways generally
experiences stronger results in the second and third quarters due to demand for
commercial passenger services including the annual Hadj pilgrimage. Fourth
quarter results depend upon the overall world economic climate and global trade
patterns.
Since the end of the Persian Gulf War, soft demand and weakening yields have
adversely effected worldwide cargo and passenger markets. In management's view,
block hours flown are a critical indicator of the airline's profitability. In
order for World Airways to achieve positive operating results and meet its
requirements under certain financing agreements, it will be necessary to
increase block hours flown from 1993 levels. In response, World Airways has
significantly increased its worldwide sales and marketing presence by 1) selling
24.9% of its equity to MHS Berhad solidifying a marketing alliance with a
leading aviation company in Malaysia, 2) recruiting three active outside board
members with experience in worldwide aviation and travel services, and 3)
increasing its internal sales and marketing staff from two to seven executives.
These actions were taken with the objective of increasing World Airways' flying
levels. The fourth quarter of 1993 was the first recent quarter where flying
level trends turned positive, increasing by 40% over the prior year's fourth
quarter. Also, in the first quarter of 1994, management expects flying levels
to be up more than 20% compared to 1993 levels. Management believes that
positive trends will continue for the second and third quarters. Fourth quarter
1994 flying levels will largely depend upon global trade demand for cargo and
the placement of at least two MD-11 passenger aircraft under longer-term
contracts.
The Company's investment in its US Order subsidiary has also required
substantial support by WorldCorp in recent years. The Company's share of US
Order losses in 1993 approximated $9.2 million. US Order, a development stage
company, expects to continue to incur losses in 1994. In December 1993, US
Order completed a private equity financing (see Note 16 for additional
information) and is currently seeking additional equity
28
<PAGE>
financing. However, there can be no assurance that such financing will be
obtained. WorldCorp does not plan to provide additional financing to US Order
in 1994.
The Company believes that the combination of the financings consummated to
date and the operating and additional financing plans described above will be
sufficient to allow the Company to meet its operating and capital requirements
during 1994.
3. SALE OF KEY AIRLINES
In September 1992, WorldCorp decided to dispose of its wholly-owned
subsidiary, KeyAir and on October 6, 1992, WorldCorp entered into a letter of
intent to sell the stock of KeyAir to Savannah Aviation Group ("SAG"). The sale
of KeyAir was completed on October 23, 1992. Accordingly, KeyAir's net loss for
1992 is reflected in the accompanying financial statements, under the caption
"Loss from operation of Key Airlines". Included in "Loss from operation of Key
Airlines" in 1992 is $40.7 million of KeyAir operating revenues and $46.7
million of KeyAir operating expenses. The 1991 financial statements were not
reclassified to conform with the 1992 presentation.
Under the terms of the stock purchase agreement, WorldCorp sold all of the
outstanding common shares of KeyAir for $6.5 million. As consideration for the
shares, WorldCorp accepted a $3.5 million Senior Secured Note (the "Note") and a
$3.0 million Convertible Subordinated Debenture (the "Debenture") from SAG,
which were not recorded by the Company due to uncertainty regarding realization
of these amounts. WorldCorp recorded an estimated loss on the sale of KeyAir of
$31.4 million in the accompanying financial statements as of December 31, 1992.
Loss on sale of KeyAir in 1992 consisted primarily of a writedown of the B727
aircraft and related rotables to estimated net realizable values and a write-off
of the remaining goodwill associated with the purchase of KeyAir in 1987. As a
result of the sale of KeyAir and the Company's inability to deploy the aircraft
in other long-term opportunities beyond 1992, the Company discontinued operating
the B727-100 aircraft after December 31, 1992. The Company entered into a
consignment agreement with a third party to dismantle and sell certain of the
B727-100 aircraft and the related rotables beginning in November 1992. As a
result, in 1992, the Company reduced the carrying values of the B727 aircraft to
estimated net realizable values and classified these amounts as assets held for
sale in the accompanying balance sheet (see Note 7).
On February 8, 1993, KeyAir filed a voluntary petition for bankruptcy
protection under Chapter 11 and certain disputes arose between the Company and
the purchasers of KeyAir. During 1993, in connection with the settlement of
these disputes, the Company relinquished all rights to collection of the Notes
and the Debentures. The Company recorded a loss of approximately $0.8 million in
1993 related to amounts outstanding under a line of credit and certain letters
of credit related to KeyAir which will not be recovered by the Company.
4. SUPPLEMENTAL INFORMATION -- STATEMENTS OF CASH FLOWS
Additional information pertaining to certain cash payments and noncash
investing and financing activities is as follows (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1993 1992 1991
---------- --------- ---------
<S> <C> <C> <C>
Cash paid for:
Interest $10,274 $12,722 $14,512
Income taxes 91 129 513
</TABLE>
During 1993, US Order completed a $12.0 million private equity placement in
which WorldCorp invested $1.7 million (see Note 16). Included in the remaining
$10.3 million investment was $2.5 million received in the form of an advertising
credit and $4.3 million received in the form of forgiveness of various
liabilities of US Order. Additionally, during 1993, US Order entered into $1.7
million of capital leases and other long-term obligations in connection with the
purchase of transaction processing equipment.
29
<PAGE>
During 1993, the Company sold $9.5 million of MD-11 aircraft spare parts and
leased the parts back under a 79 month capital lease. The following is a
summary of the transaction (in thousands):
<TABLE>
<S> <C>
Sale price of parts $9,463
Debt retired (7,570)
Security deposit (1,893)
-------
Net cash proceeds $ 0
========
</TABLE>
During 1991 and 1992, the Company purchased $59.1 million of its 13 7/8%
Subordinated Notes (the "Notes"). The following is a summary of these
transactions (in thousands):
<TABLE>
<CAPTION>
1992 1991
--------- --------
<S> <C> <C>
Face value of Notes purchased $ 48,806 $10,334
Cash paid (50,453) (6,393)
Debt discount and issuance costs (1,606) (406)
-------- -------
Extraordinary gain (loss) $ (3,253) $ 3,535
======== =======
</TABLE>
During 1991, the Company sold a DC10-30 aircraft and leased the aircraft back
under a 12-year operating lease. The following is a summary of the transaction
(in thousands):
<TABLE>
<S> <C>
Sale price of aircraft $47,500
Debt retired (38,068)
Related expenses (552)
--------
Net cash proceeds $ 8,880
========
</TABLE>
During 1991, the Company sold a DC10-30 engine generating net proceeds of $1.3
million and leased the engine back under a 60 month operating lease. The
following is a summary of the transaction (in thousands):
<TABLE>
<S> <C>
Sale price of engine $ 3,200
Debt retired (1,862)
Related expenses (64)
--------
Net cash proceeds $ 1,274
========
</TABLE>
5. SHORT-TERM INVESTMENTS
At December 31, 1993 and 1992, short-term investments consist of cash pledged
as collateral for letters of credit with expiration dates in excess of ninety
days.
In December 1992, the Company sold its $3.0 million partnership investment for
$4.7 million. The $4.7 million is included in other receivables at December 31,
1992 and was received in 1993. Interest income in 1992 includes $1.7 million
related to this partnership investment.
6. OTHER ASSETS AND DEFERRED CHARGES
Other assets and deferred charges consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------
1993 1992
------ ------
<S> <C> <C>
Debt issuance costs, net $3,062 $2,761
Long-term employee loan receivable (Note 16) -- 1,648
Other 1,673 472
------ ------
$4,735 $4,881
====== ======
</TABLE>
30
<PAGE>
Debt issuance costs consist of the costs of issuing the 13 7/8% Subordinated
Notes due 1997, the Convertible Subordinated Debentures due 2004, and revolving
lines of credit agreements. These costs are being amortized over the term of
the respective debt instruments using the effective interest method (see Note 9
and 10).
7. ASSETS HELD FOR SALE
Assets held for sale consist primarily of DC10 and B727 rotables with a net
book value of $8.9 million and two DC10 engines with a net book value of $4.5
million. The Company has consigned these parts with a third party to sell these
parts over a reasonable period of time with the objective of maximizing the
proceeds from sale. During 1993, US Order recorded a $1.8 million writedown
associated with its older generation of terminal components, a portion of which
are available for sale.
8. EQUIPMENT AND PROPERTY
World Airways was awarded an insurance settlement which resulted in a $1.1
million reduction in maintenance expenses in 1991 for repairs associated with an
aircraft that was damaged in a volcanic eruption.
On May 1, 1991, World Airways sold a DC10-30 engine for $3.2 million and
leased the engine back under a 60 month operating lease.
On December 29, 1989, World Airways purchased a McDonnell Douglas DC10-30CF
series aircraft (the "Aircraft") from Potomac Capital Investment Corporation,
for approximately $42.0 million. The Aircraft had been involved in a sale
leaseback transaction with Burnham Leasing Incorporated in 1987, and was in the
World Airways fleet under an operating lease which was terminated at the time of
the purchase. Upon purchase of the Aircraft, World Airways reduced the carrying
value of the Aircraft and, correspondingly, the deferred gain from the 1987 sale
by $5.0 million. On January 15, 1991, World Airways sold the Aircraft for $47.5
million, retired $38.1 million in related debt, and leased the Aircraft back
under a twelve year operating lease. The resulting gain on sale of $12.1
million is being amortized over the lease period.
9. NOTE PAYABLE TO BANK
In 1993, World Airways entered into an $8.0 million revolving line of credit
borrowing arrangement which is collateralized by certain receivables which were
sold to the bank with recourse. Borrowing availability under the line is based
on the amount of eligible receivables. Borrowings under the line of credit were
$7.1 million at December 31, 1993 and bear interest at the greater of the
federal funds rate plus 2.5% or the prime rate plus 2%. At December 31, 1993,
the interest rate was 8%. World Airways is required to pay any outstanding
amounts under the line of credit by January 7, 1996, with the option to extend
for one year. This agreement contains certain covenents related to World
Airways' financial condition and operating results, including minimum quarterly
net income tests. In addition, there is an unused facility fee of 0.5% per year
(see Note 10).
The Company had a $10.0 million revolving line of credit borrowing
arrangement, collateralized by certain receivables, available during 1992.
Approximately $9.8 million was available under this credit facility at December
31, 1992 based upon the amount of outstanding receivables. Borrowings under the
line of credit were $9.3 million at December 31, 1992 and bear interest at the
lesser of the LIBOR rate plus 2.75% per annum or the lender's prime rate plus
0.5% per annum. At December 31, 1992 the interest rate was 6.5%. The line of
credit was paid in full on December 7, 1993 and expired at the end of the year.
10. LONG-TERM OBLIGATIONS
Long-Term Debt
The Company's long-term obligations at December 31 are as follows (in
thousands):
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Note payable due 1994 -- with interest at one month $ 1,020 $ 1,620
LIBOR plus 1.95% payable monthly (5.51% at December 31,
1993 and 6.08% at December 31, 1992) collateralized by
one General Electric CF6-50C2 engine.
</TABLE>
31
<PAGE>
<TABLE>
1993 1992
---- ----
<S> <C> <C>
Note payable due 1994 -- with interest at one month 952 1,495
LIBOR plus 1.75% payable monthly (5.31% at December
31, 1993 and 6.13% at December 31, 1992) collateralized
by one General Electric CF6-50C2 engine.
Spare parts loan due 1998 -- with principal and 4,392 --
interest at 8.5% payable monthly, collateralized by
certain MD-11 spare parts.
Spare parts loan due 1997 -- with principal and 5,000 --
interest at 8.5% payable semi-annually,
collateralized by certain MD-11 spare parts.
Aircraft parts security agreement payable to a bank due 11,815 --
1996 -- with interest at the greater of the federal
funds rate plus 2.5% or the prime rate plus 2% (8%
at December 31, 1993) collateralized by DC10-30 and
B727-100 rotables.
Guaranteed bank loan due May 23, 1996 -- with interest 1,914 2,274
at 85% of the prime rate of interest payable monthly
(5.1% at December 31, 1993 and 5.1% at December 31,
1992) collateralized by 478,501 and 568,501 shares,
respectively, of WorldCorp common stock held by the
WorldCorp Employee Stock Ownership Plan (see Note 13).
Unsecured promissory note due 1997 -- with interest at 900 --
6% payable quarterly beginning May 8, 1994
Note payable due 1993 -- with interest at one month -- 711
LIBOR plus 1.5% payable monthly (5.63% at December 31,
1992) collateralized by one General Electric
CF6-6D1A engine.
Note payable due 1993 -- with interest at 3.47% payable -- 2,592
monthly.
Equipment financing due 1996 -- with interest at 12% -- 968
payable monthly.
Note payable due 1993 -- with interest at LIBOR plus 2% -- 3,000
payable monthly (5.5% at December 31, 1992)
collateralized by B727-100 aircraft, spare parts and
rotables.
13 7/8% Subordinated Notes due August 15, 1997 -- 24,926 24,912
interest payable semi-annually beginning February 15,
1988 (net of unamortized discount of $0.1 million in
1993 and 1992).
Convertible Subordinated Debentures due 2004 -- with 65,000 65,000
interest at 7% payable semi-annually beginning May 15,
1992. The Debentures are convertible into WorldCorp
common stock at $11.06 per share subject to adjustment
in certain events.
Deferred aircraft rent, non-current 1,850 --
Capitalized lease obligations 11,280 1,620
-------- --------
Total 129,049 104,192
Less current maturities 10,448 8,651
-------- --------
Total long-term obligations $ 118,601 $ 95,541
======== ========
</TABLE>
32
<PAGE>
The Indenture pursuant to which the 13 7/8% Subordinated Notes (the
"Indenture") were issued may restrict the Company's ability to pay dividends on
its common stock. Under the Indenture, the Notes are redeemable beginning
August 15, 1992, at which time they are redeemable at 104% of par value and at
rates declining thereafter.
In May 1992, the Company issued $65.0 million of Convertible Subordinated
Debentures due 2004 (the "Debentures"). The Debentures are convertible into
WorldCorp common stock at $11.06 per share, subject to adjustment in certain
events, and bear an annual interest rate of 7%. Semi-annual interest payments
are due on May 15 and November 15. During the second and third quarters of
1992, the Company used $47.1 million of the proceeds from this borrowing to
retire a portion of its 13 7/8% Subordinated Notes due 1997 (the "Notes").
WorldCorp has never paid any cash dividends and does not plan to do so in the
foreseeable future. Both the 13 7/8% Subordinated Notes Indenture and the
indenture pursuant to which the Debentures were issued (the "Indentures")
restrict the Company's ability to pay dividends or make other distributions on
its common stock. In addition, the Indentures originally restricted the ability
of World Airways to pay dividends other than to the Company. In 1994, however,
the Company received approval from the holders of the Indentures to allow World
Airways to pay dividends to parties other than the Company.
The aircraft parts security agreement is subject to the terms of the $8.0
million revolving line of credit borrowing (see Note 9). Under this agreement
the borrowing must be reduced by the amount of proceeds received from the sale
of excess DC10 and B727 spare parts, but at a minimum of $0.5 million each
month. The borrowing facility also restricts World Airways' ability to pay
dividends. Under this agreement, World Airways cannot declare, pay, or make any
dividend or distribution in excess of the lesser of $4.5 million or 50% of net
income for the previous six months. In addition, World Airways must have a cash
balance of at least $7.5 million immediately after giving effect to such
dividend.
The following table shows the aggregate amount of scheduled principal
maturities (in thousands) of debt outstanding at December 31, 1993:
<TABLE>
<S> <C>
1994 $ 9,434
1995 7,990
1996 3,010
1997 27,717
1998 2,842
Thereafter 65,000
--------
Total $115,993
========
</TABLE>
Deferred Aircraft Rent
During 1993, the Company negotiated with several of its lessors to defer
approximately $14.7 million of lease payments on eight aircraft. Of this
amount, $6.6 million was repaid during 1993. The remaining deferrals are
scheduled to be repaid beginning the second quarter of 1994 and bear interest at
rates ranging from 7% to 12%. Principal payments in 1994 amount to $6.3
million, with the remaining amounts due as follows (in thousands):
<TABLE>
<S> <C>
1995 $ 911
1996 589
1997 284
1998 66
Thereafter --
------
Total $1,850
======
</TABLE>
Capital Leases
The present values of the obligations under capital leases at December 31,
1993 are calculated using rates ranging from 6.14% to 11.7%. The following are
scheduled minimum capital lease payments (in thousands) due in the succeeding
five years and thereafter, together with the present value of such obligations:
33
<PAGE>
<TABLE>
<S> <C>
1994 $ 1,899
1995 1,856
1996 2,076
1997 1,717
1998 3,302
Thereafter 4,170
--------
Total minimum lease payments 15,020
Less imputed interest 3,740
--------
Present value of obligations under capital leases $11,280
========
</TABLE>
Property under capital leases consists of equipment leases and are amortized
on a straight-line basis over the lease terms or expected useful life of the
assets. Accumulated amortization under capital leases was $3.2 million and $2.5
million at December 31, 1993, and 1992, respectively. Amortization expense of
property under capital lease totaled $658,000, $522,000, and $456,000 for the
years ended December 31, 1993, 1992, and 1991, respectively.
Operating Leases
In October 1992 and January 1993, World Airways signed a series of agreements
with International Lease Finance Corporation ("ILFC"), McDonnell Douglas
Corporation, GATX Capital Corporation, and Pratt and Whitney to lease seven new
McDonnell Douglas MD-11 aircraft under initial lease terms of two to five years.
Six of the seven aircraft leases contain annual renewal options in years three
through fifteen of the lease term. Under the terms of the lease agreements,
World Airways may be required to pay additional rent in excess of the fixed
monthly amounts depending on block hours flown. World Airways took delivery of
four passenger MD-11s in 1993, and is scheduled to take delivery of one
freighter MD-11 in 1994 and two convertible MD-11s in 1995. The delivery of the
convertible MD-11s is expected to occur approximately six months after the end
of the lease in 1994 of three DC10-30 convertibles. The leases contain options
to purchase the aircraft at various times throughout the lease terms. Long-term
deposits consist primarily of deposits on the MD-11 leases. As part of the
lease agreements, World Airways was assigned purchase options for four
additional MD-11 aircraft. At December 31, 1992, World Airways made non-
refundable deposits toward three of the option aircraft. During 1993, the
options' exercise dates were extended to July 30, 1994 with scheduled aircraft
delivery dates from August 1995 to September 1996. If the options are
exercised, World Airways intends to obtain financing for the purchases.
In February 1992, World Airways signed twelve year operating leases for two
McDonnell Douglas DC10-30 passenger aircraft. In July 1993, World Airways
returned these aircraft to their lessor which resulted in a $1.5 million early
termination payment of which $1.1 million was expensed in 1993.
In October 1993, the Company returned an aircraft to its lessor and recorded
an expense of $1.2 million related to the early termination of the lease.
Rental expense, primarily relating to aircraft leases, totaled approximately
$52.1 million, $39.6 million, and $43.0 million for the years ended December 31,
1993, 1992, and 1991, respectively.
The following is a schedule of future annual minimum rental payments (in
thousands), principally aircraft rentals (excluding variable portions), required
under operating leases that have initial or remaining noncancellable lease terms
in excess of one year as of December 31, 1993:
<TABLE>
<S> <C>
1994 $ 50,712
1995 54,145
1996 46,383
1997 46,368
1998 35,344
Thereafter 43,894
--------
Total $276,846
========
</TABLE>
34
<PAGE>
11. COMMON STOCK PURCHASE WARRANTS
Drexel Warrants
On June 30, 1988, the Company issued to Drexel Burnham Lambert, Incorporated
("Drexel") warrants expiring May 24, 1994 to purchase 1,000,000 shares of the
Company's common stock at a price of $8.00 per share, subject to certain
antidilution adjustments (the "Drexel Warrants"). On July 31, 1989, the Company
purchased 500,000 of these warrants from Drexel for $1.3 million. In 1992,
37,500 of these warrants were exercised. At December 31, 1993, there were
462,500 Drexel Warrants fully vested and outstanding.
BNYFC Warrants
On December 7, 1993, in connection with a revolving line of credit facility
and an aircraft parts security agreement (see Notes 9 and 10), the Company
granted to Bank of New York Financial Corporation ("BNYFC") warrants expiring
December 7, 1996 to purchase 250,000 shares of the Company's common stock, at a
price of $6.15 per share. These warrants include certain registration rights.
At December 31, 1993, these warrants were fully vested and outstanding.
1986 Executive Warrants
During 1986, the Company entered into agreements with certain officers of the
Company to issue 3,600,000 warrants, expiring May 24, 1994, each to purchase
one share of the Company's common stock at a price of $5.00 per share, subject
to certain antidilution adjustments (the "1986 Executive Warrants"). During
1993, 1992, and 1991, 779,875, 0, and 237,789, respectively, of these warrants
were exercised. At December 31, 1993, a total of 2,362,336 of the 1986
Executive Warrants are fully vested and outstanding.
1989 Executive Warrants
During 1989, the Company entered into warrant agreements with certain officers
of the Company providing for the issuance of warrants ("1989 Executive
Warrants") to purchase a total of 745,000 shares of Company common stock at an
exercise price of $5.50; such warrants to vest, at differing rates, over 60
months. The 1989 Executive Warrants expire on August 31, 1997. On November 1,
1990, Mr. T. Coleman Andrews cancelled his right to receive 250,000 warrants
granted to him under his 1989 Executive Warrant agreement, and the agreement was
terminated. Mr. Andrews agreed to cancel his right to receive the 250,000
warrants so that equity compensation under the 1988 Stock Option Plan could be
granted in 1990 to officers of the Company and its subsidiaries. During 1991,
163,417 of the warrants were cancelled. During 1992, 40,000 of these warrants
were cancelled. At December 31, 1993, there were 291,583 1989 Executive
Warrants outstanding of which 276,416 are fully vested.
12. STOCK OPTIONS
On July 19, 1988, the Board of Directors approved The WorldCorp, Inc. 1988
Stock Option Plan (the "1988 Plan"). The 1988 Plan was amended and restated on
May 13, 1992. The 1988 Plan calls for one share of WorldCorp common stock to be
issued upon exercise of one stock option. Shares issuable under the 1988 Plan,
as amended, shall not exceed 2,800,000 in the aggregate. Options may be granted
to employees and directors at the discretion of the Administrative Committee of
the 1988 Plan. In 1990, the 1988 Plan was amended to change the vesting
percentage to 20% per year beginning on the grant date provided that the grantee
was still an employee of the Company or a subsidiary.
During 1991, the Company made cash payments totaling $35,054 in exchange for
the cancellation of 9,670 options.
A summary of option transactions under the 1988 Plan for the years ended
December 31, 1991, 1992, and 1993 is presented below:
35
<PAGE>
<TABLE>
<S> <C>
Options outstanding, January 1, 1991 1,676,699
Options granted (exercise price $5.63) 535,000
Options exercised (736,413)
Options expired or cancelled (180,899)
---------
Options outstanding, December 31, 1991 1,294,387
Options granted (exercise price from $7.70 to $10.59) 590,000
Options exercised (214,091)
Options expired or cancelled (69,334)
---------
Options outstanding, December 31, 1992 1,600,962
Options granted (exercise prices from $4.72 to $7.03) 300,000
Options exercised (175,000)
Options expired or cancelled (77,600)
---------
Options outstanding, December 31, 1993 1,648,362
=========
</TABLE>
A total of 961,692 options have vested and are exercisable by the
participants under the 1988 Plan as of December 31, 1993.
13. EMPLOYEE BENEFIT PLANS
During 1989, the Company adopted an Employee Stock Ownership Plan (the
"ESOP") for the benefit of employees not covered by collective bargaining
agreements. The ESOP is designed as a stock bonus plan which qualifies for
favorable tax treatment under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and as an employee stock ownership plan under
Section 4975(e)(7) of the Code. In addition, the ESOP includes a "cash or
deferred arrangement" under Section 401(k) of the Code.
During 1989, the ESOP acquired 450,000 shares of common stock from Violet
June Daly and 450,000 shares of common stock from the Estate of Edward J. Daly.
The purchase price in each transaction was $4.00 per share or a total of $3.6
million. The ESOP obtained bank financing of $3.6 million (the "ESOP Loan") that
matures seven years from funding and requires quarterly principal payments of
$90,000 and a final principal payment of $1,080,000. Interest at 85% of the
bank's prime rate is payable monthly. At December 31, 1993, the ESOP had pledged
478,501 shares as collateral for the loan and the loan is guaranteed by
WorldCorp. Under the guarantee, the Company is also required to meet certain
restrictive covenants. The Company is required to make minimum annual
discretionary contributions to the ESOP in an amount necessary to pay principal
and interest due on the ESOP Loan to the extent that other contributions to the
ESOP are insufficient to make such payments. In 1992, contributions from
employees combined with employer matching contributions were sufficient to make
required principal and interest payments. The Company expensed $0.2 million and
$0.1 million of principal and interest for the ESOP Loan in 1993 and 1991,
respectively.
In 1990, the ESOP was replaced by the Employee Savings and Stock Ownership
Plan ("ESSOP"). Participation in the ESSOP is limited to employees not covered
under a collective bargaining agreement. Employees may elect to invest Salary
Deferral Contributions in either the WorldCorp Stock Fund or in Other Investment
Funds. The ESSOP provides employer matching contributions in the WorldCorp
Stock Fund at a rate determined by the Board of Directors, but at least 50% of
the Salary Deferral Contribution. The employer matching contribution rate in
the WorldCorp Stock Fund for 1993, 1992 and 1991 was 100%. The employer
matching contribution in Other Investment Funds is at the rate of 33 1/3% of the
Salary Deferral Contribution. The Company charged approximately $416,000,
$394,000, and $273,000 to expense for its contributions to the ESSOP in 1993,
1992 and 1991, respectively.
The World Airways' Crewmembers Target Benefit Plan is a defined contribution
plan covering flight engineers and pilots with contributions based upon defined
wages. This is a tax-qualified retirement plan under Section 401(a) of the
Code. The World Airways' Flight Attendants Target Benefit Plan is a defined
contribution plan covering flight attendants with contributions based upon
defined wages. This is a tax-qualified retirement plan under Section 401(a) of
the Code. Pension expense for both plans totaled $1,524,000, $1,288,000, and
$1,165,000 for the years ended December 31, 1993, 1992 and 1991, respectively.
Effective January 1, 1987, World Airways adopted the World Airways, Inc.
Profit Sharing Bonus Plan (the "1987 Profit Sharing Plan"). Contributions to
the 1987 Profit Sharing Plan are equal to 20% of World Airways'
36
<PAGE>
defined operating income, subject to an annual limitation of 10% of the total
annual aggregate compensation of World Airways' employees participating in the
1987 Profit Sharing Plan in that year. This is not a tax-qualified retirement
plan under Section 401(a) of the Code. Prior to 1993, contributions to the 1987
Profit Sharing Plan were allocated first to payments to all persons or their
beneficiaries whose wages were reduced during the time from December 1, 1982 to
January 31, 1985. The total wage reduction for this period was approximately
$5.8 million. World Airways has repaid the entire $5.8 million as of December
31, 1992. Approximately $0.8 million was distributed in 1993 pertaining to 1992
financial results. The Company does not anticipate any distributions in 1994
pertaining to 1993 financial results.
World Airways' cockpit crewmembers and eligible dependents are covered under
postretirement health care benefits to age 65. Effective January 1, 1992, World
Airways adopted Statement of Financial Accounting Standards No. 106, Employers'
----------
Accounting for Postretirement Benefits Other Than Pensions ("FAS #106"). FAS
- ----------------------------------------------------------
#106 requires accrual accounting for all postretirement benefits other than
pensions. Prior to the adoption of FAS #106, the cost of health benefits for
cockpit retirees was recognized by charging claims to expense as they were
incurred. The Company elected to immediately recognize the cumulative effect of
the change in accounting for postretirement benefits of $2.0 million in 1992.
1991's financial results have not been restated. World Airways funds the
benefit costs on a pay-as-you-go (cash) basis.
A summary of the net periodic postretirement benefit cost for the year ended
December 31, 1993 is as follows:
<TABLE>
<S> <C>
Service cost $ 103,000
Interest cost on accumulated postretirement benefit obligation 156,000
----------
Net periodic postretirement benefit cost $ 259,000
==========
<CAPTION>
The components of the Accumulated Postretirement Benefit
Obligation at December 31, 1993 are as follows:
<S> <C>
Retirees and dependents $ 941,000
Fully eligible, active participants 211,000
Not fully eligible participants 1,098,000
----------
$2,250,000
Less: plan assets 0
----------
Accrued postretirement benefit obligation $2,250,000
==========
</TABLE>
The assumed discount rate used to measure the accumulated postretirement
benefit obligation for 1993 was 6.25%. The medical cost trend rate in 1993 was
11.75% trending down to an ultimate rate in 2011 of 4.25%. A one percentage
point increase in the assumed health care cost trend rates for each future year
would have increased the aggregate of the service and interest cost components
of 1993 net periodic postretirement benefit cost by $30,000 and would have
increased the accumulated postretirement benefit obligation as of December 31,
1993 by $175,000.
14. FEDERAL AND STATE INCOME TAXES
Effective January 1, 1992 the Company adopted FAS #109. There was no
adjustment necessary for the cumulative effect of this change in accounting for
income taxes as of January 1, 1992. The 1991 financial statements have not been
restated to apply the provisions of FAS #109. The consolidated provision for
income taxes consists entirely of current income taxes and excludes any amounts
related to US Order since US Order is not part of WorldCorp and subsidiaries
consolidated income tax return.
Total income tax expense was allocated as follows (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1993 1992 1991
---------- --------- ---------
<S> <C> <C> <C>
Income (loss) from continuing operations $ 117 $ 28 $ 481
Extraordinary item -- 0 152
Change in accounting principle -- 0 --
----- ----- -----
Income tax expense $ 117 $ 28 $ 633
===== ===== =====
</TABLE>
37
<PAGE>
Income tax expense attributable to income from continuing operations consists
of (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------
1993 1992 1991
---------- ---------- ---------
<S> <C> <C> <C>
U.S. Federal $ 71 $ (29) $ 287
State 46 57 194
----- ----- -----
Income tax expense $ 117 $ 28 $ 481
===== ===== =====
</TABLE>
There is no deferred tax expense or benefit for the years ended December 31,
1993, 1992 and 1991.
Income tax expense attributable to income (loss) from continuing operations
for the years ended December 31, 1993, 1992, and 1991 differed from the amounts
computed by applying the U.S. Federal income tax rate of 34 percent as a result
of the following (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
1993 1992 1991
----------- ----------- ----------
<S> <C> <C> <C>
Expected Federal income tax expense
(benefit) at the statutory rate $(11,457) $(15,195) $ 2,485
Subsidiary (US Order) not
consolidated for tax purposes 3,130 1,447 --
Tax loss on sale of subsidiary -- (3,812) --
Amortization of goodwill 149 281 216
Equity interest in loss of investee
company -- 314 132
Other 386 179 159
Generation (utilization) of net
operating loss carryforward 7,879 16,776 (2,992)
Federal alternative minimum tax and
environmental tax -- -- 376
State income tax expense, net of
Federal benefit 30 38 105
-------- -------- -------
Income tax expense $ 117 $ 28 $ 481
======== ======== =======
</TABLE>
The effect of the alternative minimum tax as set forth in the above table is
caused by the limitation on the utilization of net operating loss carryforwards
for alternative minimum tax purposes. The tax effects of temporary differences
that give rise to significant portions of deferred tax assets and liabilities at
December 31, 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
Deductible Taxable Net
Amounts Amounts Total
----------- ---------- ------------
<S> <C> <C> <C>
Temporary differences:
Net operating loss carryforwards $ 46,663 $ -- $46,663
Capital loss carryforward 6,219 -- 6,219
Depreciation -- 2,798 (2,798)
Recognition of sale/leaseback gains 3,419 -- 3,419
Accrued maintenance in excess of
reserves paid, primarily due to
accrual for financial statement
purposes 6,432 -- 6,432
Accrued postretirement benefit
obligation, due to accrual for
financial statement purposes 765 -- 765
Compensated absences, primarily due
to accrual for financial statement
purposes 488 -- 488
Other 117 113 4
Alternative minimum tax credit
carryforward 2,211 -- 2,211
Investment tax credit carryforward
which expires primarily by 1995 9,600 -- 9,600
-------- ---------- -------
Total gross deferred tax assets
and liabilities $ 75,914 $2,911 73,003
======== ========== =======
Less: valuation allowance (73,003)
-------
Net deferred tax balance $ 0
=======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1993 was
$64.4 million. The net change in the total valuation allowance for the year
ended December 31, 1993 was an increase of $8.6 million.
38
<PAGE>
The availability of net operating loss, investment tax credit, and
alternative minimum tax credit carryforwards to reduce the Company's future
Federal income tax liability is subject to limitations under the Internal
Revenue Code of 1986, as amended (the "Code"). Generally, these limitations
restrict the availability of net operating loss and investment tax credit
carryforwards upon certain changes in stock ownership by five percent
shareholders which, in aggregate, exceed 50 percentage points in value in the
three-year testing period ("Ownership Change").
In August 1991, 5.7 million shares of common stock were sold by a group of
existing shareholders. This transaction constituted an Ownership Change, which
reduced the annual utilization of net operating loss, alternative minimum tax
credit, and investment tax credit carryforwards ("Carryforwards") available to
the Company in 1991 and future years. As of December 31, 1993, the Company had
net operating loss carryforwards for federal income tax purposes of $72.6
million [subject to a $6.3 million annual limitation based on the value of the
outstanding Common Stock immediately prior to the Ownership Change and the
statutorily provided long-term tax exempt rate (the "Limitation")] and $64.6
million (generated after the Ownership Change) which are available to offset
future federal taxable income. These carryforwards expire between 1995 and
2008.
On February 28, 1994, the Company sold 24.9% of World Airways' common stock
to MHS Berhad ("MHS"), decreasing WorldCorp's ownership in World Airways to
75.1% (see Note 18). The Code permits a controlled group to file a consolidated
tax return that includes all subsidiaries which are at least 80% owned by the
parent company. As a result, for the period beginning March 1, 1994, World
Airways will be required to file a separate company tax return and will no
longer be included in the WorldCorp and subsidiaries consolidated U.S. income
tax return. As a result, approximately $84.4 million of the consolidated net
operating loss carryforwards for federal income tax purposes (subject to the
Limitation) will be allocated to World Airways, and will no longer be available
to offset federal taxable income reflected on future consolidated tax returns.
World Airways settled its litigation with the State of California Franchise
Tax Board (the "Board") concerning assessments of deficiencies in state
franchise taxes for the years 1973-1975 and 1978. The Board had asserted a
total tax deficiency of $2.4 million and unpaid interest of $5.9 million. This
final settlement resulted in the reversal of a previously recorded liability and
the recognition of a 1991 non-operating gain of $5.5 million, net of related
legal expenses.
15. SEGMENT INFORMATION
The Company operates in two business segments: air transportation and
transaction processing. The air transportation segment consists of the
operations of World Airways, a worldwide provider of air transportation for
commercial and government customers. The Company's transaction processing
business consists of its 46% ownership of the voting stock of US Order, a
company that has developed a patented, automated ordering system with
residential and commercial applications.
Summarized financial information by business segment is as follows (in
thousands):
<TABLE>
<CAPTION>
Depreciation
Year Ended Operating Total and Capital
December 31, 1993 Revenues (Loss) Assets Amortization Expenditures
- --------------------------- --------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Air transportation $201,811 $(11,933) $89,425 $6,025 $19,450
Transaction processing 905 (10,875) 7,694 250 3,952
-------- -------- ------- ------ -------
$202,716 $(22,808) $97,119 $6,275 $23,402
======== ======== ======= ====== =======
<CAPTION>
Depreciation
Year Ended Operating Total and Capital
December 31, 1992 Revenues (Loss) Assets Amortization Expenditures
- --------------------------- -------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Air transportation $200,374 $(32,917) $83,856 $9,000 $ 7,085
Transaction processing 36 (3,938) 9,490 205 1,466
-------- -------- ------- ------ -------
$200,410 $(36,855) $93,346 $9,205 $ 8,551
======== ======== ======= ====== =======
</TABLE>
There were no significant intersegment sales or transfers during 1993 and
1992.
39
<PAGE>
Information concerning customers for years in which their revenues comprised
10% or more of the Company's consolidated operating revenues is presented in the
following table (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1993 1992 1991
------- ------- --------
<S> <C> <C> <C>
U.S. Department of Defense (including AMC) $54,201 $88,683 $169,421
Malaysian Airline System Berhad 34,672 49,065 29,312
P. T. Garuda Indonesia 42,583 25,284 9,774
Burlington Air Express, Inc 22,358 10,811 3,573
</TABLE>
The Company's contract with the United States Air Mobility Command ("AMC")
expires in September 1994. The Company anticipates that future renewals of the
AMC contract will be on an annual basis.
World Airways has provided service to MAS since 1981, transporting passengers
for the annual Hadj pilgrimage as well as providing aircraft for integration
into MAS' scheduled passenger and cargo operations. The current MAS contract,
which was entered into in 1992, expires in 1996. However, in 1992 the government
of Malaysia instructed the Malaysian Hadj Board (which in turn instructed MAS)
to competitively rebid the contract for the 1993 Hadj. MAS rebid the contract
for the 1993 Hadj and World Airways was again selected to provide 1993 Hadj
service to MAS. World's management believes that its contract with MAS through
1996 is a legally binding obligation. MHS has agreed to acquire 32% of MAS in
1994 (see Note 18).
World Airways has provided service to Garuda since 1988 under an annual
contract. World Airways supplied six of Garuda's sixteen aircraft necessary for
its 1993 Hadj operations and will provide six aircraft for the 1994 Garuda Hadj
operations.
World Airways provided service to Burlington Air Express in 1993. At this
time, World Airways has no contract for services in 1994.
All export contracts are denominated in U.S. dollars as are substantially all
of the related expenses. The classification between domestic and export
revenues is based on entity definitions prescribed in the economic regulations
of the Department of Transportation. Information concerning the Company's
export revenues is presented in the following table (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Operating Revenues:
Domestic $ 96,637 $111,606 $224,214
Export - Malaysia 34,672 49,065 29,312
- Indonesia 42,583 25,284 9,774
- Other 28,824 14,455 16,992
-------- -------- --------
Total $202,716 $200,410 $280,292
======== ======== ========
</TABLE>
16. RELATED PARTY TRANSACTIONS
Effective November 10, 1988, T. Coleman Andrews', III employment agreement
to serve as Chief Executive Officer and President of WorldCorp, which was
originally entered into in August 1986, was extended an additional five years to
August 1, 1994. The contract will automatically be extended annually at the end
of the term of the agreement unless either party provides a twelve month
advance, written notice of their intent to terminate the agreement. The Company
and Mr. Andrews did not provide written notice of their intent to terminate the
Agreement, and therefore, Mr. Andrews' employment agreement has been
automatically extended through August 1995. In connection with the employment
agreement, Mr. Andrews also entered into a Supplemental Incentive agreement with
WorldCorp that provides for a bonus in the amount of $1,300,000 plus interest
earned at 8.91% to be paid to Mr. Andrews on August 1, 1994 provided he is still
an employee of WorldCorp at that time. This amount is included in accrued wages
in the accompanying 1993 consolidated balance sheet. In connection with this
employment arrangement, the Company loaned Mr. Andrews $1,300,000 on January
10, 1989. Mr. Andrews executed and delivered to the Company a full recourse
promissory note dated January 10, 1989. The principal
40
<PAGE>
amount of the note is due and payable on December 31, 1994 and interest accrues
quarterly and is payable at maturity at a fixed rate of 8.91% per annum. This
amount is included in prepaid expenses and other current assets in the
accompanying 1993 consolidated balance sheet.
On September 10, 1990, the Board of Directors of WorldCorp unanimously
authorized WorldCorp to enter into and consummate a Stock Purchase Agreement
dated as of September 14, 1990 (the "Stock Purchase Agreement"), under which
WorldCorp agreed to purchase Series A Preferred Stock ("Preferred Stock") issued
by US Order. The Board of Directors of the Company authorized the purchase of
US Order, a development stage company with limited revenue to date, as part of
the Company's continuing efforts to diversify its interests. Mr. Gorog is
Chairman of the Board of US Order and is Chairman of the Board of Directors of
WorldCorp. Mr. Gorog, together with certain members of his immediate family
(the "Founders"), were majority owners of US Order. On July 1, 1992, the
Company purchased an incremental 6% of the preferred stock of US Order for $1.0
million which increased the Company's ownership in US Order to 51%.
Accordingly, US Order's financial position, results of operations, and statement
of cash flows have been consolidated in the accompanying financial statements
for the period subsequent to July 1, 1992. All significant intercompany
balances have been eliminated. Prior to July 1, 1992, WorldCorp's investment
was accounted for using the equity method. As of December 31, 1993, WorldCorp
had purchased for $5.3 million a total of 5,204,082 shares of US Order preferred
stock, which are convertible into common stock. In December 1992, WorldCorp
agreed to convert $7.6 million in principal amount of loans from WorldCorp to US
Order into 7,550 shares of redeemable preferred stock of US Order. The
preferred stock pays quarterly dividends at a rate of 7.5%. As part of this
transaction, WorldCorp's option to purchase additional shares of the capital
stock of US Order was extended from September 15, 1993 to December 15, 1994, and
WorldCorp received an exclusive license to apply US Order's transaction
processing technology to lottery and gaming applications. In December 1993, US
Order completed a private equity placement for $12.0 million with financial and
strategic partners. WorldCorp invested $1.7 million in this equity offering.
Following this transaction, WorldCorp owns 46% of the voting stock of US Order.
US Order is still in the developmental stage and, therefore, the gain resulting
from this transaction of $0.8 million was recorded as additional paid-in-capital
in the accompanying consolidated financial statements. Additionally, the
intangible asset previously recorded by the Company was eliminated. WorldCorp
and the financial and strategic partners of US Order own stock which carry
liquidation preferences pursuant to which WorldCorp is currently entitled to 59%
of any distributions. The results of operations of US Order are allocated based
on liquidation preferences. WorldCorp provided consulting services to assist US
Order's management during 1993, 1992 and 1991. US Order paid consulting fees to
WorldCorp equal to the cost of the salary and benefits of WorldCorp personnel
who performed these services.
W. Jerrold Scoutt, Jr., a member of the Board of Directors of WorldCorp, is a
member of the law firm of Zuckert, Scoutt & Rasenberger, Washington, D.C.
Zuckert, Scoutt & Rasenberger rendered legal services to the Company during
1993, 1992 and 1991.
17. COMMITMENTS AND CONTINGENCIES
Litigation and Claims
On August 11, 1992, WorldCorp, World Airways, and certain other commercial
paper customers of Washington Bancorporation ("WBC") were served with a
complaint by WBC as debtor-in-possession by and through the Committee of
Unsecured Creditors of WBC (the "Committee"). The complaint arises from
investment proceeds totaling $6.8 million received by WorldCorp and World
Airways from WBC in May 1990 in connection with the maturity of WBC commercial
paper. The Committee seeks to recover $2.0 million from WorldCorp and $4.8
million from World Airways on the grounds that these payments constituted
voidable preferences and/or fraudulent conveyances under the Federal Bankruptcy
Code and under applicable state law. The Company has filed a motion to dismiss
this complaint and intends to defend vigorously against these claims. No
assurances can be given of the eventual outcome of this litigation.
On February 3, 1992, the US Patent and Trademark Office ("PTO") issued an
order granting a request to reexamine US Order's patent based on a previously
issued patent to a third party. On April 3, 1993, the PTO completed its
reexamination and approved the amended claims of US Order's patent. Other claims
of patent infringement have also been asserted or threatened against US Order.
Although US Order and its counsel believe that US Order has substantial defenses
to any claim of infringement, there can be no assurances that US Order would
prevail in any such proceedings. In addition, upon the occurrence of certain
events such as the bankruptcy of US
41
<PAGE>
Order, an investor of the company receives a fully paid, non exclusive worldwide
license to certain of US Order's licensed technology.
The Company is involved in various other claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position.
Letters of Credit
At December 31, 1993 and 1992, restricted cash and short-term investments
included customer deposits held in escrow and cash pledged as collateral for
various letters of credit facilities issued by a bank on the Company's behalf
totaling $1.0 million and $2.9 million, respectively, with expiration dates
principally occurring in 1994.
Options on MD-11 Aircraft
The Company has options to purchase four MD-11 aircraft, which, if exercised,
would require a downpayment equal to five percent of the purchase price in July
1994.
18. SUBSEQUENT EVENTS
On October 30, 1993, WorldCorp, Inc., World Airways, Inc., and MHS Berhad
("MHS") entered into a Stock Purchase Agreement (the "Stock Purchase Agreement")
pursuant to which MHS, subject to satisfactory completion of its due diligence
investigations, agreed to purchase 24.9% of World Airways' common stock for
$27.4 million in cash. Under this Agreement, World Airways would receive upon
closing $12.4 million to fund its working capital requirements. The remaining
$15.0 million would be paid to WorldCorp to add to its cash reserves. The
Company received $2.7 million prior to December 31, 1993 as an advance on the
sales price. At the time of the signing of the Stock Purchase Agreement, World
Airways was a wholly-owned subsidiary of WorldCorp. On February 28, 1994,
WorldCorp, World Airways, and MHS concluded the transaction according to the
terms described above. As a result of this transaction, WorldCorp will
recognize a gain of approximately $27.0 million in the first quarter of 1994.
Under this agreement, if at any time after October 30, 1996 World Airways
registers its common stock under the Securities Act of 1993, MHS has the right
to demand the registration of its shares. Also, if without the prior written
consent of MHS: (1) World Airways sells all or substantially all of its
business; or (2) World Airways fundamentally changes its line of business, then
MHS has the option (a) to sell or transfer all or a portion of its shares to a
third party notwithstanding the aforementioned three-year holding period; and/or
(b) to require WorldCorp to purchase all or part of MHS's shares at fair market
value. Fair market value may not be less than the aggregate of the costs borne
by MHS in acquiring and holding its World Airways shares. Management has
indicated that it does not intend to take any such actions without the prior
consent of MHS.
MHS recently announced that it will acquire 32% of Malaysian Airline System
Berhad ("MAS"), the flag carrier of Malaysia. MAS is one of World Airways'
largest commercial customers.
19. UNAUDITED QUARTERLY RESULTS
The results of the Company's quarterly operations for 1993 and 1992 are as
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------
March 31 June 30 September 30 December 31 Total Year
-------- ------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
1993
Revenues $ 28,037 $ 86,576 $ 44,253 $ 43,850 $ 202,716
Operating income (loss) (12,634) 11,384 (12,852) (8,706)/(a)/ (22,808)
Earnings (loss) before income
taxes and minority interest (15,413) 8,706 (15,460) (11,530) (33,697)
Net earnings (loss) (14,188) 9,813 (15,431) ( 11,139) (30,945)
</TABLE>
42
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Primary earnings (loss)
per common share:
Net earnings (loss) $ (1.00) $ .61 $ (1.06) $ (.74) $ (2.12)
======== ======= ======== ======== ========
Fully diluted earnings (loss)
per common share:
Net earnings (loss) $(1.00) $ .50 $ (1.06) $ (.74) $ (2.12)
====== ======== ======= ======= ========
<CAPTION>
Quarter Ended
------------------------------------------------------------
March 31 June 30 September 30 December 31 Total Year
-------- ------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
1992
Revenues
As previously reported/(b)/ $ 49,332 $ 85,284 $ 54,841 $ 37,580
Reclassification/(c)/ (12,906) (13,721) -- --
-------- -------- -------- -------
As restated 36,426 71,563 54,841 37,580 $ 200,410
Operating income (loss)
As previously reported (3,855) 10,165 (35,552) (7,652)
Adjustment /(d)/ (41) (41) (41) --
Reclassification /(c)/ 18 144 -- --
-------- -------- -------- ------- ----------
As restated (3,878) 10,268 (35,593) (7,652) (36,855)
Earnings (loss) before extraordinary
item and change in accounting
principle
As previously reported (6,370) 7,424 (35,995) (7,827)
Adjustment /(d)/ (41) (41) (41) --
-------- -------- -------- ------- ----------
As restated (6,411) 7,383 (36,036) (7,827) (42,891)
Extraordinary item 214 (1,234) (2,233) -- (3,253)
Change in accounting principle
As previously reported -- -- -- --
Adjustment /(d)/ (1,973) -- -- -- (1,973)
-------- -------- -------- ------- ----------
As restated (1,973) -- -- -- (1,973)
Net earnings (loss)
As previously reported (6,156) 6,190 (38,228) (7,827)
Adjustment /(d)/ (2,014) (41) (41) --
-------- -------- -------- -------
As restated (8,170) 6,149 (38,269) (7,827) (48,117)
Primary earnings (loss) per
common share:
Earnings (loss) before extra-
ordinary item and change
in accounting principle
As previously reported $ (0.45) $ 0.46 $ (2.53) $ (0.55)
Adjustment /(d)/ -- (0.01) (0.01) --
-------- -------- -------- -------
As restated $ (0.45) $ 0.45 $ (2.54) $ (0.55) $ (3.02)
======== ======== ======== ======= ==========
Net earnings (loss)
As previously reported (0.44) 0.38 (2.69) (0.55)
Adjustment /(d)/ (0.14) -- (0.01) --
-------- -------- -------- -------
As restated $ (0.58) $ 0.38 $ (2.70) $ (0.55) $ (3.39)
======== ======== ======== ======= ==========
</TABLE>
43
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Fully diluted earnings (loss)
per common share:
Earnings (loss) before extra-
ordinary item and change
in accounting principle
As previously reported $ (0.45) $ 0.42 $ (2.53) $ (0.55)
Adjustment /(d)/ -- -- (0.01) --
-------- -------- -------- -------
As restated $ (0.45) $ 0.42 $ (2.54) $ (0.55) $ (3.02)
======== ======== ======== ======= ==========
Net earnings (loss)
As previously reported (0.44) 0.36 (2.69) (0.55)
Adjustment /(d)/ (0.14) -- (0.01) --
-------- -------- -------- -------
As restated $ (0.58) $ 0.36 $ (2.70) $ (0.55) $ (3.39)
======== ======== ======== ======= ==========
</TABLE>
(a) Includes the effects of the aircraft lease termination expenses of
approximately $2.7 million and a write-down of $1.5 million for older
generation transaction processing equipment.
(b) Included in total revenue in 1992 is $4.1 million relating to settlements
from AMC of two contract claims ($2.4 million in the second quarter and
$1.7 million in the fourth quarter).
(c) As the result of the sale of KeyAir on October 23, 1992, the results of
KeyAir's operations for the year ended December 31, 1992 have been
presented on a separate line within operating expenses.
(d) Adjustment is the result of adopting Statement of Financial Accounting
Standards No. 106, Employer's Accounting for Postretirement Benefits
Other Than Pensions effective January 1, 1992. The adoption of FAS# 109
as of January 1, 1992 had no impact on previously reported results.
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
WorldCorp, Inc. :
We have audited the accompanying consolidated balance sheets of WorldCorp, Inc.
and subsidiaries (WorldCorp) as of December 31, 1993 and 1992, and the related
consolidated statements of operations, changes in common stockholders' deficit
and cash flows for each of the years in the three-year period ended December 31,
1993. In connection with our audits of the consolidated financial statements,
we also have audited the related financial statement schedules as listed in Item
14(a)2 herein. These consolidated financial statements and financial statement
schedules are the responsibility of WorldCorp's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of WorldCorp, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information set forth
therein.
As discussed in Notes 13 and 14 to the consolidated financial statements,
effective January 1, 1992, WorldCorp adopted the provisions of the Financial
Accounting Standards Board's Statements of Financial Accounting Standards No.
106,"Employers' Accounting for Postretirement Benefits Other Than Pensions", and
No. 109,"Accounting for Income Taxes".
KPMG PEAT MARWICK
Washington, D.C.
March 14, 1994
45
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Directors
The Company incorporates herein by reference the information concerning
directors contained in its Notice of Annual Stockholder's Meeting and Proxy
Statement to be filed within 120 days after the end of the Company's fiscal year
(the "1994 Proxy Statement").
Executive Officers
The following table sets forth the names and ages of all executive officers
of the Company and all positions and offices within the Company presently held
by such executive officers:
<TABLE>
<CAPTION>
Name Age Position Held
- ---- --- -------------
<S> <C> <C>
T. Coleman Andrews, III 39 Chief Executive Officer and President
William F. Gorog 68 Chief Executive Officer, US Order
John H. DeWitt 60 President - World Flight Crew Services
Charles W. Pollard 36 President - World Airways
A. Scott Andrews 35 Chief Financial Officer
Andrew M. Paalborg 38 Vice President - Legal and General Counsel
</TABLE>
Mr. T. Coleman Andrews, III was elected Chief Executive Officer, President
and a director of World Airways in August 1986 and of WorldCorp in June 1987.
From 1983 through 1986, he was Chairman of Key Holding Corporation and its
principal operating subsidiary, KeyAir. From 1978 through 1986, he was
affiliated with Bain & Company, an international management consulting firm. At
Bain, he was elected partner in 1982 and was a founding general partner of Bain
Capital Fund, a private venture capital partnership, in 1984. Prior to his
experience with Bain & Company, Mr. T. Coleman Andrews, III served in several
appointed positions in the Ford Administration. He is the brother of A. Scott
Andrews.
Mr. William F. Gorog has served as Chief Executive Officer of US Order
since May 1, 1990. He was elected a director of WorldCorp in April 1989 and was
elected Vice-Chairman of the WorldCorp Board of Directors in October 1992. From
October 1987 until founding US Order, he has served as Chairman of the Board of
Arbor International, an investment management firm. From 1982 to 1987, he
served as President and Chief Executive Officer of Magazine Publishers of
America, a trade association representing the principal consumer publications in
the United States. During the Ford Administration, Mr. Gorog served as Deputy
Assistant to the President for Economic Affairs and Executive Director of the
White House Council on International Economic Policy. Prior to that time, he
founded and served as Chief Executive Officer of Data Corporation, which
developed the LEXIS and NEXIS information systems for legal and media research.
He currently serves as a director of NationsBank (Maryland), a bank holding
company, Verifone, Inc., a manufacturer of point of sale terminals, and Fiskars,
Inc., a Finnish manufacturing company.
46
<PAGE>
Mr. John H. DeWitt was elected President of World Flight Crew Service in
November of 1992. From June 1989 until October 1992 he was Vice President,
Flight Operations of World Airways, Inc. Mr. DeWitt served as Vice President,
Operations Planning, of World Airways, Inc. from September 1988 until May 1989.
Since joining World Airways, Inc. in 1967 he has served in several flight
operations management positions including that of System Chief Pilot.
Mr. Charles W. Pollard was elected President of World Airways in May 1992.
He was elected General Counsel and Secretary of WorldCorp in October 1987, and
Vice President, Administration and Legal Affairs in October 1990. From August
1983 to October 1987, he practiced law in the corporate department of Skadden,
Arps, Slate, Meagher & Flom, Washington, D.C. Mr. Pollard is a member of the
District of Columbia Bar.
Mr. A. Scott Andrews joined WorldCorp as Treasurer in August 1987 and was
elected Vice President of the Company in April 1988 and Chief Financial Officer
in May, 1992. From August 1985 to February 1987, he was Vice President, Finance
of Presidential Airlines. From September 1980 to August 1985, he was associated
with J.P. Morgan & Co., most recently as Assistant Vice President. He is the
brother of T. Coleman Andrews, III.
Mr. Andrew M. Paalborg joined World Airways as General Counsel in October
1989 and was elected Vice President, Legal and General Counsel of WorldCorp in
May 1992. From 1984 to 1989 Mr. Paalborg was an associate with Hogan & Hartson,
McLean, Virginia. From 1982 to 1984 he was an associate with Morgan, Lewis &
Bockius, New York, New York. Mr. Paalborg received his law degree cum laude
from Georgetown University in 1982 and is a member of the New York, Virginia and
District of Columbia Bars.
Beneficial Ownership Reporting
The Company incorporates herein by reference the information required by
Item 405 of Regulation S-K contained in its 1994 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
- ---------------------------------
The Company incorporates herein by reference the information concerning
executive compensation contained in the 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------------
The Company incorporates herein by reference the information concerning
security ownership of certain beneficial owners and management contained in the
1994 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------------------------------------------------------------
The Company incorporates herein by reference the information concerning
certain relationships and related transactions contained in the 1994 Proxy
Statement.
47
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial Statements
The following consolidated financial statements of WorldCorp, Inc. and
subsidiaries are filed herewith:
Consolidated Balance Sheets, December 31, 1993 and 1992
Consolidated Statements of Operations, Years Ended
December 31, 1993, 1992, and 1991
Consolidated Statements of Changes in Common Stockholders'
Deficit, Years Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows, Years Ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedules
Schedule
Number
--------
II. Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees other than Related Parties
V. Property, Plant and Equipment
VI. Accumulated Depreciation and Amortization of Property,
Plant and Equipment
VIII. Valuation and Qualifying Accounts
IX. Short-Term Borrowings
NOTE: All other schedules are omitted because the requisite
information is either presented in the financial statements or
notes thereto or is not present in amounts sufficient to require
submission of the schedules.
48
<PAGE>
(b) Reports on Form 8-K
None filed.
* * * * * * * * * * * * * *
*
Status of Prior Documents
WorldCorp's Annual Report on Form 10-K for the year ended December 31, 1993,
at the time of filing with the Securities and Exchange Commission, shall modify
and supersede all prior documents filed pursuant to Sections 13, 14, and 15(d)
of the Securities Exchange Act of 1934 for purposes of any offers or sales of
any securities after the date of such filing pursuant to any Registration
Statement or Prospectus filed pursuant to the Securities Act of 1933, as
amended, which incorporates by reference such Annual Report on Form 10-K.
(3) Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C> <C>
3.1 Certificate of Incorporation of Incorporated WorldCorp, Inc. dated March 16, by reference 1987. Incorporated
[Filed as Exhibit 3.1 to WorldCorp, Inc.'s Registration Statement on Form S-4 (Commission File by reference
No. 33012735) filed on March 19, 1987 and incorporated herein by reference.]
3.2 Amended and Restated Bylaws of WorldCorp, Inc. dated November 13, 1987. (Filed as Exhibit 3.1 Incorporated
to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1987 by reference
and incorporated herein by reference.)
4.1 Indenture dated as of August 1, 1987 between WorldCorp, Inc. and Norwest Bank of Minneapolis, Incorporated
N.A. (Filed as Exhibit 4.1 to Amendment No. 2 to WorldCorp, Inc.'s Form S-2 Registration by reference
Statement (Commission File No. 33-1358276) filed August 13, 1987 and incorporated herein by
reference.]
4.2 First Supplemental Indenture dated Incorporated as of March 1, 1988 between WorldCorp, Inc. Incorporated
and Norwest Bank of Minneapolis, N.A. (Filed as Exhibit 4.2 to WorldCorp, Inc.'s Annual by reference
Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein
by reference. )
10.1 Warrant Agreement between WorldCorp, Inc. and Drexel Burnham Lambert, Incorporated ("Drexel") Incorporated
dated as of June 30, 1988. (Filed as Exhibit 10.1 to WorldCorp, Inc.'s Form 10-Q for the by reference
quarter ended March 31, 1989 and incorporated herein by reference.)
10.2 Employment Agreement dated as of November 10, 1988 between WorldCorp, Inc. and T. Coleman Incorporated
Andrews, III. (Filed as Exhibit 10.4 to WorldCorp, Inc.'s Annual Report on Form 10-K for by reference
the fiscal year ended December 31, 1988 and incorporated herein by reference.)
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C> <C>
10.4 Aircraft Lease Agreement dated as of Incorporated March 30, 1987 between World Airways, Inc. Incorporated
and The Connecticut National Bank, not in its individual capacity, but solely as by reference
Owner Trustee. (Filed as Exhibit 10.34 to World Airways, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1986 and incorporated herein by reference.)
10.5 Merger Agreement and Plan of Reorganization dated as of April 28, 1987 by and among World Incorporated
Airways, Inc., World Merger Corporation and WorldCorp, Inc. [Filed as Exhibit 10.50 to by reference
WorldCorp, Inc.'s Form S-2 Registration Statement (Commission File No. 33-1358276) filed on
July 31, 1987 and incorporated herein by reference.]
10.6 Assumption Agreement dated as of June 23, 1987 among WorldCorp, Inc., World Airways, Inc. and Incorporated
T. Coleman Andrews, III. [Filed as Exhibit 10.51 to WorldCorp, Inc.'s Form S-2 Registration by reference
Statement (Commission File No. 33-1358276) filed on July 31, 1987 and incorporated herein by
reference.]
10.7 Assumption Agreement dated as of Incorporated June 23, 1987 among WorldCorp, Inc., World Incorporated
Airways, Inc. and D. Fraser Bullock. [Filed as Exhibit 10.52 to WorldCorp, by reference
Inc.'s Form S-2 Registration Statement (Commission File No. 33-1358276) filed on July 31,
1987 and incorporated herein by reference.]
10.8 Guaranty and Amendment Agreement dated as of June 23, 1987 between WorldCorp, Inc. and The Incorporated
Connecticut National Bank, a national banking association, as Owner Trustee, with Burnham by reference
Leasing Corporation, as Owner Participant. [Filed as Exhibit 10.55 to WorldCorp, Inc.'s Form
S-2 Registration Statement (Commission File No. 33-1358276) filed July 31, 1987 and
incorporated herein by reference.]
10.9 Form of Assumption Agreement dated as of June 23, 1987 among WorldCorp, Inc., World Airways, Incorporated
Inc. and each Indemnified Party. [Filed as Exhibit 10.60 to WorldCorp, Inc.'s Form S-2 by reference
Registration Statement (Commission File No. 33-1358276) filed on July 31, 1987 and
incorporated herein by reference.]
10.10 Agreement between World Airways, Inc. and Cockpit Crewmembers represented by International Incorporated
Brotherhood of Teamsters. [Filed by reference as Exhibit 10.66 to WorldCorp, Inc.'s Form S-3 by reference
Registration Statement (Commission File No. 2-91998) filed on December 10, 1987 and
incorporated herein by reference.]
10.11 Agreement between World Airways, Inc. and Flight Attendants represented by Incorporated
International Brotherhood of Teamsters. [Filed reference as Exhibit 10.67 to by reference
WorldCorp, Inc.'s Form S-3 Registration Statement (Commission File No. 2-91998) filed on
December 10, 1987 and incorporated herein by reference.]
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C> <C>
10.12 Agreement Incorporated between World Airways, Inc. and Mechanics represented by the by Incorporated
reference International Brotherhood of Teamsters. (Filed as Exhibit 10.41 to WorldCorp, by reference
Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and
incorporated herein by reference.)
10.13 Agreement between World Airways, Inc. and Stock Clerks and Store Room Employees represented Incorporated
by the International Brotherhood of Teamsters. (Filed as Exhibit 10.42 to WorldCorp, Inc.'s by reference
Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated
herein by reference.)
10.14 Office Lease- The Hallmark Building dated as of May 16, 1987 between WorldCorp, Inc. and GT Incorporated
Renaissance Centre Limited Partnership. (Filed as Exhibit 10.36 to WorldCorp, Inc.'s Annual by reference
Report on Form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by
reference.)
10.15 Lease Amendment dated as of June 27, 1989 between WorldCorp, Inc. and GT Renaissance Centre Incorporated
Limited Partnership. (Filed as Exhibit 10.37 to WorldCorp, Inc.'s Annual Report on Form 10-K by reference
for the fiscal year ended December 31, 1989 and incorporated herein by reference.)
10.16 Office Lease- The Hallmark Building dated as of September 20, 1989 between World Airways, Incorporated
Inc. and GT Renaissance Centre Limited Partnership. (Filed as Exhibit 10.38 to WorldCorp, by reference
Inc's Annual Report on form 10-K for the fiscal year ended December 31, 1989 and incorporated
herein by reference.)
10.17 Warrant Agreement dated as of July 22, 1989 between WorldCorp, Inc. and Charles W. Pollard. Incorporated
(Filed as Exhibit 10.45 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year by reference
ended December 31, 1989 and incorporated herein by reference.)
10.18 Warrant Agreement dated as of July 22, 1989 between WorldCorp, Inc. and T. Coleman Andrews. Incorporated
(Filed as Exhibit 10.46 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year by reference
ended December 31, 1989 and incorporated herein by reference.)
10.19 Warrant Agreement dated as of February 23, 1990 between WorldCorp, Inc. and D. Fraser Incorporated
Bullock. (Filed as Exhibit 10.47 to WorldCorp, Inc.'s Annual Report on Form 10-K for the by reference
fiscal year ended December 31, 1989 and incorporated herein by reference.)
10.21 Amendment No. 1 to WorldCorp Inc. Employee Savings and Stock Ownership Plan. (Filed as Incorporated
Exhibit 10.50 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended by reference
December 31, 1989 and incorporated herein by reference.)
10.20 WorldCorp, Inc. Employee Savings and Stock Ownership Plan. (Filed as Exhibit 10.49 to WorldCorp. Incorporated
Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and by reference
incorporated herein by reference.)
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C> <C>
10.22 Loan and Security Agreement dated as of May 24, 1989 between WorldCorp Employee Incorporated
Savings and Stock Ownership Trust and American Security Bank, N.A. (Filed as by reference
Exhibit 10.51 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1989 and incorporated herein by reference. )
10.23 Guaranty Agreement dated as of May 24, 1989 by WorldCorp, Inc. for the benefit of American Incorporated
Security Bank, N.A. (Filed as Exhibit 10.52 to WorldCorp, Inc.'s Annual Report on Form 10-K by reference
for the fiscal year ended December 31, 1989 and incorporated herein by reference.)
10.24 Guarantor's Security Agreement dated as of May 24, 1989 between WorldCorp, Inc. and American Incorporated
Security Bank, N.A. (Filed as Exhibit 10.53 to WorldCorp, Inc.'s Annual Report on Form 10-K by reference
for the fiscal year ended December 31, 1989 and incorporated herein by reference.)
10.25 Warrant Agreement dated as of August 25, 1986 between World Airways, Inc. and T. Coleman Incorporated
Andrews, III. [Filed as Exhibit 10.13 to WorldCorp, Inc.'s Form S-4 Registration Statement by reference
(Commission File No. 33-12735), filed March 19, 1987 and incorporated herein by reference.]
10.26 Warrant Agreement dated as of August 25, 1986 between World Airways, Inc. and D. Fraser Incorporated
Bullock. [Filed as Exhibit 10.14 to WorldCorp, Inc.'s Form S-4 Registration Statement by reference
(Commission File No. 33-12735), filed March 19, 1987 and incorporated herein by reference.]
10.27 Aircraft Warranty Bill of Sale dated as of January 15, 1991 between World Airways, Inc. and Incorporated
First Security Bank of Utah, N.A., not in its individual capacity, but solely as Owner by reference
Trustee. (Filed as Exhibit 10.46 to WorldCorp, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 and incorporated herein by reference.)
10.28 Aircraft Lease Agreement dated as of January 15, 1991 between World Airways, Inc. and First Incorporated
Security Bank of Utah, N.A., not in its individual capacity, but solely as Owner Trustee. by reference
(Filed as Exhibit 10.47 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1990 and incorporated herein by reference.)
10.29 Loan and Security Agreement dated as of February 26, 1992 between WorldCorp, Inc. and US Incorporated
Order Incorporated. (Filed as Exhibit 10.38 to WorldCorp, Inc.'s Annual Report on Form 10-K by reference
for the fiscal year ended December 31, 1991 and incorporated herein by reference.)
10.30 Aircraft Lease Agreement I dated as of February 12, 1992 between McDonnell Douglas Incorporated
Finance Corporation and World Airways, Inc. (Filed as Exhibit 10.39 to WorldCorp, Inc.'s by reference
Annual Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated
herein by reference.)
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<S> <C> <C>
10.31 Aircraft Lease Agreement II dated as of February 12, 1992 between McDonnell Douglas Finance Incorporated
Corporation and World Airways, Inc. (Filed as Exhibit 10.40 to WorldCorp, Inc.'s Annual by reference
Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.)
10.32 Aircraft Engine Purchase Agreement dated as of April 26, 1991 between Terandon Leasing Incorporated
Corporation and World Airways, Inc. (Filed as Exhibit 10.41 to WorldCorp, Inc.'s Annual by reference
Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.)
10.33 Aircraft Engine Lease Agreement dated as of April 26, 1991 between Terandon Leasing Incorporated
Corporation and World Airways, Inc. (Filed as Exhibit 10.42 to WorldCorp, Inc.'s Annual by reference
Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.)
10.34 Guaranty Agreement I dated as of February 12, 1992 between McDonnell Douglas Finance Incorporated
Corporation and World Airways, Inc. (Filed as Exhibit 10.43 to WorldCorp, Inc.'s Annual by reference
Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.)
10.35 Guaranty Agreement II dated as of February 12, 1992 between McDonnell Douglas Finance Incorporated
Corporation and World Airways, Inc. (Filed as Exhibit 10.44 to WorldCorp, Inc.'s Annual by reference
Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.)
10.36 Series A Preferred Stock Purchase Agreement dated as of September 14, 1990 between US Order, Incorporated
Inc. and WorldCorp, Inc. (Filed as Exhibit 10.45 to WorldCorp, Inc.'s Annual Report on Form by reference
10-K for the fiscal year ended December 31, 1991 and incorporated herein by reference.)
10.37 Stock Restriction Agreement dated as of September 14, 1990 between WorldCorp, Inc., William Incorporated
F. Gorog, Jonathan M. Gorog, Peter M. Gorog, Henry R. Nichols, William N. Melton and John by reference
Porter. (Filed as Exhibit 10.46 to WorldCorp, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 and incorporated herein by reference.)
10.38 Aircraft Lease Agreement for Aircraft Serial Number 48518 dated as of September 30, 1992 Incorporated
between World Airways, Inc. and International Lease Finance Corporation. by reference
10.39 Aircraft Lease Agreement for Aircraft Serial Number 48519 dated as of September 30, 1992 Incorporated
between World Airways, Inc. and International Lease Finance Corporation. by reference
10.40 Aircraft Lease Agreement for Aircraft Serial Number 48520 dated as of September 30, 1992 Incorporated
between World Airways, Inc. and International Lease Finance Corporation . by reference
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<S> <C> <C>
10.41 Aircraft Lease Agreement for Aircraft Serial Number 48633 dated as of September 30, 1992 Incorporated
between World Airways, Inc. and International Lease Finance Corporation. by reference
10.42 Aircraft Lease Agreement for Aircraft Serial Number 48631 dated as of September 30, 1992 Incorporated
between World Airways, Inc. and International Lease Finance Corporation . by reference
10.43 Aircraft Lease Agreement for Aircraft Serial Number 48632 dated as of September 30, 1992 Incorporated
between World Airways, Inc. and International Lease Finance Corporation. by reference
10.44 AMC contract between Air Mobility Command and World Airways, Inc. effective January 1, 1993. Incorporated
by reference
10.45 MD-11 Aircraft Charter Agreement dated as of March 18, 1993 between World Airways, Inc. and Incorporated
PT. Garuda Indonesia. by reference
10.45 DC10-30 Aircraft Charter Agreement dated as of March 18, 1993 between World Airways, Inc. and Incorporated
PT. Garuda Indonesia. by reference
10.46 Accounts Receivable Management and Security Agreement dated as of December 7, 1993 between Filed Herewith
World Airways, Inc. and BNY Financial Corporation.
10.47 Aircraft Parts Security Agreement dated as of December 7, 1993 between World Airways, Inc. Filed Herewith
and BNY Financial Corporation.
10.48 Warrant Certificate dated as of December 7, 1993 between WorldCorp, Inc. and BNY Financial Filed Herewith
Corporation.
10.49 AMC contract dated as of October 1, 1993 between Air Mobility Command and World Airways, Inc. Filed Herewith
10.50 Subscription and Preferred Stock Purchase Agreement dated as of December 20, 1993 between US Filed Herewith
Order, Inc. and Knight-Ridder, Inc.
10.51 Subscription and Preferred Stock Purchase Agreement dated as of December 21, 1993 between US Filed Herewith
Order, Inc. and WorldCorp, Inc.
10.52 Subscription and Preferred Stock Purchase Agreemet dated as of December 20, 1993 between US Filed Herewith
Order, Inc. and Jerome Kohlberg, Jr.
10.53 Subscription and Preferred Stock Purchase Agreement dated as of December 21, 1993 between US Filed Herewith
Order, Inc. and Hoechst Celanese Corporation Employee Benefit Master Trust
10.54 Series C Preferred Stock Purchase Agreement dated as of December 21, 1993 between US Order, Filed Herewith
Inc. and VeriFone, Inc.
10.55 Registration Rights Agreement dated as of December 21, 1993 between US Order, Inc. and Filed Herewith
VeriFone, Inc.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<S> <C> <C>
10.56 Technology License Agreement dated as of December 21, 1993 between US Order, Inc. and Filed Herewith
VeriFone, Inc.
10.57 Investment Agreement dated as of December 21, 1993 by and among US Order, Inc., WorldCorp, Filed Herewith
Inc., and VeriFone, Inc.
10.58 Settlement Agreement dated as of February 8, 1994 between World Airways, Inc, WorldCorp, Filed Herewith
Inc., Concord Asset Management, Inc., Concord Leasing, Inc., and The CIT Group.
10.59 Lease Agreement dated as of June 1, 1993 between World Airways, Inc. and Mattei Corporation. Filed Herewith
10.60 Lease Agreement dated as of March 30, 1993 between World Airways, Inc. and Tinicum Properties Filed Herewith
Associates Limited Partnership, as amended by First Amendment to Lease dated July 9, 1993.
10.61 Lease Agreement dated as of January 25, 1993 between World Flight Crew Services, Inc. and Filed Herewith
Sakioka Farms.
10.62 Consignment Agreement dated as of September 30, 1993 between World Airways Inc. and The Filed Herewith
Memphis Group.
10.63 Assignment and Assumption and Consent and Release for Aircraft Serial Number 47818 dated as Filed Herewith
of July 20, 1993 among World Airways, Inc., WorldCorp, Inc., McDonnell Douglas Corporation,
and McDonnell Douglas Finance Corporation.
10.64 Assignment and Assumption and Consent and Release for Aircraft Serial Number 46999 dated as Filed Herewith
of July 9, 1993 among World Airways, Inc., WorldCorp, Inc., McDonnell Douglas Corporation,
and McDonnell Douglas Finance Corporation.
10.65 Aircraft Lease Agreement for Aircraft Serial Number 48458 dated as of January 15, 1993 between Filed Herewith
World Airways, Inc. and Wilmington Trust Company/GATX Capital Corporation.
10.66 Aircraft Lease Supplement for Aircraft Serial Number 48458 dated as of April 23, 1993 between Filed Herewith
World Airways, Inc. and Wilmington Trust Company/GATX Capital Corporation.
10.67 Aircraft Spare Parts Lease Agreement dated as of April 15, 1993 between World Airways, Inc. Filed Herewith
and GATX Capital Corporation .
10.68 Amendment No. 1 To Aircraft Lease Agreement for Aircraft Serial Number 48518 dated as of Filed Herewith
November 1993 between World Airways, Inc. and International Lease Finance Corporation.
10.69 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number 48518 dated as of Filed Herewith
March 8, 1993 between World Airways, Inc. and International Lease Finance Corporation.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<S> <C> <C>
10.70 Assignment of Rights for Aircraft Serial Number 48518 dated as of March 8, 1993 between World Filed Herewith
Airways, Inc. and International Lease Finance Corporation.
10.71 Assignment of Rights for Aircraft Engines Serial Numbers P723942, P723945, and P723943 dated Filed Herewith
as of March 1, 1993 between World Airways, Inc. and International Lease Finance Corporation.
10.72 Agency Agreement for Aircraft Serial Number 48518 dated as of January 15, 1993 between World Filed Herewith
Airways, Inc. and International Lease Finance Corporation.
10.73 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number 48437 dated as of Filed Herewith
March 31, 1993 between World Airways, Inc. and International Lease Finance Corporation.
10.74 Amendment No. 3 to Aircraft Lease Agreement for Aircraft Serial Number 48437 dated as of Filed Herewith
April 15, 1993 between World Airways, Inc. and International Lease Finance Corporation.
10.75 Agency Agreement for Aircraft Serial Number 48437 dated as of January 15, 1993 between World Filed Herewith
Airways, Inc. and International Lease Finance Corporation.
10.76 Assignment of Rights for Aircraft Serial Number 48437 dated as of April 15, 1993 between World Filed Herewith
Airways, Inc. and International Lease Finance Corporation.
10.77 Assignment of Rights for Aircraft Engines Serial Numbers P723913, P723912, and P723914 dated Filed Herewith
as of April 15, 1993 between World Airways, Inc. and International Lease Finance Corporation.
10.78 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number 48520 dated as of Filed Herewith
April 22, 1993 between World Airways, Inc. and International Lease Finance Corporation.
10.79 Agency Agreement for Aircraft Serial Number 48520 dated as of January 15, 1993 between World Filed Herewith
Airways, Inc. and International Lease Finance Corporation.
10.80 Assignment of Rights for Aircraft Serial Number 48520 dated as of April 22, 1993 between World Filed Herewith
Airways, Inc. and International Lease Finance Corporation.
10.81 Assignment of Rights for Aircraft Engines Serial Numbers P723957, P723958, and P723956 dated Filed Herewith
as of March 1, 1993 between World Airways, Inc. and International Lease Finance Corporation.
10.82 Aircraft Charter Agreement dated as of July 24, 1993 between World Airways, Inc. and Malaysian Filed Herewith
Airline System Berhad.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<S> <C> <C>
10.83 Amendment No. 1 to Aircraft Lease Agreement for Aircraft Serial Numbers 46835, 46837, and Filed Herewith
46820 dated as of May 14, 1993 between World Airways, Inc. and The Connecticut National Bank
(assigned to Federal Express Corporation).
10.84 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Numbers 46835, 46837, and Filed Herewith
47820 dated as of May 14, 1993 between World Airways, Inc. and The Connecticut National Bank
(assigned to Federal Express Corporation).
10.85 Return Agreement for Aircraft Serial Numbers 47818 and 46999 dated as of July 9, 1993 among Filed Herewith
World Airways, Inc., WorldCorp, Inc., International Lease Finance Corporation, McDonnell
Douglas Corporation, and McDonnell Douglas Finance Corporation
11.1 Statement on Calculation of Earnings Per Common Share. Filed Herewith
22.1 Subsidiaries of the Registrant WorldCorp, Inc. Filed Herewith
23.1 Consent of Independent Auditors Filed Herewith
</TABLE>
57
<PAGE>
SCHEDULE II
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
For the years ended December 31, 1993, 1992 and 1991
(in thousands)
<TABLE>
<CAPTION>
Principle Balance of Note Receivable
--------------------------------------------------------------------
End of Period
Beginning --------------------------
Name of Debtor Year of Period Additions Collections Current Noncurrent
- -------------- ---- ---------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
T. Coleman Andrews, III 1993 $1,300 $ -0- $ -0- $1,300 $ -0-
===== ===== ==== ===== =====
1992 $1,300 $ -0- $ -0- $ -0- $1,300
===== ===== ==== ===== =====
1991 $1,300 $ -0- $ -0- $ -0- $1,300/(a)/
===== ===== ==== ===== =====
</TABLE>
(a) Mr. T. Coleman Andrews, III entered into a five-year employment agreement
with the Company in November 1988. In connection with this employment
arrangement, the Company loaned him $1,300,000 on January 10, 1989. Mr.
Andrews executed and delivered to the Company a full recourse promissory
note dated January 10, 1989. The principal amount of the note is due and
payable on December 31, 1994 and interest accrues quarterly and is payable
at maturity at a fixed rate of 8.91% per annum.
58
<PAGE>
SCHEDULE V
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Other Balance
Beginning Charged to Changes Add/ At End of
Description of Period Expense Retirements (Deduct) Period
----------- --------- --------- ----------- ------------ --------
<C> <S> <C> <C> <C> <C> <C>
1993 Owned Property
--------------
Flight equipment $ 39,855 $19,250/(1)/ $ 9,718/(1)/ $ (22,775)/(2)/ $ 26,612
Other 9,103 4,152/(3)/ 1,310 (3,010) 8,935
-------- ------- ------- --------- --------
48,958 23,402 11,028 (25,785) 35,547
-------- ------- ------- --------- --------
Property under
Capital Lease
-------------
Flight equipment 2,003 9,463/(1)/ -0- -0- 11,466
Other 1,540 671 2 -0- 2,209
-------- ------- ------- --------- --------
3,543 10,134 2 -0- 13,675
-------- ------- ------- --------- --------
$ 52,501 $33,536 $11,030 $ (25,785) $ 49,222
======== ======= ======= ========= ========
1992 Owned Property
--------------
Flight equipment $ 73,521 $ 7,485/(4)/ $ 903 $ (40,248)/(6)/ $ 39,855
Other 4,878 2,347/(5)/ 68 1,946/(7)/ 9,103
-------- ------- ------- --------- --------
78,399 9,832 971 (38,302) 48,958
-------- ------- ------- --------- --------
Property under
Capital Lease
-------------
Flight equipment 2,003 -0- -0- -0- 2,003
Other 784 189 -0- 567/(8)/ 1,540
-------- ------- ------- --------- --------
2,787 189 -0- 567 3,543
-------- ------- ------- --------- --------
$ 81,186 $10,021 $ 971 $ (37,735) $ 52,501
======== ======= ======= ========= ========
1991 Owned Property
--------------
Flight equipment $113,477 $ 2,879 $42,372/(9)/ $ (463)/(10)/ $ 73,521
Other 4,331 1,150 603/(11)/ -0- 4,878
-------- ------- ------- --------- --------
117,808 4,029 42,975 (463) 78,399
-------- ------- ------- --------- --------
Property under
Capital Lease
-------------
Flight equipment 2,003 -0- -0- -0- 2,003
Other 784 -0- -0- -0- 784
-------- ------- ------- --------- --------
2,787 -0- -0- -0- 2,787
-------- ------- ------- --------- --------
$120,595 $ 4,029 $42,975 $ (463) $ 81,186
======== ======= ======= ========= ========
</TABLE>
(Continued)
59
<PAGE>
SCHEDULE V (Continued)
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(1) During 1993, $18.3 million MD-11 rotables were purchased. $9.2 million of
these rotables were sold and leased back.
(2) In 1993, an engine with a cost basis of $3.3 million and rotables with a
cost basis of $12.7 million were reclassified to assets held for sale. In
addition, three DC10-30 aircraft were returned in 1993 along with the $7.4
million in leasehold improvements which related to these aircraft.
(3) Other equipment increased by $3.2 million during 1993 due to the purchase
of ScanFone(R) terminal equipment by US Order.
(4) During 1992, $3.6 million was invested in DC10-30 leasehold improvements.
Also, $2.2 million additional DC10-30 rotables were purchased.
(5) Other equipment increased $1.5 million during 1992 due to the purchase of
ScanFone(R) terminals by US Order since WorldCorp acquired a majority
ownership interest on July 1, 1992.
(6) During 1992, eight owned B727-100 aircraft with a cost basis of $31.9
million at the beginning of 1992 were reclassified to assets held for sale.
In addition, rotables with a cost basis of $7.7 million were reclassified
to assets held for sale.
(7) Other equipment increased $2.0 million during 1992 due to the acquisition
of a majority interest in US Order. This increase was offset by a decrease
of $0.7 million due to the sale of KeyAir.
(8) Other property under capital lease increased due to the acquisition of a
majority interest in US Order.
(9) In January 1991, the Company sold and leased back a DC10-30 aircraft under
a twelve year operating lease. The cost basis of the aircraft was $37.0
million at the time of the sale-leaseback.
(10) During 1991, the cost basis of one B727-100 aircraft was reduced $392,000.
(11) In March 1991, KeyAir sold selected assets at its Las Vegas facility in
conjunction with the early termination of a domestic military contract.
The cost basis of the assets was $603,000 at the time of the sale.
60
<PAGE>
SCHEDULE VI
WORLDCORP, INC, AND CONSOLIDATED SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Other Balance
Beginning Charged to Changes Add/ At End of
Description of Period Expense Retirements (Deduct) Period
----------- --------- --------- ----------- ------------ --------
<C> <S> <C> <C> <C> <C> <C>
1993 Owned Property
--------------
Flight equipment $14,281 $4,474 $ 204 $(10,135)/(2)/ $ 8,416
Other 3,336 1,306 35 (52) 4,555
------- ------ ------ -------- -------
17,617 5,780 239 (10,187) 12,971
------- ------ ------ -------- -------
Property under
Capital Lease
-------------
Flight equipment 1,615 445 -0- -0- 2,060
Other 927 213 -0- -0- 1,140
------- ------ ------ -------- -------
2,542 658 -0- -0- 3,200
------- ------ ------ -------- -------
$20,159 $6,438/(1)/ $ 239 $(10,187) $16,171
======= ====== ====== ======== =======
1992 Owned Property
--------------
Flight equipment $19,947 $6,111/(3)/ $ 144 $(11,633)/(4)/ $14,281
Other 2,214 947 42 217 3,336
------- ------ ------ -------- -------
22,161 7,058 186 (11,416) 17,617
------- ------ ------ -------- -------
Property under
Capital Lease
-------------
Flight equipment 1,486 129 -0- -0- 1,615
Other 424 424 -0- 79 927
------- ------ ------ -------- -------
1,910 553 -0- 79 2,542
------- ------ ------ -------- -------
$24,071 $7,611 $ 186 $(11,337) $20,159
======= ====== ====== ======== =======
1991 Owned Property
--------------
Flight equipment $18,179 $6,262/(5)/ $4,494/(6)/ $ -0- $19,947
Other 2,021 717 524/(7)/ -0- 2,214
------- ------ ------ -------- -------
20,200 6,979 5,018 -0- 22,161
------- ------ ------ -------- -------
Property under
Capital Lease
-------------
Flight equipment 1,356 130 -0- -0- 1,486
Other 98 326 -0- -0- 424
------- ------ ------ -------- -------
1,454 456 -0- -0- 1,910
------- ------ ------ -------- -------
$21,654 $7,435 $5,018 $ -0- $24,071
======= ====== ====== ======== =======
</TABLE>
(Continued)
61
<PAGE>
SCHEDULE VI (Continued)
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(1) Depreciation expense does not agree to the statement of operations as a
result of the classification of depreciation on certain transaction
processing equipment.
(2) Includes $5.2 million related to DC10-30 rotables and a DC10-10 engine which
were reclassified to assets held for sale in 1993.
(3) Includes depreciation of $1.7 million for eight B727-100 series aircraft and
$1.2 million for rotables in 1992.
(4) Accumulated depreciation related to the eight B727-100 aircraft and excess
rotables was reclassified to assets held for sale in 1992.
(5) Includes depreciation of $87,000 for one DC10-30CF aircraft, $2.3 million
for eight B727-100 series aircraft and $1.2 million for rotables in 1991.
(6) In January 1991, the Company sold and leased back a DC10-30CF aircraft under
a twelve year operating lease. Accumulated depreciation on the aircraft was
$2.2 million at the time of the sale-leaseback.
(7) In March 1991, KeyAir sold selected assets at its Las Vegas facility in
conjunction with the early termination of a domestic military contract. The
accumulated depreciation of the assets was $0.5 million at the time of the
sale.
62
<PAGE>
SCHEDULE VIII
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1993, 1992 and 1991
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance
beginning costs and --accounts at end of
of period expenses written off period
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
- --------------------------------
Year ended December 31, 1993 $ 15 $ 309 $ 13 $ 311
========== ========== ========= =========
Year ended December 31, 1992 $ 408 $ 112 $ 505 $ 15
========== ========== ========= =========
Year ended December 31, 1991 $ 420 $ 476 $ 488 $ 408
========== ========== ========= =========
</TABLE>
63
<PAGE>
SCHEDULE IX
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
SHORT-TERM BORROWINGS
For the years ended December 31, 1993, 1992 and 1991
(in thousands)
<TABLE>
<CAPTION>
Stated Maximum Average Weighted
Interest Amount Amount Average
Short-term Balance at Rate at Outstanding Outstanding Interest Rate
Borrowings End of Period End of Period During Period During Period/(a)/ During Period/(a)/
- ---------- ------------- -------------- ------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
1993:
Line of Credit/(b)/ $7,069 8.00% $ 7,954 $4,840 8.00%
Line of Credit/(c)/ -0- None 10,000 4,581 6.14%
1992:
Line of Credit/(c)/ 9,300 6.50% 9,300 9,300 6.50%
1991:
Note Payable/(d)/ -0- None 3,617 2,037 9.41%
Line of Credit/(e)/ -0- None 10,000 4,708 10.36%
</TABLE>
(a) The period used to calculate averages is from the beginning of the month of
inception to the last applicable month during each year that each individual
borrowing was outstanding.
(b) A revolving line of credit, collateralized by certain receivables, for a
maximum of $8.0 million, which bears interest at the higher of the lender's
prime rate plus 2% or the federal funds rate plus 2.5%.
(c) A revolving line of credit, collateralized by certain receivables, for a
maximum of $10.0 million, which bears interest at the lessor of the LIBOR
rate plus 2.75% or the lender's prime rate plus 0.5%.
(d) A short-term loan, collateralized by $15.9 million face value of the
Company's repurchased 13 7/8% Subordinated Notes, which bears interest at
variable rates ranging from 3/4% to 1 1/4% above the broker's call money
rate.
(e) A revolving line of credit, collateralized by certain receivables, for a
maximum of $10.0 million, which bears interest at the lender's prime rate of
interest plus 3/4%.
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WORLDCORP, INC.
By
--------------------------------------
T. Coleman Andrews, III
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
- -------------------------- Chief Executive Officer, March 31, 1994
(T. Coleman Andrews, III) President and Director
(Principal Financial Officer)
- -------------------------- Chief Financial Officer March 31, 1994
(A. Scott Andrews)
- -------------------------- Director March 31, 1994
(James E. Colburn)
- -------------------------- Director and March 31, 1994
(William F. Gorog) Chairman of the Board
- -------------------------- Director March 31, 1994
(Patrick F. Graham)
- -------------------------- Director March 31, 1994
(Juan C. O'Callahan)
- -------------------------- Director March 31, 1994
(W. Jerrold Scoutt, Jr.)
</TABLE>
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WORLDCORP, INC.
By
--------------------------------------
T. Coleman Andrews, III
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ T. Coleman Andrews Chief Executive Officer, March 31, 1994
- ---------------------------- President and Director
(T. Coleman Andrews, III) (Principal Financial Officer)
/s/ A. Scott Andrews Chief Financial Officer March 31, 1994
- ----------------------------
(A. Scott Andrews)
/s/ James E. Colburn Director March 31, 1994
- ----------------------------
(James E. Colburn)
/s/ William F. Gorog Director and March 31, 1994
- ---------------------------- Chairman of the Board
(William F. Gorog)
/s/ Patrick F. Graham Director March 31, 1994
- ----------------------------
(Patrick F. Graham)
/s/ Juan C. O'Callahan Director March 31, 1994
- ----------------------------
(Juan C. O'Callahan)
/s/ W. Jerrold Scoutt, Jr. Director March 31, 1994
- ----------------------------
(W. Jerrold Scoutt, Jr.)
</TABLE>
66
<PAGE>
EXHIBIT 10.46
ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
----------------------
This Accounts Receivable Management and Security Agreement is made as of
December 7, 1993 by and between BNY FINANCIAL CORPORATION ("Lender"), having
offices at 1290 Avenue of the Americas, New York, New York 10104 and World
Airways, Inc. ("Borrower"), having its principal place of business at 13873 Park
Center Road, #490, Herndon, VA 22071.
WHEREAS, the Borrower has requested that Lender make loans and advances
available to Borrower; and
WHEREAS, Lender has agreed to make such loans and advances to Borrower, as
Borrower's sole Lender, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
and the terms and conditions contained herein, the parties hereto agree as
follows:
1. (A) General Definitions. When used in this Agreement, the following
-------------------
terms shall have the following meanings:
"Advance Rates" means the Inventory Advance Rate and the Receivables
-------------
Advance Rate.
"Affiliate" of any Person means (a) any Person (other than a Subsidiary)
---------
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such Person, or (b) any Person who is a director or officer
(i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (i) to vote 5% or more of the
securities having ordinary voting power for the election of directors of such
Person, or (ii) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Aircraft" means all aircraft owned by Borrower, whether characterized as
--------
Inventory or Equipment, together with all assets and properties of the Borrower
installed in, affixed to, customarily kept within or used in connection with
such aircraft, whether now existing or hereafter acquired or created, wherever
located and whether or not affixed thereto, including (without limitation) all
accessions, accessories, additions, air frame components, appliances,
attachments, Avionics, engines, equipment, fixtures, furnishings, instruments,
log books, maintenance records, manuals, parts and replacements.
"Aircraft Lease" means each and every current or future lease, rental
--------------
agreement or other arrangement by which any
<PAGE>
-2-
Aircraft is used by anyone other than the Borrower, if any, as the same may be
renewed, modified, amended or restated from time to time in the manner provided
therein.
"Aircraft Parts Security Agreement" means the security agreement executed
---------------------------------
by Borrower in favor of Lender with respect to the Spare Parts Inventory dated
December 7, 1993.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
-------------------
higher of (i) the Prime Rate in effect on such day and (ii) the Federal Funds
Rate in effect on such day plus 1/2 of 1%.
"Ancillary Agreements" means all agreements, instruments, and documents
--------------------
including, without limitation, the mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust agreements
whether heretofore, concurrently, or hereafter executed by or on behalf of
Borrower or delivered to Lender, relating to this Agreement or to the
transactions contemplated by this Agreement.
"Avionics" means any and all communication, computing, navigation, radar
--------
and other electronic equipment installed in, affixed or appurtenant to,
customarily kept within or used or delivered for use in connection with any
Aircraft, whether now existing or hereafter or created, wherever located and
whether or not affixed thereto, including (without limitation) the equipment
listed on Schedule 1 (B) hereto.
"Bank" means The Bank of New York.
----
"Business Day" means any day other than a day on which commercial banks in
------------
New York are authorized or required by law to close.
"Change of Ownership" means (a) any transfer (whether in one or more
-------------------
transactions) of ownership of not less than 50% of the common stock of Borrower
held by the Original Owners (including for the purposes of the calculation of
percentage ownership, any shares of common stock into which any capital stock of
Borrower held by any of the Original Owners is convertible or for which any such
shares of the capital stock of Borrower or of any other Person may be exchanged
and any shares of common stock issuable to such Original Owners upon exercise of
any warrants, options or similar rights which may at the time of calculation be
held by such Original Owners) to a Person who is neither an Original Owner nor
an Affiliate of an Original Owner or (b) any merger, consolidation or sale of
substantially all of the property or assets of Borrower.
"Closing Date" means December 7, 1993 or such other date as may be agreed
------------
upon by the parties hereto.
"Collateral" means and includes:
----------
<PAGE>
-3-
(A) all Inventory (including Spare Parts Inventory);
(B) all Equipment;
(C) all General Intangibles;
(D) all Receivables;
(E) all Aircraft;
(F) all Aircraft Leases;
(G) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software (owned by
Borrower or in which it has an interest) which at any time evidence or contain
information relating to (A), (B), (C) (D), (E) and (F) above or are otherwise
necessary or helpful in the collection thereof or realization thereupon;
(H) documents of title, policies and certificates of insurance,
securities, chattel paper, other documents or instruments evidencing or
pertaining to (A), (B), (C), (D), (E), (F) and (G) above;
(I) all guaranties, liens on real or personal property, leases,
and other agreements and property which in any way secure or relate to (A), (B),
(C), (D), (E), (F), (G) and (H) above, or are acquired for the purpose of
securing and enforcing any item thereof;
(J) (i) all cash held by Lender or its parent, subsidiaries or
affiliates as cash collateral to the extent not otherwise constituting
Collateral, all other cash or property at any time on deposit with or held by
Lender for the account of Borrower (whether for safekeeping, custody, pledge,
transmission or otherwise), (ii) all present or future deposit accounts (whether
time or demand or interest or non-interest bearing) of Borrower with Lender or
its parent, subsidiaries, or affiliates including those to which any such cash
may at any time and from time to time be credited, (iii) all investments and
reinvestments (however evidenced) of amounts from time to time credited to such
accounts, and (iv) all interest, dividends, distributions and other proceeds
payable on or with respect to (x) such investments and reinvestments and (y)
such accounts; and
(K) all products and proceeds of (A), (B), (C), (D), (E), (F),
(G), (H), (I) and (J) above (including, but not limited to, all claims to items
referred to in (A), (B), (C), (D), (E), (F), (G), (H), (I) and (J) above) and
all claims of Borrower against third parties (x) for (i) loss of, damage to, or
destruction of, and (ii) payments due or to become due under
<PAGE>
-4-
leases, rentals and hires of, any or all of (A), (B), (C), (D), (E), (F), (G),
(H), (I) and (J) above and (y) proceeds payable under, or unearned premiums with
respect to policies of insurance in whatever form.
"Contract Rate" means an interest rate per annum equal to the (i) Alternate
-------------
Base Rate (Pounds)plus (ii) two Percent (2%) provided, however, that at such
---- -----------------
time as the Inventory Sublimit has been reduced to zero, such rate shall be
reduced by 1/2 of 1%, provided further that the Contract Rate shall not at any
-------- -------
time be less than 6%.
"Credit Risk" means the risk of loss resulting solely and exclusively from
-----------
a Customer's financial inability to pay at maturity with respect to any
Receivable purchased hereunder.
"Customer" means and includes the account debtor with respect to any
--------
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.
"Default Rate" means an interest rate per annum equal to (i) the Alternate
------------
Base Rate plus (ii) five (5%); provided that if a Default occurs as a result of
----
non-compliance with Section 12(u), such rate shall increase by 1% at the end of
each 90 day period following such Default, during which the Default is not
cured.
"Dispute" means any cause asserted for nonpayment of Receivables,
-------
including, without limitation, any alleged defense, counterclaim, offset,
dispute or other claim (real or merely asserted) whether arising from or
relating to the sale of goods or rendition of services or arising from or
relating to any other transaction or occurrence.
"Early Termination Fee" shall mean $400,000 during the first year of the
---------------------
Term and $200,000 during the remainder of the original Term.
"Eligible Inventory" means Spare Parts Inventory consisting of 727 and
------------------
DC-10 aircraft parts which Lender, in its reasonable discretion, determines: (a)
is subject to the security interest of Lender and is subject to no other liens
or encumbrances whatsoever (other than Permitted Liens); (b) is in good
condition and meets all standards imposed by any governmental agency, or
department or division thereof having regulatory authority over such Inventory,
its use or sale including but not limited to the Federal Fair Labor Standards
Act of 1938 as amended, and all rules, regulations and orders thereunder; (c) is
currently either usable or salable in the normal course of Borrower's business;
and (d) is not determined
<PAGE>
-5-
to be ineligible for any other reason, provided however that there shall be
included in Eligible Inventory the Net Face Amount of Receivables arising from
sales to the Memphis Group, Inc. up to $1,000,000 outstanding at anytime.
"Eligible Receivables" means and includes each Receivable which conforms to
--------------------
the following criteria: (a) shipment of the merchandise or the rendition of
services has been completed; (b) no return, rejection or repossession of the
merchandise has occurred; (c) merchandise or services shall not have been
rejected or disputed by the Customer and there shall not have been asserted any
offset, defense, counterclaim, or Dispute; (d) such Receivable continues to be
in full conformity with the representations and warranties made by Borrower to
Lender with respect thereto; (e) Lender is, and continues to be, satisfied with
the credit standing of the Customer in relation to the amount of credit
extended, (f) such Receivable is documented by an invoice in the form of Exhibit
Y hereto or in such other form as is approved by Lender and shall not be unpaid
more than (i) ninety (90) days from invoice date or (ii) sixty (60) days from
due date; (g) less than 50% of the unpaid amount of invoices due from such
Customer remains unpaid more than sixty (60) days from due date; (h) such
Receivable is not evidenced by chattel paper or an instrument of any kind with
respect to or in payment of such Receivable unless such instrument is duly
endorsed to and in possession of Lender or represents a check in payment of a
Receivable; (i) such Receivable is not subject to any lien, other than Permitted
liens; (j) such Receivable does not arise out of transactions with any employee,
officer, agent, director, stockholder or Affiliate of Borrower provided that up
to $7,000,000.00 of Receivables outstanding at any time arising from arms-length
transactions with Malaysia Helicopter Services may be eligible if such
Receivables meet all other criteria set forth herein; (k) such Receivable is
payable to Borrower; (1) such Receivable does not arise out of a billing prior
to rendering of services and, if the Receivable arises out of a sale to any
person to which Borrower is indebted, the amount of such indebtedness, and any
anticipated indebtedness, is deducted in determining the face amount of such
Receivable; (m) such Receivable is net of any returns, discounts, claims,
credits and allowances; (n) if the Receivable arises out of contracts between
Borrower and the United States, any state, or any department, agency or
instrumentality of any of them, Borrower has so notified Lender, and, if Lender
so requests, there has been compliance with any governmental notice or approval
requirements, including without limitation, compliance with the Federal
Assignment of Claims Act; (o) such Receivable is a good and valid account
representing an undisputed bona fide indebtedness incurred by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto with
respect to an unconditional sale and delivery upon the stated terms of goods
sold by Borrower, or work, labor and/or services rendered by Borrower; and (p)
such Receivable is otherwise satisfactory to
<PAGE>
-6-
Lender as determined in good faith by Lender in its reasonable credit judgment.
"Environmental Complaint" shall have the meaning set forth in Section
-----------------------
12(e)(3).
"Equipment" means and includes all of Borrower's now owned or hereafter
---------
acquired equipment, machinery and goods (excluding Inventory), whether or not
constituting fixtures, including, without limitation: plant and office
equipment, tools, dies, parts, data processing equipment, furniture and trade
fixtures, trucks, trailers, loaders and other vehicles and all replacements and
substitutions therefore and all accessions thereto, but Equipment shall exclude
everything listed on Exhibit X.
"Equity Infusion" means an equity cash infusion of not less than
---------------
$10,000,000 whereby cash will be exchanged for the common stock of the Borrower.
"ERISA" shall have the meaning set forth in Section 12(f).
-----
"Event of Default" means the occurrence of any of the events and the
----------------
expiration of the related grace period, if any, set forth in Section 18.
"FAA" means the United States Federal Aviation Administration, the
---
Administrator thereof and any agency or instrumentality of the Federal
government of the United States succeeding to their functions.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended,
--------------------
or any subsequent legislation that amends, supplements or supersedes the Federal
Aviation Act and any reference to a provision or provisions of such Act shall
also mean and refer to any successor provisions, however designated or
distributed.
"Federal Funds Rate" means, for any day, the weighted average of the rates
------------------
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day which
is a Business Day, the average of quotations for such day on such transactions
received by The Bank of New York from three Federal funds brokers of recognized
standing selected by The Bank of New York.
"Formula Amount" shall have the meaning set forth in paragraph 2(d).
--------------
<PAGE>
-7-
"GAAP" means generally accepted accounting principles, practices and
----
procedures in effect from time to time.
"General Intangibles" means and includes all of Borrower's now owned or
-------------------
hereafter acquired general intangibles as said term is defined in the Uniform
Commercial Code in effect in the State of New York including, without
limitation, trademarks, tradenames, tradestyles, trade secrets, equipment
formulation, manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights, registrations,
contract rights, choses in action, causes of action, corporate or other business
records, inventions, designs, goodwill, claims under guarantees, licenses,
franchises, tax refunds, tax refund claims, computer programs, computer data
bases, computer program flow diagrams, source codes, object codes and all other
intangible property of every kind and nature, but General Intangibles shall
exclude everything listed on Exhibit X.
"Hazardous Discharge" shall have the meaning set forth in Section 12
-------------------
(e)(iii).
"Hazardous Substance" means, without limitation, any flammable explosives,
-------------------
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or related materials
as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New York State
------
Environmental Conservation Law or any other applicable Environmental Law and in
the regulations adopted pursuant thereto.
"Incipient Event of Default" means any act or event which, with the giving
--------------------------
of notice or passage of time or both, would constitute an Event of Default.
"Indebtedness" of a Person at a particular date shall mean all obligations
------------
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness (whether installment, serial maturity, sinking fund payment or
otherwise), debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.
<PAGE>
-8-
"Inventory" means and includes all of Borrower's now owned or hereafter
---------
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in Borrower's
business or used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents representing
them but Inventory shall exclude everything listed on Exhibit X.
"Inventory Advance Rate" shall have the meaning set forth in the definition
----------------------
of Inventory Availability.
"Inventory Availability" means the lesser of (a) the Inventory Sublimit or
----------------------
(b) 60% ("Inventory Advance Rate") of the Orderly Liquidation Value of
Borrower's Eligible Inventory.
"Inventory Sublimit" shall be $12,000,000.00 for the period commencing on
------------------
the Closing Date and ending on January 31, 1994 and thereafter such amount shall
be reduced on the first day of each month by the greater of (a) $500,000.00 or
(b) the amount of cash proceeds realized by the Borrower from the sale of Spare
Parts Inventory in the previous month.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
----
assignment, security interest, lien, charge, claim or encumbrance, or
preference, priority or other security agreement or preferential arrangement in
respect of any asset of any kind or nature whatsoever including, without
limitation, any conditional sale or other title retention agreement, any lease
having substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction.
"Loans" means the Revolving Credit Advances and all other extensions of
-----
credit hereunder.
"Matured Funds" means collected funds in excess of any outstanding
-------------
Obligations under this Agreement excluding any balances remaining under the
$12,000,000 Inventory advance made on the Closing Date.
"Matured Funds Rate" means the rate of interest, announced by Lender from
------------------
time to time, as the rate applicable to matured funds, such rate to be adjusted
automatically on the effective date of any change in such rate as announced by
Lender.
"Maximum Revolving Amount" means $20,000,000.00.
------------------------
"Net Face Amount" of Receivables means the gross face invoice amount
---------------
thereof, less returns, discounts (the calculation
<PAGE>
-9-
of which shall be determined by Lender where optional terms are given), or any
other unilateral deductions taken by Customers, and credits and allowances to
Customers of any nature.
"Net Worth" at a particular date means (a) the aggregate amount of all
---------
assets of Borrower as may be properly classified as such in accordance with GAAP
consistently applied less (b) the aggregate amount of all liabilities of the
Borrower as may be properly classified as such in accordance with GAAP
consistently applied.
"Obligations" means and includes all Loans, all advances, debts,
-----------
liabilities, obligations, covenants and duties owing by Borrower to Lender (or
any corporation that directly or indirectly controls or is controlled by or is
under common control with Lender) of every kind and description (whether or not
evidenced by any note or other instrument and whether or not for the payment of
money or the performance or non-performance of any act), direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise
now existing or hereafter arising including, without limitation, any debt,
liability or obligation owing from Borrower to others which Lender may have
obtained by assignment or otherwise and further including, without limitation,
all interest, charges or any other payments Borrower is required to make by law
or otherwise arising under or as a result of this Agreement and the Ancillary
Agreements, together with all reasonable expenses and reasonable attorneys' fees
chargeable to Borrower's account or incurred by Lender in connection with
Borrower's account whether provided for herein or in any Ancillary Agreement.
"Orderly Liquidation Value" shall mean 72.5% of the fair market value of
-------------------------
Borrower's Eligible Inventory.
"Original Owners" means WorldCorp, Inc.
---------------
"Overadvance Rate" means a rate equal to one-half (1/2%) percent per annum
----------------
in excess of the Contract Rate.
"Permitted Liens" means (i) liens of carriers, warehousemen, mechanics and
---------------
materialmen incurred in the ordinary course of business securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of Borrower in
conformity with GAAP; (ii) liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of Borrower in
conformity with GAAP, (iii) liens in favor of Lender, (iv) liens for taxes (a)
not yet due or (b) being diligently contested in good faith,
<PAGE>
-10-
provided that adequate reserves with respect thereto are maintained on the books
of Borrower in conformity with GAAP and (v) liens specified on Schedule 1 (D)
--------------
hereto.
"Person" means an individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prime Rate" means the prime commercial lending rate of The Bank of New
----------
York as publicly announced in New York, New York to be in effect from time to
time, such rate to be adjusted automatically, without notice, on the effective
date of any change in such rate. This rate of interest is determined from time
to time and is neither tied to any external rate of interest or index nor does
it necessarily reflect the lowest rate of interest actually charged to any
particular class or category of customers.
"Receivables" means and includes all of Borrower's now owned or hereafter
-----------
acquired accounts and contract rights, instruments, insurance proceeds (unless
related to property listed on Exhibit X), documents, chattel paper (unless
related to property listed on Exhibit X), letters of credit (unless related to
property listed on Exhibit X) and Borrower's rights to receive payment
thereunder, any and all rights (unless related to property listed on Exhibit X)
to the payment or receipt of money or other forms of consideration of any kind
at any time now or hereafter owing or to be owing to Borrower, all proceeds
thereof and all files in which Borrower has any interest whatsoever containing
information identifying or pertaining to any of Borrower's Receivables, together
with all of Borrower's rights to any merchandise which is represented thereby,
and all Borrower's right, title, security and guaranties with respect to each
Receivable, including, without limitation, all rights of stoppage in transit,
replevin and reclamation and all rights as an unpaid vendor, but Receivables
shall exclude everything listed on Exhibit X.
"Receivables Advance Rate" shall have the meaning set forth in the
------------------------
definition of Receivables Availability.
"Receivables Availability" means 85% ("Receivables Advance Rate") of the
------------------------
net face amount of Borrower's Eligible Receivables.
"Reports" shall have the meaning set forth in Section 14.
-------
"Retained Goods" shall have the meaning set forth in Section 8(h).
--------------
"Revolving Credit Advances" shall have the meaning set forth in paragraph
-------------------------
2(d).
<PAGE>
-11-
"Settlement Date" means three (3) Business Days after the day on which the
---------------
applicable Receivable is actually collected by Lender.
"Spare Parts Inventory" means the GE CF6-DlA airplane engine (serial number
---------------------
451-109) and DC 10 and Boeing 727 parts owned by the Borrower listed on Schedule
III to the Aircraft Parts Security Agreement.
"Subsidiary" of any Person means a corporation or other entity of whose
----------
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Term" means the Closing Date through January 7, 1996 subject to
----
acceleration upon the occurrence of an Event of Default hereunder or other
termination hereunder.
(B) Accounting Terms. Any accounting terms used in this Agreement which
----------------
are not specifically defined shall have the meanings customarily given them in
accordance with GAAP.
(C) Other Terms. All other terms used in this Agreement and defined in
-----------
the Uniform Commercial Code as adopted in the State of New York, shall have the
meaning given therein unless otherwise defined herein.
2. Sale of Receivables; Purchase Price; Accounts Receivables Management;
---------------------------------------------------------------------
Loans.
- -----
(a) Borrower hereby assigns and sells to Lender, as absolute owner, and
Lender hereby purchases from Borrower all Receivables existing on and created
after the date hereof, which arise from Borrower's sale of merchandise or
rendition of services.
(b) Lender shall not assume the Credit Risk on any Receivables, it being
understood that the commission payable by Borrower to Lender under Section 5(e)
is in consideration of the accounts receivable management and record keeping
services to be performed by Lender and not in consideration of the assumption of
Credit Risk by Lender. Accordingly, all Receivables shall be purchased by Lender
with full recourse to Borrower in the event of non-payment thereof for any
reason whatsoever and Lender may charge back to Borrower's account the amount of
any Receivable that is not paid on its due date. The procedure manual Lender has
delivered to Borrower describes Lender's current practices and procedures
regarding its accounts receivable management and record keeping services. Lender
reserves the right to vary such practices and procedures from time to time in
its sole discretion. Lender's liability to Borrower for any alleged
<PAGE>
-12-
failure on Lender's part to provide adequate accounts receivable management and
record keeping services shall be expressly limited to a refund of commissions
paid by Borrower during the period of such alleged failure and Lender shall have
no liability of any kind whatsoever for consequential or other damages or
penalties based upon any such alleged failure on Lender's part.
(c) The purchase price of Receivable shall be the Net Face Amount thereof
less Lender's commission described In Section 5(e). The purchase price will be
credited to Borrower's account on the Settlement Date. Lender may in its
reasonable discretion deduct from the amount payable to Borrower on any
Settlement Date reserves for all Obligations then chargeable to Borrower's
account and Obligations which in Lender's reasonable discretion may be
chargeable to Borrower's account thereafter.
(d) Subject to the terms and conditions set forth herein and in the
Ancillary Agreements, Lender shall make revolving credit advances, (the
"Revolving Credit Advances") to Borrower from time to time during the Term
which, in the aggregate at any time outstanding, will not exceed the lesser of
(x) the Maximum Revolving Amount or (y) an amount equal to the sum of:
(i) Receivables Availability, plus
(ii) Inventory Availability, minus
(iii) Such reserves as Lender may reasonably deem proper and
necessary from time to time.
The sum of 2(d)(i), plus (ii) minus (iii) shall be referred to as the
"Formula Amount".
(e) Notwithstanding the limitations set forth above, Lender retains the
right to lend Borrower from time to time such amounts in excess of such
limitations as Lender may determine in its sole discretion.
(f) Borrower acknowledges that the exercise of Lender's rights
(discretionary or otherwise) hereunder may result during the term of this
Agreement in one or more increases or decreases in the Advance Rates and
Borrower hereby consents to any such increases or decreases which may limit or
restrict advances requested by Borrower.
(g) If Borrower does not pay any interest, fees, costs, charges or
commissions to Lender when due, Borrower shall thereby be deemed to have
requested, and Lender is hereby authorized at its discretion to make and charge
to Borrower's account, a Revolving Credit Advance to Borrower as of such date in
an amount equal to such unpaid interest, fees, costs, charges or commissions.
Borrower hereby acknowledges that Lender may
<PAGE>
-13-
charge to Borrower's account all amounts owing to Lender hereunder when the same
are due.
(h) Any sums expended by Lender due to Borrower's failure to perform or
comply with its obligations under this Agreement, including but not limited to
the payment of taxes, insurance premiums or leasehold obligations, shall be
charged to Borrower's account as a Revolving Credit Advance and added to the
Obligations, provided however that Lender will use its best efforts to give the
Borrower two Business Days advance notice of its intent to expend such sums.
(i) Lender will account to Borrower monthly with a statement of all Loans
and other advances, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
unless Lender is notified by Borrower in writing to the contrary within thirty
(30) days of the date each account was rendered specifying the item or items to
which objection is made.
(j) During the Term, Borrower may borrow, prepay at par and reborrow
Revolving Credit Advances, all in accordance with the terms and conditions
hereof.
(k) The aggregate balance of Loans outstanding at any time shall not
exceed the Maximum Revolving Amount. The aggregate balance of Revolving Credit
Advances outstanding at any time shall not exceed the Formula Amount.
(l) Any payments made by Customers constituting advances or deposits
which do not correspond to any Receivable purchased hereunder and which have
been indicated by the Borrower as an advance or deposit, shall be paid by Lender
to Borrower on the same Business Day as such collection (if practical) and
otherwise on the next Business Day after such collection.
(m) As long as no Event of Default exists, Matured Funds shall be paid by
Lender to Borrower at Borrower's request.
(n) Lender will use its best efforts to notify Borrower promptly of any
change in Advance Rates, eligibility of Collateral and reserves.
(o) Lender will use its best efforts to provide the Borrower daily with
an account status report reflecting the amount, if any, available for borrowing
hereunder, provided that such report shall be subject to Lenders customary
disclaimer.
3. Repayment of Loans. Borrower shall be required to (i) make a mandatory
------------------
prepayment hereunder at any time that the aggregate outstanding principal
balance of the Loans made by Lender to Borrower hereunder is in excess of the
Formula Amount in an amount equal to such excess, and (ii) repay on the
expiration of the Term (x) the then aggregate outstanding
<PAGE>
-14-
principal balance of Revolving Credit Advances made by Lender to Borrower
hereunder together with accrued and unpaid interest, fees, charges and
commissions and (y) all other amounts owed Lender under this Agreement and the
Ancillary Agreements.
4. Procedure for Revolving Credit Advances. The Borrower may request a
---------------------------------------
borrowing of Revolving Credit Advances prior to 1:00 P.M. New York time on the
Business Day of its request to incur, on that day, a Revolving Credit Advance.
All Revolving Credit Advances shall be disbursed from whichever office or other
place in the United States Lender may designate from time to time and, together
with any and all other Obligations of Borrower to Lender, shall be charged to
the Borrower's account on Lender's books. The proceeds of each Revolving Credit
Advance made by the Lender shall be made available to the Borrower on the day so
requested by way of credit to the Borrower's operating account maintained with
such bank as Borrower designated to Lender by Federal Funds Wire. Any and all
Obligations due and owing hereunder may be charged to Borrower's account and
shall constitute Revolving Credit Advances.
5. Interest; Fees; Commissions.
---------------------------
(a) Interest.
(i) Except as modified by Section 5(a)(iii) below, interest on
Revolving Credit Advances shall be payable in arrears on the last day of each
month. Interest payments hereunder may, at Lender's option be charged by Lender
to Borrower's account. Interest charges shall be computed on the unpaid balance
of the Revolving Credit Advances for each day they are outstanding at a rate per
annum equal to the Contract Rate. In the event the aggregate amount of Revolving
Credit Advances exceeds the Formula Amount for ten (10) or more days in any
month during the Term, the average daily balance of Revolving Credit Advances in
that month shall bear interest at the Overadvance Rate.
(ii) Interest shall be computed on the basis of actual days
elapsed over a 360-day year.
(iii) Upon the occurrence and during the continuance of an Event
of Default described in Section 18(a), interest shall be payable at the
Default Rate on the amount overdue.
(iv) Notwithstanding the foregoing, in no event shall interest
exceed the maximum rate permitted under any applicable law or regulation, and
if any provision of this Agreement or an Ancillary Agreement is in
contravention of any such law or regulation, such provision shall be deemed
amended to provide for interest at said maximum rate and any excess amount
shall either be applied, at Lender's option, to the outstanding
<PAGE>
-15-
Loans in such order as Lenders shall determine or refunded by Lender to
Borrower.
(v) Borrower shall pay principal, interest and all other amounts
payable hereunder, or under any Ancillary Agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any set-off or
counterclaim.
(b) Fees.
(i) Closing Fee. Upon execution of this Agreement by Borrower
-----------
and Lender, Borrower shall pay to Lender a closing fee in an amount equal to
$100,000.00. Any portion of the Deposit delivered to us pursuant to the
proposal letter remaining in your account with us after all expenses have been
applied, shall be offset against the closing fee.
(ii) Due Diligence Fee. Upon execution of this Agreement by
-----------------
Borrower and Lender, Borrower shall pay to Lender a due diligence fee in an
amount equal to $100,000.
(iii) Facility Fee. Borrower shall pay to Lender a facility fee in
------------
an amount equal to $185,000.00, payable in installments of $10,000 per month
during the first year of the Term and $5,000 per month thereafter.
(iv) Collateral Monitoring Fee. Upon Lender's performance of any
-------------------------
collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Lender and
which monitoring is undertaken by Lender or for Lender's benefit, an amount
equal to $600.00 per day, per person, for each person employed to perform such
monitoring together with all reasonable out-of-pocket costs, disbursements and
expenses incurred by the Lender and the person performing such collateral
monitoring shall be charged to Borrower's account provided that such charges
shall not exceed $10,000.00 annually.
(v) Unused Facility Fee. Borrower shall pay to Lender monthly, an
-------------------
unused facility fee, at the rate of .5% (one-half of one percent) per annum on
the difference between $8,000,000 and the average daily amount of Revolving
Credit Advances which have been made based upon Receivables.
(c) Increased Costs. In the event that a change shall occur after the
---------------
Closing Date in any applicable law, treaty or governmental regulation, or in the
interpretation or application thereof, or compliance by Lender (for purposes of
this Section 5(c), the term "Lender" shall include Lender and any corporation or
bank controlling Lender) with any request or directive (whether or not having
the force of law) from any central bank or other financial, monetary or other
authority, if such request results from such a change, shall:
<PAGE>
-16-
(i) subject Lender to any stamp, documentary or similar tax with
respect to this Agreement or any Ancillary Agreements;
(ii) impose, modify or hold applicable with respect to the Loans any
reserve, special deposit, assessment or similar requirement against assets held
by, or deposits in or for the account of, advances or loans by, or other credit
extended by, any office of Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(iii) impose on Lender any other condition with respect to this
Agreement or any Ancillary Agreements; and the result of any of the foregoing is
to increase the cost to Lender of making, renewing or maintaining its Loans
hereunder by an amount that Lender deems to be material or to reduce the amount
of any payment (whether of principal, interest or otherwise) in respect of any
of the Loans by an amount that Lender deems to be material, then, in any case
Borrower shall promptly pay Lender, upon its demand, such additional amount as
will compensate Lender for such additional cost or such reduction, as the case
may be. Lender shall certify the amount and method of calculation of such
additional cost or reduced amount to Borrower, and such certification shall be
conclusive absent manifest error. Lender shall take such reasonable steps, as
Borrower may request and at Borrower's expense, to minimize such costs provided
such steps have no adverse effect on Lender.
(d) Capital Adequacy.
----------------
(i) In the event that a change after the Closing Date in any
applicable law, rule, regulation or guideline regarding capital adequacy, or in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender (for purposes of this Section
5(d), the term "Lender" shall include Lender and any corporation or bank
controlling Lender) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, which request or directive results from such a change, has
the effect of reducing the rate of return on Lender's capital as a consequence
of its obligations hereunder to a level below that which Lender could have
achieved but for such adoption, change or compliance (taking into consideration
Lender's general policies with respect to capital adequacy) by an amount deemed
by Lender to be material, then, from time to time, Borrower shall pay upon
demand to Lender such additional amount or amounts as will compensate Lender for
such reduction. In determining such amount or amounts, Lender may use any
reasonable averaging or attribution methods. The protection of this Section
shall be
<PAGE>
-17-
available to Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition
Lender shall take such reasonable steps, as Borrower may request and at
Borrower's expense, to minimize such costs provided such steps have no adverse
effect on Lender.
(ii) A certificate of Lender setting forth such amount or amounts as
shall be necessary to compensate Lender with respect to Section 5(d) hereof and
the method of calculation thereof when delivered to Borrower shall be conclusive
absent manifest error.
(e) Commission.
----------
(i) Borrower shall pay to Lender monthly, on the fifteenth day of
each month, a commission on each invoice evidencing a Receivable purchased
hereunder during the prior month of $5.00.
(f) Matured Funds. On the last day of each month during the Term, Lender
-------------
shall credit Borrower's account with interest at the Matured Funds Rate in
effect during such month on the average daily balance during such month of any
amounts payable by Lender to Borrower hereunder which are not drawn by Borrower
on the Settlement Date.
6. Security Interest.
-----------------
(a) To secure the prompt payment to Lender of the Obligations, Borrower
hereby assigns, pledges and grants to Lender a continuing security interest in
and to the Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located (whether or not the same is subject to Article 9
of the Uniform Commercial Code). All of the Borrower's ledger sheets, files,
records, books of account, business papers and documents relating to the
Collateral shall, until delivered to or removed by Lender, be kept by Borrower
in trust for Lender until all Obligations have been paid in full. Each
confirmatory assignment schedule or other form of assignment hereafter executed
by Borrower shall be deemed to include the foregoing grant, whether or not the
same appears therein.
(b) Lender may file one or more financing statements disclosing Lender's
security interest in the Collateral without Borrower's signature appearing
thereon or Lender may sign on Borrower's behalf as provided in paragraph 13
hereof. The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement. If any Receivable
becomes evidenced by a promissory note or any other instrument for the payment
of money, Borrower will immediately deliver such instrument to Lender
appropriately endorsed.
<PAGE>
-18-
7. Representations Concerning the Collateral. Borrower represents and
-----------------------------------------
warrants (each of which such representations and warranties shall be deemed
repeated upon the making of each request for a Revolving Credit Advance and made
as of the time of each and every Revolving Credit Advance hereunder):
(a) all the Collateral (i) is owned by Borrower free and clear of all
claims, liens, security interests and encumbrances (including without limitation
any claims of infringement) except (A) those in Lender's favor and (B) Permitted
Liens and (ii) is not subject to any agreement prohibiting the granting of a
security interest or requiring notice of or consent to the granting of a
security interest;
(b) all Receivables except those with respect to which Borrower has
notified Lender at the time of assignment were not to be treated as Eligible
Receivables (i) represent complete bona fide transactions which require no
further act under any circumstances on Borrower's part to make such Receivables
payable by Customers, (ii) to the best of Borrower's knowledge, are not subject
to any present, future or contingent Disputes and (iii) do not represent bill
and hold sales, consignment sales, guaranteed sales, sale or return or other
similar understandings or obligations of any Affiliate or Subsidiary of
Borrower.
8. Covenants Concerning the Collateral. During the Term, Borrower covenants
-----------------------------------
that it shall:
(a) not dispose of any of the Collateral whether by sale, lease or
otherwise except for (i) the sale of Inventory in the ordinary course of
business, (ii) the sale of Spare Parts Inventory, (iii) the disposition or
transfer of obsolete and worn-out Equipment in the ordinary course of business
during any fiscal year having an aggregate fair market value of not more than
$200,000 and, if in excess of said amount, only to the extent that (x) the
proceeds of any such disposition are used to acquire replacement Equipment which
is subject to Lender's first priority security interest or (y) the proceeds of
which are remitted to Lender in reduction of the Obligations and (iv) the
disposition of General Intangibles in the ordinary course of business;
(b) not encumber, mortgage, pledge, assign or grant any security interest
in any Collateral to anyone other than Lender except as set forth on Schedule 1
----------
(B) attached hereto and made a part hereof;
- ---
(c) place notations upon Borrower's books of account and any financial
statement prepared by Borrower to disclose Lender's security interest in the
Collateral;
(d) defend the Collateral against the claims and demands of all parties;
<PAGE>
-19-
(e) keep and maintain the Equipment in good operating condition, except
for ordinary wear and tear, and shall make all necessary repairs and
replacements thereof so that the value and operating efficiency shall at all
times be maintained and preserved ordinary wear and tear excepted. Borrower
shall not permit any such items to become a fixture to real estate or accessions
to other personal property;
(f) not extend the payment terms of any Receivable without prompt notice
thereof to Lender;
(g) perform all other steps requested by Lender to create and maintain in
Lender's favor a valid perfected first security interest in all Collateral; and
(h) Borrower shall promptly provide Lender with duplicate originals of
all credits which Borrower issues to its Customers and immediately notify Lender
of any merchandise returns or Disputes. Borrower shall settle all Disputes at no
cost or expense to Lender. Should Lender so elect, during the continuation of
any Event of Default, Lender may at any time in its discretion (i) withdraw
Borrower's authority to issue credits to its Customers without Lender's prior
written consent; (ii) litigate Disputes or settle them directly with Customers
on terms acceptable to Lender; or (iii) direct Borrower to set aside and
identify as Lender's property any returned or repossessed merchandise or other
goods which by sale resulted in Receivables theretofore assigned to Lender
("Retained Goods"). All Retained Goods (and the proceeds thereof) shall be (A)
held by Borrower in trust for Lender as Lender's property, (B) subject to
Lender's security interest hereunder and (C) disposed of only in accordance with
Lender's express written instructions.
9. Collection and Maintenance of Collateral and Records. Lender may at any
----------------------------------------------------
time verify Borrower's Receivables utilizing an audit control company or any
other agent of Lender, provided however, that absent an Event of Default, or a
reason to suspect fraud such action may only be taken during normal business
hours upon one Business Day's notice to the Borrower. Lender or Lender's
designee may, but only while an Event of Default in continuing, notify
Customers, at any time at Lender's sole discretion, of Lender's security
interest in Receivables, collect them directly and charge the collection costs
and expenses to Borrower's account, but, unless and until Lender does so or
gives Borrower other instructions, Borrower shall instruct all of its Customers
to make payments on account of Receivables to an account under Lender's dominion
or control at such bank as Lender may designate, as provided by the terms of
Section 23. To the extent Borrower receives any payments on account of
Receivables, it shall hold such payments for Lender's benefit in trust as
Lender's trustee and immediately deliver them to Lender in their original form
with all necessary endorsements or, as
<PAGE>
-20-
directed by Lender, deposit such payments as directed by Lender pursuant to
Section 22 hereof. Lender will credit (conditional upon final collection) all
such payments to Borrower's account on the Settlement Date. Once each week
Borrower shall provide Lender with schedules describing all Receivables created
or acquired by Borrower during the preceding seven days and shall execute and
deliver confirmatory written assignments of such Receivables in the form of
Schedule 9 to Lender, but Borrower's failure to execute and deliver such
schedules or written confirmatory assignments of such Receivables shall not
affect or limit Lender's security interest or other rights in and to the
Receivables. Borrower shall furnish, at Lender's request, copies of contracts,
invoices or the equivalent, and any original shipping and delivery receipts for
all merchandise sold or services rendered and such other related documents and
information as Lender may require. All of Borrower's invoices shall bear the
payment terms stated on the applicable customer order, and no change from the
original payment terms of such customer order shall be made without the prior
written consent of Lender. Borrower shall provide Lender on a monthly (within
ten (10) days after the end of each month), or more frequent basis, as requested
by Lender, a summary report of Borrower's current Spare Parts Inventory,
certified as true and accurate by Borrower's President or Chief Financial
Officer. Borrower shall provide Lender, as requested by Lender, such other
schedules, documents and/or information regarding the Collateral as Lender may
reasonably require.
10. Inspections. At all times during normal business hours, Lender shall
-----------
have the right to (a) visit and inspect Borrower's properties and the
Collateral, (b) inspect, audit and make extracts from Borrower's relevant books
and records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal officers, and
independent accountants, Borrower's business, assets, liabilities, financial
condition, results of operations and business prospects provided that absent an
Event of Default or a reason to suspect fraud, such action may be taken only
upon one Business Day's notice to the Borrower. Borrower will deliver to Lender
any instrument necessary for Lender to obtain records from any service bureau
maintaining records for Borrower.
11. Financial Information. Borrower shall provide Lender (a) as soon as
---------------------
available, but in any event within ninety (90) days after the end of each of
Borrower's fiscal years, Borrower's balance sheet as at the end of such fiscal
year and the related statements of income, retained earnings and statement of
cash flow for such fiscal year, setting forth in comparative form the figures as
at the end of and for the previous fiscal year, which shall have been reported
on by Peat Marwick & Co. or such other independent certified public accountants
who shall be reasonably satisfactory to Lender and shall be accompanied by an
unqualified audit report issued by such independent certified
<PAGE>
-21-
public accountants; (b) as soon as available, drafts of Borrower's balance sheet
as at the end of each of Borrower's fiscal years and the related statements of
income, retained earnings and statement of cash flow for such fiscal year, which
have been internally prepared by Borrower; (c) as soon as available, but in any
event within forty-five (45) days after the end of each quarter, Borrower's
balance sheet as at the end of such quarter and the related statements of
income, retained earnings and statement of cash flow for such quarter, setting
forth in comparative form the figures as at the end of and for the previous
quarter, which shall have been internally prepared by Borrower and certified as
being prepared in accordance with GAAP, subject to year-end adjustments by its
Chief Financial Officer; (d) as soon as available, but in any event within
thirty (30) days after the close of each month, the balance sheet as at the end
of such month and the related statements of income, retained earnings and
statement of cash flow for such month, which have been internally prepared by
Borrower and certified by its Chief Financial Officer as being prepared in
accordance with GAAP, subject to year-end adjustments. All financial statements
required under (a), (b), (c) and (d) above shall be prepared in accordance with
GAAP, subject to year-end adjustments in the case of monthly and quarterly
statements. At the times the financial statements are furnished pursuant to (a),
(b), (c) and (d) above, a certificate of Borrower's President or Chief Financial
Officer shall be delivered to Lender stating that, based on an examination
sufficient to enable him to make an informed statement, no Event of Default or
Incipient Event of Default exists, or, if such is not the case, specifying such
Event of Default or Incipient Event of Default and its nature, when it occurred,
whether it is continuing and the steps being taken by Borrower with respect to
such event. If any internally prepared financial information, including that
required under this paragraph, is unsatisfactory in any manner to Lender, and an
Event of Default is continuing Lender may at its own expense request that
Borrower's independent certified public accountants review same.
In addition to the foregoing financial statements, Borrower shall furnish
Lender (i) no less than thirty (30) days after the close of each month a
borrowing base certificate in the form of Schedule 11 and (ii) no less than
thirty (30) days prior to the beginning of each fiscal year, or such other
reasonable intervals as may be requested by Lender, commencing with fiscal year
1995, a month by month projected operating budget and cash flow for such fiscal
year (including an income statement for each month and a balance sheet as at the
end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by Borrower's President or Chief Financial
Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared. If any such
<PAGE>
-22-
projections are unsatisfactory in any manner to Lender, and an Event of Default
is continuing, Lender may at its own expense request that Borrower's independent
certified public accountants compile or review same. Borrower shall also furnish
Lender with copies of the 10Q, 10K and 8K Statements of WorldCorp, Inc.
12. Additional Representations, Warranties and Covenants. Borrower
----------------------------------------------------
represents and warrants (each of which such representations and warranties shall
be deemed repeated upon the making of a request for a Revolving Credit Advance
and made as of the time of each Revolving Credit Advance made hereunder), and
covenants that:
(a) Borrower is a corporation duly organized and validly existing under
the laws of the State of Delaware and duly qualified and in good standing in
every other state or jurisdiction in which the nature of Borrower's business
requires such qualification;
(b) the execution, delivery and performance of this Agreement and the
Ancillary Agreements (i) have been duly authorized, (ii) are not in
contravention of Borrower's certificate of incorporation, by-laws or of any
indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is bound and (iii) are within Borrower's corporate powers;
(c) this Agreement and the Ancillary Agreements executed and delivered by
Borrower are Borrower's legal, valid and binding obligations, enforceable in
accordance with their terms;
(d) it keeps and will continue to keep all of its books and records
concerning the Collateral at Borrower's executive offices located at the address
set forth in the introductory paragraph of this Agreement and will not move such
books and records without giving Lender at least thirty (30) days prior written
notice;
(e) (i) the operation of Borrower's business is and will continue to be
in compliance in all material respects with all applicable federal, state and
local laws, including but not limited to all applicable environmental laws and
regulations.
(ii) In the event the Borrower obtains, gives or receives notice of
any release or threat of release of a reportable quantity of any Hazardous
Substances on its property (any such event being hereinafter referred to as a
"Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions on its property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of any environmental laws affecting its property or
<PAGE>
-23-
Borrower's interest therein (any of the foregoing is referred herein as an
"Environmental Complaint") from any Person or entity, including any state agency
responsible in whole or in part for environmental matters in the state in which
such property is located or the United States Environmental Protection Agency
(any such person or entity hereinafter the "Authority"), then the Borrower
shall, within five (5) Business Days, give written notice of same to the Lender
detailing facts and circumstances of which the Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint and periodically inform
Lender of the status of the matter. Such information is to be provided to allow
the Lender to protect its security interest in the Collateral and is not
intended to create nor shall it create any obligation upon the Lender with
respect thereto.
(iii) Borrower shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral to any lien, charge,
claim or encumbrance. If Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or Borrower shall fail to comply
with any of the requirements of any environmental laws, the Lender may, but
without the obligation to do so, for the sole purpose of protecting the Lender's
interest in Collateral: (A) give such notices or (B) enter onto Borrower's
property (or authorize third parties to enter onto such property) and take such
actions as the Lender (or such third parties as directed by the Lender) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by the Lender (or such third parties) in
the exercise of any such rights, including any sums paid in connection with any
judicial or administrative investigation or proceedings, fines and penalties,
together with interest thereon from the date expended at the Default Rate for
Revolving Credit Advances shall be paid upon demand by the Borrower, and until
paid shall be added to and become a part of the Obligations secured by the Liens
created by the terms of this Agreement or any other agreement between Lender and
Borrower.
(iv) Borrower shall defend and indemnify the Lender and hold the
Lender harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including reasonable attorney's fees,
suffered or incurred by the Lender under or on account of any environmental
laws, including, without limitation, the assertion of any lien thereunder, with
respect to any Hazardous Discharge by Borrower or on its property, the presence
of any Hazardous Substances affecting Borrower's property, whether or not the
same originates or emerges from Borrower's property or any contiguous real
estate, including any loss of value of the Collateral as a result of the
foregoing except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge
<PAGE>
-24-
resulting from actions on the part of the Lender. The Borrower's obligations
under this paragraph 12(e) shall arise upon the discovery of the presence of any
Hazardous Substances on the Borrower's property, whether or not any federal,
state, or local environmental agency has taken or threatened any action in
connection with the presence of any hazardous substances. The Borrower's
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
(v) For purposes of paragraph 12(e) all references to Borrower's
property shall be deemed to include all of Borrower's right, title and interest
in and to all owned and/or leased premises;
(f) based upon the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the regulations and published interpretations thereunder:
(i) Borrower has not engaged in any Prohibited Transactions as defined in
paragraph 406 of ERISA and paragraph 4975 of the Internal Revenue Code, as
amended; (ii) Borrower has met all applicable minimum funding requirements under
paragraph 302 of ERISA in respect of its plans; (iii) Borrower has no knowledge
of any event or occurrence which would cause the Pension Benefit Guaranty
Corporation to institute proceedings under Title IV of ERISA to terminate any
employee benefit plan(s); (iv) Borrower has no fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than Borrower's employees; and (v) since September, 1986 Borrower has not
withdrawn, completely or partially, from any multi-employer pension plan so as
to incur liability under the Multiemployer Pension Plan Amendments Act of 1980;
(g) it has capital sufficient to carry on its business and all businesses
in which it is about to engage;
(h) except as described in Borrower's financial statements which have
been delivered to Lender, there is no pending or threatened litigation, actions
or proceeding which involve the possibility of materially and adversely
affecting the Borrower's business, assets, operations, condition or prospects,
financial or otherwise, or the Collateral or the ability of Borrower to perform
this Agreement;
(i) all balance sheets and income statements which have been delivered to
Lender fairly, present Borrower's financial condition on a basis consistent with
that of previous financial statements and there has been no material adverse
change in Borrower's financial condition as reflected in its September 30, 1993
financial statements since the date thereof and such statements do not fail to
disclose any fact or facts which materially and adversely affect Borrower's
financial condition;
<PAGE>
-25-
(j) (x) it possesses all of the licenses, patents, copyrights,
trademarks, tradenames and permits necessary to conduct its material business,
(y) there has been no assertion or claim of violation or infringement with
respect thereof which would have a material adverse affect on the Borrower's
business and (z) all such licenses, patents, copyrights, trademarks, tradenames
and permits are listed on Schedule 12(j);
--------------
(k) it will pay or discharge when due all taxes, assessments and
governmental charges or levies imposed upon it unless such tax, charge or levy
is being diligently contested in good faith provided that adequate reserves with
respect thereto are maintained on the books of Borrower in conformity with GAAP;
(l) it will promptly inform Lender in writing of: (i) the commencement of
all proceedings and investigations by or before and/or the receipt of any
notices from, any governmental or nongovernmental body and all actions and
proceedings in any court or before any arbitrator against or in any way
concerning any of Borrower's properties, assets or business, which might singly
or in the aggregate, have a materially adverse effect on Borrower; (ii) any
amendment of Borrower's certificate of incorporation or by-laws; (iii) any
change in Borrower's business, assets, liabilities, condition (financial or
otherwise), results of operations or business prospects which has had or might
have a materially adverse effect on Borrower; (iv) any Event of Default or
Incipient Event of Default; (v) any default or any event which with the passage
of time or giving of notice or both would constitute a default under any
agreement for the payment of money to which Borrower is a party or by which
Borrower or any of Borrower's properties may be bound which would have a
material adverse effect on Borrower's business, operations, property or
condition (financial or otherwise) or the Collateral; (vi) any change in the
location of Borrower's executive offices; (vii) any change in the location of
Borrower's Spare Parts Inventory from the locations listed on Schedule 12(l)
---------------
attached hereto, (viii) any change in Borrower's corporate name; (ix) any
material delay in Borrower's performance of any of its obligations to any
Customer and of any assertion of any material claims, offsets, counterclaims or
Disputes by any Customer and of any allowances, credits and/or other monies
granted by it to any Customer; (x) furnish to and inform Lender of all material
adverse information relating to the financial condition of any account debtor
owing more than $100,000 to Borrower with respect to which Borrower has actual
knowledge; and (xi) any material return of goods;
(m) it will not (i) create, incur, assume or suffer to exist any
Indebtedness in excess of $25,000,000 (exclusive of trade debt) whether secured
or unsecured other than (A) capital leases or purchase money security interests
which do not exceed an aggregate amount of $20,000,000 and (B) Borrower's
Indebtedness to Lender and as set forth on Schedule 12(m) attached hereto and
--------------
made a part hereof; (ii) declare, pay or make
<PAGE>
-26-
any dividend or distribution on any shares of the common stock or preferred
stock of Borrower or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common or preferred stock of Borrower
except that Borrower may make quarterly dividends so long as (x) in any six
month period such dividends do not exceed the lesser of $4,500,000 or 50% of
Borrower's aggregate net income for the previous six months and (y) after giving
effect to such dividend, there exists not less than $7,500,000 of cash or cash
equivalents on the Borrower's balance sheet; (iii) directly or indirectly,
prepay any Indebtedness (other than to Lender), or repurchase, redeem, retire or
otherwise acquire any indebtedness of Borrower; (iv) makes advances, loans or
extensions of credit to any Person; (v) become either directly or contingently
liable upon the obligations of any Person by assumption, endorsement or guaranty
thereof or otherwise; (vi) enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a portion of the
assets or stock of any Person or permit any other Person to consolidate with or
merge with it; (vii) form any Subsidiary or enter into any partnership, joint
venture or similar arrangement provided that Borrower may do so as long as its
aggregate loans and investments to such entities do not exceed $250,000 in each
fiscal year; (viii) materially change the nature of the business in which it is
presently engaged; (ix) change its fiscal year or make any changes in accounting
treatment and reporting practices without prior written notice to Lender except
as required by GAAP or in the tax reporting treatment or except as required by
law; (x) enter into any transaction with any Affiliate, except in ordinary
course on arms-length terms; or (xi) bill Receivables under any name except the
present name of the Borrower;
(n) it shall not permit its Net Worth to be less than the following
amounts at any time during the following periods provided that (A) each such
amount shall be decreased by the cumulative amount of dividends paid in
accordance herewith and (B) upon the Equity Infusion, each such amount shall be
increased by the amount of the Equity Infusion:
<TABLE>
<CAPTION>
Quarter Ending Amount
- -------------- ------
<S> <C>
12/31/93 ($ 8,000,000.00)
3/31/94 ( 14,000,000.00)
6/30/94 ( 3,000,000.00)
9/30/94 2,000,000.00
12/31/94 4,000,000.00
3/31/95 ( 2,000,000.00)
6/30/95 9,000,000.00
9/30/95 14,000,000.00
12/31/95 16,000,000.00
</TABLE>
(o) it shall not permit its net income to be less than the following
amounts for the following periods:
<PAGE>
-27-
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
1/1/94 - 3/31/94 ( 6,000,000.00)
4/1/94 - 6/30/94 11,000,000.00
7/1/94 - 9/30/94 5,000,000.00
10/1/94 - 12/31/94 2,000,000.00
1/1/95 - 3/31/95 ( 6,000,000.00)
4/1/95 - 6/30/95 11,000,000.00
7/1/95 - 9/30/95 5,000,000.00
10/1/95 - 12/31/95 2,000,000.00
</TABLE>
provided that in any quarter that the net income exceeds the applicable amount
set forth above, such excess may be applied to the consecutive quarter for
purposes of this Section 12(o);
(p) all financial projections of Borrower's performance prepared by
Borrower or at Borrower's direction and delivered to Lender will represent, at
the time of delivery to Lender, Borrower's best estimate of Borrower's future
financial performance and will be based upon assumptions which are reasonable in
light of Borrower's past performance and then current business conditions;
(q) it will not make capital expenditures including for Spare Parts
Inventory (net of related Indebtedness permitted hereunder) in any fiscal year
an amount in excess of $15,000,000;
(r) it shall not suffer to exist a pre-tax loss in any month except that
during January, February and March of each year, it may incur a loss of not more
than $2,000,000;
(s) none of the proceeds of the Loans hereunder will be used directly or
indirectly to "purchase" or "carry" "margin stock" or to repay indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted terms under Regulation G of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect; and
(t) it will bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral. At its own cost and expense in
amounts and with carriers used by companies engaged in business similar to
Borrowers, it shall (i) keep all its insurable properties and properties in
which it has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to Borrower's; (ii) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to Borrower's
insuring against larceny, embezzlement or other criminal misappropriation of
insured's officers and employees who may either singly or jointly with others
at any time have access to the assets or funds of Borrower either directly or
through authority to draw
<PAGE>
-28-
upon such funds or to direct generally the disposition of such assets; (iii)
maintain public and product liability insurance against claims for bodily
injury, death or property damage suffered by others; (iv) maintain all such
workmen's compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which Borrower is engaged in business; (v) furnish
Lender with copies of certificates of insurance evidencing the maintenance of
such policies at least thirty (30) days before any expiration date, and (y)
appropriate loss payable endorsements in form and substance satisfactory to
Lender, naming Lender as loss payee and providing that as to Lender the
insurance coverage shall not be impaired or invalidated by any act or neglect of
Borrower and the insurer will provide Lender with at least thirty (30) days
notice prior to cancellation. Borrower shall instruct the insurance carriers
that in the event of any loss thereunder, the carriers shall make payment for
such loss to Borrower and Lender jointly. Upon an Event of Default, if any
insurance losses are paid by check, draft or other instrument payable to
Borrower and Lender jointly, Lender may endorse Borrower's name thereon and do
such other things as Lender may deem advisable to reduce the same to cash. Upon
an Event of Default, Lender is hereby authorized to adjust and compromise
claims. All loss recoveries received by Lender upon any such insurance may be
applied to the Obligations, in such order as Lender in its sole discretion shall
determine. Any surplus shall be paid by Lender to Borrower or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by Borrower to
Lender, on demand.
(u) it shall cause the occurrence of the Equity Infusion within 120 days
from the Closing Date.
(v) it shall not acquire any interest other than leasehold interests in
any Aircraft, airframe or engine unless at Borrower's expense (i) Borrower
grants a first priority perfected security interest therein to Lender, (ii)
executes and delivers to Lender an amendment to the Aircraft Security Agreement
with respect to such Aircraft, airframe or engine, in form and substance
satisfactory to, and approved in writing by, Lender, (iii) causes such agreement
to be immediately filed for recording with the FAA pursuant to the Federal
Aviation Act and (iv) Borrower delivers to Lender an opinion of counsel
satisfactory, in form and substance to Lender with respect to the acquisition of
such Aircraft, airframe or engine, Borrower's title thereto, the validity and
perfection of the security interest of Lender therein, and such other matters as
may reasonably be requested by Lender.
(w) Schedule 1 (A) sets forth a list of each engine owned by Borrower
that comprises Spare Parts Inventory, together with the serial number of each
such engine and the book value of each such engine. No further action, including
any filing or recording of any document, is necessary or advisable in order to
establish and perfect Borrower's title to the engines owned by
<PAGE>
-29-
Borrower, respectively, as against any other Person. Except for the filing for
recordation pursuant to the Federal Aviation Act of the Aircraft Security
Agreement, no further action, including any filing or recordation of any
document (including, without limitation, any financing statement in respect
thereof under Article 9 of the Uniform Commercial Code), is necessary or
advisable in order to create and perfect the security interest created under the
Aircraft Security Agreement in favor of the Lender in engines listed on
Schedules 1 (A).
(x) it shall no later than January 15, 1994 take all steps necessary to
protect Lender's interest in Borrower's Receivables under the Federal Assignment
of Claims Act or other applicable state or local statutes or ordinances and
deliver to us appropriately endorsed, any instrument or chattel paper connected
with any Receivable arising out of contracts between it and the United States,
any state or any department, agency, instrumentality or any of them.
(y) it shall not use any Spare Parts Inventory for the purpose of
maintaining or repairing any MD-11 aircraft.
13. Power of Attorney. Borrower hereby appoints Lender or any other Person
-----------------
whom Lender may designate as Borrower's attorney, with power to: (i) endorse
Borrower's name on any checks, notes, acceptances, money orders, drafts or other
forms of payment or security that may come into Lender's possession; (ii) sign
Borrower's name on any invoice or bill of lading relating to any Receivables,
drafts against Customers, schedules and assignments of Receivables, notices of
assignment, financing statements and other public records, verifications of
account and notices to or from Customers; (iii) verify the validity, amount or
any other matter relating to any Receivable by mail, telephone, telegraph or
otherwise with Customers provided that so long as no Event of Default is
continuing, Lender will use its best efforts not to disclose any aspect of this
Agreement or any Ancillary Agreements to any Customer; (iv) execute customs
declarations and such other documents as may be required to clear Inventory
through Customs; (v) while an Event of Default is continuing, do all things
necessary to carry out this Agreement, any Ancillary Agreement and all related
documents; and (vi) on or after the occurrence and continuation of an Event of
Default, should Lender determine that Borrower is not cooperating with Lender,
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and to receive, open and
dispose of all mail addressed to Borrower. Borrower hereby ratifies and approves
all acts of the attorney executed as aforesaid. Absent gross negligence, neither
Lender nor the attorney will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law. This power, being coupled with an
interest, is irrevocable so long as any Receivable which is assigned to Lender
or in which Lender has a security interest remains unpaid and until the
Obligations have been fully satisfied.
<PAGE>
-30-
14. Expenses. Borrower shall pay all of Lender's reasonable out-of-pocket
--------
costs and expenses, including without limitation reasonable fees and
disbursements of counsel retained or employed by Lender and appraisers, in
connection with the preparation, execution and delivery of this Agreement and
the Ancillary Agreements, and in connection with the prosecution or defense of
any action, contest, dispute, suit or proceeding concerning any matter in any
way arising out of, related to or connected with this Agreement or any Ancillary
Agreement if the Lender prevails in such prosecution or defense. Borrower shall
also pay all of Lender's reasonable out-of-pocket costs and expenses, including
without limitation reasonable fees and disbursements of counsel retained or
employed by Lender, in connection with (a) the preparation, execution and
delivery of any waiver, any amendment thereto or consent proposed or executed in
connection with the transactions contemplated by this Agreement or the Ancillary
Agreements, if requested by Borrower, (b) Lender's obtaining performance of the
Obligations under this Agreement and any Ancillary Agreements, including, but
not limited to, the enforcement or defense of Lender's security interests,
assignments of rights and liens hereunder as valid perfected security interests,
and (c) subject to any limitations contained in this Agreement any attempt to
inspect or verify any Collateral and (d) if an Event of Default is continuing,
the protection, collection, sale liquidation or other disposition of Collateral.
Borrower shall also pay Lender's then standard price for furnishing Borrower or
its designees copies of any statements, records, files or other data
(collectively, "Reports") requested by Borrower or its designees, other than
reports of the kind furnished to Borrower and Lender's other borrowers on a
regular, periodic basis in the ordinary course of Lender's business. Borrower
shall also pay Lender's customary bank charges, including, without limitation,
all wire transfer fees incurred by Lender, for all bank services performed or
caused to be performed by Lender for Borrower at Borrower's request. All such
costs and expenses together with all filing, recording and search fees, taxes
and interest payable by Borrower to Lender shall be payable on demand and shall
be secured by the Collateral. Borrower hereby acknowledges that Lender shall not
be liable in any manner whatsoever for any selling expenses, orders, purchases
or contracts of any kind resulting from any transaction between Borrower and any
other Person and Borrower hereby indemnifies and holds Lender harmless with
respect thereto, which indemnity shall survive termination of this Agreement.
15. Assignment By Lender. In the event of a sale of its assets or stock,
--------------------
Lender may assign any or all of the Obligations together with any or all of the
security therefor and any transferee shall succeed to all of Lender's rights
with respect thereto. Upon such transfer, Lender shall be released from all
responsibility for the Collateral to the extent same is assigned to any
transferee. Lender may from time to time sell or
<PAGE>
-31-
otherwise grant participations in any of the Obligations but only if Lender
retains full decision making authority and administrative responsibility for the
transactions contemplated hereby and the holder of any such participation shall,
subject to the terms of any agreement between Lender and such holder, be
entitled to the same benefits as Lender with respect to any security for the
Obligations in which such holder is a participant. Borrower agrees that each
such holder may exercise any and all rights of banker's lien, set-off and
counterclaim with respect to its participation in the Obligations as fully as
though Borrower were directly indebted to such holder in the amount of such
participation.
16. Waivers. Except as expressly provided herein, Borrower waives
-------
presentment and protest of any instrument and notice thereof, notice of default
and all other notices to which Borrower might otherwise be entitled.
17. Term of Agreement. This Agreement shall continue in full force and
-----------------
effect until the expiration of the Term. If Lender receives written notice from
the Borrower of its request to extend the Term 60 days prior to the last day of
the initial Term or any renewal Term, and Lender agrees to do so, the Term shall
be extended for a period of one year from the expiration date of such Term. The
Borrower may terminate this Agreement effective as of any time during the Term
by (a) giving Lender sixty (60) days' prior written notice (via certified mail,
return receipt requested) and (b) paying Lender, in addition to all other
Obligations (including but not limited to any outstanding balance of the
facility fee set forth in Section 5(b)(ii)), the Early Termination Fee. Upon
termination of this Agreement and full satisfaction of all Obligations Lender
shall at Borrower's request and expense execute documents terminating the lien
of this Agreement and the Ancillary Agreements and reselling to Borrower all
Receivables at their original purchase price from Borrower.
18. Events of Default. The occurrence of any of the following shall
-----------------
constitute an Event of Default:
(a) failure to make payment of any of the Obligations when required
hereunder if such failure continues for five (5) days;
(b) failure to pay any taxes for 20 days after being due unless such
taxes are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been provided on Borrower's books;
(c) failure to perform under and/or committing any breach of this
Agreement or any Ancillary Agreement or any other agreement between Borrower and
Lender and such failure or breach is not cured within 10 days of Lender's notice
thereof to Borrower;
<PAGE>
-32-
(d) occurrence of a default under any agreement to which Borrower is a
party with third parties which default has a material adverse affect upon
Borrower's business, operations, property or condition (financial or otherwise)
including all leases for any premises where Inventory or Equipment is located;
(e) any representation, warranty or statement made by Borrower hereunder,
in any Ancillary Agreement, any certificate statement or document delivered
pursuant to the terms hereof, or in connection with the transactions
contemplated by this Agreement should at any time be false or misleading in any
material respect and has not been cured within 10 days of Lender's notice
thereof to Borrower;
(f) an attachment or levy is made upon any of Borrower's assets and such
attachment or levy is for an aggregate value in excess of $500,000, or a
judgment is rendered against Borrower or any of Borrower's property involving a
liability of more than $500,000, which shall not have been vacated, discharged,
stayed or bonded pending appeal with thirty (30) days from the entry thereof;
(g) any change in Borrower's condition or affairs (financial or
otherwise) which in Lender's good faith opinion impairs the Collateral or the
ability of Borrower to perform its Obligations;
(h) subject to liens permitted hereunder, any lien created hereunder or
under any Ancillary Agreement for any reason ceases to be or is not a valid and
perfected lien having a first priority interest and such deficiency has not been
cured within 10 days of Lender's notice thereof to Borrower;
(i) if Borrower shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated
a bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within sixty (60) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
(j) Borrower shall admit in writing its inability, or be generally unable
to pay its debts as they become due or cease operations of its present business;
(k) WorldCorp, Inc. or any Subsidiary of the Borrower shall (i) apply for
or consent to the appointment of, or the taking possession by, a receiver,
custodian, trustee or
<PAGE>
-33-
liquidator of itself or of all or a substantial part of its property, (ii) admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated
a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within sixty (60) days, any petition filed against it in any
involuntary case under such bankruptcy laws, (viii) take any action for the
purpose of effecting any of the foregoing;
(l) Borrower directly or indirectly sells, assigns, transfers, conveys,
or suffers or permits to occur any sale, assignment, transfer or conveyance of
any assets of Borrower or any interest therein with an aggregate value of more
than $500,000, except as permitted herein;
(m) Lender shall in good faith deem itself insecure or unsafe or shall
fear diminution in value, removal or waste of the Collateral in an amount in
excess of $500,000 as measured from the Closing Date;
(n) a default by Borrower in the payment, when due, of any principal of
or interest on any indebtedness for money borrowed in excess of the aggregate
amount of $1,000,000;
(o) any Change of Ownership.
19. Remedies. (a) Upon the occurrence of an Event of Default pursuant to
--------
Section 18(i) herein, all Obligations shall be immediately due and payable and
this Agreement shall be deemed terminated; upon the occurrence and continuation
of any other of the Events of Default, Lender shall have the right to demand
repayment in full of all Obligations, whether or not otherwise due. Until all
Obligations have been fully satisfied, Lender shall retain its security interest
in all Collateral. Lender shall have, in addition to all other rights provided
herein, the rights and remedies of a secured party under the Uniform Commercial
Code, and under other applicable law, all other legal and equitable rights to
which Lender may be entitled, including without limitation, the right to take
immediate possession of the Collateral, to require Borrower to assemble the
Collateral, at Borrower's expense, and to make it available to Lender at a place
designated by Lender which is reasonably convenient to both parties and to enter
any of the premises of Borrower or wherever the Collateral shall be located,
with or without force or process of law, and to keep and store the same on said
premises until sold (and if said premises be the property of Borrower, Borrower
agrees not to charge Lender for storage thereof for a period up to at least
sixty (60) days after sale or disposition of said Collateral). Further, Lender
may, at any time or times after
<PAGE>
-34-
default by Borrower, sell and deliver all Collateral held by or for Lender at
public or private sale for cash, upon credit or otherwise, at such prices and
upon such terms as Lender, in Lender's sole discretion, deems advisable or
Lender may otherwise recover upon the Collateral in any commercially reasonable
manner as Lender, in its sole discretion, deems advisable. Except as to that
part of the Collateral which is perishable or threatens to decline speedily in
nature or is of a type customarily sold on a recognized market, the requirement
of reasonable notice shall be met if such notice is received by Borrower at
Borrower's address as set forth herein, at least ten (10) days before the time
of the event of which notice is being given. Lender may be the purchaser at any
sale, if it is public. In connection with the exercise of the foregoing
remedies, Lender is granted permission to use all of Borrower's trademarks,
tradenames, tradestyles, patents, patent applications, licenses, franchises and
other proprietary rights which are used in connection with (a) Inventory for the
purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds of sale shall be
applied first to all costs and expenses of sale, including attorneys' fees, and
second to the payment (in whatever order Lender elects) of all Obligations.
Lender will return any excess to Borrower and Borrower shall remain liable to
Lender for any deficiency.
20. Waiver; Cumulative Remedies. Failure by Lender to exercise any right,
---------------------------
remedy or option under this Agreement or any supplement hereto or any other
agreement between Borrower and Lender or delay by Lender in exercising the same,
will not operate as a waiver; no waiver by Lender will be effective unless it is
in writing and then only to the extent specifically stated. Lender's rights and
remedies under this Agreement will be cumulative and not exclusive of any other
right or remedy which Lender may have.
21. Application of Payments. Borrower irrevocably waives the right to
-----------------------
direct the application of any and all payments at any time or times hereafter
received by Lender from or on Borrower's behalf and Borrower hereby irrevocably
agrees that Lender shall have the continuing exclusive right to apply and
reapply any and all payments received at any time or times hereafter against
Borrower's Obligations hereunder in such manner as Lender may deem advisable
notwithstanding any entry by Lender upon any of Lender's books and records.
22. Depository Accounts. Any payment received by Borrower on account of any
-------------------
Receivables or Spare Parts Inventory shall be held by Borrower in trust for
Lender and Borrower shall promptly deliver same in kind to Lender or deposit all
such payments into a cash collateral account at such bank as Lender may
designate for application to payment of the Obligations.
23. Lock Box Accounts. Borrower shall, at Lender's request, instruct all of
-----------------
its Customers to make such payments on account of Receivables to an account
under Lender's dominion and
<PAGE>
-35-
control at such bank in the United States as Lender may designate.
24. Revival. Borrower further agrees that to the extent Borrower makes a
-------
payment or payments to Lender, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy act, state or federal law, common law or equitable cause, then, to
the extent of such payment or repayment, the obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if
said payment had not been made.
25. Notices. Any notice or request (except a request under Section 4
-------
hereof) hereunder may be given to Borrower or Lender at the respective addresses
set forth below or as may hereafter be specified in a notice designated as a
change of address under this paragraph. Any notice or request (except a request
under Section 4 hereof) hereunder shall be given by registered or certified
mail, return receipt requested, or by overnight mail or by telecopy (confirmed
by mail). Notices and requests shall be, in the case of those by mail or
overnight mail, deemed to have been given when received
Notices shall be provided as follows:
If to the Lender: BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Robert Grbic
Telephone: (212) 408-7292
Telecopy: (212) 408-4384
If to the Borrower: WORLD AIRWAYS, INC.
13873 Park Center Rd. Suite 490
Herndon, VA 22071
Attention: Chief Financial Officer
Telephone: (703) 834-9200
Telecopy: (703) 834-9211
With a copy to: Morgan Lewis & Bockius
101 Park Ave.
New York, NY 10178
Attention: Ian Shrank
Telephone: (212) 309-6076
Telecopy: (212) 309-6273
26. Governing Law and Waiver of Jury Trial. THIS AGREEMENT SHALL BE
--------------------------------------
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. LENDER SHALL HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY
UNDER APPLICABLE LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL
CODE OF NEW YORK. BORROWER AGREES THAT ALL ACTIONS AND PROCEEDINGS RELATING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY
<PAGE>
-36-
ANCILLARY AGREEMENT OR ANY OTHER OBLIGATIONS SHALL BE LITIGATED IN THE FEDERAL
DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK AND THAT SUCH COURTS ARE
CONVENIENT FORUMS AND BORROWER SUBMITS TO THE PERSONAL JURISDICTION OF SUCH
COURTS. BORROWER WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF
PROCESS UPON BORROWER MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO BORROWER AT BORROWER'S ADDRESS APPEARING ON
LENDER'S RECORDS, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED WHEN RECEIVED BY
BORROWER. BOTH PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BETWEEN BORROWER AND LENDER AND BORROWER WAIVES THE RIGHT TO
ASSERT IN ANY ACTION OR PROCEEDING INSTITUTED BY LENDER WITH REGARD TO THIS
AGREEMENT OR ANY OF THE OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS WHICH IT MAY
HAVE.
27. Limitation of Liability. Borrower acknowledges and understands that in
-----------------------
order to assure repayment of the Obligations hereunder Lender may be required to
exercise any and all of Lender's rights and remedies hereunder and agrees that
neither Lender nor any of Lender's agents shall be liable for acts taken or
omissions made in connection herewith or therewith except for actual bad faith
or gross negligence.
28. Entire Understanding. This Agreement and the Ancillary Agreements
--------------------
contain the entire understanding between Borrower and Lender and any promises,
representations, warranties or guarantees not herein contained shall have no
force and effect unless in writing, signed by the Borrower's and Lender's
respective officers. Neither this Agreement, the Ancillary Agreements, nor any
portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged.
29. Modification. This Agreement and the Ancillary Agreements constitute
------------
the complete agreement between the parties with respect to the subject matter
hereof and thereof and may not be modified, altered or amended except by an
agreement in writing signed by the parties hereto and thereto.
30. Severability. Wherever possible each provision of this Agreement or the
------------
Ancillary Agreements shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement or the
Ancillary Agreements shall be prohibited by or invalid under applicable law such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
thereof.
31. Captions. All captions are and shall be without substantive meaning or
--------
content of any kind whatsoever.
<PAGE>
-37-
32. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which taken together shall constitute one and the same
instrument.
33. Construction. The parties acknowledge that each party and its counsel
------------
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
WORLD AIRWAYS, INC.
By: /s/ A. Scott Andrews
-------------------------------
Name: A. Scott Andrews
Title: C.F.O.
[CORPORATE SEAL]
BNY FINANCIAL CORPORATION
By: /s/ Donald G. Niddris
-------------------------------
Name: Donald G. Niddris
Title: EVP
<PAGE>
-38-
LIST OF SCHEDULES
-----------------
Schedule 1 (A) - Engines
Schedule 1 (B) - Avionics Equipment
Schedule 1 (D) - Permitted Liens
Schedule 9 - Form of Assignment
Schedule 11 - Borrowing Base Certificate
Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights
Schedule 12(l) - Inventory Locations
Schedule 12(m) - Permitted Indebtedness
Exhibit X - Collateral Exceptions
Exhibit Y - Form of Invoice
<PAGE>
-39-
Schedule 1(A)
-------------
One GE Engine Model CF6 - DIA, Serial number 451-109
<PAGE>
-40-
Schedule 1(B)
-------------
None
<PAGE>
-41-
Schedule 1(D)
-------------
Sale, Loan and Security Agreement, dated as of March 8, 1993, with McDonnell
Douglas Corporation
Loan and Security Agreement with International Lease Finance Corporation
Engine Mortgage dated as of May 24, 1993 with GATX Capital Corporation
Engine Mortgage with Svenska Finans International BV
Engine Mortgage with PK Financing II
Various leases of aircraft, engines, parts and real estate where Borrower is the
lessee
<PAGE>
SCHEDULE 9
----------
RECEIVABLES ASSIGNMENT CERTIFICATE
For value received the undersigned hereby pledges, assigns, and transfers
to BNY FINANCIAL CORPORATION (herein called "Lender") the claims or accounts
receivable described and set forth on this statement or in the statements
attached hereto, together with all monies now due or to become due thereon, all
guaranties and security therefor, and all rights, title and interest of the
undersigned in the merchandise giving rise thereto, including the right of
stoppage in transit, with full power (but only to the extent set forth in the
Agreement referenced below) to collect and/or compromise the same or otherwise
deal with the same in its own name or otherwise as though it were the absolute
owner thereof for all purposes.
Said claims, accounts, money, merchandise, and security are assigned as
collateral security for all Obligations (as such term is defined in the Accounts
Receivable Management and Security Agreement dated December 7, 1993, as amended
and supplemented between the Lender and the undersigned). The undersigned
repeats and confirms that the representations and warranties made by the
undersigned in said Agreement, or otherwise in connection with said Agreement
and the Ancillary Agreements referenced therein are true and correct as of the
date hereof, except to the extent same relate solely to a different date which
representations and warranties are true and correct as of the other date.
WORLD AIRLINES, INC.
By:
----------------------------------
A. SCOTT ANDREWS
CHIEF FINANCIAL OFFICER
DATED:
-------------------------------
<PAGE>
SCHEDULE 11
-----------
BORROWER'S CERTIFICATE
A. Accounts Receivable:
1. Balance from previous month ____________________________________
2. Adjustments: ____________________________________
a. Collections ____________________________________
b. Discounts ____________________________________
c. Other ____________________________________
3. Current month's Accounts
Receivable ____________________________________
4. Less non-qualifying Reserves:
a. 50% or more of account balance
is 31 days past due ____________________________________
b. Invoices with terms greater
than 90 days from date of invoice ____________________________________
c. Invoices 61 days past due ____________________________________
d. Customers with credit balances ____________________________________
e. Invoices in dispute ____________________________________
f. Contra Accounts ____________________________________
5. Net Eligible Accounts Receivable ____________________________________
6. Availability @ 85% of Eligible
(Not greater than $8,000,000) ____________________________________
B. Loan Balance ____________________________________
C. Availability Computation
1. Availability
(line 6) ____________________________________
2. Less Loan balance ____________________________________
3. Availability (overadvance) ____________________________________
WORLD AIRWAYS, INC.
By:
-----------------------
A. SCOTT ANDREWS
CHIEF FINANCIAL OFFICER
<PAGE>
BNY Financial Corporation
1290 Avenue of the Americas
New York, NY 10104
Date Submitted
-------------------
Pursuant to the Accounts Receivable Management and Security Agreement between us
dated December 7, 1993, we hereby represent and report to you with respect to
our Spare Parts Inventory.
Following is a record of the DC-10 and Boeing 727 Spare Parts Inventory for the
period: _______________ to _______________.
Report of Inventory Position: Fair Market Value:
------------------------------------------------
(000's omitted)
Opening inventory as of:_________________ _______________________
Add: Purchases for Month: _______________________
Total Available for Sale: _______________________
Less: Total Net Sales for Month:___________
Estimated Cost of Inventory Sold: _______________________
Estimated Ending Inventory as of:___________ _______________________
Less Ineligibles:
Inventory Outside U.S. _______________
Inventory Unserviceable _______________
Other (Fly Away Kits) _________________
Total/Ineligible _______________________
Net Eligible
=======================
Calculation of Loan Value Availability
--------------------------------------
OLV=@ 72.5% of Fair Market Value _______________________
Availability @ 60% of (OLV)
(Not Greater Than 12,000,000) =======================
Comparison of Loan Balance to Availability
------------------------------------------
Inventory Loan Balance _______________________
Loan Balance (Over)/Under Availability
=======================
World Airways, Inc.
By:
---------------------------------
A. Scott Andrews
Chief Financial Officer
Dated:
------------------------------
<PAGE>
Schedule 12(j)
--------------
Service Mark
- ------------
1. Certificate of Registration (Reg. No. 1,648,372) issued and registered by the
United States Patent and Trademark Office on June 18, 1991.
Government Authorizations
for the Conduct of Commercial
Air Transportation by
World Airways, Inc.
-----------------------------
1. Certificate of Public Convenience and Necessity for Charter Air
Transportation, authorizing the Company to engage in overseas and foreign
charter air transportation (March 24, 1982) (DOT Order 82-3-137).
2. Certificate of Public Convenience and Necessity, authorizing the Company to
engage in interstate and overseas air transportation of persons, property and
mail between all points in the United States, its territories and possessions
(December 22, 1981) (DOT Order 81-12-131).
3. Certificate of Public Convenience and Necessity, authorizing the Company to
engage in scheduled all-cargo foreign air transportation between the United
States and the following points (June 19, 1981, amended January 25, 1991)
(DOT Order 91-1-44) :
Afghanistan
Algeria
Australia
Austria
Bahrain
Belgium
Bermuda
Brunei
Dakar, Senegal
Denmark
Egypt
Fiji
Finland
France
Germany
Greece
Hong Kong
India
Indonesia
Shannon, Ireland
Tel Aviv, Israel
Italy
<PAGE>
Jamaica
Kenya
Korea
Liberia
Libya
Luxembourg
Malaysia
Morocco
The Netherlands
New Zealand
Nigeria
Norway
Oman
Pakistan
Portugal
Romania
Singapore
Spain
Sri Lanka
Sweden
Switzerland
Taiwan
Thailand
Tunisia
Turkey
The United Arab Emirates
The United Kingdom
Yugoslavia
Zimbabwe
4. Certificate of Public Convenience and Necessity, authorizing the Company to
engage in scheduled foreign combination service between the United States and
the following points (June 19, 1981) (DOT Order 81-8-113):
Belgium Korea
Costa Rica Luxembourg
Finland Malaysia
France Netherlands
Germany Shannon, Ireland
Hong Kong Singapore
Israel Switzerland
Jamaica Taiwan
Jordan Thailand
-2-
<PAGE>
5. Air Carrier Operating Certificate (Federal Aviation Regulation Part 121).
6. Certificates of Aircraft Registration with respect to each Company aircraft.
7. Certificates of Airworthiness with respect to each Company aircraft.
-3-
<PAGE>
Schedule 12(L)
---------------
See attached four pages.
<PAGE>
SCHEDULE II
-----------
WORLD AIRWAYS LOCATION ADDRESSES
--------------------------------
ITEM #
- ------
1 AGES - AVIATION ACCESSORIES CO
645 Park of Commerce Way
Boca Raton, FL 33487
2 WORLD AIRWAYS, INC.
c/o Dynair
5011 Aircraft Drive
Anchorage, AK 99519
3 WORLD AIRWAYS, INC.
2460 Remount Road
Suite 105
Charleston, SC 29418
9 WORLD AIRWAYS, INC.
Rhein Main Flughafen
Building 202 Room 1123
600 Frankfurt/Main 75
Frankfurt, Germany
10 WORLD AIRWAYS, INC.
c/o TIMCO, Inc.
623 Radar Road
Greensboro, NC 27410
11 HAECO
Main Storeroom
Tai-Kai International Airport
Hong Kong
12 WORLD AIRWAYS,INC.
c/o P/T Garuda Indonesia
Material Department (CGKMDGA)
Garuda Maintenance Facility
Soekarno-Hatta International Airport
Cengkareng 19101 Box 303 Bush
<PAGE>
Location Addresses
Page 2
13 WORLD AIRWAYS, INC.
71 Industrial Blvd
Southgate Industrial Center
New Castle, DE 19720
14 WORLD AIRWAYS, INC.
71 Industrial Blvd
Unserviceable Room
Southgate Industrial Center
New Castle, DE 19720
15 WORLD AIRWAYS, INC.
c/o A.M.R. Services
Cargo Bldg 263, Door #1
JFK Int'l Airport
Jamaica, NY 11430
16 WORLD AIRWAYS, INC.
c/o A.M.R. Services
Unserviceable Room
Cargo Bldg 263, Door #1
JFK Int'l Airport
Jamaica, NY 11430
17 WORLD AIRWAYS, INC.
Bldg E-3, Ground Floor MAS TEC
OP Center, Eng Supplies Manager
Subang Int'l Airport
Selangor, West Malaysia
18 WORLD AIRWAYS, INC.
Bldg E-3, Ground Floor MAS TEC
Unserviceable Room
OP Center, Eng Supplies Manager
Subang Int'l Airport
Selangor, West Malaysia
19 WORLD AIRWAYS REP./DYNAIR
211 California Street
LAX Int'l Airport
El Segundo, CA 90245
<PAGE>
Location Addresses
Page 3
20 JIT-AERO Ltd
Unit 16
Gatewick Metro Center
Balcombe Road
Horley Surry RH69GA
21 JIT-AERO Ltd
Unit 16
Gatewick Metro Center
Unserviceable Room
Balcombe Road
Horley Surry RH69GA
22 THE MEMPHIS GROUP
3900 Willow Lake Blvd
Memphis, TN 38118
23 WORLD AIRWAYS, INC. (NO BULK)
c/o United Aerodynamics
6995 N.W. 46th Street
Miami, FL 33166
24 WORLD AIRWAYS, INC. (NO BULK)
c/o United Aerodynamics
6995 N.W. 46th Street
Miami, FL 33166
25 WORLD AIRWAYS, INC. (NO BULK)
c/o United Aerodynamics
Unserviceable Room
6995 N.W. 46th Street
Miami, FL 33166
26 WORLD AIRWAYS, INC.
Atlantic Aviation Bldg #2
PHL Int'l Airport
Philadelphia, PA 19153
<PAGE>
Location Addresses
Page 4
33 WORLD AIRWAYS, INC.
Signature Inn
6515 Signature Drive
Louisville, KY 40213
Room 108
37 AIR ASIA
4-2 No. 22 Lane 618
Ming Ch'uan East Road
Taipei, Taiwan
Republic of China
38 WORLD AIRWAYS, INC.
c/o 6511C Field Avenue
White House, OH 43571
<PAGE>
Schedule 12(m)
--------------
World Airways, Inc.
Long-Term & Short-Term Debt Breakdown
Balance as of October 21, 1993
<TABLE>
<CAPTION>
Interest Original
Debt Description Purpose of Debt Collateral Liens Paid Rate Debt Amount
- --------------------------- ---------------- ---------- ------ --------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
GATX/HELEASCO-Capital Lease GE Engine GE Engine None Semi-Annually 11.7040% $1,687,228.65
1517-715 1517-715
F&SD Financial Services AT&T Legend AT&T None Monthly Imputed 18,404.04
Equipment Legend 6.1389%
Equipment
GATX MD-11 Spares CAP LSE MD-11 Spare Parts MD-11 None Monthly Prime 9,462,993.06
Spare Parts + 1.50%
OK Financing II GE Engine GE Engine See Monthly LIBOR + 3,080,000.00
1517-309 1517-309 Note 1.95%
(1)
Svenska Finans Int'l By GE Engine GE Engine None Monthly LIBOR + 2,820,000.00
1517-338 1517-338 1.75%
ASB Line of Credit Line of Credit WOA None See Note (2) LIBOR + 5,000,000.00
Receivables 2.75% (3)
International Lease MO-11 Spare Parts MD-11 None Monthly 8.5000% 4,650,000.00
Finance Corp. Spare Parts
McDonnell Douglas Corp. MD-11 Spare MD-11 None Semi-Annually 8.5000% 5,000,000.00
Parts- A/C 16 Spare (4)
Parts-A/C
16
Potomac Capital -Deferred Deferred None None Monthly (5) 8.0000% 872,060.69
Rent Rent-A/C 1H107WA
ILFC-Deferred Rent/Spare IN271/272/273 & DC10-30 None Due Nov 30, 9.0000% 4,766,284.16
Parts Loan Sep-Nov Parts Rotables 1993
(6)
McDonnell Douglas Def Rent A/C None None Monthly (7) 12.0000% 3,481,500.00
Corp-Deferred Rent IN106WA/H108/H112
GATX Capital Corporation - Deferred None None Monthly (8) 8.0000% 1,150,000.00
Def Rent Rent-A/C IN280WA
Heller Financial-Deferred Deferred None None Monthly (9) 7.0000% 360,000.00
Rent Rent-A/C IN107WA
<CAPTION>
L/T Debt S/T Debt Total
Balance @ Balance @ Balance
10/31/93 10/31/93 @ 10/31/93
-------------- -------------- --------------
<S> <C> <C> <C>
GATX/HELEASCO-Capital Lease $ 432,278.12 $ 249,824.68 $ 682,102.81
F&SD Financial Services 10,332.14 3,185.20 13,817.34
GATX MD-11 Spares CAP LSE 8,962,993.06 500,000.00 9,462,993.06
PK Financing II 484,557.00 639,805.45 1,124,362.45
Svenska Finans Int'l By 470,143.00 576,388.09 1,046,531.09
ASB Line of Credit 0.00 3,400,000.00 3,400,000.00
International Lease 4,068,749.96 387,500.04 4,456,250.00
Finance Corp.
McDonnell Douglas Corp. 5,000,000.00 0.00 5,000,000.00
Potomac Capital -Deferred 519,818.52 352,242.17 872,060.69
Rent
ILFC-Deferred Rent/Spare 0.00 4,766,284.16 4,766,284.16
Parts Loan
McDonnell Douglas 0.00 3,484,500.00 3,484,500.00
Corp-Deferred Rent
GATX Capital Corporation - 0.00 1,150,000.00 1,150,000.00
Def Rent
Heller Financial-Deferred Rent 360,000.00 0.00 360,000.00
-------------- -------------- --------------
Total: $20,308,871.81 $15,510,029.79 $35,818,901.60
============== ============== ==============
</TABLE>
(1) GATX Capital Corporation has a secondary lien on this engine as additional
collateral on the spare parts capital lease.
(2) Interest is paid monthly, principal payments vary based on borrowing base
certificates.
(3) This is the current rate of interest being charged.
(4) Interest to be paid commencing June 1993, principal repayment commencing
December 1994.
(5) Payments to commence on June 1994.
(6) WDA DC10-30 Rotable Spare Parts which are in active marketing status serve
as collateral for this loan.
(7) Payments to commence on April 1994.
(8) Payments to commence on April 1994.
(9) Payments to commence on October 1995.
<PAGE>
Exhibit X
---------
All right, title and interest of Borrower in the following, whether now owned
or hereafter acquired:
1. MD-11 spare parts and engines.
2. All loan or security agreements relating to the financing of MD-11 spare
parts or engines.
3. The following engines and any and all agreements, instruments or rights
relating thereto: GE engines serial numbers 517-309 and 517-338.
4. Any aircraft or engines leased by Borrower as lessee, and all agreements,
instruments and rights relating thereto, including subleases thereof.
5. Any office or warehouse space or other real estate leased by Borrower as
lessee.
<PAGE>
EXHIBIT Y
---------
(LOGO OF WORLD AIRWAYS Invoice No.:
APPEARS HERE)
INVOICE
To: Date:
WORLD AIRWAYS INC.
13873 PARK CENTER ROAD, SUITE 490
HERNDON, VIRGINIA 22071
ATTN:ACCOUNTS RECEIVABLE
(703)834-9200
Customer No:
- --------------------------------------------------------------------------------
DESCRIPTION AMOUNT
- --------------------------------------------------------------------------------
Please remit payment to:
World Airways, Inc.
P.O. Box 19001
Newark, NJ 07195-0001
- --------------------------------------------------------------------------------
AMOUNT DUE
- --------------------------------------------------------------------------------
<PAGE>
AIRCRAFT PARTS SECURITY AGREEMENT
This is the AIRCRAFT PARTS SECURITY AGREEMENT, dated as of December 7,
1993, between World Airways, Inc., a Delaware corporation ("Company"), and BNY
Financial corporation ("Lender").
Company and Lender are parties to an Accounts Receivable Management and
Security Agreement dated as of December 7, 1993 (as amended, modified and
supplemented and in effect from time to time, the "A/R Agreement"), pursuant to
which Company has granted to Lender a security interest in certain personal
property of Company, as security for the Secured Obligations (as hereinafter
defined).
To induce Lender to enter into the A/R Agreement and to extend credit there
under, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Company has agreed to pledge and
grant a security interest in the Collateral (as hereinafter defined) as security
for the Secure Obligations. Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the A/R Agreement are used
-----------
herein as defined therein. In addition, as used herein:
"Collateral" shall have the meaning ascribed thereto in Section 3 hereof.
----------
"Engine" means the engine identified on Schedule I hereto and any and all
------- ----------
Parts so long as the same shall be incorporated or installed in or attached to
such engine.
"FAA" means the United States Federal Aviation Administration, the
---
Administrator thereof and any agency or instrumentality of the Government
succeeding to their functions.
<PAGE>
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended,
--------------------
or any subsequent legislation that amends, supplements or supersedes the Federal
Aviation Act and any reference to a provision or provisions of such Act shall
also mean and refer to any successor provisions, however designated or
distributed.
"Government" means the federal government of the United States of America,
----------
and any instrumentality or agency thereof.
"Parts" means any and all appliances, parts, instruments, appurtenances,
-----
accessories, and other equipment of whatever nature which may be maintained for
installation or use in an aircraft engine.
"Secured Obligations" means and includes all Loans, all advances, debts,
-------------------
labilities, obligations, covenants and duties owing by Company to Lender (or any
corporation that directly or indirectly controls or is controlled buy or is
under common control with Lender) of every kind and description (whether or not
evidenced by any note or other instrument and whether or not for the payment of
money or the performance or nonperformance of any act), direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise
now existing or hereafter arising including, without limitation, any debt,
liability or obligation owing from Company to others which Lender may have
obtained by assignment or otherwise and further including, without limitation,
all interest, charges or any other payments Company is required to make by law
or otherwise arising under or as a result of the A/R Agreement, this Agreement
and the Ancillary Agreements, together with all reasonable expenses and
reasonable attorneys' fees chargeable to Company's account or incurred by Lender
in connection with Company's account whether provided for in the A/R Agreement,
this Agreement, or in any Ancillary Agreement.
"Spare Parts" shall mean the items listed on Schedule III hereof and all
-----------
substitutions, modifications and replacements thereof.
<PAGE>
"Uniform Commercial Code" shall mean, unless the context otherwise
-----------------------
requires, the Uniform Commercial Code as in effect in the State of New York from
time to time.
Section 2. Representations, Warranties and Covenants. Company represents,
-----------------------------------------
warrants and covenants to Lender that, in addition to the representations,
warranties and covenants contained in the A/R Agreement, which are incorporated
herein by reference:
2.1 Company is the sole legal and beneficial owner of the Collateral and
no security agreement, financing statement, mortgage, lease, equivalent security
or lien instrument or continuation statement covering all or any part of the
Collateral is on file or of record with the FAA or in any other public office,
except for the security interest in favor of Lender created or provided for
herein which security interest will constitute, when this Agreement is filed
with the FAA and when UCC-1 financing statements are filed as contemplated by
the A/R Agreement, a perfected security interest in and to all of the
Collateral.
2.2 The Engines and the Spare Parts will not be maintained, used or
operated (i) in violation of any law or any rule, regulation or order of any
governmental authority having jurisdiction, or in violation of any airworthiness
certificate, license or registration relating to any Engine issued by such
authority, (ii) so as to invalidate any manufacturer's warranty or (iii) so as
to invalidate any insurance required by the A/R Agreement.
2.3 Company shall maintain the Spare Parts at the locations described on
Schedule II hereto.
2.4 Company, at its own cost and expense, shall maintain, service, repair,
overhaul and test the Engines and Spare Parts in accordance with the maintenance
program approved by the FAA, so as to keep the Engines and Spare Parts in as
good an operating condition as when delivered to Company, ordinary wear and tear
excepted.
2.5 Company shall maintain all records, logs and other materials required
by the FAA.
<PAGE>
2.6 Within 20 days after the Closing Date, and at all times thereafter so
long as the Engine is subject to the security interest created by this
Agreement, Company shall affix and maintain on the Engine, a nameplate
identifying the security interest of Lender created by this Agreement, as
follows:
SUBJECT TO AN AIRCRAFT PARTS SECURITY AGREEMENT
IN FAVOR OF BNY FINANCIAL CORP.
OR ITS SUCCESSOR
and Company shall not permit the name of any person (other than the Company) to
be placed on the Engine as a designation that might be interpreted as a claim of
ownership of, or Lien on, such Engine.
2.7 Company is an air carrier certificated under Section 604(b) of the
Federal Aviation Act.
Section 3. Collateral. As collateral security for the prompt payment in
----------
full when due (whether at stated maturity, by acceleration or otherwise) of the
Secure Obligations, Company hereby pledges and grants to Lender, a security
interest in all of Company's right, title and interest in the following
property, whether now owned by Company or hereafter acquired and whether now
existing or hereafter coming into existence, and wherever located (all being
collectively referred to herein as "Collateral"):
(a) the Engines;
(b) the Spare Parts;
(c) all substitutes, renewals and replacements of, and additions,
improvements, accessions and accumulations to, the foregoing items;
(d) any lease or chattel paper with respect to any of the foregoing items;
<PAGE>
(e) all log books, manuals, data, modification and overhaul records,
maintenance records, bills of sale, manufacturers' warranties and any other
documents maintained with respect to, or relating to, the foregoing items;
(f) all requisition proceeds, warrant proceeds and proceeds of policies of
insurance from the foregoing items; and
(g) all proceeds from the foregoing items.
Section 4. Further Assurances. In furtherance of the grant of the
------------------
security interest pursuant to Section 3 hereof, Company hereby agrees with
Lender as follows:
4.1 Delivery and Other Perfection. Company shall:
-----------------------------
(a) give, execute, deliver, file and record any financing statement,
notice, instrument, document, agreement or other papers that may be necessary or
desirable to create, preserve, perfect or validate any security interest granted
pursuant hereto or to enable Lender to exercise and enforce its rights hereunder
with respect to such security interest;
(b) keep full and accurate books and records relating to the Collateral,
and stamp or otherwise mark such books and records in such manner as Lender may
reasonably require in order to reflect the security interest granted by this
Agreement;
(c) subject to the provisions of the A/R Agreement, permit representatives
of Lender during normal business hours to inspect and make copies and abstracts
from its books and records pertaining to the Collateral.
4.2 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Lender, Company shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, with the FAA or in any other public
office, any security agreement, financing
<PAGE>
statement, mortgage, lease, equivalent security or loan instrument or
continuation statement with respect to the Collateral in which Lender is not
named as the sole secured party.
4.3 Perfection. Prior to or concurrently with the execution and delivery
----------
of this Agreement, Company shall file this Agreement with the FAA and such other
documents in such offices as Lender may request to perfect the security interest
granted by Section 3 of this Agreement.
4.4 Termination. When all Secured Obligations shall have been paid and
-----------
performed in full in cash, this Agreement shall terminate, and Lender shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representations whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of Company.
Lender shall also execute and deliver to Company upon such termination such
Uniform Commercial Code termination statements and such other documentation as
shall be reasonably requested by Company to effect the termination and release
of the security interest created hereby on the Collateral.
4.5 Further Assurances. Company shall, from time to time upon the written
------------------
request of Lender, execute and deliver such further documents and do such other
acts and things as Lender may reasonably request in order fully to effect the
purposes of this Agreement.
Section 5. Miscellaneous.
-------------
5.1 No Waiver. No failure on the part of Lender or any of its agents to
---------
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by Lender or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
<PAGE>
5.2 Governing Law and Waiver of Jury Trial. THIS AGREEMENT SHALL BE
--------------------------------------
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. LENDER SHALL HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER
APPLICABLE LAW INCLUDING, BUT NOT LIMITED, TO THE UNIFORM COMMERCIAL CODE OF NEW
YORK. COMPANY AGREES THAT ALL ACTIONS AND PROCEEDINGS RELATING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR ANY OTHER SECURED OBLIGATIONS SHALL BE LITIGATED
IN THE FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK AND THAT SUCH
COURTS ARE CONVENIENT FORUMS AND COMPANY SUBMITS TO THE PERSONAL JURISDICTION OF
SUCH COURTS. COMPANY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT
SERVICE OF PROCESS UPON COMPANY MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, DIRECTED TO COMPANY AT COMPANY'S ADDRESS APPEARING
HEREIN, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED WHEN RECEIVED. BOTH
PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BETWEEN COMPANY AND LENDER AND COMPANY WAIVES THE RIGHT TO ASSERT IN ANY ACTION
OR PROCEEDING INSTITUTED BY LENDER WITH REGARD TO THIS AGREEMENT OR ANY OF THE
SECURED OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS WHICH IT MAY HAVE.
5.3 Notices. All notices and other communications provided for in this
-------
Agreement shall be in writing and delivered, telecopied or mailed, first class
postage prepaid, addressed:
if to Company:
World Airways, Inc.
13873 Park Center Road
Herndon, Virginia 22071
Attention: Chief Financial Officer
<PAGE>
Telephone: (703) 834-9200
Telecopy: (703) 834-9211
if to Lender:
BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Robert Grbic, VP
Telephone: (212) 408-7292
Telecopy: (212) 408-4384
5.4 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the respective successors and assigns of Company, and
Lender (provided, however, that Company shall not assign or transfer its rights
hereunder without the prior written consent of Lender).
5.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which together shall constitute one and the same instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
5.6 Lender. Lender may employ agents and attorneys-in-fact in connection
------
herewith and shall not be responsible for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it in good faith.
5.7 Severability. If any provision hereof is invalid and unenforceable in
------------
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of Lender in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
<PAGE>
5.8 Entire Understanding. This Agreement, the A/R Agreement and the
--------------------
Ancillary Agreements contain the entire understanding between Company and Lender
and any promises, representations, warranties or guarantees not herein contained
shall have no force and effect unless in writing, signed by the Company's and
Lender's respective officers. Neither this Agreement, the A/R Agreement, the
Ancillary Agreements, nor any portion or provisions thereof may be changed,
modified, amended, waived, supplemented, discharged, cancelled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WORLD AIRWAYS, INC.,
a Delaware corporation
By: /s/ A. Scott Andrews
-------------------------------
Name: A. Scott Andrews
Title: Chief Financial Officer
BNY FINANCIAL CORPORATION
By:
-------------------------------
Name:
Title: Vice President
<PAGE>
SCHEDULE I
----------
One General Electric Engine Model CF6-D1A, Serial Number 451-109, which is
750 or more rated takeoff horsepower or its equivalent.
<PAGE>
SCHEDULE II
-----------
WORLD AIRWAYS LOCATION ADDRESSES
--------------------------------
ITEM #
- ------
1 AGES - AVIATION ACCESSORIES CO
645 Park of Commerce Way
Boca Raton, FL 33487
2 WORLD AIRWAYS, INC.
c/o Dynair
5011 Aircraft Drive
Anchorage, AK 99519
3 WORLD AIRWAYS, INC.
2460 Remount Road
Suite 105
Charleston, SC 29418
9 WORLD AIRWAYS, INC.
Rhein Main Flughafen
Building 202 Room 1123
600 Frankfurt/Main 75
Frankfurt, Germany
10 WORLD AIRWAYS, INC.
c/o TIMCO, Inc.
623 Radar Road
Greensboro, NC 27410
11 HAECO
Main Storeroom
Tai-Kai International Airport
Hong Kong
12 WORLD AIRWAYS,INC.
c/o P/T Garuda lndonesia
Material Department (CGKMDGA)
Garuda Maintenance Facility
Soekarno-Hatta International Airport
Cengkareng 19101 Box 303 Bush
<PAGE>
Location Addresses
Page 2
13 WORLD AIRWAYS, INC.
71 Industrial Blvd
Southgate Industrial Center
New Castle, DE 19720
14 WORLD AIRWAYS, INC.
71 Industrial Blvd
Unserviceable Room
Southgate Industrial Center
New Castle, DE 19720
15 WORLD AIRWAYS, INC.
c/o A.M.R, Services
Cargo Bldg 263, Door #1
JFK Int'l Airport
Jamaica, NY 11430
16 WORLD AIRWAYS, INC.
c/o A.M.R, Services
Unserviceable Room
Cargo Bldg 263, Door #1
JFK Int'l Airport
Jamaica, NY 11430
17 WORLD AIRWAYS, INC.
Bldg E-3, Ground Floor MAS TEC
OP Center, Eng Supplies Manager
Subang Int'l Airport
Selangor, West Malaysia
18 WORLD AIRWAYS, INC.
Bldg E-3, Ground Floor MAS TEC
Unserviceable Room
OP Center, Eng Supplies Manager
Subang Int'l Airport
Selangor, West Malaysia
19 WORLD AIRWAYS REP/DYNAIR
211 California Street
LAX Int'l Airport
El Segundo, CA 90245
<PAGE>
Location Addresses
Page 3
20 JIT-AERO Ltd
Unit 16
Gatewick Metro Center
Balcombe Road
Horley Surry RH69GA
21 JIT-AERO Ltd
Unit 16
Gatewick Metro Center
Unserviceable Room
Balcombe Road
Horley Surry RH69GA
22 THE MEMPHIS GROUP
3900 Willow Lake Blvd
Memphis, TN 38118
23 WORLD AIRWAYS, INC. (NO BULK)
c/o United Aerodynamics
6995 N.W. 46th Street
Miami, FL 33166
24 WORLD AIRWAYS, INC. (NO BULK)
c/o United Aerodynamics
6995 N.W. 46th Street
Miami, FL 33166
25 WORLD AIRWAYS, INC. (NO BULK)
c/o United Aerodynamics
Unserviceable Room
6995 N.W. 46th Street
Miami, FL 33166
26 WORLD AIRWAYS, INC.
Atlantic Aviation Bldg #2
PHL Int'l Airport
Philadelphia, PA 19153
<PAGE>
Location Addresses
Page 4
33 WORLD AIRWAYS, INC.
Signature Inn
6515 Signature Drive
Louisville, KY 40213
Room 108
37 AIR ASIA
4-2 No. 22 Lane 618
Ming Ch'uan East Road
Taipei, Taiwan
Republic of China
38 WORLD AIRWAYS, INC.
c/o 6511C Field Avenue
White House, OH 43571
<PAGE>
THIS WARRANT AGREEMENT is entered into as of December 7, 1993, by and
between BNY Financial Corporation, a New York corporation, ("BNYFC"), and
WorldCorp, Inc., a Delaware corporation (the "Company").
In furtherance of that certain Accounts Receivable Management and Security
Agreement between BNYFC and the Company of even date herewith (the "Loan
Agreement"), the Company agrees to grant to BNYFC warrants (the "Warrants") to
purchase shares of the Company's common stock, par value $ 1.00 per share
("Common Stock"), on the terms and conditions stated herein with Warrants to
purchase 250,000 shares of Common Stock being granted hereby. Each Warrant
shall entitle the Holder thereof to purchase upon the exercise thereof one share
of the Company's Common Stock as the number of shares may be adjusted from time
to time pursuant to Section 9 below (the shares of Common Stock issuable upon
exercise of the Warrants being referred to herein as "Warrant Shares").
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein and for other good and valuable consideration, the parties hereto agree
as follows:
1. Issuance and Exercisability of Warrants: Form of Warrant Certificates.
----------------------------------------------------------------------
(a) BNYFC is hereby granted 250,000 Warrants, which Warrants will be
exercisable as of the date hereof through the Expiration Date as hereinafter
defined. The Company will issue and deliver to BNYFC a warrant certificate or
warrant certificates (individually a "Warrant Certificate" and collectively the
"Warrant Certificates") for the 250,000 warrants. The text of the Warrant
Certificate and of the form of election to purchase shares shall be
substantially as set forth in Exhibit A hereto. The form of election to
---------
purchase shares shall be substantially as set forth in Exhibit B hereto.
---------
2. Registration. The Warrant Certificates shall be numbered and shall be
------------
registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the registered holder of any Warrant Certificate on the
Warrant Register (the "Holder") as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration of transfer of Warrant Certificates which are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with knowledge of such
facts that its participation therein amounts to bad faith. The Warrant
<PAGE>
Certificates to be issued to BNYFC hereunder shall be registered initially in
the name of "BNY Financial Corporation."
3. Exchange of Warrant Certificate. Subject to any restriction upon
-------------------------------
transfer set forth in this Warrant Agreement, each Warrant Certificate may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
and representing in the aggregate a like number of Warrants. Any Holder
desiring to exchange a Warrant Certificate or Warrant Certificates shall make
such request in writing delivered to the Company, and shall surrender, properly
endorsed, the Warrant Certificate or Warrant Certificates to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant Certificate or Warrant Certificates, as the case may be, as so
requested.
4. Transfer of Warrants. Subject to compliance with state and federal
--------------------
securities laws and the terms and conditions hereof, BNYFC shall have the right
to sell, transfer, negotiate, assign or grant participation in all or any part
of BNYFC's rights and obligations under this Warrant Agreement or under any
Warrant Certificate. The Warrant Certificates shall be transferable on the
books of the Company (the "Warrant Register") only upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited with the
Company in its discretion. Upon any registration of transfer, the Company shall
deliver a new Warrant Certificate or Warrant Certificates to the person entitled
thereto. Notwithstanding the foregoing, the Company shall have no obligation to
cause Warrant Certificates to be transferred on its books to any person, unless
the Holder of such Warrant Certificates shall furnish to the Company evidence of
compliance with the Securities Act of 1933, as amended (the "Act"), in
accordance with the provisions of Section 11 of this Warrant Agreement. The
text of each new Warrant Certificate issued under Sections 3 or 4 and of the
form of election to purchase shares shall be set forth in Exhibit A hereto and
---------
shall be exchanged and transferred and subject to adjustment in the same manner
as if such new Warrant Certificate were the original Warrant Certificate issued
to the Holder. Any Holder who transfers Warrants shall be responsible for and
pay all costs and expenses associated with such transfer of Warrants to its
transferee.
<PAGE>
5. Term and Compliance with Government Regulations.
------------------------------------------------
5.1 Term of Warrants: Exercise of Warrants.
---------------------------------------
(a) From and after each Warrant becomes exercisable, such
Warrant entitles the registered Holder thereof to purchase one share of Common
Stock at any time thereafter until 5:00 p.m. Washington, D.C. time, December
7, 1996 (the "Warrant Expiration Date"), at a purchase price of $6.15 per
share, as such number of shares may be adjusted from time to time pursuant to
Section 9 of this Warrant Agreement (such purchase price, as adjusted, being
referred to herein as the "Warrant Price").
(b) Subject to the provisions of this Warrant Agreement, each
registered Holder of Warrant Certificates shall have the right, which may be
exercised as expressed in such Warrant Certificates, to purchase from the
Company (and the Company shall issue and sell to such registered Holder) the
number of fully paid and nonassessable shares of Common Stock specified in
such Warrant Certificates, upon surrender to the Company, or its duly
authorized agent, of such Warrant Certificates, with the form of election to
purchase duly filled in and signed, and upon payment to the Company of the
Warrant Price for the number of shares in respect of which such Warrants are
then exercised. Payment of such Warrant Price may be made in cash or by
certified or cashier's check. No adjustment shall be made for any dividends on
any shares of stock issuable upon exercise of a Warrant.
(c) Upon such surrender of Warrant Certificates, and payment of
the Warrant Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
registered Holder of such Warrant Certificates and (subject to receipt of
evidence of compliance with the Act in accordance with the provisions of
Section 11 of this Warrant Agreement) in such name or names as such registered
Holder may designate, a certificate or certificates for the number of full
shares of stock so purchased upon the exercise of such Warrants.
(d) If permitted by applicable law, such share certificate or
certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
shares as of the date of the surrender of such Warrant Certificates and
payment of the Warrant Price as aforesaid. The rights of purchase represented
by the Warrant Certificates shall be exercisable, at the election of
registered Holders thereof, either as an entirety or from time to time for
part only of the shares specified therein and, in the event that any Warrant
is exercised in respect of less than all of the shares specified therein at
any time prior to the date of
3
<PAGE>
expiration of the Warrants, a new Warrant Certificate or Warrant Certificates
will be issued for the remaining whole number of shares specified in the Warrant
so surrendered.
5.2 Compliance with Government Regulations. The Company covenants that if
--------------------------------------
any shares of Common Stock required to be reserved for purposes of exercise of
Warrants require, under any Federal or state law or applicable governing rule or
regulations of any national securities exchange, registration with or approval
of any governmental authority, or listing on any such national securities
exchange before such shares may be issued upon exercise, the Company will as
expeditiously as possible endeavor to cause such shares to be duly registered,
approved or listed on the relevant national securities exchange, as the case may
be.
6. Payment of Taxes. The Company will pay all taxes (other than any
----------------
income taxes or other similar taxes), if any, attributable to the initial
issuance of the Warrants: provided, however, that the Company shall not be
-------- -------
required to pay any tax or taxes which may be payable in respect of any other
issuance or delivery of any Warrants or the issuance of certificates for Warrant
Shares, or the transfer thereof, and no such issuance, delivery or transfer
shall be made unless and until the person requesting such issuance or transfer
has paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that no such tax is payable or such tax has been
paid.
7. Mutilated or Missing Warrants. In case any of the Warrant Certificates
-----------------------------
shall be mutilated, lost, stolen or destroyed, the Company shall issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of the substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction of
such Warrant Certificate and indemnity or bond, if requested, also reasonably
satisfactory to the Company. An applicant for such substitute Warrant
Certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. There has been reserved out of the
-----------------------------
authorized and unissued shares of Common Stock, and the Company shall at all
times keep reserved out of its authorized and unissued shares of Common Stock, a
number of shares sufficient to provide for the exercise of the rights of
purchase represented by the Warrants, and the transfer agent for the Common
Stock ("Transfer Agent") and every subsequent Transfer Agent for any shares of
the Company's Common Stock issuable upon
4
<PAGE>
the exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such purpose.
Concurrently with any corporate action that might result in an increase in the
number of shares for which any Warrant may be exercised pursuant to Section 9
below, the Company shall reserve out of its authorized and unissued Common Stock
the maximum number of additional shares that would be needed to provide for
exercise of all outstanding Warrants after any such increase. The Company will
keep a copy of this Warrant Agreement on file with the Transfer Agent and with
every subsequent Transfer Agent for any shares of the Company's Common Stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. The Company will supply such Transfer Agent with duly executed stock
certificates for such purpose. The Company will furnish to such Transfer Agent
a copy of all notices of adjustments, and certificates related thereto,
transmitted to each Holder pursuant to Section 9.7 hereof. All Warrant
Certificates surrendered in the exercise of the rights thereby evidenced shall
be cancelled.
9. Adjustments. The number and kind of securities purchasable upon the
-----------
exercise of each Warrant and the Warrant Price shall be subject to adjustment
from time to time upon the happening of certain events, as hereinafter
described.
9.1 Definitions.
-----------
(a) "Common Equity Securities" means any class or series of
Common Stock of the Company;
(b) "Convertible Security" means any evidence of indebtedness of
the Company, any share of stock of the Company (other than Common Stock), or
any other security of the Company that is convertible into Common Stock;
(c) "Option" means, subject to Section 9.11 hereof, any right,
option or warrant to purchase either Common stock or Convertible Securities;
(d) "Other Security" means (i) any security of the Company
(other than Common Stock), (ii) any other security of the Company or any
successor entity which the Holder of a Warrant shall be entitled to purchase
at any time, or shall have purchased, upon exercise thereof in lieu of or in
addition to Common Stock, or (iii) any other security of the Company which at
any time shall be issuable or shall be been issued in exchange for, or as a
distribution with respect to, Common Stock or other securities of the Company;
and
(e) "Additional Shares of Common Stock" means all shares of
Common Stock (or Other Securities) issued (or, pursuant
5
<PAGE>
to Section 9.3 below, deemed to be issued) by the Company after the date hereof.
9.2 Adjustments of Warrant Price and Number of Warrant Shares in
------------------------------------------------------------
General. Upon the occurrence of any of the events described in this Section 9,
- -------
subject to Sections 9.10 and 9.11 hereof, the Warrant Price shall be adjusted
in the manner and as of the time set forth in this Section 9. Upon each
adjustment of such Warrant Price pursuant to this Section 9, the Holder of
each Warrant shall thereafter prior to the Expiration Date thereof be entitled
to purchase, at the Warrant Price resulting from such adjustment, the number
of Warrant Shares obtained by multiplying the Warrant Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of such Warrant immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment. Notwithstanding any provision in this Warrant Agreement to the
contrary, however, no adjustment shall be made in the Warrant Price in respect
of the issuance of Additional Shares of Common Stock unless the consideration
per share for an Additional Share of Common Stock issued or deemed to be
issued by the Company is less than the lesser of the Closing Price or the
Warrant Price in effect immediately prior to such issuance.
9.3 Issue of Additional Shares of Common Stock; Actual and Deemed.
--------------------------------------------------------------
(a) Whenever the Company issues Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
subsection 9.3(b) below) without consideration or for a consideration per share
less than the lesser of the Closing Price or the Warrant Price in effect on the
date of and immediately prior to such issuance, such Warrant Price shall be
reduced, concurrently with such issuance, to a price (calculated to the nearest
cent) determined by multiplying such Warrant Price by the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance and the
number of shares of Common Stock which the aggregate consideration received by
the Company for the total number of Additional Shares of Common Stock so issued
would purchase at such Warrant Price, and dividing the result by the sum of the
number of shares of Common Stock outstanding immediately prior to such issuance
and the actual number of such Additional Shares of Common Stock so issued. For
purposes of this calculation, all shares of Common Stock issuable upon
conversion of outstanding Convertible Securities shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to subsection 9.3(b) below, such Additional Shares of
Common Stock shall be deemed to be outstanding.
6
<PAGE>
(b) In the event that the Company, after the date hereof, issues
any Options or Convertible Securities, subject to Section 9.11 hereof, then
the maximum number of shares (as set forth in the instrument governing such
Options or Convertible Securities, without regard to any provisions contained
therein for a subsequent adjustment of such number) of Common Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities
and Options therefor, such number of shares of Common Stock into which such
Convertible Securities may be converted, shall be deemed to be Additional
Shares of Common Stock issued as of the time of issuance, provided that
-------- ----
Additional Shares of Common Stock shall not be deemed have been issued unless
the consideration per share (determined pursuant to subsection 9.5(a) below)
of such Additional Shares of Common Stock would be less than the lesser of the
Closing Price or the Warrant Price in effect on the date of and immediately
prior to such issuance. Throughout this Section 9, the terms "issue" and
"issuance" and all related forms thereof, when used in reference to issuance
of Additional Shares of Common Stock, include reference to deemed issuance
under this subsection 9.3(b), except where the context requires otherwise.
9.4 Readjustment. In any case in which Additional Shares of Common
------------
Stock are deemed or have been deemed issued in connection with the issuance of
Options or Convertible Securities, certain subsequent events shall require
further adjustment of the Warrant Price as set forth in this Section 9.4.
(a) No further adjustment in the Warrant Price shall be made as a
result of the subsequent issuance of any Convertible Security or share of
Common Stock upon the exercise of any such Options or the conversion of any
such Convertible Securities.
(b) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the Company, or increase in the number of shares of
Common Stock issuable upon the exercise, conversion, or exchange thereof, the
Warrant Price computed upon the original issuance thereof, and any subsequent
adjustments based thereon, shall, upon any such decrease or increase becoming
effective, be recomputed to reflect such decrease or increase insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities. Notwithstanding any provision to the contrary in any
instrument governing such Options or Convertible Securities, however, there
shall be no such decrease or increase as a result of any recomputation of the
Warrant Price pursuant to this subsection 9.4(b).
(c) Upon the expiration of any Options or rights of conversion or
exchange under any Convertible Securities, if
7
<PAGE>
any thereof shall not have been exercised, the Warrant Price shall, upon such
expiration, be readjusted and shall thereafter be such as it would have been had
it been originally adjusted (or had the original adjustment not been required,
as the case may be) as if (A) the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon the exercise of
such Options or conversions or exchange rights under such Convertible Securities
and (B) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregated consideration, if any, actually received by the Company for the
issuance, sale or grant of all of such Options or conversion or exchange rights
under such Convertible Securities whether or not exercised, provided, further,
-------- -------
that no such readjustment shall have the effect of increasing the Warrant Price
by an amount in excess of the amount of the adjustment initially made, in
respect to the issuance, sale or grant of such Options, or conversion or
exchange rights under such Convertible Securities.
9.5 Determination of Consideration. For purposes of this Section 9,
------------------------------
the consideration received or deemed to be received by the Company for the
issuance or deemed issuance of any Additional Shares of Common Stock shall be
determined according to this Section 9.5, but shall not include interest
accrued and unpaid on Convertible Securities.
(a) Options and Convertible Securities. The consideration per
----------------------------------
share received by the Company for Additional Shares of Common Stock deemed to
have been issued pursuant to subsection 9.3(b) relating to Options and
Convertible Securities shall be determined by dividing
(x) the total amount, if any, received by the Company as
consideration for the issuance of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Company upon the exercise of such Options or the conversion of
such Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion of such Convertible
Securities, by
(y) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion of such Convertible Securities, or, in the case of
Options for Convertible Securities,
8
<PAGE>
the exercise of such Options for Convertible Securities and the
conversion of such Convertible Securities.
(b) Stock Dividends and Stock Subdivisions. Any Additional
--------------------------------------
Shares of Common Stock issued or deemed to have been issued pursuant to any
stock dividend or stock subdivision shall be deemed to have been issued for no
consideration.
9.6 Stock Dividends and Stock Splits.
--------------------------------
(a) In the event the Company at any time or from time to time on
or after the date hereof shall, subject to Section 9.11 hereof, pay any dividend
on securities payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares, Additional
Shares of Common Stock shall be deemed to have been issued for no consideration:
(i) in the case of any such dividend, immediately after the close
of business on the record date for determining the holders of any
class of securities entitled to received such dividend, or
(ii) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which
such corporate action becomes effective.
In either case the number of Additional Shares of Common Stock deemed to have
been issued shall be the difference between the number of outstanding shares of
Common Stock immediately before such dividend or subdivision and the number of
shares of Common Stock outstanding immediately thereafter.
(b) In the event the Company at any time or from time to time
after the date hereof shall pay any dividend on securities payable in
Convertible Securities, an adjustment shall be made as if such dividend were an
issuance, for no consideration, of the total number of Convertible Securities
distributed in such dividend.
9.7 Adjustments for Combinations or Consolidation of Common Stock.
-------------------------------------------------------------
In the event the outstanding shares of Common Stock shall be combined or
consolidated into a lesser number of shares of Common Stock, the Warrant Price
in effect immediately prior to such combination or consolidation, concurrently
with the effectiveness of such combination or consolidation, shall be
proportionately increased.
9
<PAGE>
9.8 Adjustment for Merger or Reorganization, etc. In case of any
---------------------------------------------
consolidation or merger of the Company with or into another corporation or the
conveyance of substantially all of the assets of the Company to another
corporation, each Warrant hereunder, without any further act or the execution of
any further instrument whatsoever, shall become a warrant to purchase or
receive, at the Warrant Price, such shares of stock or other securities or
property as a holder of the number of Warrant Shares purchasable upon exercise
of such Warrant immediately prior to such consolidation, merger, or conveyance
would have been entitled to upon such consolidation, merger or conveyance, and
appropriate adjustment (as reasonably determined by the Board of Directors of
the Company or the surviving corporation, as the case may be) shall be made in
the application of the provisions herein set forth with respect to the rights of
the holder of such Warrant, to the end that such provisions (including
provisions with respect to changes in and other adjustments of the Warrant
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
exercise of such Warrant. The Company shall not effect any such consolidation,
merger or conveyance unless prior to the consummation thereof the successor (if
other than the Company) resulting from such consolidation or merger, or the
transferee of the assets, as the case may be, shall have assumed by written
instrument the obligation to deliver to each holder of a Warrant such shares of
stock or other securities or property as, in accordance with the foregoing
provisions and the provision of each Warrant, such holder may be entitled to
purchase or receive.
9.9 Adjustment of Warrant Price Upon Issuance of Other Securities.
-------------------------------------------------------------
In the event Other Securities shall be issued or shall become subject to
issuance upon the conversion of any shares (or Other Securities) of the Company
for a consideration such as to diminish the aggregate fair market value of the
Warrant Shares purchasable upon exercise of any Warrant, adjustments of the
Warrant Price shall be made as nearly as possible in the matter provided in this
Section 9 so as to maintain the aggregate fair market value of such Warrant
Shares to the extent reasonably possible.
9.10 Minimum Adjustment. Notwithstanding anything in this Section 9
------------------
to the contrary, the Company shall not be required to give effect to any
adjustment in the Warrant Price unless and until the cumulative effect of one or
more adjustments, determined as above provided, shall have required a change in
the Warrant Price by at least one cent ($.01), but when the cumulative effect of
one or more adjustments so determined shall be to change the Warrant Price by at
least one cent ($.01) such cumulative change in the Warrant Price shall
thereupon be given effect.
10
<PAGE>
9.11 No Adjustment. No adjustment in the Warrant Price shall be
-------------
made:
(a) for a change in the par value of the Warrant Shares; or
(b) in the case of the Warrants issued pursuant hereto; or
(c) as a result of shares of Common Stock or Convertible
Securities being issued upon conversion or exchange of any Options, warrants, or
Convertible Securities of the Company outstanding on the date hereof; or
(d) solely on account of any warrants issued or deemed to be
issued in connection with an adjustment pursuant to the antidilution provisions
of any outstanding warrants of the Company; or
(e) in the case the Company issues or distributes to each Holder
of Warrants the Options or Convertible Securities which each Holder of Warrants
would have been entitled to receive had the Warrants been exercised prior to the
happening of such event or the record date with respect thereto.
(f) in the case of shares of Common Stock or Convertible
Securities pursuant to any employee or director incentive or benefit plan or
stock ownership plan, agreement or arrangement, including any employment,
severance or consulting agreement of the Company or any subsidiary or affiliate
of the Company heretofore or hereafter adopted or approved, as the case may be,
and any modifications to, or amendments of, any such plans, agreements or
arrangements.
For the purpose of any computation under this Section 9, the term
"Closing Price" on any day shall mean the last reported sales price regular way
on such day or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such day, in each
case on the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market as reported by NASDAQ
or any comparable system, or, in the absence of one or more such quotations, the
average of the closing bid and asked prices as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for this purpose.
The term "Trading Day" shall mean a date on which the New York Stock Exchange
(or any successor to such exchange) is open for the transaction of business.
11
<PAGE>
9.12 Notice of Adjustment. Whenever the number of Warrant Shares
--------------------
purchasable upon the exercise of each Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall promptly mail
by first class, postage prepaid, to each Holder notice of such adjustment or
adjustments and a certificate of a firm of independent certified public
accountants selected by the Board of Directors of the Company (who may be the
regular accountants employed by the Company) setting forth the number of Warrant
Shares purchasable upon the exercise of each Warrant and the Warrant Price of
such Warrant shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth the computation by which
such adjustment was made.
9.13 Statement on Warrant Certificates. Irrespective of any
---------------------------------
adjustments in the Warrant Price or the number or kind of shares purchasable
upon the exercise of the Warrants, Warrant Certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrant Certificates initially issuable pursuant to
this Warrant Agreement.
10. No Fractional Interests. No fractional Warrant Shares, or cash or
-----------------------
other property in lieu thereof, shall be issued upon the exercise of Warrants.
11. Registration under the Securities Act of 1933 and Registration Rights.
---------------------------------------------------------------------
(a) BNYFC represents and warrants to the Company that BNYFC will not
dispose of any of its Warrants or Warrant Shares except pursuant to (i) an
effective registration statement under the Act, (ii) Rule 144 under the Act (or
any similar rule under the Act relating to the disposition of securities), or
(iii) an opinion of counsel that an exemption from such registration is
available.
12. Certificates to Bear Legends. The Warrants shall be subject to a
----------------------------
stop-transfer order and the Warrant Certificates therefor shall bear the
following legend by which each Holder shall be bound:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK (OR OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
12
<PAGE>
The Warrant Shares (or Other Securities) issued upon exercise of the
Warrants shall be subject to a stop-transfer order and the Warrant Certificate
or Warrant Certificates evidencing any such Warrant Shares (or Other Securities)
shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The Company covenants that it shall issue a new Warrant Certificate or
Warrant Certificates without the legends referred to above, evidencing the
Warrants or the Warrant Shares or Other Securities issued upon exercise of the
Warrants, in exchange for a Warrant Certificate or Warrant Certificates
evidencing such Warrants, Warrant Shares or Other Securities, and will remove
the stop-transfer order, in the event the Holder of such Warrants, Warrant
Shares or Other Securities shall deliver to the Company an opinion of counsel
reasonably satisfactory to the Company that an exemption from registration under
the Act is available with respect to such Warrants, Warrant Shares or Other
Securities.
13. Registration Rights. The Company and BNYFC agree that their
-------------------
respective rights and obligations with respect to registration of the Warrants
and Warrant Shares under the Act are as hereinafter set forth.
13.1 Registration of Warrants and Warrant Shares. If the Company at
-------------------------------------------
any time proposes to register any of its Common Stock under the Act for its own
account or for the account of any Holder or any other person (other than (i) any
registration of an offering solely to employees of the Company or its
subsidiaries or (ii) any registration relating to a merger or other business
combination transaction), it shall promptly give written notice to the Holder of
its intention to do so, and the Company shall include in such registration,
subject to Section 13.2 hereof, all Warrant Shares that the Holder shall specify
in a written notice delivered to the Company within 30 days after its receipt of
the Company's notice of the proposed filing of the registration statement,
provided that the Company shall not be required to include in such registration
- --------
any Warrant Shares that a Holder shall so specify if, in the unqualified opinion
of counsel to the Company reasonably acceptable to the Holder so specifying,
registration under the Act is not required for the transfer of such Warrant
Shares in the manner requested by such Holder or that a post-effective amendment
to an existing registration
13
<PAGE>
statement would be legally sufficient for such transfer and the Company shall
have obtained such a post-effective amendment.
13.2 Exclusion. If the proposed or required registration is to be
---------
underwritten (whether on a "best efforts" or a "firm commitment" basis), the
managing underwriter shall have the right to exclude all or any part of the
Warrant Shares of the Holder if the underwriter advises the Company in writing
that it reasonably believes that such securities should be withdrawn therefrom.
Any exclusion of Warrant Shares shall be made pro rata among the Holder and all
other persons (other than the Company) participating in the registration in
proportion to the respective number of Warrant Shares or other securities for
which such Holder and each such other person have requested registration.
13.3 Further Obligations and Conditions Relating to Registration of
--------------------------------------------------------------
Shares. Registration of Warrant Shares pursuant to Section 13.1 shall be
- ------
subject to the following:
(i) Information, Documents, Assignments, etc. The Holder shall
-----------------------------------------
furnish to the Company such information as the Company may
reasonably request and as shall be required in connection with
any registration, qualification or compliance referred to herein.
The Company shall permit counsel for the Holder to participate in
meetings in connection with the preparation of any registration
statement prepared pursuant to Section 13.1 (but the Holder shall
be under no obligation to participate in any such meetings and
shall incur no liability for its failure to so participate).
Before filing any such registration statement or amendment or
supplement thereto, the Company shall furnish to the Holder
copies of all such documents proposed to be filed. The Company
shall promptly deliver to the Holder copies of each such
registration statement and each amendment or supplement thereto
as filed with the Securities and Exchange Commission ("SEC").
The Company shall furnish to the Holder the number of
prospectuses, offering circulars or other documents, and all
amendments or supplements thereto, incident to each registration,
qualification or compliance as from time to time the Holder may
reasonably request.
(ii) Underwriting Agreement. The Company and the Holder shall
----------------------
enter into an underwriting agreement in customary form with
respect to the registration of Warrant Shares pursuant to Section
13.1 hereof with the underwriter or underwriters selected for
14
<PAGE>
such underwriting by the Company, which underwriting agreement
shall provide for the completion of the offering within 90 days
of the effective date of the registration statement, provided,
--------
however, that such underwriting agreement shall not require any
-------
Holder to indemnify the underwriter for any losses, claims,
damages, liabilities or actions except those arising out of or
based on an untrue statement or omission made in reliance upon
and in conformity with written information furnished to the
underwriter by such Holder for specific use in the registration
statement, prospectus, preliminary prospectus, amendment or
supplement.
(iii) Filing of Amendments. The Company shall file such
--------------------
amendments and supplements to the registration statement and the
related prospectus and take such other action as may be necessary
to keep the registration statement effective and to comply with
the Act for such period, not exceeding 90 days from the original
effective date of the registration statement.
(iv) Blue Sky. The Company shall do any and all acts and things
--------
which may be necessary or advisable to enable the Holder to
consummate the sale, transfer or other disposition of Warrant
Shares and take such action under the securities laws of such
states as the Holder shall reasonably request, provided, however,
-------- -------
that the Company shall not be required to file any general
consent to service of process, to qualify to do business as a
foreign corporation, or to otherwise subject itself to taxation
in connection with any such action, in any state.
(v) Expenses. The Company and the Holder shall share all of the
--------
costs of registration and all related blue sky costs, including,
but not limited to, printing expenses, registration and filing
fees, and fees and disbursements of counsel and accountants for
the Company (subject, however, to subsection (vi) below), except
that the Holder shall pay the fees and selling commissions
applicable to its Warrant Shares and the Company (or others)
shall pay the fees and selling commissions applicable to all
other shares of Common Stock being sold. Such sharing shall be
in the proportion that the number of Warrant Shares being so
registered for the Holder bears to the total number of other
shares of Common Stock being
15
<PAGE>
so registered. Notwithstanding the foregoing provisions of this
subsection, the Company shall not be required to pay any of the
costs or such expenses with respect to registration statements
prepared pursuant to Section 13.1 hereof unless the aggregate
value of the total number of Warrant Shares to be registered,
including all Common Stock to be registered by another person,
exceeds $2,000,000. In the event that the Company shall not be
required to pay any of such costs or expenses, each person
participating in the registration shall bear its pro rata portion
of such costs or expenses. The aggregate value of the total
number of Warrant Shares and Common Stock to be registered shall
be determined by multiplying the total number of Warrant Shares
and Common Stock to be registered by the average of the daily
Closing Price (as defined in Section 9.11 hereof) of the Common
Stock for 20 consecutive Trading Days commencing 30 Trading Days
before the date on which the Holder received from the Company the
notice of proposed registration referred to in Section 13.1
hereof.
(vi) Audits. The Company shall not be required to furnish any
------
audited financial statements at the request of the Holder other
than those statements customarily prepared at the end of its
fiscal year, unless the Holder shall agree to reimburse the
Company of the out-of-pocket costs incurred by the Company in the
preparation of such other audited financial statements. The
Company shall, however, furnish, without charge, copies of all
such unaudited financial statements as the Holder shall
reasonably request.
(vii) Indemnification. The Company shall indemnify and hold
---------------
harmless the Holder, each person who under the Act is deemed a
controlling person of the Holder, and each underwriter for the
Holder against any losses, claims, damages or liabilities to
which the Holder, controlling person or underwriter may become
subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
shall arise out of or be based upon any untrue or allegedly
untrue statement of any material fact contained in the
registration statement, upon any related prospectus or
preliminary prospectus or any amendment or supplement to the
registration statement or any prospectus or preliminary
prospectus or upon the
16
<PAGE>
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse any legal or other
expenses reasonably incurred by the Holder, controlling person or
underwriter in connection with investigating or defending against
any such loss, claim, damage, liability or action; provided,
--------
however, that the Company shall not be liable to the Holder,
-------
controlling person or underwriter for any losses, claims,
damages, liabilities or actions insofar as the same shall arise
out of or be based upon any such untrue statement or omission
made in reliance upon and in conformity with written information
furnished by the Holder, controlling person or underwriter
seeking indemnification hereunder to the Company for use in the
registration statement, prospectus, preliminary prospectus,
amendment or supplement. The Holder and each underwriter for the
Holder shall similarly indemnify and hold harmless the Company
and its controlling persons and underwriters and all persons
participating in the registration against any such losses,
claims, damages, liabilities or actions but only insofar as the
same shall arise out of or be based upon any untrue statement or
omission made in reliance upon and in conformity with written
information furnished by such indemnifying person to the Company
for use in the registration statement, prospectus, preliminary
prospectus, amendment or supplement.
13.4 Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnification provided for in
Section 13.3 above is due in accordance with its terms but is for any reason
held by a court to be unavailable from the Company or the Holder, the Company
and each Holder shall contribute to the aggregate losses, claims, damages, and
liabilities (or actions in respect thereof) to which any Holder or the Company
may be subject in such proportion so that the indemnifying party is responsible
for that portion of such losses, claims, charges, and liabilities for which its
has agreed to indemnify the indemnitee pursuant to Section 13.3 above, provided
that in no event shall the indemnifying party be required to contribute to any
losses, claims, damages or liabilities that arise solely out of or are based
upon written information furnished by such indemnitee for specific use in the
registration statement, prospectus, preliminary prospectus, amendment or
supplement.
17
<PAGE>
13.5 Change in SEC Procedures or Forms. If the SEC adopts new
---------------------------------
procedures or forms for public resales of restricted securities, the Company
shall take such action as may be demanded by the Holder in order to permit
public resales of the Warrants and/or Warrant Shares pursuant to such new
procedures or forms so long as the economic or other burden of compliance is not
materially greater than the burden contemplated by Sections 13.1 to 13.4 above.
13.6 Transfer of Registration Rights. It is expressly understood and
-------------------------------
agreed that BNYFC may transfer all or any portion of its registration rights
hereunder to any person or enter into any agreement providing for the joint
exercise of the registration rights granted hereunder, provided, however, that
-------- -------
BNYFC shall notify the Company of any such transfer and any transferee Holder,
shall, if such transferee Holder desires to exercise registration rights
hereunder, agree to be bound with respect to such registration rights by the
terms of this Warrant Agreement.
14. No Rights as Stockholders: Notices to Holders.
---------------------------------------------
Nothing contained in this Warrant Agreement or in any of the Warrants shall be
construed as conferring upon the Holders or their transferees the right to vote
or to receive dividends or to consent to or receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company. The Company shall provide to BNYFC all information it provides to
shareholders, including, without limitation, notices, proxy statements and
financial statements. If, however, at any time prior to the Expiration Date and
prior to the exercise of the Warrants, any of the following events shall occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock or make any distribution (other than a cash
dividend in the ordinary course) to the holders of its shares of Common Stock;
or
(b) the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe to or purchase
any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, sale or transfer or lease of
all or substantially all of its property, assets, and business as an entirety)
shall be proposed;
then in any one or more of said events the Company shall (i) give notice in
writing of such event to the Holders as provided in
18
<PAGE>
Section 14 hereof and (ii) if there are more than 100 Holders, cause notice of
such event to be published once in The Wall Street Journal (national edition),
such giving of notice and publication to be completed at least 20 days (or 10
days in any case specified in paragraphs (a) and (b) above) prior to the date
fixed as a record date or the date of closing and transfer books for the
determination of the stockholders entitled to such dividend, distribution, or
subscription rights, or for the determination of stockholders entitled to vote
on such proposed dissolution, liquidation or winding up. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be.
15. Notices. Any notice pursuant to this Warrant Agreement to be given or
-------
made by the registered Holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:
If to the Company:
WorldCorp, Inc.
13873 Park Center Road
Suite 490
Herndon, VA 22071
Attention: President and Chief Executive
Officer
Notices or demands authorized by this Warrant Agreement to be given or made by
the Company to or on any registered Holder of any Warrant shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by first-class mail, postage prepaid, addressed to such Holder at the address of
such Holder as shown on the Warrant Register.
16. Supplements and Amendments. The Company and all of the Holders may
--------------------------
from time to time supplement or amend this Warrant Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Holders may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interests of the Holders.
17. Successors. All the covenants and provisions of this Warrant
----------
Agreement by or for the benefit of the Company or the Holders shall bind and
inure to the benefit of their respective successors and assigns hereunder.
18. Benefits of this Warrant Agreement. Nothing in this Warrant Agreement
----------------------------------
shall be construed to give to any person or corporation other than the Company
and the Holders, any legal or
19
<PAGE>
equitable right, remedy or claim under this Warrant Agreement, but this Warrant
Agreement shall be for the sole and exclusive benefit of the Company and the
Holders of the Warrants and Warrant Shares.
19. Captions. The captions of the Sections and subsections of this
--------
Warrant Agreement have been inserted for convenience only and shall not affect
the construction hereof.
20. Counterparts. This Warrant Agreement may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed on the date first set forth above.
WORLDCORP, INC.
By: /s/ SIGNATURE APPEARS HERE
-------------------------------
Title: C.F.O.
----------------------------
BNY FINANCIAL CORPORATION
By: /s/ SIGNATURE APPEARS HERE
--------------------------------
Title: VICE PRES
-----------------------------
20
<PAGE>
EXHIBIT A
TO
WARRANT AGREEMENT
-----------------
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
NO. ______ _____ WARRANTS
VOID AFTER 5:00 P.M. WASHINGTON, D.C. TIME
December 7, 1996
(Unless Voided Later as Provided Herein)
WORLDCORP, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received ____________________, the registered
holder hereof or registered assigns (the "Holder"), is the owner of the number
of Warrants set forth above, each of which entitles the owner thereof to
purchase at any time after issuance until 5:00 P.M. , Washington, D.C. time on
December 7, 1996, one fully paid and nonassessable share of the common stock
(the "Common Stock"), $1.00 par value per share, of WorldCorp, Inc. (the
"Company"), as such number of shares may be adjusted pursuant to the Warrant
Agreement referred to below at the purchase price of $6.15 per share (the
"Warrant Price").
<PAGE>
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of a warrant agreement dated as of
December 7, 1993 (the "Warrant Agreement") by and between the Company and BNY
Financial Corporation ("BNYFC"), and which Warrant Agreement is hereby
incorporated herein by reference and made a part hereof and to which Warrant
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Company and the Holders of the Warrant Certificates. Copies of the Warrant
Agreement are on file at the principal office of the Company.
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant Certificate as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of the Company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
The Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such
2
<PAGE>
Holder to purchase. If this Warrant Certificate shall be exercised in part, the
Holder shall be entitled to receive upon surrender hereof, another Warrant
Certificate or Warrant Certificates for the number of whole Warrants not
exercised.
No fractional shares, or cash or other property in lieu thereof, of common
Stock shall be issued upon the exercise of any Warrant.
No Holder shall be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company which may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained in the Warrant Agreement or herein be construed to confer upon such
Holder, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or, except as provided
in the Warrant Agreement, to receive notice of meetings, or to receive dividends
or subscription rights or otherwise, until the Warrant or Warrants evidenced by
this Warrant Certificate shall have been exercised and the shares of Common
Stock purchasable upon the exercise thereof shall have become deliverable as
provided in the Warrant Agreement.
3
<PAGE>
IN WITNESS WHEREOF, WorldCorp, Inc. has caused the manual or facsimile
signature of its President and Chief Executive Officer or Chairman of the Board
of Directors to be printed hereon, under its corporate seal, affixed or in
facsimile, attested by the manual or facsimile signature of the Secretary or an
Assistant Secretary of the Company.
DATE: ___________________, 1993 WORLDCORP, INC.
[SEAL]
By:
---------------------
Title:
Attest:
By:
---------------------------------
Title
4
<PAGE>
EXHIBIT B
PURCHASE FORM
[To be executed upon exercise of Warrant]
To World Corp, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate(s) for, and to purchase
thereunder, ___ shares of Common Stock as provided for therein, and tenders
herewith payment of the purchase price in full in the form of cash or a
certified or cashier's check in the amount of $________________________.
Please issue
a certificate or certificates for such shares of Common Stock in the name of
____________________________.
PLEASE INSERT SOCIAL SECURITY Name
OR OTHER IDENTIFYING NUMBER ------------------------------
OF ASSIGNEE (Please print name and address)
Address
------------------------------
Signature
------------------------------
NOTE: The above signature should correspond
exactly with the name on the face of this
Warrant Certificate or with the name of
assignee appearing in the assignment form
below.
AND, if said number of Shares shall not be all the Shares purchasable under the
within Warrant Certificate, a new Warrant
<PAGE>
Certificate is to be issued in the name of said undersigned for the balance of
the whole number of Shares purchasable thereunder.
Dated: ____________________, 19__
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, ________________, a ______________ corporation
("Assignor") hereby sells, assigns and transfers unto
___________________________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ___________ _________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Date: _______________, 199_ [ ]
By:
----------------------------
Name:
Title:
2
<PAGE>
PART I - THE SCHEDULE
- ---------------------
SECTION B-SUPPLIES OR SERVICES AND PRICES/COSTS
- -----------------------------------------------
1. AIRLIFT SERVICES
- --------------------
<TABLE>
<CAPTION>
CLIN AMOUNT
- ---- ------
<S> <C> <C>
0001 PEACETIME AIRLIFT SERVICE--(FIXED REQUIREMENTS) $200,795,920.71
SUBCLINS 0001AA THROUGH 0001CK
Airlift services to include passenger and/or cargo
as described in Section C, para. 1.
0002 EXPANSION AIRLIFT SERVICE Estimated
$220,875,512.78
The government may from time to time during the
period of performance of this contract, subject
to the contractors acceptance, order expansion
airlift services. Expansion requirements are
unplanned, additional missions bought on delivery
order as described in Sec G, para 1b. Expansion
may include, SAAMS, Exercises, L100 and CAT A
cargo requirements.
0002AA The contractor shall furnish L-100 airlift services
worldwide when requested by the government at ton
mile rate of $________
0002AB CAT A Cargo (See Attachment 6)
0002AC CAT A Stars & Stripes. Delivery of military
newsletters from Tokyo Japan to various pacific
locations at a price per pound of: $________
0003 DATA--Data shall be provided to the US Government
as specified in part III, SECTION J, Contract Data
Requirements List (CDRL)--DD Form 1423. NSP
0004 CRAF ACTIVATION
The contractor grants the Government the unilateral
right to increase the airlift service to be performed
hereunder up to and including the full capacity of
</TABLE>
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<PAGE>
all aircraft listed in Attachment 8 and other
related support services as set forth in Attachment
9, entitled Civil Reserve Air Fleet (CRAF). Such airlift
services shall be ordered by delivery order except
for other related support services which shall be ordered
in accordance with the CHANGES clause.
STAGE I - This is airlift capability, from the long range international
-------
segment, committed to Commander, Air Mobility Command. It can be used to
perform airlift services when the AMC airlift force can not meet both deployment
and other traffic requirements simultaneously. CINCTRANS, on approval by the
Secretary of Defense (SECDEF), has the authority to activate Stage I of CRAF.
STAGE II - This is an airlift expansion identified for an airlift emergency
--------
not warranting national mobilization. CINCTRANS, on approval by the SECDEF,
has the authority to activate Stage II of CRAF.
STAGE III - CRAF Activation. This is the total CRAF airlift capability
---------
made available when required for DOD operations during major military
emergencies involving US forces.
The Secretary of Defense shall issue the order to CINCTRANS to
activate Stage III of the CRAF:
(1) In time of war or during a defense-oriented national emergency
declared by the President, or in time of national emergency declared by
Congress.
(2) In a national security situation short of a declared defense-
oriented national emergency.
0004AA AEROMED SERVICES Aeromedical airlift services in accordance with
Atch 9, Chap 13.
0005 REIMBURSABLE Estimated at 6% of award
The following subclins identify additional charges not included in
the Uniform Rate which may be recognized and reimbursed at cost if
incurred in the performance of this contract.
0005AA Tax, Customs, Immigration, Federal Inspection Services Fees, Excess
Baggage and Passenger Facility Charges (Para 2a(5) below and Sec G,
Para 7)
0005AB Fuel Adjustment (Para 2a(2) below)
0005AC Demurrage (Reference para 2a(6), below)
2. PRICING
-------
a. Contract Line Item Numbers (CLINs) 0001 and 0002 shall be priced as
follows:
(1) Airlift services shall be paid at the price established for each
SUBCLIN. Such price shall be determined in accordance with AMC Uniform
Negotiated Rates and Rules incorporated by reference for International Long- and
Short-Range Commercial Augmentation. AMC will continue to conduct an annual
rate review in accordance with the Memorandum of Understanding (MOU) between the
contractors and AMC. Mileages will be determined in accordance with the
Commercial Operations Integrated System (COINS). Those missions that cannot be
flown at the mileages calculated in COINS due to circumnavigating certain
communist countries, will be paid override mileage. Override mileage will be
determined on actual flight plans and mutually agreed to.
(2) CAT A cargo transportation services shall be paid at the one-way
CAT B
B-2
<PAGE>
ton mile rate, provided that, if a carrier has on file a tariff available to
the general public for equivalent unrestricted service which is less than the
above rate, then the tariff rate shall apply. In either case, the price shall
be calculated in accordance with the FY94 AMC Uniform Rates and Rules for long-
range airlift).
(3) The prices are subject to adjustment for variances in fuel prices
as set forth in the AMC Final Uniform Negotiated Rates and Rules Appendix A.
(4) When requirements for SAAMs or Exercises exceed the 'Maximum
Standard Payloads' as set forth in Appendix A of the Rates and Rules, the
Government shall negotiate an ACL taking into consideration the Gross Take Off
Weight (as certified by the carrier), desired ACL and mission requirements.
Ferry on SAAMs or Exercises will be paid at the standard ACL or where allowable
cabin loads for various aircraft types are less, the government shall pay ferry
for the lower number of seats.
(5) CLIN 0005AA: The following additional charges may be recognized
under the terms of this contract: Excess Baggage Charges (Scheduled Service);
Transportation Tax; Head Tax; Custom Charges as outlined in 19 USC 58c;
Immigration Charges as outlined in 8 USC 1356(d); Passenger Facility Charge
Imposed by Commercial Airports, approved by the FAA under the Aviation, Safety,
and Capacity Expansion Act of 1990; and Federal Inspection Service fee.
(6) CLIN 0005AC - (Demurrage) will be paid on completed cargo
missions when departure is delayed over 3 hours beyond scheduled block time and
the delay is Government controlled (See paragraph F-7). Payment of delays of
fractions of an hour will be calculated using normal rounding procedures, i.e.,
29 minutes or less will be dropped, 30 minutes or more will be rounded to the
next whole hour. Charges are as follows:
<TABLE>
<S> <C> <C>
(1) B747 - $1246 per hour
(2) DC-10 - $1038 per hour
(3) DC-8 - $ 623 per hour
(4) B707 - $ 505 per hour
</TABLE>
b. CLIN 0003 is included in the AMC determined rate and shall not be priced
separately.
c. CLIN 0004 (excluding aeromedical) shall be priced as follows:
(1) Prices for airlift services during CRAF activation, Stage I, II
and III and during Commander, AMC, determined periods where volunteered
airlift is used in lieu of CRAF activated airlift shall be determined in the
same manner as for CLINs 0001 and 0002, except that one-way cargo and
passenger missions will be priced at the percentage of the round trip rate,
identified as CRAF one-way rate, in the AMC Negotiated Uniform Rates and
Rules.
(2) For long-range international aircraft called up (See Atch 9,
---------
para 2.18) under CRAF activation Stages I, II or III, there will be a
guaranteed average daily utilization of 8 hours flight time. If an aircraft
fails to achieve the guaranteed utilization, the contractor will be entitled
to additional compensation due to under utilization.
(a) The equation for computing compensation for under utilization is:
(guaranteed hours - actual hours) x 500 mph x ACL x rate =
compensation.
1. Flight time (actual hours) shall include all revenue
-
hours including paid-ferry and any commercial flights operated during the CRAF
activation.
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<PAGE>
2. Actual hours will be increased by 8 hours for each time
-
an aircraft is unavailable to the Government for contractor controllable
reasons.
3. The rate will be based on the AMC Negotiated Uniform
-
Rate minus any costs not expected to be incurred (i.e., fuel, meals,
maintenance).
4. The underutilized hours will be converted to miles
-
using an average speed of 500 mph.
EXAMPLE:
(i) Tail number N123 with an ACL of 326 PAX is activated on the 5th of
the month.
(ii) The aircraft operated for 100 flight hours for the remainder of the
month including 10 commercial hours.
(iii) Guaranteed utilization = 200 hours (25 days x 8 hrs)
(iv) Actual utilization = 100 hours
(v) Underutilized hours = 100 hours
(vi) 100 hours x 500 mph = 50,000 miles x 326 ACL = 16,300,000 seat
miles x .045 (actual rate to be determined = $733,500 compensation earned for
the month.
(b) The procedure for determining under utilization and
compensation will be based on documentation provided by the contractor.
Contractor will report to AMC at the end of each month total hours flown for
each called up aircraft, the number of contractor controllable delays, hours
flown in commercial service, and hours flown in AMC service. Compensation for
under utilization will be accomplished at the end of the contract period or
upon CRAF deactivation, whichever comes first. Contractors must provide cost
data to determine the rate as soon as possible.
(c) Additionally, should the long-range international aircraft
called up, as defined in Attachment 9, para 2.14. under CRAF activation Stages
I, II, III not be required for the 30-day minimum guaranteed utilization
period or not be required for all or a portion of the 15 days between
notification and official release from call up, they will be compensated for
not being utilized at an amount not to exceed that calculated as provided in
paragraph 2(b) above. Carriers are obligated to utilize their best efforts to
obtain commercial business to minimize government costs.
(d) Prices for airlift called up under CRAF activation Stages I,
II, and III may be adjusted by negotiation between the contractor and the
government pursuant to the procedures in the CHANGES clause. The Memorandum of
Understanding (MOU) between the contractor and AMC shall serve as the
guideline for establishing prices and adjustments thereto. In establishing
such prices, it shall be presumed, unless the contractor presents evidence
establishing that an adjustment to the rate of compensation is appropriate,
that prices computed in accordance with the AMC Negotiated Uniform Rate
applied to the mileage set forth in COINS for the shortest route over which
the type of aircraft involved operated, constitutes equitable prices for such
services. However, consideration will be given but not limited to evidence so
presented by the contractor for aircraft called up which reflect reasonable
incurred cost outside the peacetime rate associated with call-up aircraft
under CRAF activation. Examples of such costs are:
1. Additional per diem expenses incurred to relocate
-
personnel required to assist in the flow of CRAF activated aircraft.
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<PAGE>
2. Additional security expenses for the safety of aircraft
-
and crew.
d. The government shall also have the right at its sole option to order
other airlift service under the contract in accordance with and at the rate
specified by the contractor for service to the public which will, in the
judgment of the contracting officer, meet the government needs. In addition,
the government may, for airlift service not covered by the AMC Uniform Rates
and Rules, establish rates by negotiation.
3. MINIMUM GUARANTEE
-----------------
The total minimum guarantee to be awarded under this contract will be those
dollars negotiated and awarded for each contract as the fixed award under CLIN
0001. This minimum can be satisfied by a combination of fixed and expansion
award.
B-5
<PAGE>
PART I - THE SCHEDULE
SECTION C - DESCRIPTION/SPECS/WORK STATEMENT
1. GENERAL DESCRIPTION OF SERVICE
a. Contractor shall provide international long and/or short range
airlift services. Services are to include passenger, cargo and/or aeromedical
transportation as stated in SECTION B and in accordance with the specifications
set forth in Attachments 1 through 7, 9 through 11 and Exhibit A. Cargo (and/or
baggage during CRAF operations) may include hazardous material classes 1 through
9 as defined in the International Air Transport Association Dangerous Goods
Regulation. Passenger service shall in no event be less than that afforded
economy class passengers, commensurate with customs, practices and standard
procedures of particular airports and countries, and this contract.
b. Contractor shall operate in accordance with Federal Aviation
Administration (FAA) approved manuals, (applicable copies of which shall be
aboard each aircraft), appropriate provisions of Federal Aviation Regulation
(FAR) 121, applicable International Civil Aviation Organization (ICAO)
recommended practices and standard procedures, appropriate emergency response
guidebook/manual, and this contract.
c. The Contractor, in furnishing services hereunder shall provide,
except as otherwise specifically set forth in the contract, all personnel,
facilities, supplies, and equipment to support and perform air transportation
services called for under this contract. Contractor shall be self-supporting at
all bases of operation.
2. CONTRACT REQUIREMENTS
a. The contractor (or in the case of a Contractor Team Arrangement,
the entity of the Contractor Team Arrangement operating the aircraft) shall
conform and adhere to these requirements throughout the term of the contract:
(1) Shall meet requirements set forth in AMC FARS 5352.247-1001
incorporated in Section H, paragraph 17.
(2) Shall participate in the Civil Reserve Air Fleet (CRAF) Program
and maintain a minimum of 15% of the aircraft in their wide-body equivalent
fleet.
(3) The Contractor shall provide and maintain a minimum of four
qualified cockpit crews per aircraft as required by Attachment 9 of this
contract, exclusive of those with Reserve or National Guard commitments, and
material to enable at least 10 hours per day utilization of each aircraft as
required in Attachment 9. Cockpit crew members must be US. citizens and
eligible for a SECRET clearance. The Contractor shall submit a list of the
names of the crew members within 15 days if requested by the Contracting
Officer.
(a) Contractors who do not have sufficient crews for all of
their aircraft may arrange with other contractors for the necessary crews.
Contractor may employ such crews on a full-time basis; however, arrangements
could include standby or temporary crews as long as their names appear on the
contractor's list of current and qualified crew members provided to the FAA.
(b) In the event cockpit crews are obtained through contractual
arrangement with another contractor, they must be US citizens and eligible for a
Secret clearance. If during any period of contract performance, including
activation of CRAF, the contractor for reasons beyond its control is unable to
provide either the personnel or the material necessary to operate 10 hours per
day, it will still be obligated to provide the aircraft listed on Attachment 8,
and the Government shall have the right to operate such aircraft. The exercise
of such right is contingent upon the provision by the Government of adequate
financial protection to the contractor/carrier and any lessor(s). In such
event, the compensation, which would otherwise be paid to the
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<PAGE>
Contractor under the terms of this contract, shall be reduced by the amount
which the Contracting Officer finds to represent the services and material not
furnished by the Contractor, and related overhead and profit.
(4) The Contractor shall at all times during the contract period,
including any extension described elsewhere in the contract, maintain control
over the aircraft listed on Attachment 8, to the extent necessary to assure the
Contractor's ability to meet its guarantee under CRAF. The Contractor shall, at
any time or times during the contract period, furnish to the Contracting Officer
upon demand, evidence that demonstrates the required control of said aircraft.
The Contractor shall not part with control of any aircraft accepted by AMC and
listed on Attachment 8 unless the loss is beyond the control of the Contractor,
such as aircraft accident, or the Contracting Officer, at his option, has agreed
to the substitution of other acceptable CRAF aircraft, as appropriate, and has
accomplished such substitution by contract modification. Examples of failure to
maintain control within the intent of this paragraph are as follows; (1) failure
to retain US registry, (2) leasing of aircraft to unapproved foreign
contractors, (3) dry leasing of aircraft to US airlines or aircraft operators
not possessing a temporary or permanent certificate issued by the DOT and, (4)
removal of aircraft from active utilization (in storage, out of service, or
parked) and not flyable for reasons other than maintenance, repair, or overhaul.
Aircraft temporarily removed from active utilization that are mission capable
within 24 hours are considered to meet the control requirements of this
contract. The parties agree that failure of the Contractor to maintain control
of any aircraft listed on Attachment 8, unless loss of the control is beyond the
control of the Contractor, such as aircraft accident, or approved by the
Contracting Officer, will constitute failure to have a currently existing
capability to perform services called for, and will justify termination of this
contract under the clause entitled "Default." In lieu of Default, the
Government, at its option, may, by unilateral contract modification, reduce its
purchase of airlift services for passengers or cargo, or both, during the
remaining period of the contract by an amount equal to the award share for the
remaining period of the contract attributable, under the formula used to
determine the original contract award entitlement, to the aircraft removed from
the AMC contract creditable mobilization base and deleted from Attachment 8.
Nothing in this paragraph shall limit the right of the Contracting Officer to
terminate this contract for cause for reasons other than failure to maintain
control of the above mentioned aircraft.
(5) Any non-certificated member of a Contractor Team Arrangement
must be an indirect air carrier, exercising effective ownership or control of
the aircraft.
3. MAINTENANCE
a. The contractor shall furnish an aircraft for each flight capable of
completing the flight without requiring regularly scheduled maintenance.
b. No scheduled maintenance except en route or turnaround service and
safety of flight items shall be accomplished at military installations under
the terms of this contract except as otherwise authorized by the
Administrative Contracting Officer (ACO) when deemed to be in the best
interest of the Government. Request for performance of maintenance other than
en route or turn-around servicing, shall be submitted to the Contract
Administrator and the local Operations Center/Command Post. It shall be the
responsibility of the Contractor to arrange for all scheduled aircraft
maintenance and to provide for movement of aircraft to and from their selected
maintenance activity without charge to the Government. Such movement to and
from selected maintenance activity shall not become part of scheduled route
operations. If any maintenance service is to be performed including en route,
turnaround, safety of flight, or scheduled maintenance during ground time of
aircraft, Contractor shall notify the local Operations Center/Command Post as
follows:
(1) Specific type of maintenance to be performed;
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<PAGE>
(2) Anticipated duration;
(3) Type of Government Furnished Service desired in conjunction
with performance of the turnaround or en route maintenance service;
(4) Any reimbursable support desired in conjunction with
performance of the turnaround or en route maintenance service; and
(5) Any change in status or type of work to be performed
subsequent to initial notification to Operations Center/Command Post will be
immediately communicated to the Operations Center/Command Post.
c. The Operations Center/Command Post will coordinate the above
information with Maintenance Control to assure proper spotting of the aircraft
in relation to the degree of hazard associated with the maintenance work to be
performed. Aerial Port Contract Coordinator (CONCOR) and any other interested
base agencies will also be notified by the Operations Center/Command Post.
Except as otherwise specified in the contract, no charge will be made for any
Government furnished services required to perform en route turnaround
maintenance checks and servicing. If any services or material are required to
perform other than turnaround maintenance checks and servicing, such services
or material will be provided on a reimbursable basis in accordance with Air
Force Regulation (AFR) 55-20 and Air Force Manual (AFM) 67-1, Vol I, Part I,
Chapter 10, SECTION O, Subsection 2. Requests for reimbursable services will
be passed from the Operations Center/Command Post to the CONCOR who will
arrange for performance of the required services. Contractor shall comply with
the Air Force "Foreign Objects Damage Program" in accordance with AFR 66-33.
4. AMC TACC OPERATIONS CENTERS
AMC TACC Operations Centers are primarily concerned with mission
monitoring/status and only under cases of extreme emergency will guidance be
provided by the Operations Center as it pertains to mission accomplishment. All
other problems shall be directed to the ACO or appropriate Contract
Administrator for resolution.
5. SPECIAL ASSIGNMENT AIRLIFT MISSIONS or EXERCISE MISSIONS
When positioning at the initial on-load station for a Special Assignment
Airlift Mission (SAAM) or Exercise mission, the contractor shall provide the
AMC mission identifier, aircraft tail number, and ETA to the controlling
numbered TACC Operations Center (OC), i.e., McGuire AFB NJ, or Travis AFB CA.
This information shall be reported as soon as the aircraft departs the last
station prior to positioning at the on-load station originating the SAAM or
Exercise mission. If a mission will be delayed beyond the scheduled or
contractual positioning time, contractor shall report the cause for delay and
the estimated revised ETA to the controlling numbered TACC Operations Center.
6. UNLAWFUL SEIZURE
The Contractor, in performance of this contract, shall have established a
program to prevent unlawful seizure of aircraft. At airports, bases, and air
terminals where there is a Air Mobility Command (AMC) presence or where US
forces are present and responsible for deployment/redeployment of forces, the
military will be responsible for security processing of passengers at on/off
load. At en route/technical stops and at locations where there is no AMC or
military presence, security processing of passengers shall be the responsibility
of the contractor. At these locations, the Contractor shall satisfy the
requirements of the FAA security program for scheduled/charter operations in
commercial service. Contractor shall establish procedures for off-load of
baggage of gate "No Show" passengers unless that baggage has received customs
preclearance. Copies of the Contractor's program shall be furnished to the
Administrative Contracting Officer (ACO) upon request.
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<PAGE>
7. UNUSUAL WEATHER CONDITIONS
a. Contract missions will be permitted into military stations under
either actual or forecast typhoon/hurricane condition I or II, provided such
flights are conducted in accordance with Federal Aviation Regulation's
applicable provisions of the USAF Foreign Clearance Guide, regulations of the
foreign country in which the station is located, and have the approval of the
departure and destination station AMC commander (base commander where there is
no AMC commander). This approval must be obtained prior to originating each
flight segment entering the above forecast conditions. There are no
restrictions relative to actual or forecast typhoon condition III or IV.
b. Whenever possible, every effort should be made to delay a civil
mission at the originating station in instances when severe weather (for
example, a typhoon) is forecast for the terminating station, rather than
permit the mission to proceed to an en route station and then be delayed.
8. AIR ROUTE TRAFFIC CONTROL CLEARANCE OF AIRCRAFT
a. The Contractor shall use the appropriate FAA or ICAO clearance form
when clearing aircraft from civil airports. When clearing from military
installations, DD Form 175, Military Flight Plan, or appropriate FAA or ICAO
clearance form may be used. Civil aircraft commanders are vested with self-
clearance authority; therefore, military clearance officers are not required
to sign clearance.
b. The DD Form 2401, Civil Aircraft Landing Permit, issued to the AMC
contract carriers constitutes prior approval for landings at AF bases only
while performing bona fide US Government AMC contract missions. Commanders are
authorized to impose a penalty landing fee for any aircraft which lands at an
AF base without prior authority (a valid DD Form 2401) except for bona fide
emergency landings. Unauthorized landings constitute a violation and the base
commander will take action in accordance with AFR 55-20, Use of United States
Air Force Installations by Other Than United States Department of Defense
Aircraft.
9. FLYING IN CONTROLLED AIRSPACE
All contract flights shall fly over established airways, domestic or
international, and in controlled airspace. Exception may be made to this
requirement where it is impractical to follow airways or fly in controlled
airspace, provided airways are intersected at the first practical point and
departed at the last practical radio navigational fix near destination, or when
area control or established airways do not exist within a flight information
region. Economic considerations will not justify deviation from this procedure.
10. BLUE BARK PASSENGER/CARGO
Occasionally survivors of deceased military or civilian personnel of the
DOD are carried on contract missions. The code name assigned by AMC to these
passengers is BLUE BARK. The originating station CONCOR will tell the local
contractor representative of the names of the BLUE BARK passengers on board.
The contractor shall ensure that these passengers are afforded the utmost
courtesy throughout their trip. When such passengers are terminating at a
civil airport the contractor shall tell the CONCOR at the nearest AMC
terminal. The CONCOR will make sure that proper onward handling is provided.
Cargo accompanied by a BLUE BARK Passenger at the civil airport normally is
accepted from the Government at plane side and delivered to the Government at
plane side, unless directed by special contract provisions requiring pickup
and delivery at a particular location.
11. SCHEDULED TRAFFIC STOPS/OPERATIONAL STOPS
a. A scheduled traffic stop is a military required stop and scheduled
arrival/departure time must be met by the contractor.
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b. An operational stop is one made by the contractor for their own
convenience. At such stops, the contractor has the right to depart the
aircraft upon completion of its own required ground operations. The Government
may on/off-load passengers or cargo at operational stops if this does not
interfere with the contractor's ground operations or delay their departure.
Even though operational stops are reflected in the published schedule, the
contractor may overfly such stops and AMC may not force the contractor to land
at such stations for the purpose of on/off-loading traffic. Special care must
be taken to make sure any off-load or on-load of passengers at operational
stops do not conflict with the diplomatic clearance or customs required of the
country involved.
12. UNAUTHORIZED TRANSPORT OF PERSONNEL ON FERRY SEGMENTS
Under provisions of the AMC airlift service contracts only those Government
personnel traveling for contract administration purposes are authorized
transportation on the ferry segments of AMC contract flights.
13. ROUTE SUPPORT
a. Where support items or personnel are required for performance of
this contract, the contractor may transport route support items and personnel,
including support for aircraft not operationally ready, in belly compartments,
in any space available on a ferry segment of any trip, and in unused
guaranteed standard ACL space which may exist due to nongeneration of
Government traffic. However, in any such case, any passengers and/or cargo
displaced by said route support will result in appropriate reduction in
payment to the contractor for such flight. The contractor will not be charged
for use of Government 463L pallets nor for on/off-loading services in
connection with moving route support cargo. Route support personnel are
employed by the contractor for route support and required for performance of
this contract.
b. A request received by the contractor for transportation of route
support cargo for other AMC contractors will be referred to the ACO, who may,
at his/her discretion, permit such transportation.
c. Contractor requests for transportation of route support personnel or
equipment on military or another AMC contract aircraft will be referred to the
ACO. The ACO will, in his/her sole discretion, decide whether or not to permit
such transportation.
d. The contractor route support items including the baggage of the
crews shall be stowed aboard the aircraft in a place that will not restrict or
impede the immediate off-load at destination points of cargo and/or the
personal baggage of passengers. The contractor's crew members shall not
transport motorized cycles or like equipment on passenger flights.
14. REFERENCED PUBLICATIONS AND FORMS
Publications and forms referenced in this contract are listed in Atch 10.
15. CONTRACTOR TEAM ARRANGEMENT
The term Contractor Team Arrangement as used in this contract includes
any and all permissible team arrangements identified in the Federal
Acquisition Regulation and supplements thereto. Any teaming arrangements
proposed for fulfillment of the requirements of this contract are subject to
approval by the Government. All teaming arrangements must be documented and
defined in a teaming arrangement agreement or similar document which defines
the roles, responsibilities, and relationships of the parties thereto. All
agreements must be signed by all parties thereto.
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PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
1. The following clause is incorporated by reference:
FAR
NUMBER CLAUSE TITLE DATE
52.246-4 INSPECTION OF SERVICES--FIXED PRICE FEB 1992
DEFENSE
FAR SUP CLAUSE TITLE DATE
252.246-7000 MATERIAL INSPECTION AND RECEIVING REPORT DEC 1991
2. INSPECTION AND ACCEPTANCE OF SERVICES
Inspection and acceptance of services under this contract will be accomplished
at aerial port of debarkation (APOD) by an authorized Government representative
designated by the Administrative Contracting Officer (ACO). The AMC Form 8,
Civil Aircraft Certificate, or DD Form 250, Material Inspection and Receiving
Report, as referred to in SECTION G, are the documents used for certifying
transportation services rendered by the Contractor pursuant to the terms of this
contract.
3. INSPECTION
The Government reserves the right to inspect, conduct on-site capability
surveys, perform ramp inspections, conduct cockpit observation flights, and
initiate performance evaluations of the contractor during all phases of this
contract.
4. QUALITY CONTROL PLAN -- CATEGORY B
In accordance with FAR Paragraph 52.246-4 above, the Contractor shall establish,
provide, and maintain a complete quality control plan, to ensure the
requirements of the contract are provided as specified. Contractors providing
Scheduled Service only are exempt from providing a Quality Control Plan.
E-1
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PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
1. PERIOD OF PERFORMANCE
a. Performance of this contract shall begin 01 October 1993, or the date
of award, whichever occurs later. It shall continue through 30 September 1994
unless sooner terminated or extended by the Government under the provisions of
this contract. All flights in progress at midnight of the last day of the
contract shall not be affected by the expiration of this contract.
b. If, during the period of this contract including any extension
pursuant to this paragraph, the Government gives notice to the Contractor of the
declaration of an airlift emergency or national emergency, or of the activation
of CRAF, as described in Attachment 9, the parties agree that the giving of such
notice will extend this contract for the purpose of permitting the Government to
order additional airlift services throughout the period of the emergency, and/or
extend the Contractor's commitment to the CRAF program for the entire period of
CRAF activation, and for up to six months thereafter.
2. SCHEDULES - CATEGORY "B" and Scheduled Service
a. For the purposes of this paragraph "Schedules" shall mean the
detailed arrangements regarding the days and time of day of the flight
operations required to perform the air transportation services called for under
this contract. To the extent such schedules are not specified in this contract,
they shall be established by agreement between the Contractor and the ACO or the
contracting officer's representative (COR) in accordance with the provisions of
this paragraph. Scheduling for CAT B will be done at TACC/DOO. Scheduled
Service scheduling will be done at HQ AMC/XONRB.
b. Schedule Formation and Coordination.
(1) Category B Cargo trips on fixed buy.
AMC will provide proposed schedules for contractor coordination not
later than 30 days prior to the month of operation. Contractor shall provide in
writing the following, to TACC/DOO, within three (3) working days after verbal
or other notification of the proposed AMC schedule;
(a) confirmation of proposed schedule; or
(b) a proposed alternative schedule.
(2) Category B Passenger trips on fixed buy.
AMC will provide proposed schedules for contractor coordination not
later than 120 days prior to the month of operation. Contractor shall provide
in writing the following, to TACC/DOO, within three (3) working days after
verbal or other notification of the proposed AMC schedule;
(a) confirmation of proposed schedule; or
(b) a proposed alternative schedule.
(3) Category B Expansion Requirements.
All trips ordered under peacetime expansion provisions will be
scheduled no later than 72 hours after notice of order; require confirmation
within 24 hours, and will be ordered in accordance with SECTION G.
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(4) Scheduled Service Passenger seats on fixed buy.
(a) Scheduled Service will be scheduled as early as 150 days, but
no later than 120 days prior to the first day of the month in which such
flights are scheduled to operate. Contractor shall provide the following, in
writing to HQ AMC/XONR within three (3) working days after verbal or other
notification of the proposed AMC Schedule;
1. Confirmation of proposed schedule; or
-
2. A proposed alternative schedule.
-
(b) Seat Wait Listing. Any seats wait listed by the contractor will
-----------------
be on the same priority as commercial travel agencies. Seats wait listed over
seven (7) calendar days may be canceled by AMC. In that event the Government
shall issue a unilateral modification reducing the contract SUBCLIN.
(c) Fixed Buy:. The Government shall make every attempt to fulfill
---------
its contractual requirements for movements of passengers in the quantity and
direction stated on the contract. However, rescheduling activities may include
the rescheduling of seats within the same city pair and month, moving in the
opposite direction (i.e. 20 seats have been procured moving London - Washington,
a need arises to move 20 passengers Washington - London. Rescheduling would be
accomplished within the same city pair and month). In the event the Government
and the Contractor can not agree to an initial schedule, the Government shall
issue a unilateral modification reducing the contract SUBCLIN.
(d) Expansion.
---------
1. Rescheduling may also occur with expansion requirements
-
and the procedures as stated in paragraph (4)(c) above will be followed. In
the event the Government is unable to produce the number of passengers
necessary to satisfy contracted expansion efforts, the Contracting Officer may
reduce the expansion requirements at no cost to the Government provided mutual
agreement is reached and the Contractor so specifies in writing. A
modification to the delivery order will be executed reflecting the quantity
change.
2. All trips ordered under peacetime expansion provisions
-
will be-scheduled not later than 72 hours after notice of order. Confirmation
by the contractor is required within 24 hours and will be ordered in
accordance with SECTION G.
3. TRIP CANCELLATION - CATEGORY B (Peacetime)
a. General. The Contracting Officer may unilaterally cancel an
occasional mission, provided notification is given the Contractor. Any verbal
notification will be confirmed in writing. Large scale cancellations or long
term reduction of requirements will not normally be covered by this paragraph.
Any reference to days in this clause means a continuous 24-hour period.
(1) A cancellation charge will be paid on missions canceled with
notification given within the timeframes noted below. (Times are all prior to
scheduled departure.) The cancellation charge will be applied to the trip price
less ferry charge and Eurocontrol surcharge. The charges are as follows:
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<PAGE>
a. Seven days or less:
Passenger -- 31.8%
Cargo -- 31.6%
b. 8 to 14 days:
Passenger -- 19.8%
Cargo -- 21.8%
c. 15 to 30 days:
Passenger -- 11.3%
Cargo -- 10.2%
d. 31 to 45 days: Passenger -- 7%
31 to 75 days: Cargo -- 7%
e. Beyond 45 days: Passenger -- 0.0%
Beyond 75 days: Cargo -- 0.0%
(2) Missions bought less than 14 days prior to the operating date and
subsequently canceled will be paid a cancellation charge of 19.8% for passenger
and 21.8% for cargo.
(3). Contractor may elect to accept replacement missions in lieu of
cancellation charge.
b. No Cost Cancellations
(1) The Government will accrue one no-cost cancellation per quarter
(ending Dec, Mar., Jun., and Sep.) from all contractors (in the event of a
teaming arrangement, each individual member of the team) who have operated 30
or more missions during the previous quarter (maximum 4 per contract period).
These no-cost cancellations may be applied to either basic or expansion buys.
(2) No-cost cancellations may be used by the Government in lieu of
paying a cancellation charge for missions canceled with at least 7 days notice
and can be used at any time during the contract periods. If a mission is
canceled with less than 7 days notice, the application of a no-cost
cancellation is subject to mutual agreement.
(3) No-cost cancellations will not be carried over from the current
contract to the next contract.
4. DIVERSIONS AND REROUTES - CATEGORY B MISSIONS ONLY
a. Diversions: The en route rerouting of a trip due to hostilities,
weather, medical emergency or natural disaster, constitutes a diversion. Both
the Government and the contractor have the right to divert any trip for these
reasons. The Contractor shall be paid the AMC rate for Government directed
diversions.
b. Reroute: The changing of a trip's route to other than that which is
specified in SECTION B or in a Delivery Order. The Contractor grants the
Government the right to reroute trips, subject to mutual agreement of the
parties. Contractor shall be paid at the AMC rate for the reroute trip using
Great Circle Statute Miles from airport to airport, for mileage computation.
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5. CATEGORY B MISSION POSITIONING - PEACETIME
a. Aircraft must be positioned at the originating station prior to
scheduled departure as indicated below. Positioning of an aircraft means the
placing of an aircraft at a specific departure point. Complete crew must be
available at the aircraft not less than one hour prior to scheduled departure
time. (Pilot crew members may be in operations preparing flight plans,
receiving weather briefing, etc., provided they comply with company Operations
Manuals.) EARLY POSITIONING IS NOT AUTHORIZED UNLESS PRIOR COORDINATION AND
APPROVAL HAS BEEN OBTAINED.
(1) Cargo Missions:
Palletized Loading Bulk Loading and Rolling Stock
1-13 pallets - 2 hours 1-25 ton ACL - 4 hours
14-18 pallets - 2 1/2 hours 26 or more tons ACL - 5 hours
19 or more pallets - 4 hours
At stations where concurrent loading and servicing is not authorized, 1 hour
will be added to the required positioning times. When the Government requires
an aircraft to be bulk loaded, the Government will notify the Contractor 24
hours in advance of scheduled departure time and the schedule will be revised to
provide adequate time for loading and unloading.
(2) Mixed Missions: 2 hours
(3) Passenger Missions:
250 or less ACL - 2 hours
251 or more ACL - 3 hours
b. Ground times for passenger or cargo missions at en route stations
shall be as follows:
(1) Operational Stops - Not in excess of 2 hours.
(2) Traffic Stops - Minimum of 1 1/2 hours and a maximum of 3
hours.
c. Ground times at turnaround stations of round trip missions shall be as
follows:
(1) Cargo Missions:
1-13 pallets - 2 1/2 hours
14-18 pallets - 3 hours
19 or more pallets - 5 hours
(2) Passenger Missions:
250 or less ACL - 3 1/2 hours
251 or more ACL - 4 1/2 hours
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<PAGE>
d. Off-loading times at destination (terminating) station, including
aircraft servicing time, shall be as follows:
(1) Cargo Missions:
Palletized Loading Bulk Loading and Rolling Stock
1-7 pallets - 45 minutes 1-25 tons - 2 hours
8-13 pallets - 1 hour 26 or more tons - 3 hours
14-18 pallets - 1 hour, 15 minutes
19 or more pallets - 3 hours
(2) Passenger Missions:
250 or less ACL - 2 hours
251 or more ACL - 3 hours
e. Contractor shall adhere to operating hour restrictions at all stations
transited.
6. MOVEMENT OF PASSENGERS ON SCHEDULED COMMERCIAL FLIGHTS - SCHEDULED SERVICE
a. The Contractor shall provide the Government the most expeditious
routing and shall maintain this service for the term of the contract.
Contractor agrees to always schedule AMC traffic on its most expeditious
routing unless mutually agreed upon by the contractor and AMC.
b. Terms
-----
(1) Acceptable Service: The Scheduled Service which does not
------------------
exceed the maximum elapsed time (MET) set forth in SECTION B. Missions that
require passengers to board or disembark between 2400 hours and 0600 hours
local will not be considered if other flights are available.
(2) Most Expeditious Service: The service offered by the
------------------------
contractor requiring the shortest flying time between POE and POD.
(3) Maximum Elapsed Time: The combined time of the outbound and
--------------------
inbound segments of a round trip mission.
(4) Significantly Improved Service: Significantly improved
------------------------------
service occurs when any CRAF contractor introduces service which is 20% less
total intransit time than specified as the maximum allowable time over a 30
day period over a contracted scheduled service route. The new service will be
utilized for expansion requirements only.
c. If the Contractor is unable to accommodate a booked Scheduled Service
passenger on any delay that exceeds 8 hours, the Contractor will accommodate
such passenger on the first available flight of the contractor to the
passenger's destination. In event the Contractor is unable to accommodate the
passenger, on its own flight within 24 hours from the original schedule, the
Contractor will obtain substitute service. The purchase of such service must
comply with the Fly America Act and be approved by the Contracting Officer. In
such event, the Contractor would be paid the original contract price.
F-5
<PAGE>
(1) Controllable Delays: The Contractor will provide, without
-------------------
charge to the passenger or to the Government, meals, quarters, and
transportation to/from quarters.
(2) Non controllable Delays: The Contractor shall care for
-----------------------
passengers, to include billeting and transportation to and from billeting
area. Meals and personal expenses; i.e., telephone calls, TV, etc., shall not
be provided. The Contractor shall submit an invoice supported by receipts for
billets and transportation charges to HQ AMC/XOKMA for reimbursement of these
charges. The Government shall effect fair and reasonable payment to the
Contractor on receipt of a valid invoice.
d. Twelve hours in advance of flight departure time, AMC will furnish the
Contractor at the originating station with a passenger list, AMC Form 117, AMC
Passenger List, or other appropriate document listing the passengers booked for
that flight. The passenger will present the Contractor's ticket agent a DD Form
1482, AMC Transportation Authorization (MTA). The Contractor will annotate the
passenger list indicating whether the passenger appeared or no-showed. If a
passenger does not have a DD Form 1482, and the passenger is booked, Contractor
shall attach a copy of the passenger's orders to the passenger list. If a
passenger has only one copy of his/her orders, the Contractor shall reproduce a
copy of the orders. The Contractor shall sign the AMC Passenger List and return
the list with an MTA for each passenger moved to the appropriate AMC reporting
station within 24 hours of flight departure for locations where the originating
station and AMC reporting station are collocated and 48 hours for other than
collocated stations.
e. The Government will pay for all scheduled seats in accordance with the
procedures in SECTION G, whether or not a passenger is booked against those
seats. Since the Government has purchased these reserved seats, the Government
reserves the right to add or substitute passenger names within the reserved seat
capacity (as indicated on the AMC Form 117 or other appropriate document listing
passengers) up to 1 hour and 30 minutes prior to flight departure. Contractor
will not cancel these "CATYMIL" bookings until this time without approval of a
PRC representative. The Government (AMC reporting station or PRC) will be
allowed to substitute nonscheduled passengers for no-shows in the Scheduled
Service System.
f. Personnel shall not be accommodated in the Scheduled Service System
above the PRC Total Scheduled Seat (manifested seats) without prior approval
of the AMC Reporting Station or PRC. The Contractor shall be reimbursed only
for the PRC total scheduled seats plus any additional approved seats.
g. Contractor shall provide secure space and facilities for two AMC
representatives at the applicable commercial terminals in the vicinity of the
passenger processing counter.
7. GOVERNMENT CONTROLLABLE DELAYS - CAT B CARGO (DEMURRAGE)
Compensation will accrue to the contractor for departure delays of more than 3
hours beyond the scheduled block time on completed cargo missions when delay is
Government controllable. Demmurage charges are limited to delays in loading or
unloading but exclude delays due to damage resulting from the negligence of
government personnel. The compensation will be as set forth in SECTION B.
Delays due to Act of God, ATC or contractor controllable reasons will not be
compensated.
EXAMPLE:
B747 cargo aircraft is scheduled to depart at 0700. Departure is delayed
due to a broken K-loader until 1140 (4 hours 40 minutes Government
controlled delay). Contractor is entitled to demurrage payment of $2492. (1
hour 40 minutes rounded to the next whole hour compensable).
F-6
<PAGE>
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
1. EXPANSION ALLOCATION
a. Entitlement will be calculated in the same manner as calculated for
the fixed, peacetime airlift award and described in paragraph b, below.
Teaming Arrangements (TAs) are to be aware that when two entities of a TA make
an acceptable offer under expansion business, the TA agent will be asked to make
the decision which contractor will perform the mission. Factors used to
determine the acceptability of an offer include aircraft type, aircraft weight
capacity, date of availability and total cost. The Contracting Officer will
determine which offers are acceptable.
b. Ordering of expansion business will be allocated monthly based on
entitlement calculated by dividing each carrier's mobilization points by the
total points of all carriers offering in a category. The L-100 does not receive
entitlement from the CRAF, and therefore, will not be counted toward any
individual contractor's entitlement. Six months after contract start date,
mobilization value points will be recalculated to include any additional
aircraft added to the CRAF. Recalculated entitlement percentages will be
utilized on expansion business only. Scheduled service expansion will be
ordered based on meeting the METs. Entitlement will be used to allocate
business among carriers when more than one carrier meets the METs. Entitlement
not used in one month may not be carried over to a future month. These
percentages are calculated for every category. If a contractor does not operate
in a particular category, the entitlement is distributed among those contractors
who offer. Such service shall be ordered in accordance with the procedures set
forth in this SECTION. The Government is not undertaking any obligation to
issue orders for services and will issue such orders only when it is considered
in the best interest of the Government. The Government may from time to time
purchase services to be performed by aircraft other than those specified herein.
Aircraft must meet all other terms and conditions outlined elsewhere in this
contract.
2. DELIVERY ORDERS
a. The Government will request and contractors shall submit offers for
expansion airlift (except as specified in paragraph 3 below) via the electronic,
coded bulletin board or telefax. An offer submitted via the bulletin board or
telefax is considered a firm offer that, when accepted by the government,
becomes binding. Issuance of a delivery order (DD Form 1155) serves as
government acceptance of the contractor's offer. Delivery orders shall set
forth (1) the services being ordered, (2) performance date, (3) price, (4) fund
cite, and (5) any other pertinent information. In emergencies, offers may be
requested, submitted, and accepted by telephone or telefax. Contractors shall
confirm telephone offers in writing (by bulletin board or telefax) within 24
hours. The government will issue a delivery order confirming emergency orders.
An executed copy of each delivery order will be mailed to the contractor.
G-1
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b. Category (CAT)-A Cargo: The Contractor and the Government may agree
to move cargo over any of the Contractor's scheduled routes at the rates set
forth in the AMC Uniform Negotiated Rates and Rules or the Contractor's
published tariff, whichever is lower. When the Contractor agrees to move such
traffic, a delivery order will be issued which will purchase a specified number
of pallets/pounds of cargo by route. The delivery order will show the route,
period of performance, quantitative requirements, and the rate and total dollar
amount for cargo movement. (Ref Atch 6).
3. SCHEDULED SERVICE ORDERS
The Government will request and contractors shall make offers for scheduled
service expansion airlift by telephone or otherwise. Offers will be solicited
on the basis of seats per month. Offers will be evaluated on the basis of MET,
availability, and entitlement. Each requirement to be ordered as expansion will
be assigned an individual call number and entered on a Scheduled Service Order
(SSO) which identifies (1) the route, (2) performance date, (3) price, (4) fund
cite, (5) name of individual making the offer for the contractor and (6) any
other pertinent information. On the first business day of each week, during the
contract period of performance, the contracting officer will forward (telefax)
the contractor the SSO for the previous weeks activity. The SSOs will be
sequentially numbered (6900-OCT-01,02 etc.). Ordering occurs through the
bilateral execution of the SSO. The contractor is required to sign the SSO and
return it to the contracting officer. The SSO shall become a binding contract.
An executed copy will be mailed to the contractor.
4. RECEIPT FOR SERVICES PERFORMED
a. An AMC Form 8 will be issued for each Category (CAT)-B mission to be
performed under this contract. These documents will be used for payment
purposes as well as certifying the transportation services rendered by the
Contractor pursuant to the terms of this contract. The AMC Form 8 will be
prepared and appropriate remarks entered at each station by the Government. The
Government will provide the Contractor representative the AMC Form 8 who in-turn
will be responsible for insuring that it is aboard the aircraft from origin to
final destination of the mission. At final destination station, the
Contractor's representative shall sign the AMC Form 8 certifying that the
services were performed in accordance with the contract. The Government
representative at final destination will retain one copy of the AMC Form 8 to be
mailed to HQ AMC/XOKMA, 402 Scott Dr Room 132, Scott AFB IL 62225-5363. The
original and one copy will be returned to the Contractor's representative. The
contractor will be responsible to provide a completed copy of the AMC Form 8
with submission of the payment voucher. Scheduled service will be accepted on a
DD Form 250, Material Inspection and Receiving Report, prepared by the
Government.
b. CAT-A Cargo. A DD Form 250 will be issued by the Quality Assurance
Evaluator (QAE), indicating the amount of CAT-A cargo moved by flight
number/date. The frequency of issue of the DD Form 250 will be as mutually
agreed between the Government and the Contractor. Sufficient copies of the DD
Form 250 with waybills will accompany the shipment to the receiving activity.
Upon receipt of the CAT-A cargo at the destination, an authorized Government
representative will sign/date in Item 22 of the DD Form 250 to verify acceptance
of the shipment. The Contractor will attach two copies of the DD Form 250 and
applicable waybills to his billing and submit them to HQ AMC/XOKM, 402 Scott Dr
Room 132, Scott AFB IL 62225-5363 for payment. Authorization for payment of
CAT-A cargo shipment requires that the signed/accepted DD Form 250 is received
by HQ AMC/XOKM.
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5. ADDRESS TO MAIL PAYMENT
Offeror should indicate below the address to which payments should be mailed if
such address is different than that shown on the solicitation, offer, and award
form.
NAME _____________________________
ADDRESS ________________________________
-----------------------------------------
CITY/STATE/ZIP _______________________________
6. ELECTRONIC FUNDS TRANSFER
A payment to the contractor by the government may be accomplished by the
electronic transfer of funds directly into a designated bank account. Offer
should indicate below the account to which payments should be transferred if
such service is desired.
NAME OF BANK: N/A
NAME OF ACCOUNT___________________________
ACCOUNT NUMBER_____________________________
ABA (ROUTING) NUMBER_________________________
7. PAYMENT FOR CONTRACT SERVICES
a. General. Public Voucher for Transportation Services (SF Form 1113)
may be ordered from Superintendent of Documents, US. Government Printing Office,
Washington DC. 20402, (202) 783-3238.
b. CAT-B (Full Plane Load) Charter Movements -- Passenger and Cargo
Transportation. Contractor shall submit the SF 1113, original and two copies,
along with the AMC Form 8, Civil Aircraft Certificate, directly to HQ AMC/FMIA,
402 Scott Dr Room 132, Scott AFB IL 62225-5363, reflecting the below listed
information. No more than one month's service will be submitted on a single SF
1113.
(1) Contract/Delivery Order Number (Example: F11626-90-D0001/D.O.
6001/Item 1).
(2) Mission number, as applicable, routing and date.
(3) Price per passenger/ton and per trip.
(4) Ferry charge per trip, as applicable.
(5) Eurocontrol per trip, as applicable.
(6) Total price per passenger/cargo trip (Trip price plus any
applicable Ferry and/or Eurocontrol).
(7) Applicable International Air Transportation Taxes, Federal US
Transportation Taxes (Public Law 97-248), Customs, Immigration, and Agricultural
charges, Passenger Facility Charge Imposed by Commercial Airport approved by the
FAA under the Aviation Safety and Capacity Expansion Act of 1990 and Federal
Inspection Service fees.
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(8) A certification of actual ferry routing and mileage for all
ferry except for round trips where the ferry mileage is between the
originating station and the terminating station. Ferry certification shall
include aircraft tail number, ferry routing as flown, actual miles flown, and
certifying signature. Contractor shall be paid either the contracted ferry
miles or actual ferry miles flown, whichever is less.
c. Scheduled Service or Cat-A Cargo (Less than Plane Load) Movement.
Contractor shall submit the SF 1113, original and two copies, directly to HQ
AMC/XOKM, 402 Scott Dr, Room 132, Scott AFB IL 62225-5363, reflecting the
below listed information. No more than 1 month's service will be submitted on
a single SF 1113.
(1) Identify as "Scheduled Service" or "CAT-A Cargo".
(2) Contract/Delivery Order Number
(3) Period of Performance (Month and Year).
(4) Subtotals for each of the following: Scheduled Seats,
Pallets/Tons, Departure Tax, and customs, Immigration, and Agricultural Fees.
(5) Support documentation attached to SF 1113 shall include the
contractor's name and contract number, period of performance (month and year),
call number, channel, number of seats or pallets/tons, or per seat or
pallet/ton rate and extended price, and calculations for taxes and fees.
d. Scheduled Service Excess Baggage. Contractor shall submit the
SF 1113, original and two copies, directly to HQ AMC/XOKMA, 402 Scott Dr,
Room 132, Scott AFB IL 62225-5363, reflecting the below listed information.
No more than one month's service will be submitted on a single SF 1113.
(1) Identify as Scheduled Service--Excess Baggage and the charge
as stated in Section B of the contract.
(2) Contract Number.
(3) Period of performance (month and year)
(4) Support documentation attached to the SF 1113 shall include
a copy of the MTA and/or copy of passenger's orders authorizing the excess
baggage.
8. PAYMENT OF LANDING AND PARKING FEES
a. The Contractor shall pay all required airport service fees and
charges; such fees and charges are not reimbursable (see subparagraph b,
below, for special additional requirements for Rhein-Main AB, Germany,
herein). The fees/charges include landing and parking fees at airports that
the Contractor operates to/from or transits in the performance of AMC contract
flights, both domestic and international.
b. To confirm payment of landing and parking fees at Rhein-Main AB,
Germany, the following procedures have been agreed to between HQ USAFE,
Ministry of Finance, Office of Defense Costs, Federal Republic of Germany
(FRG), Federal Ministry of Finance, Bonn, and the 435th Military Airlift Wing
(435 MAW), Rhein-Main AB, Germany:
(1) Contractors operating CAT-B missions into Frankfurt/Rhein-
Main AB GE, shall forward copies 2 and 3 of their invoices to OL-A, DET 4,
AMCOS, APO New York 09097, within 10 days after payment is made, but not later
than 30 days after landing. The paid invoices shall be certified and show the
applicable AMC mission number.
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(2) If the Contractor is unable to furnish both a second and
third invoice copy, the third copy and a reproduced second copy will be
satisfactory.
(3) Invoices shall be accompanied by a cover sheet identifying
the AMC CAT-B flights by mission number.
9. AIR FORCE ADMINISTRATIVE CONTRACTING OFFICE (ACO)
The ACO for this contract is:
Bob Simpson or Olivia Hitsman Telephone: (618)256-5771 FAX: (618)256-2804
HQ AMC/XOKM
402 Scott Dr., Room 132 Western Union: 442474
Scott AFB IL 62225-5363 Passenger Reservation Center
10. SCHEDULE RELIABILITY - CAT-B MISSIONS ONLY
a. The Contractor's schedule reliability rate shall be computed for a
three-month period by subtracting the total number of Contractor-controllable
delays during the 3-month period from the Contractor's total number of
scheduled originating and turnaround station departures in that 3-month
period, and dividing the remainder by the Contractor's total number of
scheduled originating and turnaround station departures for the period. In the
event a Contractor had a CRAF contract the previous year, the schedule
reliability for the final 2 months of the previous year will be used in
determining schedule reliability for the first 2 months of this contract. This
reliability rate computation shall be made as of 2400 hours GMT on the last
day of each calendar month. The originating station is defined as the initial
on-load station of a mission. The turnaround station is defined as that
station of a round-trip mission where the mission number changes, or initial
backhaul on-load station of a round-trip SPECIAL ASSIGNMENT AIRLIFT MISSION
(SAAM).
b. The schedule reliability rate, which is based on the combination of
total departures in both 21 AF and 22 AF, may be measured and enforced in
three ways, and each carrier performing hereunder is obligated to meet the
standard in each of those ways. First, the requirement applies to all service
performed under this contract by any one carrier. Second, in the event of a
Contractor Team Arrangement , the reliability requirement applies also to the
aggregate performance under the contract by all members of the Contractor Team
Arrangement. (Each member of the Contractor Team Arrangement bears joint and
several liability for failure of either the Contractor Team Arrangement in the
aggregate, or its individual carrier members performing hereunder, to meet the
schedule reliability requirement.) Third, for each carrier performing under
this contract, whether individually or as part of a Contractor Team
Arrangement, the requirement applies in the aggregate to all service performed
by that carrier under its CRAF contract with AMC.
c. A delay shall be deemed to have occurred at the originating or
turnaround station if the Contractor's aircraft departs the blocks more than
20 minutes after the scheduled departure time. The scheduled departure time
shall be as established pursuant to SECTION F, paragraphs entitled "Schedules"
and "CAT-B Mission Positioning", and published in the Operations Bulletin as
amended by scheduling messages; the scheduled departure time at turnaround
stations shall be subject to revision as herein- after provided. A delay at
originating and turnaround stations, caused by factors beyond the control and
without the fault or negligence of the Contractor, shall be considered as
Contractor-uncontrollable; a delay for any other reason shall be considered
Contractor-controllable. The Contractor-uncontrollable delay time experienced
at the originating and en route stations on a mission shall be added to the
scheduled departure time at the turnaround station for purposes of determining
the scheduled departure time at the turnaround station on that mission.
Additionally, if missions are scheduled back-to-back with an aircraft that
experienced a Contractor-uncontrollable delay, this uncontrollable delay time
shall be added to the scheduled departure time of the subsequent AMC mission
with the resultant delay charged as Contractor-uncontrollable. This will give
the Contractor sufficient recovery time to return to schedule or obtain
substitute service for his follow-on
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missions. However, the Contractor-controllable delay time experienced on a
previous mission shall not be added to the scheduled departure time at the
originating station for any subsequent mission. In the latter instance, the
Contractor is required to originate his next mission, on schedule, with his own
aircraft or substitute service.
d. The Contractor and in the case of a Contractor Team Arrangement, each
carrier, shall maintain an 80 percent schedule reliability rate as the minimum
acceptable standard of performance, based on 30 or more departures from
originating or turnaround stations during a 3-month period. Where volume is
less than 30 departures, reliability will be reviewed on a case-by-case basis.
Failure to maintain an 80 percent schedule reliability rate for a 3-month period
will be reason for termination, pursuant to the Contract Clause entitled
"Default." However, nothing in this paragraph shall limit the right of the
Government to terminate this contract for cause for other reasons or to limit
any other rights and remedies provided the Government by law or under this
contract.
e. It is understood that, should a schedule reliability rate fall below an
average of 85 percent for a 3-month period, the Government may elect not to
order expansion transportation services pursuant to this SECTION of this
contract.
11. 5352.247-1002 CONTRACTOR'S FAILURE TO PROVIDE SERVICE (MAR 1988)-AMCFARS
(CAT-B Missions Only)
a. In the event that Contractor's aircraft is unable to depart from any station
or if it can depart from any station but is unable to transport the full amount
of generated traffic within the guaranteed ACL, the Government may invoke
remedies which are set forth in this paragraph, which will neither constitute a
termination within the meaning of the clause entitled "Termination for
Convenience of the Government," nor in any way, diminish the Government's rights
under the Clause entitled "Default." The rights and remedies of the Government
provided for in this paragraph are not exclusive and do not give rise to
Government liability for costs incurred and are in addition to any other
Government rights and remedies provided for by law or by this contract.
b. Deficit Traffic. This term applies to a situation where the Contractor's
aircraft did depart, but where the full amount of traffic within the guaranteed
ACL was not transported on the flight involved due to reasons caused by the
Contractor. The deficit shall be charged from the station where it is incurred
through to destination unless the Government utilizes the space at an en route
station. Contractor shall not be paid for deficit traffic. Contractor shall be
paid at the AMC negotiated uniform price for that portion of the trip, if any,
over which he did transport said traffic less a discount. The discount shall be
equal to a percent of the amount otherwise due. This percent shall be obtained
by dividing the deficit by the guaranteed ACL, but in no event shall that
percent or the discount be greater than 10 percent. Deficit traffic moved by a
Contractor on any subsequent flight will be considered as newly generated
traffic. The Contractor will not bill for the dollar value of the deficit
traffic, and the Government's guarantee with respect to that mission is reduced
accordingly.
c. Substitute Service. This term, as used herein, applies to the substitution
of an aircraft to replace Contractor's aircraft which is unable to proceed from
the departure station or from any en route station short of destination in
accordance with schedules established pursuant to this contract. If the
Contractor fails to make an aircraft available for departure within 16 hours
subsequent to scheduled departure time for a passenger flight or a mixed flight
from an originating station or an en route station, or within 4 hours of a
scheduled departure time for a passenger flight or a mixed flight from an en
route station where no holding facilities for passengers are available, or
within 24 hours of a schedule departure time for a cargo flight from either the
originating station or an en route station, or for any flight within such lesser
time as may be agreed to by the Contractor's designee, the Government may: (1)
cancel the requirement for further movement of the defaulted flight; (2) require
the Contractor to transport the defaulted passengers or cargo by substitute
service within such additional time as the Contracting Officer may allow; (3)
acquire substitute service from commercial sources; (4) reschedule the defaulted
flight; or transport the defaulted passengers or cargo, or any portion thereof,
itself. The exercise of any of these options will be in accordance with the
following:
(1) In the event that the requirement for further movement of the defaulted
flight is canceled, the number of passengers equal to the guaranteed ACL for the
flight involved, or the number of pounds of cargo equal to the guaranteed ACL of
the flight involved, or the number of miles for the flight involved, will be
subtracted from the Government's guarantee. Any canceled requirement will be
deleted from the contract by unilateral modification.
If the failure to depart was from the originating station, Contractor will not
be paid any amount for the flight involved. If the failure to depart was from
an en route station, the Contractor will be paid at the AMC negotiated uniform
rate for that portion of the trip over which he did transport the passengers or
cargo.
(2) If the Contractor is required to transport the passengers or cargo of the
defaulted flight by substitute service within such additional time as the
Contracting Officer may allow, the Contractor shall arrange and pay directly all
costs involved in the transportation by the substitute aircraft. Contractor
will be paid, in this event, the full contract price for the flight involved,
irrespective of the amount paid by him for this transportation by substitute
aircraft. The substitute aircraft provided by the Contractor must be of like
type, configured in accordance with the applicable specifications, and must be
approved by the Contracting Officer. In lieu of, or in addition to, providing
the above type substitute service, the Contractor may, at his own expense,
purchase the amount of space, by common carriage or otherwise, needed for the
movement of the passengers or cargo of the defaulted flight. The purchase of
such space must be approved by the Contracting Officer and must be obtained only
from American Flag carriers, except that in the event an American Flag carrier
is unavailable or not reasonably available for point-to-point substitute service
within an overseas area, upon prior authorization of the Contracting Officer,
the Contractor may use a Foreign Flag schedule carrier for substitute service on
an exceptional basis only and provided the requirements of the clause entitled
"Preference for United States Flag Air Carriers," are complied with. In such
event, Contractor would be paid the contract price for the involved
transportation. If Contractor transports by purchase of common carriage only a
part of the number of passengers or amount of cargo of the defaulted flight, he
will only be paid for those passengers or cargo so transported, and the
passengers or cargo not transported shall be deducted from the Government's
guarantee.
(3) The Government may purchase substitute service from commercial sources.
This can be by a substitute commercial aircraft or by the purchase from
commercial sources of sufficient space to transport by common carriage or
otherwise, the number of passengers or amount of cargo involved in the defaulted
flight. In either event, the substitute service shall be deducted from the
Government's guarantee and the Contractor would be charged by the Government,
any amount which the Government had to pay to commercial sources which is in
excess of the contract price for the transportation of the passengers or cargo
involved for the distance involved. If this substitute service is obtained for
only a portion of a trip as provided in the contract, the contract price will be
prorated for the distance involved in determining the amount due the Government.
Contractor will not be paid any amount for this defaulted flight except that he
will be paid at the AMC negotiated uniform rate for that portion of the trip, if
any, over which he did transport the passengers or cargo on the flight involved.
The Contractor shall provide all services normally provided in connection with
flights operating under this contract. In the event the defaulted flight was to
be performed between military bases and the Government procures common carriage
substitute service, the defaulting Contractor shall be responsible for the
transportation between the military bases and the commercial terminal.
(4) The Government may, in its discretion, elect to either reschedule the
defaulted flight to a later time within the performance period of the contract
or may move these passengers and/or this cargo, or any portion thereof. In this
event, the number of passengers equal to the guaranteed ACL for the flight
involved, or the number of pounds of cargo to the guaranteed ACL of the flight
involved, or the number of miles for the flight involved will be subtracted from
the Government's guarantee and the Contractor will be charged, by the
Government, the excess, if any, of the charge for this movement as computed
under the provisions of AFR 76-28 over the contract price. If this movement is
utilized for only a portion of a trip as provided in the contract, the contract
price will be prorated
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for the distance involved in determining the amount due the Government.
Contractor will not be paid any amount for transportation of the passengers or
cargo of the defaulted flight except that he will be paid at the AMC
negotiated uniform rate for that portion of the trip, if any, over which he
did transport said passengers or cargo in the flight involved.
d. The Contracting Officer may permit the Contractor to provide
services with substitute aircraft having a lower ACL. When such substitution
of aircraft is permitted, the Contractor shall be reimbursed at the rate per
ton/passenger mile established in the original award times the lesser ACL with
a corresponding reduction in the Government's guarantee. In addition or as an
alternative to providing substitute aircraft having a lower ACL, the
Contracting Officer may permit the Contractor to acquire, at his own expense,
the amount of space, by common carriage, needed for movement of the passenger
or cargo equal to the ACL of the aircraft originally scheduled for the flight,
in which event the Contractor will be paid at the contract rate for the
passenger and/or cargo within the guaranteed ACL which are actually
transported. The Contracting Officer may also permit the Contractor to provide
services with substitute aircraft having a higher ACL than the aircraft
required for performance of services under the contract. In this event, the
Contractor will be reimbursed only the contract price for the flight as
originally awarded.
e. The Contracting Officer, in making his decisions and selections for
substitute service, will use his discretion in such a manner as to mitigate
Contractor's liability for excess costs when reasonably possible. However,
military needs and urgency will be the prime consideration in the exercise of
this discretion.
f. Irrespective of any of the provisions of this paragraph, the
Government may cancel any mission for movement of submarine crews if the
specified aircraft or an equal substitute aircraft acceptable to the
Government is not positioned two hours prior to scheduled departure time. This
cancellation, under these circumstances, is at the sole discretion of the
Government and will be at no cost to the Government. This will not be
considered against the Government's other rights to "no cost cancellations."
g. The provisions of Attachment 1, "Performance Work Statement Passenger
Service," relative to Contractor's responsibility for care of passengers, and
for providing meals and billets, apply to all situations discussed in this
paragraph, wherein the Contractor failed to depart as scheduled. Contractor
shall retain responsibility for passengers until such time as they are moved by
the Contractor or the Government, or the requirement is canceled by the
Government.
h. In the event the Contractor fails to deliver any part of the GACL
(passenger or cargo) to manifested destination due to an accident, Contractor
will be paid at AMC negotiated uniform rate only for that amount of passenger
or cargo delivered to manifested destination.
12. CONTRACTOR POINT OF CONTACT
The Contractor shall furnish to the ACO at HQ AMC:
a. The name of a person and point of contact who will serve as a liaison
between the Contractor and the ACO and,
b. The name of a person and point of contact who will serve as liaison
between the Contractor and the Contract Administrator (CA) for each station
transited. This person must have authority to adjust schedules, engage
substitute service, and make decisions pertinent to the airlift service, in
the name of the Contractor.
13. DISCREPANCY PERFORMANCE RATE
a. A discrepancy performance rate shall be computed on a monthly basis to
determine the level of contract violations. This rate is computed by dividing
the total number of mission segment inspections performed during the period into
the total number of discrepancies for that period. Mission segment inspections
shall be performed at all
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stations in the routing, including origination, turnaround and en route, where
the aircraft can be inspected by a QAE or CA. The discrepancy performance
rate shall be computed as soon as possible after the monthly discrepancy
reports are received by HQ AMC/XOKM.
b. A discrepancy shall be established whenever the Contractor's aircraft
or service is in violation of the terms and conditions of this contract and
shall be documented on a Contract Violation Notice, AMC Form 166b. During an
inspection, each type of discrepancy will be listed only once on an AMC Form
166b (e.g., 10 seats torn-one discrepancy, 100 meals without date stamps-one
discrepancy, etc.). An AMC Form 166b will not be issued for a contractor
controllable delay since these violations are included in the schedule
reliability rate.
c. The minimum acceptable standard of performance under this contract
shall be a discrepancy performance rate not to exceed 10 percent, as an
average, for a consecutive 3-month period with a total of 30 or more
departures from originating and turnaround stations. Where volume is less than
30 departures, discrepancies will be reviewed on a case-by-case basis. Failure
to maintain an average discrepancy rate of 10 percent or less may be reason
for termination, pursuant to the clause entitled "Default". However, nothing
in this paragraph shall limit the right of the Government to terminate this
contract (for cause for other reasons) or to limit any other rights and
remedies provided the Government by law or under this contract. The Government
may elect not to order expansion transportation service pursuant to this
SECTION of this contract.
14. EXTENDED PARKING
a. Requests for extended parking privileges exceeding 8 hours will be
reviewed on an individual basis and may be honored consistent with the
availability of space, equipment, and manpower resources. Extended ground time
exceeding 8 hours will be requested and concurrence or nonconcurrence received
through the local operations center, in coordination with deputy commander for
maintenance/chief of maintenance, and aerial port manager. Evaluation of the
contractor's request for extended parking privileges will be considered based
on the following :
(1) Positioning of aircraft in advance of time stipulated in the
contract so as to prevent delays due to weather, crew limitations, or other
reasons.
(2) Back-to-back scheduling of aircraft for a follow-on AMC mission.
(3) Other programmed mission requirements.
(4) Aircraft programmed or scheduled for subsequent commercial
operation on termination of a military mission at a military station will not
be granted extended parking privileges.
b. Use of the following procedures in requesting approval for extended
parking:
(1) Contractor may submit a request any time prior to arrival of
the aircraft. If the request is prior to mission execution, the approval
should come through the NAF/DOO scheduler. While the mission is in execution,
approval should be via the NAF/DOC.
(2) The local operations center will coordinate the request with
the deputy commander for maintenance/chief of maintenance, and squadron/port
operations office, and will advise the contractor whether the request has been
approved, or disapproved prior to the arrival of aircraft.
(3) The TACC Current Operations (DOOM) scheduler will intervene at
the contractor's request if these procedures result in denial.
c. If approval is granted for extended parking privileges, it will be
subject to the following criteria:
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(1) Taxiing crews required when towing services are not available
for the immediate respotting of an aircraft from a terminating mission shall be
contractor-furnished. Towing equipment/crews required in the repositioning of
an aircraft resulting from the above action, or from a maintenance area, shall
be contractor-furnished, with the exception of the tractor and driver which will
be furnished by the Government.
(2) The Government will not be responsible for late positioning of
contractor aircraft due to the lack of towing tractors, other equipment, or
personnel. Equipment or personnel may be withdrawn from contractor use for
higher priority AMC mission support, in accordance with the AMC Mission
Priority System. The command post will determine priorities for allocation of
manpower and equipment to service AMC military or contract aircraft.
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PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
1. GOVERNMENT-FURNISHED SERVICES AND EQUIPMENT
a. The Government will furnish necessary equipment and personnel to
provide the following services for all landings made at military installations
(originating, en route and terminating stations) at no cost to the Contractor
except as otherwise provided in this paragraph:
(1) Transient alert and ramp services to include:
(a) Landing.
(b) Follow-me vehicle.
(c) Towing.
(d) Parking.
(e) Chocking and grounding of aircraft.
(f) Positioning, connecting, operating, and
depositioning of aircraft ground power unit.
(g) Fire guard for engine starts.
(h) Positioning, connecting, operating, and
depositioning of engine start carts.
(i) Positioning, operating, and depositioning of
compressor for airing of struts and tires. Nitrogen may be used when available
to inflate aircraft tires on a non-reimbursable basis. A qualified technical
Contractor Representative will be present to supervise, provide all required
attachment fittings, and service the items.
(j) Position and deposition of aircraft jacks for tire
changes. Military owned jack will be provided if a suitable jack is available.
A technically qualified Contractor Representative will advise what capacity
jack is required, and whether using military or commercial jack, the
Contractor Representative will jack the aircraft.
(k) Ramp sweeping.
(l) To-plane service of MIL-H-82382 and supply of
oxygen (gaseous or LOX) on a reimbursable basis. Equipment and necessary
operators will be furnished for wing de-icing at no cost; the de-icing fluid
will be furnished on a reimbursable basis.
NOTE: In an emergency, into-plane service of hydraulic fluid, supply of oxygen,
de-icing fluid and servicing of struts/tires will be provided by the Government
on a reimbursable basis. A technically qualified Contractor Representative will
supervise emergency servicings to assure compliance with procedural
requirements.
(m) Maintenance stands when required for ground
servicing operations.
(n) To-plane fuel servicing. A Contractor
Representative will connect/disconnect the fuel hose to/from the aircraft
Single Point Refueling (SPR).
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(o) Chief Servicing Supervisor (CSS) and fuel vent
monitors in accordance with TO 00-25-172 when a concurrent ground servicing is
accomplished. (NOTE: See subparagraph 1c of this SECTION on concurrent
servicing procedures.)
(2) Terminal and traffic services to include:
(a) Passenger processing.
(b) Passenger manifesting and documentation.
(c) Baggage handling (weight, tag, load and unload).
(d) Passenger and crew boarding stairs/loading bridge.
(Entrance doors are not to be opened until stairs have been placed up to the
aircraft. Up to the aircraft means positioning the stairs as close to the
entrance as possible without hindering the opening of the doors.)
(e) Customs clearance (Government traffic only).
(f) Medical clearance (passengers only).
(g) Agriculture inspection (if required).
(h) Immigration clearance.
(i) Cargo receiving, processing, documentation, and
positioning for loading.
(j) Loading, tiedown and unloading. (Loading will be
in accordance with the load breakdown provided by the Contractor on AMC Form
55 or equivalent. The load supervisor will annotate the form to show the
actual load.)
(k) Cargo manifesting.
(l) Cargo handling equipment, including 463L pallets
and associated cargo restraining nets.
(m) Potable water (includes equipment and into-plane
servicing).
(n) Baggage carts.
(o) Lavatory servicing, including positioning, hookup,
operation and depositioning of servicing unit. (Anti-freeze solution mix of
approximately 50/50 ethyl/glycol to water will be furnished on a non-
reimbursable basis. Contractor is responsible for additional anti-freeze
solution if Contractor operating specifications require a stronger mix. This
will be done subsequent to lavatory servicing.)
(p) Flightline transportation for crews.
(q) Position, connect, operate, and deposition the
ground air conditioning or heating units. The aircraft interior temperature
will be maintained between 68 degrees Fahrenheit and 74 degrees Fahrenheit.
(This requirement does not apply to DC-10 and B747 aircraft.)
(r) High lift truck for galley servicing at those
military bases where commercial catering service is not available.
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(3) Fire and crash rescue support.
(4) Aircraft clearance facilities.
(5) Emergency medical services to Contractor air crews and
personnel on a reimbursable basis in accordance with AFRs 55-20 and 168-1.
NOTE: All of the above services will be furnished for all landings at military
installations, including additional landings made due to aborted flights,
irrespective of the cause of the abort. These services will also be provided at
AMC APOEs when Contractor's aircraft are scheduled in a manner to preclude
depositioning to home maintenance base between missions as determined by the
ACO. However, when an aircraft is positioned from a commercial mission from a
commercial airport requiring lavatory servicing, such lavatory servicing will be
on a reimbursable basis.
(6) Special handling equipment (equipment which is not common
to Government and Contractor aircraft and/or cargo handling system), such as
tow bars, may not be available at military installations and must, therefore,
be furnished by the Contractor. Contractor will also furnish personnel to
operate such equipment. Specifically, with regard to wide-body aircraft, if
the airlift services contract calls for services to be performed with wide-
body aircraft through military installations, the Government will furnish the
following special handling equipment:
(a) Pax loading stairs.
(b) Loaders for baggage containers.
(c) Dollies for baggage containers.
(d) Cargo on/off-loading equipment.
(7) For all CAT-B passenger missions (except SAAM and
Exercise) operating through Charleston International, Los Angeles,
Philadelphia, and St Louis, AMC will perform passenger manifesting and check-
in to include boarding, seat assignment, issuance of boarding pass, baggage
weighing, tagging and placing of baggage on conveyor at baggage check-in.
Contractor will perform all other functions. The provisions of Attachment 4
apply to Contractor's responsibility and liability for interlined baggage.
b. The Contractor may purchase petroleum products at any military
base other than those facilities that are serviced by commercial sources,
(unless specific approval is granted by supplemental agreement) for use in
performing services hereunder. These purchases shall be in accordance with
applicable service directives,
AFR 144-9 for Air Force installations, AR 37-60 for Army installations, NAVCOMPT
Manual Vol III, paragraph 032511, and NAVSUP Manual Vol II, paragraph 25317.3
for Navy installations and subject to the procedures set forth in paragraph c
below. Notwithstanding these service directives, no accessorial charges or
administrative costs will be applied to these purchases.
c. A Supervisory Contractor Representative (SCR) will be in the
cockpit during towing operations. Also, a SCR will be present for supervision
and control of Contractor personnel/equipment during aircraft fuel servicings.
TO 00-25-172 will apply. The following guidance will be followed when
concurrently servicing passenger aircraft with or without passengers aboard
and cargo aircraft at USAF military installations:
(1) The Wing/Base Commander is the final authority for ground
servicing operations and the overall safety associated therewith.
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(2) A Concurrent Servicing Supervisor (CSS) will be provided
by the Air Force (AF) when concurrently servicing Contractor aircraft at
military installations. The AF supervisor has full and final authority over
all phases of ground servicing operations. This authority allows the
individual to shutdown a refueling operation if an unsafe condition exists.
The supervisor also controls access to/from the aircraft.
(3) One qualified SCR will be present for supervising and
controlling the Contractor's aircraft as pertains to ground servicing
operations and related safety aspects. The SCR will coordinate each phase of
his operation with the CSS and shall supervise all Contractor and
subcontractor personnel. The SCR will respond to the CSSs direction to
discontinue fueling. The SCR shall also advise the CSS when he/she spots or
otherwise becomes aware of a potential hazard. The fuel servicing will not be
resumed until the issue is resolved.
(4) Prior to beginning servicing operations, the SCR will
establish a liaison with the CSS to:
(a) Determine specific servicing requirements such as
grounding/bonding sequence for the specific aircraft.
(b) Discuss any unfamiliar system characteristics or
deficiencies.
(c) Provide guidance on the duties and physical
positioning of the contractor's technical personnel during the concurrent
servicing operation.
(d) Jointly approve timing of maintenance,
cargo/baggage loading/unloading, fleet servicing, or other activities (food
service, cleaning, etc.).
(e) Determine if the aircraft (B747 and DC-10) fuel
jettison system was used since departing the previous location. If the system
was operated, concurrent operations will not be accomplished until it is
determined that jettison valves are closed.
(f) Advising the CSS of contractors procedures; if
applicable, for switch loading aviation fuel.
(5) The SCR will insure civilian vehicles involved in a
concurrent servicing comply with standards required by TO 00-20B-5 and AFOSH
Standard 127-39. Additionally, associated servicing equipment not designed or
approved for use within a hazardous location may be moved into or within the
fuel servicing safety zone (FSSZ), if pressurization of the refueling
equipment is stopped. Re-pressurization of the refueling equipment will not
resume until the servicing vehicle's engine is shut down while in the FSSZ or
the vehicle leaves the FSSZ. The SCR will inform the CSS of vehicle status
prior to commencing servicing operations.
(6) Authorized vehicles will not operate closer than 25 feet
of aircraft fuel vents, SPR connections and refueling equipment during fuel
servicing of the aircraft. All other vehicles are restricted to 25 feet from
fuel vents and must remain outside of the 50-foot fuel servicing safety zone.
(7) The aircraft APU will be used to provide power and air-
conditioning on DC-10, L-1011, B767, A-310, and B747 aircraft.
(8) The Contractor is required to furnish three headsets with
the cords for aircraft with passengers and two headsets with cords for
aircraft without passengers on board or cargo aircraft. One cord will be 100
feet long and the other(s) 50 feet long. The 100 feet long cord will be used
by the CSS and the two 50 feet cords will be used by the two Government fuel
vent monitors. One of the 50-foot cords is not required when servicing a cargo
aircraft.
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<PAGE>
(9) The Contractor refueling panel operator, shall maintain
intercom contact with the CSS.
*(10) When the refueling control panel/fuel system control
mechanism is located on the outside of the aircraft, a qualified Contractor
Representative must be on intercom inside the aircraft when passengers are on
board.
*(11) The flight crew will, prior to beginning the fuel
servicing, brief passengers regarding the fact that fuel servicing will be
conducted, passenger option to deplane, the restrictions on: smoking,
operation of electronic equipment, and personnel movement. Passengers shall
not enter or exit the aircraft and their movement will be restricted within
the aircraft during fuel servicing. Also, the flight crew will ensure required
exits are open.
*(12) Qualified flight crew personnel shall be in attendance
within the aircraft to ensure compliance with the above restrictions and to
assist in the evacuation of passengers in an emergency. A crew member will be
stationed at each appropriate exit.
(13) The aircraft INS may remain energized during a fuel
servicing operation.
(14) The aircraft radios and radar systems will not be on
during the fuel servicing operation.
(15) No aircraft electrical systems will be activated during
the fuel servicing operation except those required for servicing.
(16) The SCR will receive and connect/disconnect the fuel
nozzle at the aircraft single point refueling receptacle. The SCR may have
another qualified Contractor Representative perform the task. The Single Point
Refueling (SPR) operator must test the nozzle to ensure it cannot be removed
from the aircraft when the valve handle is in the open and lock position prior
to pressurizing the hose. The fuel nozzle will be disconnected from the
aircraft before disconnecting the refueling equipment ground and bonding
wires.
(17) When concurrent servicing operations are in progress, all
Contractor personnel (including flight crews), unless previously cleared,
shall report to and receive the CSS's concurrence prior to entering the
servicing area.
(18) When servicing cargo aircraft, the CSS and his/her
assistant (on inter phone) will also monitor both wing fuel vents.
*(19) A copy of the contractor's aircraft refueling procedures
will be located on the aircraft and made available to the CSS, as required.
*NOTE: Items preceded by an asterisk "*" apply to passenger aircraft only.
d. Billeting and messing for Contractor's crews, and Government-owned
property required in support of this contract not specifically provided for in
other provisions of this contract, may be provided by the Government at the
discretion of the commanding officer of the military installation involved.
Except as provided in paragraphs a and b above, other services at military
bases, where commercial services are not available, or not available on a
timely basis, may be made available to the Contractor on an emergency basis
only, as determined by the ACO. Aerospace Ground Equipment (AGE) and traffic
handling and servicing equipment, with necessary operators, furnished pursuant
to this paragraph H-1 shall be on a non-reimbursable basis. Billeting and
messing for Contractor's crews shall be on a reimbursable basis. Technical
services and maintenance labor provided, as well as supplies and parts
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<PAGE>
issued, shall be on a reimbursable basis and in accordance with and subject to
the provisions of:
(1) Air Force Installations - AFM 67-1 and AFR 55-20.
(2) Naval Air Stations - Naval Supply Systems Command Manual,
Volume 2.
(3) Army Installations - AR 37-27.
At overseas locations, Contractor's employees (other than native personnel
assigned to duty in their own country) who are involved in the performance of
this contract may be furnished billeting and messing facilities on a
reimbursable basis, as prescribed by local base regulations. In addition,
commissary, base exchange privileges, and other logistic support may be granted
to such employees and dependents in accordance with Joint Service Regulation AFR
400-l5/AR 700-32/OPNAVINST 4000.76, Logistic Support of United States Non
Governmental, Nonmilitary Agencies and Individuals in Overseas Military Commands
and such implementing instructions as may be issued by area or base commander
concerned. The ACO will periodically review the scope of support furnished,
pursuant to AFR 400-l5, and advise the Commander concerned as to any change in
status of the Contractor personnel which would affect their eligibility to
receive the support. Minor dependents of a US Citizen, who are employed by the
Contractor overseas in performance of this contract, are authorized dependent
education on a space available, tuition basis in the DOD dependents schools as
provided in DOD Directive 1342.213 dated 8 July 1982.
e. Contractor will be permitted to utilize military telephone and
record communications facilities in those areas where commercial circuits are
not available and it is in the best interest of the Government as determined
by the ACO. Contractor use of military communications facilities must be
limited to transmission/reception of airlift mission support traffic and must
not interfere with military command control traffic.
f. The Government will furnish office, warehouse, and storage space at
military installations for Contractor's representatives and supply support
items and equipment to the extent available. Such office, warehousing and
storage space, including utilities (heat, air conditioning when authorized in
AFM 88-l5, light, power, water, and sewage) concomitant to the use of such
space, will be provided to the Contractor on a non-reimbursable basis. All
requests for office, warehouse, and storage space shall be made to the base
commander through the ACO or his delegated representative. In addition,
intrabase communications (on base telephone service) will be provided on a non-
reimbursable basis commensurate with the availability of circuits. Whenever
space is provided it will be on an as is condition with regard to partitions,
walls, lighting, electrical wiring, plumbing, etc. No modification to
buildings will be made unless specifically authorized by the base commander,
other than minor modifications to existing facilities as approved by the Base
Commander. Requests by the Contractor for construction of facilities on any
military installation will be submitted directly to HQ AMC/XOK. Necessary
coordination will be taken by HQ AMC with the major air command concerned.
Contractor will not undertake such construction until notified by HQ AMC that
construction has been approved.
g. Contractor is authorized to purchase ground petroleum products at
overseas Air Force installations for use in company owned ground vehicles
required for performance of this contract. Such authorization is subject to
and in accordance with the provisions of AFR 144-11.
h. In accordance with FAR 52.245-2, at time of award a list of the
Government-Furnished Equipment that the Contractor has in its possession, for
use in connection with and under the terms of this contract, will be listed in
an Attachment 12.
H-6
<PAGE>
2. PASSENGER AND PUBLIC LIABILITY INSURANCE
a. General. Prior to performance of any services hereunder, the
Carrier shall, at its own expense, procure and maintain during the entire
performance period of this contract, with financially and legally responsible
insurance company or companies, passenger and public liability insurance in
accordance with paragraph b or c, below. Liability insurance purchased pursuant
to the requirements of this paragraph shall cover payment to the Government,
pursuant to the subrogation provision of the Medical Care Recovery Act (42 USC
265l-3) and within the liability limitations of this contract, of the cost of
Government provided medical care to the extent that said insurance would cover
payment to injured individuals of the cost of medical care in the absence of any
Government obligation to provide medical care. The Carrier shall furnish to the
Contracting Officer a Certificate of Insurance, duly executed by the Insurer, of
the insurance required by this paragraph. The Certificate of Insurance shall
substantially conform to the form set forth in paragraph d, below. If a court
of competent jurisdiction determines that any transportation furnished pursuant
to this contract is subject to the Warsaw Convention, 49 Stat. 3000, and that
the Carrier is entitled to limit its liability under that Convention, then the
minimum limit of insurance required by this clause shall be considered to be a
"higher limit of liability agreed to by special contract" as contemplated by the
last sentence of Article 22(l) of that Convention, and the Contractor agrees
that it shall not with respect to any claim arising out of the death, wounding,
or other bodily injury of a passenger, avail itself of any defense under Article
20(l) of the Convention. Nothing herein shall be deemed to affect the rights
and liabilities of the Carrier with regard to any claim brought by, on behalf
of, or in respect of any person who has willfully caused damage which resulted
in death, wounding, or other bodily injury of a passenger. See note below
subparagraph c(2) of paragraph entitled, "Passenger and Public Liability
Insurance".
b. Split Limits Liability. The minimum limits of liability insurance
coverage maintained by the Carrier shall be as follows:
(1) Liability for bodily injury to or death of aircraft
passengers: A limit for any one passenger of at least three hundred thousand
dollars ($300,000.00), and a limit for each occurrence in any one aircraft of
at least an amount equal to the sum produced by multiplying three hundred
thousand dollars ($300,000.00) by the next highest whole number resulting from
taking 75 percent of the total number of passenger seats installed in the
aircraft.
(2) Liability for bodily injury to or death of persons
(excluding passengers): A limit of at least three hundred thousand dollars
($300,000.00) for any one person in any one occurrence, and a limit of at
least twenty million dollars ($20,000,000.00) for each occurrence.
(3) Liability for loss of or damage to property: A limit of at
least twenty million dollars ($20,000,000.00) for each occurrence.
c. Combined Single Limit Liability.
(1) Notwithstanding the provisions of paragraph b above the
Carrier may be insured for a single limit of liability for each occurrence. In
that event, coverage must be equal to or greater than the combined required
minimums set forth in paragraph b, above, for bodily injury, property damage,
and/or passenger liability for the type of use to which such aircraft is put,
as the case may be.
(2) In the case of a single limit of liability, aircraft may
be insured by a combination of primary and excess policies. Such policies must
have combined coverage equal to or greater than the required minimums set
forth in paragraph b, above, for bodily injury to non-passengers, property
damage, and/or passenger liability for the type of use to which the aircraft
is put, as the case may be.
NOTE: In the event the proposed changes to the Warsaw Convention, known as the
Montreal Protocol, are approved or ratified by the United States and become
effective in the United States, the Montreal
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<PAGE>
Protocol will take precedence to the extent it is inconsistent with the terms
of this contract regarding insurance.
d. Form of Certificate.
"CERTIFICATE OF INSURANCE"
This is to certify that:
______________________________________________ (hereinafter called the Insurer)
Name of Insurer
of
________________________________________________________________________________
Address of Insurer
has issued to
_________________________________________________________________________
Name of Insured
Policy, bearing policy number ___________, with respect to the legal liability
of the said Insured for aircraft passenger death or bodily injury, aircraft
public death or bodily injury (excluding passengers) and aircraft property
damage liabilities, effective from ____________ through ____________.
The minimum limits of liability insurance coverage maintained by the Insured
under the said policy are as follows*:
(1) Liability for bodily injury to or death of aircraft
passengers: A limit for any one passenger of at least three hundred thousand
dollars ($300,000.00), and a limit for each occurrence in any one aircraft of
at least an amount equal to the sum produced by multiplying three hundred
thousand dollars ($300,000.00) by the next highest whole number resulting from
taking 75 percent of the total number of passenger seats installed in the
aircraft.
(2) Liability for bodily injury to or death of persons
(excluding passengers): A limit of at least three hundred thousand dollars
($300,000.00) for any one person in any one occurrence, and a limit of at
least twenty million dollars ($20,000,000.00) for each occurrence.
(3) Liability for loss of or damage to property: A limit of at
least twenty million dollars ($20,000,000.00) for each occurrence.
(4) The Insurer further certifies that the insurance afforded
under this policy covers payment to the Government, pursuant to the
subrogation provision of the Medical Care Recovery Act (42 USC 265l-3), of the
cost of Government provided medical care to the extent that said insurance
would cover payment to injured individuals of the cost of medical care in the
absence of any Government obligation to provide medical care.
The terms and conditions of the policy apply throughout the world. The
following aircraft are covered by the policy identified above:
The parties recognize that the policy may exclude certain liabilities with
respect to any DOD operations involving the Civil Reserve Air Fleet (CRAF)
subsequent to the effective date of activation of the CRAF. The excluded
liabilities will be those where a loss may be incurred during the activation of
the CRAF under circumstances such that it cannot be demonstrated that the loss
is either attributable to a war risk and therefore reimbursable under Title XIII
of the Federal Aviation Act of l958, or attributable to cause
H-8
<PAGE>
other than war risk and therefore required to be covered by the Contractor's
commercial insurance.
The policy contains the attached endorsement.
By ____________________ (Company)
____________________
*In the case of a combined single limit of liability, the Insurer will be
required to describe the amount or amounts of insurance coverage.
"ENDORSEMENT"
(Attachment to the Certificate of Insurance)
It is agreed, that, with respect only to operations of the named Insured
performed under contract with the Air Mobility Command, Department of the Air
Force (USAF), and with respect only to Aircraft Liability Insurance afforded
under this policy, the following conditions shall also apply:
a. The Insurer agrees that, the insurance afforded under this policy
shall not be subject to any lower limits of liability of the Warsaw Convention,
49 Stat. 3000, for the death or bodily injury of any passenger. If that
convention should otherwise be deemed to be applicable to any passenger death or
bodily injury liability, then to the extent stated in the preceding sentence,
this insurance shall be deemed to be a higher limit of liability agreed to by
special contract as contemplated by the last sentence of Article 22(l) of that
convention.
b. The exclusions of the policy are deleted and the following
substituted therefore:
The insurance afforded under this policy shall not apply to:
(1) Any loss against which the named Insured has other valid
and collectible insurance, except that the limits of liability provided under
this policy shall be excess of the limits provided by such other valid and
collectible insurance but in no event exceeding the limits of liability
expressed elsewhere in this policy.
(2) Any loss arising from the ownership, maintenance or use of
any type of aircraft not declared to the Insurer in accordance with the terms
and conditions of this policy.
(3) Liability assumed by the Insured under any contract or
agreement except as stated in this contract with respect to limitations of the
Warsaw Convention.
(4) Bodily injury, sickness, disease, mental anguish or death
of any employee of the Insured while engaged in the duties of his employment,
or any obligation for which the Insured or any company as his Insurer may be
held liable under any Workman's Compensation or occupational disease law.
(5) Damage to or destruction of property owned, rented,
occupied, or used by, or in the care, custody or control of the Insured, or
carried in or on any aircraft with respect to which the insurance afforded by
this policy applies.
(6) Personal injuries or death or damage to or destruction of
property, caused directly or indirectly, by hostile or warlike actions,
including action in hindering, combating or defending against
H-9
<PAGE>
an actual, impending or expected attack by any Government or sovereign power,
de jure or de facto, or military, naval or air forces; the discharge,
explosion, or use of any weapon of war employing atomic fission, or atomic
fusion, or radioactive materials; insurrection, rebellion, revolution, civil
war or usurped power, including any action in hindering, combating or
defending against such an occurrence, or confiscation by any Government or
public authority.
c. The Insurer hereby waives any right of subrogation it may have
against the United States of America, by reason of any payment under the
aforesaid policy of insurance, with respect to loss caused to transportation
services by acts of the United States of America or any agency thereof, which
acts are in conjunction with the performance by the named Insured of any
services under said contract.
d. In the event the Insurer elects to cancel the insurance afforded
under this policy, the Insurer hereby agrees that such cancellation shall not be
effective unless written notice thereof shall be sent by the Insurer by
registered mail not less than 30 days in advance of such cancellation, direct to
the Air Mobility Command, United States Air Force, 402 Scott Dr., Room 132,
Scott Air Force Base, Illinois, Attention: XOKAI, and in the event the named
Insured requests such cancellation, the Insurer agrees to notify, by registered
mail, the above stated activity immediately upon receipt of such request.
e. Anything in the policy to the contrary notwithstanding, the
aircraft may be operated by pilots authorized by the named Insured.
f. Violations of regulations prescribed by the Federal Aviation
Administration (FAA) shall not prejudice the insurance afforded by this policy.
g. No special waiver issued by the FAA shall affect the insurance
afforded hereunder.
h. Any exclusions, conditions or other provisions of this
endorsement, which have the effect of restricting or nullifying the coverage
already granted by this policy in the absence of this endorsement, shall not
apply.
Endorsement to Policy No:
- -------------------------------------------------------------------------------
Effective Date:
----------------------------------------------------------------
Countersigned:
-----------------------------------------------------------------
Company
--------------------------
--------------------------
3. NOTICES.
In performance of this contract, Contractor will furnish or be guided by the
following notices as applicable:
a. All Operations. In the event a flight containing SECRET or
CONFIDENTIAL material is delayed, interrupted or terminated at an unscheduled
point, immediate notice to that effect shall be given to the ACO. Prompt and
strict compliance with instructions received as pertains to the security of the
SECRET or CONFIDENTIAL material shall be maintained. To determine the security
clearance of CRAF personnel, call Company Security Officer. If unsuccessful,
then contact the Defense Investigative Service Clearance Office (DISCO) at
(614)236-2133 or AUTOVON 850-2133 (during duty hours) or (614)236-2058 (after
duty hours).
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<PAGE>
b. Notice of Accidents. In all cases where the aircraft is involved
in an accident or incident, as defined in Part 830 Investigation Regulation
issued by the National Transportation Safety Board or as defined in the contract
clause, "Safety Precautions for Ammunition and Explosives," the Contractor will
be responsible for ensuring that the information is transmitted by the most
expeditious means available to the Tanker Airlift Control Center (TACC)'s
Emergency Action Cell at Scott AFB, Illinois, telephone (618)256-1706.
c. Aircraft Medical Incidents. Report all aircraft medical incidents
in-flight, or while AMC passengers are under the control of the aircraft
captain, to the first available QAE or CA, at the next en route station for
inflight incidents, or the station where the incident occurs.
d. DOD Casualties. In cases where a death occurs on a Contractor's
aircraft, the following information shall be furnished by telegram to the
addresses below, with an information copy to HQ AMC/XOK: Name, service number
and component of service identified as Army-USA, Air Force-USAF, Navy-USN,
Marine Corps-USMC, Coast Guard USCG.
Army: Chief Casualty Branch Navy and Coast Guard: SEC NAV
DA Washington DC Washington DC
Marines: CMC Air Force: CSAF
Washington DC Washington DC
4. LEASE OF 463-L PALLETS AND NETS
Whenever the Contractor requires the use of 463-L pallets and associated cargo
restraining nets for commercial flights inbound to the continental United States
the Contractor shall make a request to the ACO in writing to enter into a lease
agreement for the use of such equipment.
5. CLEARANCES
a. The Government will make passengers available at airport terminal
cleared for travel to and from the United States and will provide the Contractor
with all passenger and cargo data necessary for the completion of aircraft
clearance including customs, immigration, public health and similar documents.
On arrival at the destination airport, the Government will accept passengers at
airport terminal and assume all responsibility with respect to such passengers,
such as ground transportation, quarantine, etc., provided, however, that the
foregoing shall not relieve the Contractor of responsibility for payment of any
charges, fees, or taxes based upon use of terminal facilities by or for
passengers or cargo, nor shall the Government be obligated to pay or reimburse
the Contractor for payment of any such charges.
b. Contractor will provide the US Immigration Service Form I-94, or
such other forms as may be prescribed to those passengers required, by law, to
complete while aboard aircraft en route to the US or its possessions.
c. Nothing in this contract shall relieve the Contractor of its
obligation and responsibility to furnish appropriate agencies all required
manifest, immigration, and border clearance documents, covering all personnel
and cargo aboard the aircraft upon entry into the United States or a foreign
country. In the event the Contractor is obliged, pursuant to a court or
administrative order of the United States, to pay any fine assessed for
violation of any immigration law or regulation resulting from the transportation
of a passenger in reliance upon clearance by the Government, the Government will
reimburse the Contractor for such fine.
d. The Contractor is responsible for obtaining necessary landing
rights or privileges and visas and passports for crews, route support personnel
and Contractor employees. Contractor will comply with the Aircraft Diplomatic
Landing and Overfly Clearance Procedures for specific countries as set forth in
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<PAGE>
AMCR 76-8, Chapter 7.
6. SECURITY REQUIREMENTS
a. Where regular and frequent entry into restricted areas at a
military installation is required by Contractor personnel for ground handling of
aircraft, the Contractor personnel must meet the requirements established by
AFR 205-1, Chapter 11, and DD Form 254 (Attachment 10). Applications for
personnel security investigations shall be made to the local chief of security
police. (Military installations are airfields that are owned, leased, or
controlled by the US Government.)
b. While on military installations or on military portions of civil
installations, Contractor personnel shall comply with security regulations
promulgated by the military installation/activity commander. Security
regulations are directive in nature and will be adhered to by all contractor
personnel. Senior Lodger station managers, both CONUS and overseas, are
responsible for ensuring that all contractor personnel are aware of station
regulations.
7. RESPONSIBILITY FOR GOVERNMENT CARGO
a. Property (hereinafter referenced in this paragraph as Government
cargo) placed in Contractor's possession for the sole purpose of air
transportation shall not be deemed to be Government Property within the meaning
of the Government Property Clause. Government cargo, within the meaning of this
paragraph, does not include passenger baggage.
b. The Government hereby relieves the Contractor of liability for
loss of, or damage to, any and all Government cargo transported by the
Contractor in performance of this contract, except such loss, destruction and
damage resulting from the willful misconduct or lack of good faith of any of the
Contractor's managerial personnel, as defined in the contract clauses entitled
"Government Property," (Fixed-Price Contract) - Alternate I, and except as
follows:
(1) If, other than at the direction of the Government, it
should be necessary to off-load cargo at any en route commercial stations, the
Contractor shall immediately notify the ACO. The ACO will be apprised of the
Contractor's arrangements for movement of the cargo to its originally
consigned destination. The Contractor shall at his expense be responsible for
safeguarding such cargo from loss, theft, or damage by the elements or other
causes until such time as the Contractor is relieved of responsibility by the
ACO. The provisions of SECTION G apply in determining whether the Contractor
should be charged a deficit.
(2) In the event of an accident, the Contractor will be
responsible for providing continuous protection of all cargo aboard the
aircraft and for delivery of the cargo to the point designated by the ACO.
(3) To the extent insurance required by subparagraph b(3) of
paragraph entitled, "Passenger and Public Liability Insurance" of this SECTION
or the appropriate portion of subparagraph c of paragraph entitled, "Passenger
and Public Liability Insurance" of this SECTION (if Combined Single Limit
Liability is used), is not required for payment of third party claims, the
balance of said insurance shall apply to Government property loss, damage or
destruction thereto.
c. Any expenses incurred by the Contractor in connection with
safeguarding cargo off-loaded at the direction of the Government at any
commercial field will be reimbursable to the Contractor by the Government by a
Supplemental Agreement to this contract.
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<PAGE>
8. COLLECTIVE BARGAINING UNITS
a. The contractor agrees to advise the applicable Collective
Bargaining Units of the contract requirements set forth in SECTION C
paragraph 2.
b. The Contractor agrees to provide the Contracting Officer, upon
request, a copy of any Collective Bargaining Agreement applicable to employees
performing on this contract.
9. PETROLEUM SUPPORT
a. Upon completion of round trip missions, Contractors are entitled
to purchase sufficient POL at Defense Fuel Supply Center (DFSC) standard prices
for movement of the aircraft to its nearest home base. For example:
McGuire/Dover/Charleston to Kennedy/Philadelphia/Wilmington or Travis/Norton to
San Francisco/Los Angeles/Seattle- Tacoma. If the Contractor is depositioning
their aircraft to a point other than its nearest home base, the amount of fuel
at DFSC standard prices will not be more than that quantity which would be
needed to deposition to the Contractor's nearest home base. For the purpose of
purchasing POL in excess of the amount required to deposition to contractor's
home base, an AMC mission will be considered a civil aircraft not under contract
or charter within the provisions of AFR 144-9. The sale of POL in excess of
depositioning POL will be at the DFSC standard price plus a 5.5 percent
accessorial and administrative charge, except as provided for in paragraph c,
below.
b. Upon completion of one-way trips Contractors are entitled to
purchase sufficient POL at DFSC standard prices for movement of the aircraft to
point of origin of the trip or to the home base nearest to the point of origin,
if within the general area of the point of origin of the live trip. If the
Contractor has commercial business for the ferry trip, the Contractor is
entitled to purchase POL at the DFSC standard price from the destination point
of the one-way mission to the point of origin of the commercial mission as long
as this station is less distant than the original ferry leg.
c. Upon completion of one-way or round trip missions, Contractors
will be allowed to purchase POL at DFSC standard price for ferrying from one
coast to another when positioning to originate another AMC mission. Fuel at
DFSC standard price also will be provided to permit the return of an aircraft to
the opposite coast (or any point short of the opposite coast) if, in fact, the
mission originated on the opposite coast regardless of the location of the
contractor's home base. Contractors may not transit other Air Force bases en
route while ferrying cross country.
10. LEGAL DOCUMENTS
The Contractor shall submit, simultaneously with its transfer to the DOT, one
copy to HQ AMC/XOK and one copy to HQ AMC/JAN of each application, pleading, or
other document submitted to said Agency by the Contractor or by any organization
of which the Contractor is a member, which application, pleading, or other
document pertains, directly or indirectly, to this or any other contract for air
transportation to which AMC is a party or is expected to be a party. Included
among such pleadings are any pertaining to the leasing of any aircraft listed in
Attachment 8.
11. REQUIRED REPORTS
a. FINANCIAL AND MILEAGE REPORT. The Contractor shall file with HQ
----------------------------
AMC/LGCA, 302 Scott Dr Room 132, Scott AFB IL 62225-5363, all required
financial information and mileage report. (Reference DD Form 1423, 001 and 002,
Exhibit A)
b. FUEL REPORTS. Carriers providing CAT-B service shall submit
------------
monthly fuel reports to HQ AMC/XOKM. (Reference DD Form 1423, 003, Exhibit A)
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<PAGE>
c. DD FORM 489 ANNUAL REPORT. (Geneva Convention Identity Card or -
-------------------------
Geneva Convention Card). Each CRAF Contractor will submit an annual report of
accountability of the DD Form 489, with an as-of date of 1 February in
accordance with the instructions identified in paragraph 9-8 and figure 9-3 of
AMCR 55-8, Volume I (Reference DD Form 1423, 004, Exhibit A).
d. CARRIERS' AIRCRAFT REPORTING. (Reference DD Form 1423, 005,
----------------------------
Exhibit A) CRAF contractors are required to report to HQ AMC/XOKMA and
Department of Transportation/OET when a CRAF allocated aircraft is:
(1) Destroyed or suffers major damage.
(2). Sold or leased, to include the identity of the
transferee, date and place of transfer, the terms and conditions of the
transfer.
(3). Registered under a different number or removed from US
registration.
(4). Or otherwise unable to satisfy its CRAF commitment, e.g.,
seizure by a foreign Government.
12. INVITED CONTRACTOR OR TECHNICAL REPRESENTATIVE STATUS - REPUBLIC OF KOREA
a. Invited-contractor or technical representative status under the
US-ROK SOFA is subject to the written approval of HQ USFK, ATTN: ACJ, APO
96301-0010.
b. The Contracting Officer will coordinate with HQ USFK, ATTN: ACJ
in accordance with DFARS, subpart 225.802, and USFK Reg 700-19. The AC of S,
Acquisition Management, HQ USFK, will determine the appropriate contractor
status under the SOFA and notify the ACO of the determination.
c. Subject to the above approval, the Contractor, including their
employees and lawful dependents, may be accorded such privileges and exemptions
as specified in the US-ROK SOFA, and implemented per USFK Reg 700-19, subject to
the conditions and limitations imposed by the SOFA and that regulation. These
privileges and exemptions may be furnished during the performance period of the
contract, subject to their availability and provided the invited-contractor or
technical-representative status is not withdrawn by USFK.
d. The Contractor officials and employees performing under this
contract collectively and separately warrant that they are not now performing,
nor will perform during the period of this contract, any contract services or
otherwise engage in business activities in the ROK other than those pertaining
to the US armed forces.
e. During the performance of the work in the ROK required by this
contract, the contractor will be governed by USFK regulations pertaining to the
direct hiring and the personnel administration of Korean National employees.
f. The authorities of the ROK will have the right to exercise
jurisdiction over invited contractors and technical representatives, including
officials and employees, and their dependents, for offenses committed in the ROK
and punishable by the laws of the ROK. In recognition of the role of such
persons in the defense of the ROK, they will be subject to the provisions of
paragraphs 5, 7(b), and 9 of the US-ROK SOFA and the related agreed minutes of
US-ROK SOFA, Article XXII. In those cases in which the authorities of the ROK
decide not to exercise jurisdiction, they shall notify the US military
authorities as soon as possible. On such notification, the military authorities
will have the right to exercise such jurisdiction over the persons referred to,
as conferred on them by the law of the United States.
H-14
<PAGE>
g. Invited contractors and technical representatives agree to
cooperate fully with the USFK sponsoring agency and responsible officer on all
matters pertaining to logistic support. In particular, contractors will provide
prompt and accurate reporting of changes in employee status as required by this
regulation to the assigned sponsoring agency.
h. Invited contractor and technical representative status will be
withdrawn by USFK on--
(1) Completion or termination of the contract.
(2) Proof that the contractor or employees are engaged in
business activities in the ROK other than those pertaining to US armed forces.
(3) Proof that the contractor or employees are engaged in
practices illegal in the ROK or are violating USFK regulations.
i. It is agreed that the withdrawal of the invited-contractor or
technical-representative status or any of the privileges associated therewith by
the US Government, will not constitute grounds for excusable delay by the
contractor in the performance of the contract, nor will it justify or excuse the
contractor defaulting the performance of this contract; and such withdrawal will
not serve as a basis for the filing of any claims against the US Government if
the withdrawal is made for the reasons stated in subparagraph h above. Under no
circumstances will the withdrawal of such status or privileges be considered or
construed as a breach of contract by the US Government. The determination to
withdraw SOFA status and privileges by USFK shall be final and binding on the
parties unless it is patently arbitrary, capricious, and lacking in good faith.
13. OPTION TO EXTEND CONTRACT PERFORMANCE
The Government may require continued performance of services for a maximum of
six (6) months and the AMC Uniform Rate for FY95 will apply. In the event the
Government exercises this option, prices will be determined in accordance with
para 2 of SECTION B. This option may be exercised more than once, but the total
extension of performance hereunder shall not exceed six (6) months. The
Contracting Officer may exercise the option by written notice to the contractor
not later than 15 days prior to expiration of the contract. The Government's
rights under this paragraph are in addition to those under CLIN 0004 of SECTION
B.
14. 5352.204-9001 VISITOR GROUP SECURITY AGREEMENTS (JAN 1990) AFFARS
Prior to beginning operations involving classified information on an
installation identified on the DD Form 254 where the Contractor is not required
to have a facility security clearance, the Contractor shall enter into a
security agreement (or understanding) with the installation commander to ensure
that its' security procedures are properly integrated with those of the
installation. As a minimum, the agreement shall identify the security actions
which will be performed--
a. By the installation for the Contractor, such as providing storage
and classified reproduction facilities, guard services, security forms, security
inspections under DOD 5220.22-M, paragraph 5ag, classified mail services,
security badges, visitor control and investigating security incidents; and
b. Jointly by the Contractor and the installation, such as packaging
and addressing classified transmittals, security checks, international security
controls, and implementing emergency procedures to protect classified material.
H-15
<PAGE>
15. 5352.223-9004 SAFETY AND ACCIDENT PREVENTION (APR 1984) AFFARS
a. In performing work under this contract on a Government
installation, the Contractor shall--
(1) Conform to the specific safety requirement established by
this contract;
(2) Comply with the safety rules of the Government
installation that concern related activities not directly addressed in this
contract;
(3) Take all reasonable steps and precautions to prevent
accidents and preserve the life and health of Contractor and Government
personnel performing or in any way coming in contact with the performance of
this contract; and
(4) Take such additional immediate precautions as the
Contracting Officer may reasonably require for safety and accident prevention
purposes.
b. If this contract is performed on an Air Force installation, the
Air Force Occupational Safety and Health (AFOSH) Standards developed in
accordance with AFR 127- 12, in effect on the date of this contract, apply. If
contract performance is on other than an Air Force installation, the Contractor
shall comply with the safety rules of that Government installation, in effect on
the date of this contract.
c. The Contracting Officer may, by written order, direct additional
AFOSH and safety and accident standards as may be required in the performance of
this contract and any adjustments resulting from such direction will be in
accordance with the Changes clause of this contract.
d. Any violation of these safety rules and requirements, unless
promptly corrected as directed by the Contracting Officer, shall be grounds for
termination of this contract in accordance with the "Default" clause of this
contract.
16. 5352.247-1000 AIR SAFETY (NOV 1991) AMCFARS
a. Contractor is obligated to comply with generally accepted
standards of airmanship, training, and maintenance practices and procedures.
Contractor must also satisfy DOD quality and safety requirements as described in
32 CFR Part 861 Section 861.3. In addition, contractor shall comply with all
provisions of applicable statutes, tenders of service, and contract terms, as
such may affect flight safety, as well as with all applicable Federal Aviation
Administration Regulations, Air worthiness Directives, Orders, Rules, and
Standards promulgated under the Federal Aviation Act of 1958, as amended.
Compliance with published standards may not, standing alone, constitute
compliance with generally accepted standards of airmanship, training or
maintenance.
b. The cleanliness and orderliness of an aircraft, including the
visible components and surfaces thereof affect the ability to inspect an
aircraft, may be valid indicators of the overall maintenance level of an
------
aircraft, and may have a direct effect on the security and confidence of
--------
passengers. Therefore, Contractor's failure to keep and maintain all such
components and surfaces of the aircraft used in performance of this contract
clean, orderly, and in a good state of repair, may be deemed a failure to comply
---------------------------------
with generally accepted standards of maintenance to the extent the failures go
- ------------------------------------------------------------------------------
beyond mere cosmetic or housekeeping deficiencies and relate in some manner to
- ------------------------------------------------------------------------------
confidence in the safety, maintenance or air worthiness of the aircraft.
- ------------------------------------------------------------------------
c. Should the Government determine that any of the following
conditions exist, it may suspend or place in temporary nonuse status
Contractor's further performance of airlift transportation services for the
Department of Defense:
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<PAGE>
(1) Contractor's failure to meet any of the obligations
imposed by the preceding two paragraphs;
(2) Involvement of one of Contractor's aircraft in a serious
or fatal accident, incident, or operational occurrence (regardless of whether
or not such aircraft is being used in the performance of this contract);
(3) Any other condition which affects the safe operation of
Contractor's flights hereunder.
d. Such suspension shall be accomplished pursuant to the Air Mobility
Command (AMC) and Military Traffic Management Command (MTMC) Commercial Airlift
Safety Review Procedures (32 CFR Part 861), which are hereby incorporated in
this contract by reference, or any procedures that supersede same which may be
adopted by HQ AMC/MTMC from time-to-time. The suspension procedures, including
the temporary nonuse, reinstatement, and appeals processes, set out therein, are
binding, final, and conclusive. In no event shall suspension or temporary
nonuse proceedings, regardless of outcome, give rise to any liability on the
part of the Government.
e. Suspension or temporary nonuse hereunder resulting in
unavailability of Contractor aircraft to perform service under this contract
shall be treated as failure to maintain authorization to engage in air
transportation under the clause of the contract entitled, "REQUIREMENT FOR
AUTHORIZATION TO ENGAGE IN AIR TRANSPORTATION."
17. 5352.247-1001 REQUIREMENT FOR AUTHORIZATION TO ENGAGE IN AIR TRANSPORTATION
(MAR 1988) AMCFARS
a. This contract is conditioned upon the Contractor being an air
carrier and holding a Certificate of Public Convenience and Necessity issued
under Section 401 of the Federal Aviation Act (FAA of 1958, as amended), or is
otherwise authorized by the DOT to engage in air transportation services,
holding an Air Carrier's Operating Certificate issued by the FAA under Part 121
of the Federal Aviation Regulations (14 CFR 121) for airlift operated by the
offeror (or in the case of a joint venture, the entity of the joint venture
operating the aircraft), and participating in the CRAF, if applicable.
Furthermore, the Contractor shall not be in a suspension or temporary nonuse
status in accordance with the special clause in SECTION H entitled "AIR SAFETY."
b. If at any time during the performance period of this contract the
Contractor is not in compliance with the requirements of paragraph a above,
including, but not limited to, instances when the certificate demonstrating
compliance with paragraph a above is, (i) suspended by the pertinent regulatory
body for any period of time even though the effect of the suspension is stayed
pending review by a court of competent jurisdiction, (ii) canceled or revoked in
its entirety by the pertinent regulatory body even though the effect of the
cancellation or revocation is stayed pending review by a court of competent
jurisdiction, or (iii) such certificate or interim operating authority has
expired and has not been renewed, then the Contracting Officer may elect any one
or a combination of the following courses of action:
(1) Suspend the Contractor from further performance of all or
any part of this contract until such time as the suspension/temporary nonuse
imposed by the pertinent regulatory body shall have expired or until such time
as the suspension, temporary nonuse, cancellation, or revocation shall have
been finally set aside, removed, or otherwise terminated. The period of
suspension of this contract will begin at the time that notice thereof is
given by the Contracting Officer to the Contractor's designee named in
accordance with paragraph entitled, "Contractor Point of Contact" in SECTION G
of this contract. All flights which were scheduled to be flown during the time
any such suspension is in effect will be canceled. A unilateral modification
reflecting the cancellation and reducing the Government's obligation
accordingly will be issued by the Contracting Officer at the Termination of
the period during which this contract is suspended or after the expiration of
the period of performance of this contract. Any
H-17
<PAGE>
such cancellation is not for the convenience of the Government and is not a
termination within the meaning of the clause entitled "Termination for
Convenience of the Government (Fixed-Price)." Such cancellation will be
accomplished at no cost to either party, and the substitute service provisions
of this contract will not apply to such canceled flights.
(2) Exercise the Government's rights under the special clause
of the contract entitled, "Contractor's Failure to Provide Service."
(3) Terminate this contract in whole or in part under the
procedures of the clause entitled "Default." If this contract is terminated
for default pursuant to paragraph b, and if it is subsequently determined that
termination for default is not appropriate, this contract shall then be
considered to have been canceled pursuant to subparagraph b(4) below.
(4) Cancel this contract in whole or in part. Any such
cancellation will be accomplished by the issuance of a unilateral modification
and will not be a termination under the provisions of the clause entitled
"Termination for Convenience of the Government (Fixed-Price)" and neither
party will be liable to the other party for costs incurred as a result of such
cancellation.
18. SUBMISSION OF COST AND PRICING DATA--MOU
Contractors who are required to submit certified cost and pricing data
pursuant to the MOU shall do so within the time specified by HQ AMC/LGC.
Failure to provide certified cost and pricing data within the defined time shall
result in a reduction of such offerors' entitlement for the purpose of awarding
business for the forecast year. Mobilization points shall be reduced at a rate
of one percentage point per day late, up to a maximum reduction of 30 percent.
Requirements for submission of certified cost and pricing data are addressed in
the MOU and procedures defined in FAR 52.215-10 entitled "Late Submissions,
Modifications, and Withdrawal of Proposals."
19. REQUIREMENT FOR INDEMNIFICATION APPROVAL
Notwithstanding the inclusion of FAR Clause 52.250-1 and the clause
entitled Definition of Unusually Hazardous Risk in Section I (paras 4 & 5) they
have no force and effect in this contract until the contracting officer notifies
the contractor by modification that indemnification has been approved by the
Secretary of the Air Force.
20. CONTRACTOR ACQUIRED INSURANCE
a. The Contractor shall procure and maintain during the entire period of
performance under this contract the following minimum insurance in addition to
the insurance required by paragraph 2 of this section:
TYPE AMOUNT
Automobile
- ----------
Bodily Injury Liability $200,000 per person
$500,000 per occurence
Property Damage Liability
Bodily Injury $500,000 per occurence
H-18
<PAGE>
Workmen's Compensation and Employers Liability
- ----------------------------------------------
Workman's Comp & Occupational Disease Statutory
Employer's Liability $100,000
b. Contractor shall comply with the requirements of contract clause
"Insurance -- Work on Government Installation" concerning certifications to the
Contracting Officer.
H-19
<PAGE>
PART II - CONTRACT CLAUSES
SECTION I
CONTRACT CLAUSES
1. The following clauses are incorporated by reference:
<TABLE>
<CAPTION>
FAR
NUMBER CLAUSE TITLE DATE
- ----------------- ----------------------------------------- --------
<S> <C> <C>
52.202-1 DEFINITIONS SEP 1991
52.203-1 OFFICIALS NOT TO BENEFIT APR 1984
52.203-3 GRATUITIES APR 1984
52.203-5 COVENANT AGAINST CONTINGENT FEES APR 1984
52.203-6 RESTRICTIONS ON SUBCONTRACTOR SALES TO JUL 1985
THE GOVERNMENT
52.203-7 ANTI-KICKBACK PROCEDURES OCT 1988
52.203-10 PRICE OR FEE ADJUSTMENT FOR ILLEGAL OR SEP 1990
IMPROPER ACTIVITY
52.203-12 LIMITATION ON PAYMENTS TO INFLUENCE JAN 1990
CERTAIN FEDERAL TRANSACTIONS
52.204-2 SECURITY REQUIREMENTS APR 1984
52.209-6 PROTECTING THE GOVERNMENT'S INTEREST WHEN NOV 1992
SUBCONTRACTING WITH CONTRACTORS DEBARRED,
SUSPENDED, OR PROPOSED FOR DEBARMENT
52.215-1 EXAMINATION OF RECORDS BY COMPTROLLER FEB 1993
GENERAL
52.215-2 AUDIT--NEGOTIATION FEB 1993
52.215-22 PRICE REDUCTION FOR DEFECTIVE COST OR JAN 1991
PRICING DATA
52.215-24 SUBCONTRACTOR COST OR PRICING DATA DEC 1991
52.215-27 TERMINATION OF DEFINED BENEFIT PENSION SEP 1989
PLANS
52.215-33 ORDER OF PRECEDENCE JAN 1986
52.215-39 REVERSION OR ADJUSTMENT OF PLANS FOR JUL 1991
POST RETIREMENT BENEFITS OTHER THAN
PENSIONS (PRB)
52.216-18 ORDERING APR 1984
The blank in para (a), line 5 is
completed as follows:
01 Oct 1993 through 30 Sep 1994
-------------------------------
52.216-19 DELIVERY-ORDER LIMITATIONS APR 1984
The blanks are completed
as follows:
Para (a), line 3 $1,250
------
Para (b)(1) $ 4,000,000
-----------
Para (b)(2) $10,000,000
-----------
Para (b)(3) 5 days
------
Para (d), line 5 5 days
------
52.216-22 INDEFINITE QUANTITY APR 1984
The blank in para (d), last line is
completed as follows: 30 SEP 1994
52.219-8 UTILIZATION OF SMALL BUSINESS CONCERNS FEB 1990
AND SMALL DISADVANTAGED BUSINESS CONCERNS
52.219-13 UTILIZATION OF WOMEN-OWNED SMALL AUG 1986
BUSINESSES
52.220-3 UTILIZATION OF LABOR SURPLUS AREA APR 1984
CONCERNS
52.222-1 NOTICE TO THE GOVERNMENT OF LABOR APR 1984
DISPUTES
52.222-3 CONVICT LABOR APR 1984
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
FAR
NUMBER CLAUSE TITLE DATE
- --------- -------------- ----
<C> <S> <C>
52.222-18 NOTIFICATION OF EMPLOYEE
RIGHTS CONCERNING MAY 1992
PAYMENT OF UNION DUES OR FEES
52.222-26 EQUAL OPPORTUNITY APR 1984
52.222-28 EQUAL OPPORTUNITY PREAWARD
CLEARANCE OF SUBCONTRACTS APR 1984
52.222-29 NOTIFICATION OF VISA DENIAL APR 1984
52.222-35 AFFIRMATIVE ACTION FOR
SPECIAL DISABLED AND APR 1984
VIETNAM ERA VETERANS
52.222-36 AFFIRMATIVE ACTION FOR
HANDICAPPED WORKERS APR 1984
52.222-37 EMPLOYMENT REPORTS ON
SPECIAL DISABLED JAN 1988
VETERANS AND VETERANS
OF THE VIETNAM ERA
52.223-2 CLEAN AIR AND WATER APR 1984
52.223-6 DRUG-FREE WORKPLACE JUL 1990
52.224-1 PRIVACY ACT NOTIFICATION APR 1984
52.224-2 PRIVACY ACT APR 1984
52.227-1 AUTHORIZATION AND CONSENT APR 1984
52.227-2 NOTICE AND ASSISTANCE
REGARDING PATENT AND APR 1984
COPYRIGHT INFRINGEMENT
52.228-3 WORKERS' COMPENSATION
INSURANCE APR 1984
(DEFENSE BASE ACT)
52.228-4 WORKERS' COMPENSATION AND
WAR-HAZARD APR 1984
INSURANCE INSURANCE--WORK RNMENT
INSTALLATION
52.228-5 OVERSEAS
52.229-3 FEDERAL, STATE, AND LOCAL
TAXES JAN 1991
52.229-5 TAXES--CONTRACTS PERFORMED
IN U.S. POSSESSIONS APR 1984
OR PUERTO RICO
52.229-6 TAXES--FOREIGN FIXED-PRICE
CONTRACTS JAN 1991
52.232-4 PAYMENTS UNDER
TRANSPORTATION CONTRACTS
AND APR 1984
TRANSPORTATION-RELATED
SERVICES CONTRACTS
52.232-8 DISCOUNTS FOR PROMPT
PAYMENT APR 1989
52.232-9 LIMITATION ON WITHHOLDING
OF PAYMENTS APR 1984
52.232-11 EXTRAS APR 1984
52.232-17 INTEREST JAN 1991
52.232-18 AVAILABILITY OF FUNDS APR 1984
52.232-23 ASSIGNMENT OF CLAIMS JAN 1986
ALTERNATE I APR 1984
52.232-25 PROMPT PAYMENT SEP 1992
The blank in para(b)(2)
is completed as
follows: 30th
52.233-1 DISPUTES DEC 1991
ALTERNATE I DEC 1991
52.233-3 PROTEST AFTER AWARD AUG 1989
52.237-2 PROTECTION OF GOVERNMENT
BUILDINGS, EQUIPMENT, APR 1984
AND VEGETATION
52.242-13 BANKRUPTCY APR 1991
52.243-1 CHANGES--FIXED-PRICE AUG 1987
ALTERNATE IV APR 1984
52.244-1 SUBCONTRACT (FIXED-PRICE CONTRACTS) APR 1991
52.244-5 COMPETITION IN SUBCONTRACTING APR 1984
52.245-2 GOVERNMENT PROPERTY
(FIXED-PRICED CONTRACTS) DEC 1989
ALTERNATE I APR 1984
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
FAR
NUMBER CLAUSE TITLE DATE
- ------ ------------ ----
<C> <S> <C>
52.246-25 LIMITATION OF LIABILITY - SERVICES APR 1984
52.247-5 FAMILIARIZATION WITH CONDITIONS APR 1984
52.247-12 SUPERVISION, LABOR, OR MATERIALS APR 1984
52.247.21 CONTRACTOR LIABILITY FOR PERSONAL INJURY
AND/OR PROPERTY DAMAGE APR 1984
52.247-27 CONTRACT NOT AFFECTED BY ORAL AGREEMENT APR 1984
52.247-63 PREFERENCE FOR U.S.-FLAG AIR CARRIERS APR 1984
52.248-1 VALUE ENGINEERING MAR 1989
52.249-2 TERMINATION FOR CONVENIENCE OF THE
GOVERNMENT (FIXED-PRICE) APR 1984
52.249-8 DEFAULT (FIXED-PRICE SUPPLY AND SERVICE) APR 1984
ALTERNATE I APR 1984
<CAPTION>
DEFENSE
FAR SUP
NUMBER CLAUSE TITLE DATE
- ------- ------------ ----
<C> <S> <C>
252.201-7000 CONTRACTING OFFICER'S REPRESENTATIVE DEC 1991
252.203-7000 STATUTORY PROHIBITION ON COMPENSATION TO
FORMER DEPARTMENT OF DEFENSE EMPLOYEES DEC 1991
252.203-7001 SPECIAL PROHIBITION ON EMPLOYMENT APR 1993
252.203-7002 DISPLAY OF DOD HOTLINE POSTER DEC 1991
252.203-7003 PROHIBITION AGAINST RETALIATORY
PERSONNEL ACTIONS APR 1992
252.204-7000 DISCLOSURE OF INFORMATION DEC 1991
252.204-7003 CONTROL OF GOVERNMENT PERSONNEL WORK
PRODUCT APR 1992
252.205-7000 PROVISION OF INFORMATION TO COOPERATIVE
AGREEMENT HOLDERS DEC 1991
252.209-7000 ACQUISITION FROM SUBCONTRACTORS SUBJECT
TO ON-SITE INSPECTION UNDER THE
INTERMEDIATE-RANGE NUCLEAR FORCES
(INF) TREATY DEC 1991
252.215-7000 PRICING ADJUSTMENTS DEC 1991
252.215-7002 COST ESTIMATING SYSTEM REQUIREMENTS DEC 1991
252.222-7000 RESTRICTIONS ON EMPLOYMENT OF PERSONNEL DEC 1991
The blank in para (a), line 2 is
completed as follows: HAWAII/ALASKA
-------------
252.223-7002 SAFETY PRECAUTIONS FOR AMMUNITION
AND EXPLOSIVES DEC 1991
252.223-7003 CHANGE IN PLACE OF PERFORMANCE--
AMMUNITIONS AND EXPLOSIVES DEC 1991
252.225-7026 REPORTING OF OVERSEAS SUBCONTRACTS DEC 1991
252.225-7031 SECONDARY ARAB BOYCOTT OF ISRAEL JUN 1992
252.227-7031 DATA REQUIREMENTS OCT 1988
252.231-7000 SUPPLEMENTAL COST PRINCIPLES DEC 1991
252.233-7000 CERTIFICATION OF CLAIMS AND REQUESTS FOR
ADJUSTMENT OR RELIEF DEC 1991
252.242-7000 POSTAWARD CONFERENCE DEC 1991
252.243-7001 PRICING OF CONTRACT MODIFICATIONS DEC 1991
252.249-7001 NOTIFICATION OF SUBSTANTIAL IMPACT ON DEC 1991
EMPLOYMENT
</TABLE>
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<PAGE>
2. 52.203-9 REQUIREMENT FOR CERTIFICATE OF PROCUREMENT INTEGRITY--MODIFICATION
(NOV 1990) FAR
(a) DEFINITIONS The definitions set forth in FAR 3.104-4 are
-----------
hereby incorporated in this clause.
(b) The Contractor agrees that it will execute the certification set
forth in paragraph (c) of this clause when requested by the Contracting Officer
in connection with the execution of any modification of this contract.
(c) Certification As required in paragraph (b) of this clause, the
-------------
officer or employee responsible for the modification proposal shall execute the
following certification:
CERTIFICATE OF PROCUREMENT INTEGRITY--MODIFICATION (NOV 1990)
(1) I, [Name of certifier], am the officer or employee responsible
for the preparation of this modification proposal and hereby certify that, to
the best of my knowledge and belief, with the exception of any information
described in this certification, I have no information concerning a violation or
possible violation of subsection 27(a), (b), (d), or (f) of the Office of
Federal Procurement Policy Act, as amended* (41 U.S.C. 423), (hereinafter
referred to as "the Act"), as implemented in the FAR, occurring during the
conduct of this procurement (contract and modification number).
(2) As required by subsection 27(e)(1)(B) of the Act, I further
certify that to the best of my knowledge and belief, each officer, employee,
agent, representative, and consultant of [Name of Offeror] who has participated
personally and substantially in the preparation or submission of this proposal
has certified that he or she is familiar with, and will comply with, the
requirements of subsection 27(a) of the Act, as implemented in the FAR, and will
report immediately to me any information concerning a violation or possible
violation of subsections 27(a), (b), (d), or (f) of the Act, as implemented in
the FAR, pertaining to this procurement.
(3) Violations or possible violations: (Continue on plain bond paper
if necessary and label Certificate of Procurement Integrity--Modification
(Continuation Sheet), ENTER NONE IF NONE EXISTS)
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
[Signature of the officer or employee responsible for the modification proposal
and date]
_________________________________________________________________________
_________________________________________________________________________
[Typed name of the officer or employee responsible for the modification
proposal]
*Subsections 27(a), (b), and (d) are effective on December 1, 1990. Subsection
27(f) is effective on June 1, 1991.
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN AGENCY OF THE
UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR FRAUDULENT CERTIFICATION
MAY RENDER THE MAKER SUBJECT TO PROSECUTION UNDER TITLE 18, UNITED STATES CODE,
SECTION 1001.
(End of Certification)
I-4
<PAGE>
(d) In making the certification in paragraph (2) of the certificate,
the officer or employee of the competing Contractor responsible for the offer or
bid, may rely upon a one-time certification from each individual required to
submit a certification to the competing Contractor, supplemented by periodic
training. These certifications shall be obtained at the earliest possible date
after an individual required to certify begins employment or association with
the contractor. If a contractor decides to rely on a certification executed
prior to the suspension of section 27 (i.e., prior to December 1, 1989), the
Contractor shall ensure that an individual who has so certified is notified that
section 27 has been reinstated. These certifications shall be maintained by the
Contractor for a period of 6 years from the date a certifying employee's
employment with the company ends or, for an agency, representative, or
consultant, 6 years from the date such individual ceases to act on behalf of the
contractor.
(e) The certification required by paragraph (c) of this clause is a
material representation of fact upon which reliance will be placed in
executing this modification.
3. 252.232-7006 REDUCTION OR SUSPENSION OF CONTRACT PAYMENTS UPON FINDING OF
FRAUD (JAN 1992) DFARS
(a) 10 U.S.C. 2307(e) permits the head of the agency to reduce or
suspend advance, partial, or progress payments upon a written determination by
the agency head that substantial evidence exists that the Contractor's request
for payment is based on fraud. The provisions of 10 U.S.C. 2307(e) are in
addition to any other rights or remedies provided by the Government by law or
under contract.
(b) Actions taken by the Government under 10 U.S.C. 2307(e) shall not
constitute an excusable delay under the Default clause of this contract or
otherwise relieve the Contractor of its obligations to perform under this
contract.
4. 52.250-1 INDEMNIFICATION UNDER PUBLIC LAW 85-804 (APR 1984) FAR
(a) "Contractor's principal officials," as used in this clause, means
directors, officers, managers, superintendents, or other representatives
supervising or directing--
(1) All or substantially all of the Contractor's business;
(2) All or substantially all of the Contractor's operations at any
one plant or separate location in which this contract is being performed; or
(3) A separate and complete major industrial operation in
connection with the performance of this contract.
(b) Under Public Law 85-804 (50 U.S.C. 1431-1435) and Executive Order
10789, as amended, and regardless of any other provisions of this contract, the
Government shall, subject to the limitations contained in the other paragraphs
of this clause, indemnify the Contractor against--
(1) Claims (including reasonable expenses of litigation or
settlement) by third persons (including employees of the Contractor) for death;
personal injury; or loss of, damage to, or loss of use of property;
(2) Loss of, damage to, or loss of use of Contractor property,
excluding loss of profit; and
(3) Loss of, damage to, or loss of use of Government property,
excluding loss of profit .
(c) This indemnification applies only to the extent that the claim,
loss, or damage (1) arises out of or results from a risk defined in this
contract as unusually hazardous or nuclear and (2) is not compensated for by
I-5
<PAGE>
insurance or otherwise. Any such claim, loss, or damage, to the extent that it
is within the deductible amounts of the Contractor's insurance, is not covered
under this clause. If insurance coverage or other financial protection in
effect on the date the approving official authorizes use of this clause is
reduced, the Government's liability under this clause shall not increase as a
result.
(d) When the claim, loss, or damage is caused by willful misconduct
or lack of good faith on the part of any of the Contractor's principal
officials, the Contractor shall not be indemnified for--
(1) Government claims against the Contractor (other than those
arising through subrogation); or
(2) Loss or damage affecting the Contractor's property.
(e) With the Contracting Officer's prior written approval, the
Contractor may, in any subcontract under this contract, indemnify the
subcontractor against any risk defined in this contract as unusually hazardous
or nuclear. This indemnification shall provide, between the Contractor and the
subcontractor, the same rights and duties, and the same provisions for notice,
furnishing of evidence or proof, and Government settlement or defense of claims
as this clause provides. The Contracting Officer may also approve
indemnification of subcontractors at any lower tier, under the same terms and
conditions. The Government shall indemnify the Contractor against liability to
subcontractors incurred under subcontract provisions approved by the Contracting
Officer.
(f) The rights and obligations of the parties under this clause shall
survive this contract's termination, expiration, or completion. The Government
shall make no payment under this clause unless the agency head determines that
the amount is just and reasonable. The Government may pay the Contractor or
subcontractors, or may directly pay parties to whom the Contractor or
subcontractors may be liable.
(g) The Contractor shall--
(1) Promptly notify the Contracting Officer of any claim or action
against, or any loss by, the Contractor or any subcontractors that may be
reasonably be expected to involve indemnification under this clause;
(2) Immediately furnish to the Government copies of all pertinent
papers the Contractor receives;
(3) Furnish evidence or proof of any claim, loss, or damage covered
by this clause in the manner and form the Government requires; and
(4) Comply with the Government's directions and execute any
authorizations required in connection with settlement or defense of claims or
actions.
(h) The Government may direct, control, or assist in settling or
defending any claim or action that may involve indemnification under this
clause.
5. DEFINITION OF UNUSUALLY HAZARDOUS RISK
1. Definitions:
A. "Civil Reserve Air Fleet (CRAF) Mission" means the provision of
airlift services under this contract (1) ordered pursuant to authority available
because of the activation of CRAF or (2) directed by Commander in Chief, US
Transportation Command (USCINCTRANS), or his successor for missions
substantially similar to or in lieu of those ordered pursuant to formal CRAF
activation.
B. "Airlift Services" means all services (passenger, cargo, or
medical evacuation) and anything the contractor is required to do in order to
conduct or position the aircraft, personnel, supplies, and equipment for a
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flight and return. Airlift Services include Senior Lodger and other ground
related services supporting CRAF missions. Airlift Services do not include any
services involving any persons or things which, at the time of the event, act,
or omission giving rises to a claim, are directly supporting commercial business
operations unrelated to a CRAF mission objective.
C. "War risks" means risks of:
(1) War (including war between the Great Powers), invasion, acts of
foreign enemies, hostilities (whether declared or not), civil war, rebellion,
revolution, insurrection, martial law, military or usurped power, or attempt at
usurpation of power.
(2) Any hostile detonation of any weapon of war employing atomic or
nuclear fission and/or fusion or other like reaction or radioactive force or
matter.
(3) Strikes, riots, civil commotion's, or labor disturbances
related to occurrences under subparagraph (1) above.
(4) Any act of one or more persons, whether or not agents of a
sovereign power, for political or terrorist purposes and whether the loss or
damage resulting therefrom is accidental or intentional, except for ransom or
extortion demands.
(5) Any malicious act or act of sabotage, vandalism, or other act
intended to cause loss or damage.
(6) Confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition for title or use by or under the order of any
Government (whether civil or military or de facto) or public or local authority.
(7) Hijacking or any unlawful seizure or wrongful exercise of control
of the aircraft or crew (including any attempt at such seizure or control) made
by any person or persons on board the aircraft or otherwise, acting without the
consent of the insured.
(8) The discharge or detonation of a weapon or hazardous material
while on the aircraft as cargo or in the personal baggage of any passenger.
2. For the purpose of the contract clause entitled "Indemnification Under
Public Law 85-804 (APR 1984)," it is agreed that all war risks resulting from
the provision of airlift services for a CRAF mission in accordance with the
contract are unusually hazardous risks, and shall be indemnified to the extent
that such risks are not covered by insurance procured under Title XIII of the
Federal Aviation Act or other insurance, because such insurance has been
canceled, has applicable exclusions, or has been determined by the government to
be prohibitive in cost. The government's liability to indemnify the contractor
shall not exceed that amount for which the contractor commercially insures under
its established policies of insurance.
a. Notwithstanding the above, indemnification for liability or loss
is provided for coverage in excess of the amounts the Contractor has agreed to
insure pursuant to the contract should government action or omission cause the
Contractor to lose the protection of loss limitations under the Warsaw
Convention/Montreal Agreements whether or not the claim is related to war risks
and regardless of policy limits.
b. Indemnification is provided for personal injury and death claims
resulting from the transportation of medical evacuation patients whether or not
the claim is related to war risks.
3. Indemnification of risks involving the operation of aircraft, as discussed
above, is limited to claims or losses arising out of events, acts, or omissions
involving the operation of an aircraft for airlift services for a CRAF
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mission, from the time that aircraft is withdrawn from the contractor's regular
operations (commercial, DOD, or other activity unrelated to airlift services for
a CRAF mission) until it is returned for regular operations. Indemnification
with regard to other contractor personnel or property utilized or services
rendered in support of CRAF missions is limited to claims or losses arising out
of events, acts, or omissions occurring during the time the first pre-
positioning of personnel, supplies and equipment to support the first aircraft
of the contractor used for airlift services for a CRAF mission is commenced
until the timely removal of such personnel, supplies and equipment after the
last such aircraft is returned for regular operations.
4. Indemnification, is contingent upon the Contractor maintaining, if
available, non premium insurance under Title XIII of the Federal Aviation Act
and normal commercial insurance, as required by this contract or by other
competent authority. Indemnification for losses covered by a contractor self-
insurance program shall only be on such terms as incorporated in this contract
by the contracting officer in advance of such a loss.
6. 252.223-7004 DRUG-FREE WORK FORCE (SEP 1988/DFARS)
(a) Definitions. (1) Employee in a sensitive position, as used in this
clause, means an employee who has been granted access to classified information;
or employees in other positions that the Contractor determines involve national
security, health or safety, or functions other than the foregoing requiring a
high degree of trust and confidence.
(2) Illegal drugs, as used in this clause, means controlled substances
included in Schedules I and II, as defined by section 802(6) of title 21 of the
United States Code, the possession of which is unlawful under chapter 13 of that
Title. The term "illegal drugs" does not mean the use of a controlled substance
pursuant to a valid prescription or other uses authorized by law.
(b) The Contractor agrees to institute and maintain a program for achieving
the objective of a drug-free work force. While this clause defines criteria for
such a program, contractors are encouraged to implement alternative approaches
comparable to the criteria in paragraph (c) that are designed to achieve the
objectives of this clause.
(c) Contractor programs shall include the following, or appropriate
alternatives:
(1) Employee assistance programs emphasizing high level direction,
education. counseling, rehabilitation, and coordination with available community
resources;
(2) Supervisory training to assist in identifying and addressing illegal
drug use by Contractor employees;
(3) Provision for self-referrals as well as supervisory referrals to
treatment with maximum respect for individual confidentiality consistent with
safety and security issues;
(4) Provision for identifying illegal drug users, including testing on a
controlled and carefully monitored basis. Employee drug testing programs shall
be established taking account of the following:
(i) The Contractor shall establish a program that provides for testing
for the use of illegal drugs by employees in sensitive positions. The extent of
and criteria for such testing shall be determined by the Contractor based on
considerations that include the nature of the work being performed under the
contract, the employee's duties, the efficient use of Contractor resources, and
the risks to health, safety, or national security that could result from the
failure of an employee adequately to discharge his or her position.
(ii) In addition, the Contractor may establish a program for employee
drug testing-
(A) When there is a reasonable suspicion that an employee uses
illegal drugs; or
(B) When an employee has been involved in an accident or unsafe
practice;
(C) As part of or as a follow-up to counseling or rehabilitation for
illegal drug use;
(D) As part of a voluntary employee drug testing program.
(iii) The Contractor may establish a program to test applicants for
employment for illegal drug use.
(iv) For the purpose of administering this clause, testing for illegal
drugs may be limited to those substances for which testing is prescribed by
section 2.1 of subpart B of the "Mandatory Guidelines for Federal Workplace Drug
Testing Programs" (53 FR 11980 (April 11 1988)), issued by the Department of
Health and Human Services.
(d) Contractors shall adopt appropriate personnel procedures to deal with
employees who are found to be using drugs illegally. Contractors shall not
allow any employee to remain on duty or perform in a sensitive position who is
found to use illegal drugs until such times as the Contractor, in accordance
with procedures established by the Contractor, determines that the employee may
perform in such a position.
(e) The provisions of this clause pertaining to drug testing program shall
not apply to the extent they are inconsistent with state or local law, or with
an existing collective bargaining agreement; provided that with respect to the
latter, the Contractor agrees that those issues that are in conflict will be
subject of negotiation at the next collective bargaining session.
7. 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988) FAR
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available.
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8. 52.232-25 PROMPT PAYMENT (SEP 1992) (DEVIATION) FAR
Notwithstanding any other payment clause in this contract, the Government
will make invoice payments and contract financing payments under the terms and
conditions specified in this clause. Payment shall be considered as being made
on the day a check is dated or an electronic funds transfer is made.
Definitions of pertinent terms [-----------------------] in this clause are
calendar days unless otherwise specified.
(a) Invoice payments.
(1) For purposes of this clause, "invoice payment" means a
Government disbursement of monies to a Contractor under a contract or other
authorization for supplies or services accepted by the Government. This
includes payments for partial deliveries that have been accepted by the
Government and final cost of fee payments where amounts owed have been settled
between the Government and the Contractor.
(2) Except as indicated in subparagraph (a)(3) and paragraph (c)
of this clause, the due date for making invoice payments by the designated
payment office shall be the later of the following two events:
(i) The 30th day after the designated billing office has
received a proper invoice from the Contractor.
(ii) The 30th day after Government acceptance of supplies
delivered or service performed by the Contractor. On a final invoice where the
payment amount is subject to contract settlement actions, acceptance shall be
deemed to have occurred on the effective date of the contract settlement.
However, if the designated billing office fails to annotate the invoice with
the actual date of receipt, the invoice payment due date shall be deemed to be
the 30th day after the date the Contractor's invoice is dated, provided a
proper invoice is received and there is no disagreement over quantity, quality,
or Contractor compliance with contract requirements.
(3) The due date on contracts for meat, meat food products, or
fish; contracts for perishable agricultural commodities, contracts for dairy
products, edible fats or oils, and food products prepared from edible fats or
oils, and contracts not requiring the submission of an invoice shall be as
follows:
(i) The due date for meat and meat food products, as defined
in section 2(a)(3) of the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)
and further defined in Pub. L. 98-081 to include any edible fresh or frozen
poultry meat, any perishable poultry meat food product, fresh eggs, and any
perishable egg product, will be as close as possible to but not later than the
7th day after product delivery.
(ii) The due date for fresh or frozen fish, as defined in
Section 204(3) of the Fish and Seafood Promotion Act of 1986 (16 U.S.C.
4003(3)), will be as close as possible to, but not later than, the seventh day
after product delivery.
(iii) The due date for perishable agricultural commodities,
as defined in section 1(4) of the Perishable Agricultural Commodities Act of
1930 (7 U.S.C. 499a(44)), will be as close as possible to, but not later than,
the 10th day after product delivery, unless another date is specified in the
contract.
(iv) The due date for dairy products, as defined in section
111(e) of the Dairy Production Stabilization Act of 1983 (7 U.S.C. 4502(e)),
edible fats or oils, and food products prepared from edible fats or oils, will
be as close as possible to, but not later than, the 10th day after the date on
which a proper invoice has been received.
(v) If the contract does not require submission of an
invoice for payment (e.g., periodic lease payments), the due date will be as
specified in the contract.
(4) An invoice is the Contractor's bill or written request for
payment under the contract for supplies delivered or services performed. An
invoice shall be prepared and submitted to the designated billing office
specified in the contract. A proper invoice must include the items listed in
subdivisions (a)(4)(i) through (a)(4)(viii) of this clause. If the invoice
does not comply with these requirements, then the Contractor will be
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notified of the defect within 7 days after receipt of the invoice at the
designated billing office (3 days for meat, meat food products, or fish, and 5
days for perishable agricultural commodities, edible fats or oils, and food
products prepared from edible fats or oils). Untimely notification will be
taken into account in the computation of any interest penalty owed the
Contractor in the manner described in subparagraph (a)(6) of this clause.
(i) Name and address of the Contractor
(ii) Invoice date
(iii) Contract number or other authorization for supplies delivered
or services performed (including order number and contract line item number).
(iv) Description, quantity, unit of measure, unit price, and extended
price of supplies delivered or services performed.
(v) Shipping and payment terms (e.g., shipment number and date of
shipment, prompt payment discount terms). Bill of lading number and weight of
shipment will be shown for shipments will be shown for shipments on Government
bills of lading.
(vi) Name and address of Contractor official to whom payment is to
be sent (must be the same as that in the contract or in a proper notice of
assignment).
(vii) Name (where practicable), title, phone number and mailing
address of person to be notified.
(viii) Any other information or documentation required by other
requirements of the contract (such as evidence of shipment).
(5) An interest penalty shall be paid automatically by the Government,
without request from the Contractor, if payment is not made by the due date
and the conditions listed in subdivisions (a)(5)(i) through (a)(5)(iii) of
this clause are met, if applicable.
(i) A proper invoice was received by the designated billing office.
(ii) A receiving report or other Government documentation
authorizing payment was processed and there was no disagreement over quantity,
quality, or contractor compliance with any contract term or condition.
(iii) In the case of a final invoice for any balance of funds due
the Contractor for supplies delivered or services performed, the amount was
not subject to further contract settlement actions between the Government and
the Contractor.
(6) the interest penalty shall be at the rate established by the
Secretary of the Treasury under section 12 of the Contract Disputes Act of
1978 (41 U.S.C. 611) that is in effect on the day after the due date, except
where the interest penalty is prescribed by other governmental authority. This
rate is referred to as the "Renegotiation Board Interest Rate," and it is
published in the Federal Register semiannually on or about January 1 and July
1. The interest penalty shall accrue daily on the invoice payment amount
approved by the Government and be compounded in 30-day increments inclusive
from the first day after the due date through the payment date. That is,
interest accrued at the end of any 30-day period will be added to the approved
invoice payment amount and be subject to interest penalties if not paid in the
succeeding 30-day period. If the designated billing office failed to notify
the contractor of a defective invoice within the periods prescribed in
subparagraph (a)(4) of this clause then the due date on the corrected invoice
will be adjusted by subtracting the number of days taken beyond. Any interest
penalty owed the Contractor will be based on this adjusted due date.
Adjustments will be made by the designated payment office for errors in
calculating interest penalties, if requested by the Contractor.
(i) For the sole purpose of computing an interest penalty that
might be due the Contractor, Government acceptance shall be deemed to have
occurred constructively on the 7th day (unless otherwise specified in this
contract) after the Contractor delivered the supplies or performed the
services in accordance with the terms and conditions of the contract, unless
there is a disagreement over quantity, quality, or contractor compliance with
a contract provision. In the event that actual acceptance occurs within the
constructive acceptance period, the determination of an interest penalty shall
be based on the actual date of acceptance. The constructive acceptance
requirement does not, however, compel Government officials to accept supplies
or services, perform contract requirement does not, however, compel Government
officials to accept supplies or services, perform contract administration
functions, or make payment prior to fulfilling their responsibilities.
(ii) The following periods of time will not be included in the
determination of an interest penalty:
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(A) The period taken to notify the Contractor of defects
in invoices submitted to the Government, but this may not exceed 7 days (3
days for meat, meat food products, or fish, and 5 days for perishable
agricultural commodities, dairy products, edible fats or oils, and food
products prepared from edible fats or oils).
(B) The period between the defects notice and
resubmission of the corrected invoice by the Contractor.
(iii) Interest penalties will not continue to accrue after the
filing of a claim for such penalties under the clause at 52.233-1. Disputes,
or for more than 1 year. Interest penalties of less than $1.00 need not be
(iv) Interest penalties are not required on payment delays due
to disagreement between the Government and Contractor over the payment amount
or other issues involving contract compliance or on amounts temporarily
withheld or retained in accordance with the terms of the contract. Claims
involving disputes, and any interest that may be payable, will be resolved in
accordance with the clause at 52.233-1. Disputes.
(7) An interest penalty shall also be paid automatically by the
designated payment office, without request from the Contractor, if a discount
for prompt payment is taken improperly. The interest penalty will be
calculated as described insubparagraph (a)(6) of this clause on the amount of
discount taken for the period beginning with the first day after the end of
the discount period through the date when the Contractor is paid.
(8) If this contract was awarded on or after October 1, 1989, a
penalty amount, calculated in accordance with regulations issued by the
Office of Management and Budget, shall be paid in addition to the interest
penalty amount if the Contractor:
(i) Is owed an interest penalty;
(ii) Is not paid the interest penalty within 10 days after the
date the invoice amount is paid; and
(iii) Makes a written demand, not later than 40 days after the
date in invoice amount is paid, that the agency pay such a penalty.
(b) Contract financing payments
(1) For purposes of this clause, "contract financing payment"
means a Government disbursement of monies to a Contractor under a contract
clause or other authorization prior to acceptance of supplies of services by
the Government. Contract financing payments include advance payment, progress
payments based on cost under the clause at 52.232.16, Progress Payments,
progress payments based on a percentage or stage of completion (132.102(e)(1))
other than those made under the clause at 52.232-5. Payments Under
Fixed-Priced Construction
(2) For contracts that provide for contract financing, requests
for payment shall be submitted to the designated billing office as specified
in this contract or as directed by the Contracting Officer. Contract
financing payments shall be made on the 30th say after receipt of a proper
contract financing request by the designated billing office. In the event
that an audit or other review of a specific financing request is required to
ensure compliance with the terms and conditions of the contract, the
designated payment office is not compelled to make payment by the due date
specified.
(3) For advance payments, loans, or other arrangements that do not
involve recurrent submissions of contract financing requests, payment shall be
made in accordance with the corresponding contract terms or as directed by the
Contracting Officer.
(4) Contract financing payments shall not be assessed an interest
penalty for payment delays.
(c) If this contract contains the clause 52.213-1. Fast Payment
Procedure, payments will be made within 15 days after the date of receipt of
the invoice.
9. 52.252-6 AUTHORIZED DEVIATIONS IN CLAUSES (APR 1984) FAR
(a) The use in this solicitation or contract of any Federal Acquisition
Regulation (48 CFR Chapter 1) clause with an authorized deviation is indicated
by the addition of "(DEVIATION)" after the date of the clause.
(b) The use in this solicitation or contract of any regulation (NONE)
(48 CFR ) clause with an authorized deviation is indicated by the
addition of "(DEVIATION)" after the name of the regulation.
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PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS
- ------------------------------------------------------------
SECTION J - LIST OF ATTACHMENTS AND EXHIBITS
- --------------------------------------------
ATTACHMENTS
- -----------
<TABLE>
<CAPTION>
NUMBER
NO. NAME OF PAGES
- --- ---- --------
<S> <C> <C>
1 Performance Work Statement Passenger Service, dated 10 September 1991 10
2 Specifications, Terms and Conditions for Category-B Passenger Aircraft 6
used in International Operations, dated 10 September 1991
3 Inflight Meal Schedule/Service, dated 10 September 1991 2
4 Procedures for Interlining Baggage for Passengers, dated 10 September 1991 4
5 Performance Work Statement Cargo Service, Category B Cargo, dated
10 September 1991 5
6 Performance Work Statement Cargo Service, Category A Cargo, dated
10 June 1991 3
7 Specifications, Terms and Conditions for Mixed Passenger and Cargo
Aircraft used in International Operations, dated 10 June 1991 1
8 List of Aircraft, Undated 1
9 Civil Reserve Air Fleet (CRAF) dated 10 Oct 1991 46
10 Publications and Forms, dated 10 Oct 1991 4
11 DD Form 254, Department of Defense Contract Security Classification
Specification, dated 14 Nov 1991 2
12 AMC HQ Form 82, CRAF Aircraft Basic Data Sheet; AMC HQ Form 83,
CRAF Aircraft Performance 2
13 DOD Statement of Intent 4
EXHIBITS
- --------
A DD Forms 1423, Contract Data Requirements List (CDRL) 3
B DD Forms 1664, Data Item Description 6
</TABLE>
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ATTACHMENT 1
PERFORMANCE WORK STATEMENT
PASSENGER SERVICE
1. Government passengers (Cat-B and scheduled service) shall be provided
service as detailed herein and such service shall as a minimum be equal to that
service afforded coach class passengers. Passenger service shall be performed
in accordance with the following:
1.1. BOARDING/LOADING.
----------------
1.1.1. The flight attendant or contractor representative shall check the
boarding passes as passengers board the aircraft. In case of a discrepancy, the
Contractor shall immediately advise the Government in order to resolve the
discrepancy.
1.1.2. A member of the Contractor's crew shall be responsible for weight and
balance of the aircraft.
1.1.3. Flight manifests, listing the passengers to be moved, shall be furnished
to the Contractor by the Government. The Contractor shall annotate the
passenger manifest indicating the passengers who checked in for the mission.
1.1.4. The Contractor shall verify onboard passenger count to cross check the
manifest listing.
1.2. LIMITATIONS OF CARRIAGE. Refusal, Cancellations, or Removal. The
-----------------------
Contractor may refuse to carry, cancel the reserved space of, or remove enroute
any passenger when, in the exercise of its reasonable discretion, Contractor
decides:
1.2.1. Such action is necessary for reasons of safety.
1.2.2. Such action is necessary to prevent violation of any applicable laws,
regulations, or orders of any state or country to be flown from, into, or over.
1.2.3. The conduct, status, age, or mental or physical condition of the
passenger is such as to:
1.2.3.1. Require special assistance of the Contractor over and above that
offered to his commercial passengers.
1.2.3.2. Cause discomfort or make himself objectionable to other passengers.
1.2.3.3. Involve any hazard or risk to himself or to other persons or to
property.
Page 1 of 11
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1.2.3.4. The passenger fails to observe the instructions of the carrier.
1.2.4. If the question arises of an aircraft being overloaded, the Contractor
shall decide in its reasonable discretion the number of passengers or weight of
articles which shall be carried.
1.3. ACCEPTANCE OF CHILDREN
----------------------
1.3.1 Children at least 8 years, but under 12 years of age, shall be accepted
for carriage unaccompanied provided:
1.3.1.1. They are accompanied to the airport at the time of departure by a
parent, guardian, or responsible adult who shall remain with the child until
enplaned and evidence is presented by such parent, guardian, or responsible
adult that the child will be met at the airport of arrival by another parent,
guardian, or responsible adult upon deplaning.
1.3.1.2. A health certificate is presented from a competent physician
certifying that the child does not suffer from any communicable disease and that
the child's health will not be impaired by air travel.
1.3.1.3. The flight on which space is held is not expected to terminate short
of or by-pass destination due to weather conditions.
1.3.1.4. The child shall not be permitted to stopover en route.
1.3.2. Children under 18 years of age will be required to give satisfactory
assurance to the contractor that they have permission from their parents or
guardians to undertake the trip and in the case of international travel, they
will be in the charge of a responsible adult while in the country of
destination.
1.3.3. The contractor shall not accept any financial, guardianship, or other
responsibilities beyond those applicable to an adult passenger.
1.3.4. The age limit referred to in this rule shall be the age of the child at
the date of commencement of carriage. The contractor may require satisfactory
evidence establishing the child's age.
1.4. Reserved.
1.5. CARE OF PASSENGERS DURING MISSION DELAYS.
----------------------------------------
1.5.1. The Contractor is responsible to provide care for the on-board
passengers and the Government is responsible for the care of passengers to be
boarded at originating, enroute, and turnaround stations during non controllable
delays. However, when requested by the Government, the Contractor shall care
for all passengers manifested at close-out time of the flight at the delay
station, and all space required passengers that check-in at enroute and
turnaround stations. The delay time will be mutually agreed upon between the
Government and the Contractor to allow proper delay evaluation prior to caring
for the passengers. When requested by the Government, the Contractor shall also
care for passengers upon arrival to CONUS station(s) when the arrival time is
after a reasonable hour for passengers to make onward travel connections. Care
of passengers to include billeting and transportation to and from billeting
area. Meals and personal expenses, i.e., telephone calls, TV, etc., shall not be
provided. The Contractor shall submit an invoice supported by receipts by
billets and transportation charges to HQ AMC/XOKMA for reimbursement of these
charges. The Government shall effect fair and reasonable payment to the
Contractor upon receipt of a valid invoice. SEE SECTION F, PARAGRAPH ENTITLED,
"MOVEMENT OF PASSENGERS ON SCHEDULED COMMERCIAL FLIGHTS - SCHEDULED SERVICE,"
SUBPARAGRAPH c, FOR THE SCHEDULED SERVICE PASSENGER ACCOMMODATIONS.
Page 2 of 11
<PAGE>
1.5.2. LATE CONUS ARRIVAL: In the event any contractor flight is delayed at
------------------
any point and (a) the passenger mission arrives the CONUS 4 hours or more after
scheduled arrival time; (b) actual arrival time is later than 2000 hours local;
and (c) late arrival is due to controllable reasons, the Contractor shall be
required to care for passengers who are unable to make onward travel connections
due to the late arrival. The Contractor shall provide the following care:
overnight billeting, hot meals, and transportation to and from the meal and
billeting areas.
1.5.3. OTHER CONTRACTOR CONTROLLABLE DELAYS: In the event a flight is delayed
------------------------------------
and the delay is contractor controllable, the Contractor shall provide hot meals
and transportation to the feeding point if the delay extends over a meal period
for all passengers manifested at the close-out time of the flight at the delay
station, and all space required passengers that check in at enroute stations.
If a controllable delay requires an overnight stay, the Contractor is
responsible for meals, transportation, and billeting at the origin, enroute and
destination stations (if applicable). The Contractor is responsible only for
those passengers manifested at the scheduled manifest close-out time. Overnight
billeting will be considered when the delay is more than 4 hours, or crew rest
is required due to the length of the delay, or a passenger convenience delay is
declared. A passenger convenience delay and/or overnight billeting
determination will be declared only by a Contracting Officer at 21/22 AF
Operating Location or HQ AMC/XOK. Slot time requirements at all airfields,
etc., shall be made by the appropriate personnel prior to declaring a passenger
convenience delay or overnight billeting.
1.5.4. DIVERSIONS.
----------
1.5.4.1. If the Contractor overflies an enroute station due to Contractor
controllable reasons, the passengers awaiting transportation at the overflown
station and the passengers who were to be off-loaded at the overflown station
are the responsibility of the Contractor. This includes passenger care and
transportation to manifested destination.
1.5.4.2. If the Contractor overflies an enroute station due to a diversion, the
passengers awaiting pickup at the enroute station are the responsibility of AMC.
However, the Contractor is responsible for care of the passengers on the
aircraft who were to be off-loaded at the overflown enroute station until they
are delivered by the Contractor at Contractor's expense to the manifested
destination; or until such time as the Government provides suitable air
transportation. The Contracting Officer or his representative will coordinate
with the carrier's representative and arrange transportation for the delayed
passengers as soon as possible on the first military or contract flight, if
possible. Whenever suitable transportation is available but not used, the
passengers become the responsibility of AMC. With the approval of the
Contracting Officer or representative, the carrier may decide to move the
overflown passengers by air or suitable ground transportation to the overflown
station or care for the passengers until the Government provides suitable air or
other transportation. For a turnaround station without any other traffic stops
within the same general area, the Contracting Officer or representative may
authorize the Contractor to provide ground transportation from the diversion
point to and from the turnaround point.
1.6. BAGGAGE.
-------
1.6.1. INSPECTION BY CONTRACTOR. The Contractor has the right, but not the
------------------------
obligation, to verify in the presence of the passenger, the contents of his
baggage, and in the case of unaccompanied baggage, to open and examine such
baggage whether or not the passenger is present. The existence or exercise of
such right shall not be construed as an agreement, expressed or implied, by the
Contractor to carry such contents as would otherwise be precluded from the
carriage.
1.6.2. DANGEROUS, DAMAGEABLE, OR UNSUITABLE BAGGAGE. Contractor shall not be
--------------------------------------------
required to accept baggage articles which are likely to endanger the aircraft,
persons, or property, which are likely to be damaged by air carriage or which
are unsuitably packed, or the carriage of which is forbidden by any applicable
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<PAGE>
laws, regulations, or orders of any state to be flown from, into, or over.
Liquids, firearms, explosives, munitions, corrosives, and articles which are
easily ignited can only be carried with prior consent of the carrier and be in
compliance with all DOT and DOD regulations.
1.6.3. FREE BAGGAGE ALLOWANCE. Each passenger shall be allowed free baggage as
----------------------
follows:
1.6.3.1. Two pieces of checked baggage each of which the sum of the greatest
outside length plus the greatest outside height plus the greatest outside width
does not exceed 62 inches, and the weight does not exceed 70 pounds per piece.
NOTE: For weight- restricted flights, the carrier is only obligated to
transport 70 pounds of personal baggage for each passenger per para 2.5.5.
1.6.3.2. One or more additional pieces of baggage of which, measured together
if more than one piece of baggage, the sum of the greatest outside length plus
the greatest outside height plus the greatest outside width does not exceed 45
inches, provided that such additional piece(s) of baggage are carried on-board
the aircraft, retained in the passenger's custody and capable of being stowed
under the passenger's seat, in the overhead rack, or in the garment bag rack.
Due to in-flight safety, the overhead rack will be used for baggage at the
discretion of the flight attendant/passenger service agent.
1.6.3.3. A passenger may check a duffel bag, sea bag, or B-4 bag which exceeds
the limits prescribed above and one piece not exceeding those same limits
defined above. In addition one or more pieces of baggage of which, measured
together do not exceed the hand carried baggage limits as defined above,
provided that such additional piece(s) of baggage are carried on-board the
aircraft, retained in the passenger's custody, and capable of being stowed under
the passengers seat. Excess baggage will be transported at the rates specified
in SECTION B when the passenger's AMC Transportation Authorization (MTA) or
orders specifically provides for the excess. If the MTA does not authorize
excess baggage or if the passenger has more baggage than authorized, the
passenger will be responsible for making arrangements with the Contractor or
other agency to move excess baggage at the passengers expense. Contractor shall
annotate authorized excess baggage on the AMC passenger list and forward to the
AMC Reporting Station.
1.6.3.4. ADJUDICATION OF LOST, DAMAGED, AND PILFERED BAGGAGE. All claims for
---------------------------------------------------
lost, damaged, and pilfered baggage will be settled with AMC passengers within
60 days of the contract carrier receiving the case file from the Baggage Service
Centers. Carriers must acknowledge receipt of case files and notify the baggage
service center of final adjudication with the passenger. Carriers should also
provide the baggage service center with a list of required items needed from the
passenger to expedite the final adjudication process for lost, damage, and
pilfered baggage.
1.6.4 PETS. Pets (dogs and cats) will be carried on CATEGORY B service. The
----
number of pets and movement of pets in the cabin will be as mutually agreed upon
by the carrier and the contracting officer. The weight of accompanied pets,
when accepted, including the containers carried, will not be included in the
free baggage allowance of the passenger and the passenger will be assessed the
applicable excess baggage weight charge. A maximum of 2 small pets, up to 30.8
pounds (14kg) each, from the same litter or household may be shipped in the same
container. The shipment of small pets in the cabin shall be allowed in
accordance with the carrier's policy and FAA regulations.
1.6.4.1. Pets shall be crated in an IATA-approved container and accompanied by
valid health and rabies vaccination certificates, entry permits and other
documents required by countries of entry or transit will be accepted for
carriage at the owner's risk and subject to requirements of the contractor.
1.6.4.2. If the carrier is unable to move prebooked pets because of equipment
malfunction, the carrier shall assume liability for all billeting and
subsistence for care of passenger and pets. AMC will attempt to arrange
alternate transportation within 24 hours of the original scheduled departure.
At no time will carrier liability for care of pets exceed 48 hours.
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<PAGE>
1.6.5. Seeing Eye Dogs: Dogs trained to lead the blind shall be carried free
of charge in addition to the normal free baggage allowance provided that such a
dog accompanies a passenger with impaired vision dependent upon it, and is
properly harnessed and does not occupy a seat. However, such dog shall not be
carried unless proper permits are obtained for entry into the country or
territory of destination or countries and territories of transit where such
permits prior to reservations being made. If any country or territory on the
route prohibits the entry of dogs, carriage will be refused.
1.6.6. Live animals other than pets (1.6) and "seeing eye" dogs (1.6.2.) shall
be carried when approved by service headquarters and mutually agreed upon by the
carrier (HQ AMC/XONPO is responsible for getting this approval). These animals
shall be carried in accordance with FAA regulations and paragraph 1.6. All
government-sponsored animals, such as working dogs, shall be transported as
cargo.
1.6.7. The government will not pay additional charges for the carriage of live
animals or pets.
1.6.8. Baggage Check and Baggage Ticket - Category B - The Contractor shall be
---------------------------------------------
responsible and liable for the loss, damage, or destruction of checked baggage,
unchecked baggage, and items of personal property in the possession of the
passenger on all Category B flights performed under this contract to the extent
hereinafter stated in this paragraph. The liability for checked baggage will
exist from the time the passenger checks his baggage for the flight involved
until he recovers it at his destination. this liability exists irrespective of
whether baggage handling is by Contractor personnel, Government personnel, or
self-service. Contractor's liability for checked baggage is limited to the
actual value of the item or items lost, damaged., or destroyed, not to exceed
$9.50 per pound time the weight of the packed outermost carrying case (such as
bag or suitcase) containing such item or items. Contractor's liability for
checked baggage is limited to a maximum of 140 lbs per passenger when pooled
(two pieces not exceeding 70 lbs total). The Contractor's liability for
unchecked baggage and items of personal property is for the actual value, not to
exceed $420.00 per passenger. Actual value shall be based upon actual
replacement cost to the passenger if the item has been replaced at the time of
the claim and upon the replacement purchase cost at the permanent station of the
passenger if the item has not been replaced at the time of the claim.
Contractor's liability for unchecked baggage and items of personal property in
the possession of passengers exists only for the loss, damage, or destruction
occasioned by aircraft accident or otherwise caused by the Contractor. Any
lower limitation of liability to which the Contractor might otherwise be
entitled will not be applicable and the provisions of this paragraph will
prevail over any such lower limitation. (Claims for lost or damaged baggage
will be submitted to the Contractor on AMC Form 134 (Baggage Irregularity
Report.))
1.7. CUSTOMS INSPECTION. If required, the passenger must attend inspection of
------------------
their baggage, checked or unchecked, by customs or other Government officials.
2. CATEGORY B OPERATIONS. In addition to the requirements stated in paragraph
---------------------
1. of this attachment, the following provisions are applicable specifically to
performance of Category B operations. Category B transportation means the
transportation in planeload lots of passengers and/or cargo. All aircraft
utilized must conform to the requirements of Attachment 2 and be licensed,
operated and maintained in accordance with all applicable rules and regulations
of the FAA, DOT, and USDA, giving particular attention to the responsibility of
the air carriers to perform air transportation services with the highest degree
of safety. The aircraft while performing missions under this contract will not
be considered public aircraft. This includes the recording or reporting of
routine and special air reports on meteorological information as specified in
Federal Aviation Regulations (FARs) 91.125 and 121.561 and in ICAO Manual,
"Procedures for Air Navigation Services Rules of the Air and Traffic Services."
Contractor shall also comply with all pertinent US Military regulations and
directives at all military installations.
2.1. SPECIFICATIONS. Specifications for standards of service and flight
--------------
comfort needs are contained in Attachment 2.
Page 5 of 11
<PAGE>
2.2. OPERATIONS.
----------
2.2.1. The contractor shall provide the transportation representative (Quality
Assurance Evaluator) with an aircraft capability in both pounds and seats based
upon the critical leg of the mission, 3 hours prior to departure time.
2.2.2. The Government shall have the right to on-load and/or off-load traffic
at all points listed in the item descriptions set forth in the contract. In
addition, the Government shall have the right to on-load and/or off-load traffic
at any operational stops made enroute for the Contractor's convenience plus any
diversion stops made, providing it does not interfere with the Contractor's
scheduled ground operation. When an operational stop will exceed 1 hour in
duration, the passengers shall be permitted to debark from the aircraft. The
Contractor shall assume full responsibility for the passengers during the time
required for the operational stop.
2.2.3. In all cases where landings are made for fuel or maintenance at stations
where AMC command control facilities or units are not established, including
enroute or diversion stops, the Contractor (crew member, local representative,
or responsible dispatch office) shall report advisory arrival and departure
information within 10 minutes of occurrence by telephone or electronic means as
follows:
2.2.3.1. ARINC: For missions operating in 21 AF area, use WRIOOMC. For
missions operating in 22 AF area, use SUUCAMC. For all missions info the HQ AMC
Command Center, BLVOCMC.
2.2.3.2. CONUS: If ARINC is not available, use telephone notifications. For
missions operating in 21 AF area, call 21 AF Operations Center, McGuire AFB NJ,
(609)724- 3636/3637/2314 or (609)723-7979. For missions operating in 22 AF
area, call 22 AF Operations Center, Travis AFB CA, (707)438-2192/3411.
2.2.3.3. Overseas: If operating in the Pacific theater (excluding Alaska),
notify 834th Airlift Division (ALD), Hickam AFB HI, via ARINC use HIKOOUS. If
ARINC is not available call (808)449-1724. Aircraft transiting Alaska will
notify 616th Military Airlift Group (MAG), Elmendorf AFB AK, (907)552-2858.
Aircraft transiting the European theater will notify 322 ALD, Ramstein AB,
Germany, 049-637-147-618/6715.
2.2.3.4. Arrival and departure information for paragraphs 2.2.3.1. and 2.2.3.2.
above will include the following:
ARRIVAL DEPARTURE
Mission Number Mission Number
FAA Aircraft Registration Number FAA Aircraft Registration Number
(Tail Number) (Tail Number)
Station Station
Time of Arrival Actual Departure Time (ADT)
*Estimated Time of Departure (ETD) Next Station
Next Station Estimated Time of Arrival (ETA)
* If mission is delayed beyond ETD, report delay cause and estimated
time aircraft will be in commission (ETIC) and revised ETD.
2.2.4. When transiting a station at which a Command Post/Operations Officer,
Airlift Control Element (ALCE), AMC Liaison Office (AMCLO), or other AMC airlift
representative is located, the Contractor shall provide that local AMC agency
an estimated block time at least 2 hours prior to arrival. On a follow-on
mission, the contractor shall provide the following to the AMC Operations
Center/Command Post at the last off-load station prior to the ferry leg:
2.2.4.1. FAA aircraft registration number (Tail number).
2.2.4.2. ETD from last off-load station.
Page 6 of 11
<PAGE>
2.2.4.3. ETA at first on-load station after ferry leg.
2.2.4.4. Applicable mission number.
2.2.5. Thirty minutes prior to arrival, Contractor shall notify all
originating, transiting, and terminating Operations Center/Command Post (1) by
VHF radio where equipment is available; and/or (2) within 20 to 30 minutes prior
to arrival by telephone at stations where Contractor air-to-ground radio
capability exists the following information:
2.2.5.1. Mission number.
2.2.5.2. FAA aircraft registration number (Tail number).
2.2.5.3. Verify or revised ETA.
2.2.5.4. Maintenance status.
2.2.5.5. Fuel required (as applicable).
2.2.5.6. Any other operational information that will reduce ground time or
enhance ground handling activities.
2.2.6. AMC AF Operations Centers are concerned with mission monitoring status.
All problems associated with mission accomplishment will be directed to the ACO
or appropriate Contract Administrator for resolution.
2.2.7. When positioning within CONUS for the initial on-load of a Special
Assignment Airlift Mission (SAAM) or exercise mission, the Contractor shall
provide the AMC mission identifier, aircraft tail number and ETA to the
controlling number AF Operations Center, i.e., McGuire AFB NJ, or Travis AFB CA.
When positioning overseas, the Contractor shall provide the above information
to the controlling ALD, i.e., Hickam AFB HI, or Ramstein AB, Germany. This
information shall be reported as soon as the aircraft departs the last station
prior to positioning at the on-load station originating the SAAM or exercise
mission. If a mission will be delayed beyond the scheduled or contractual
positioning time, report the cause for delay and the estimated revised ETA.
2.2.8. When an aircraft is operating from a commercial airport to a military
air base, the carrier (dispatcher, captain, etc.) shall relay the departure time
and estimated time of arrival to destination through the tie-in at the FAA
Flight Service Station (FSS) for relay to the destination military airport.
This reporting applies to live, ferry, and positioning flights.
2.2.9. In order to provide adequate notification to the destination station,
the Contractor shall notify the AMC terminal (as specified by the ACO for each
normally used commercial gateway) as soon as possible after the actual departure
of the mission and provide (a) flight number, (b) FAA aircraft registration
number (Tail number), (c) destination of aircraft, (d) actual departure time,
(e) estimated time of arrival, and (f) those Government sponsored individuals
who departed on the flight.
2.3. PASSENGER MANIFESTING. For all Category B passenger missions (except SAAM
---------------------
and exercise) operating through Charleston, Los Angeles, Philadelphia, and St
Louis International airports, AMC will perform passenger manifesting and check
in to include border clearance inspections, boarding, seat assignment, issuance
of boarding pass, baggage weighing, tagging, and placing of baggage on conveyor
at baggage check in. Contractor shall perform all other functions.
2.4 MAXIMUM STANDARD PAYLOAD.
-------------------------
Page 7 of 11
<PAGE>
2.4.1 The 'Maximum Standard Payload' as used by AMC in its Uniform Negotiated
Rates and Rules, is the same as the Guaranteed Allowable Cabin Load (GACL or
ACL). The GACL is the number of seats and/or weight of cargo for which the
Contractor guarantees to make capacity available to the Government. The
Government agrees to use this amount as the price basis regardless of whether
the Government utilizes the full guaranteed capacity on any given flight.
2.4.2. AMC will utilize up to the maximum standard ACL of passengers and their
allowable baggage. In order to maximize the benefits of the standard ACL, the
carrier shall not be allowed to block off any area of the aircraft for nonuse
or load route support crew or equipment (as authorized by the ACO in Section C,
para 13), over the maximum standard ACL.
2.5. ON-LOADING.
----------
2.5.1. The Government will load according to the Contractor provided, planned
load breakdown and is responsible for the accuracy of the actual on-load weights
provided to the Contractor and entered on the local station load summary, or
Contractor's form, by loading supervisor. The Contractor (aircraft commander or
other designated crew member) is responsible for visually checking the cargo
load, its security and tie-down so that FAA requirements are met.
2.5.2. PASSENGER MISSION ON-LOADING AT A MILITARY INSTALLATION. The
-------------------------------------------------------
Contractor's representative shall provide the Government with the aircraft
capability in both pounds and seats based upon the critical leg of the mission,
3 hours prior to departure time. The Contractor may use the station's local
load summary form or Contractor's form. As a minimum, the following shall be
shown:
2.5.2.1. Trip number/date.
2.5.2.2. Type aircraft.
2.5.2.3. ACL in passenger seats/pounds this leg.
2.5.2.4. ACL in passenger seats/pounds critical leg.
2.5.2.5. Cube allowable in the belly compartments.
2.4.2.6. Belly compartment weight by compartment.
2.5.3. The Contractor's representative shall sign the local station load
planning form to indicate receipt of actual load breakdown.
2.5.4. Contractor shall furnish seat selection charts conforming to the
configuration and seat numbering system of its aircraft, to the QAE at
originating and turnaround stations for each Category B mission. Seat selection
charts must clearly identify the location of all emergency exits. Where
required seat spacing results in less rows of seats than are indicated in the
aircraft's overhead numbering system, the excess row numbers/seats should be
blanked out, with tape or otherwise, to minimize confusion. No smoking area
shall be indicated on the charts. The flight attendant or contractor
representative shall check boarding passes as passengers board the aircraft.
In case of a discrepancy, the Contractor shall immediately advise the
Government in order to resolve the discrepancy.
2.5.5. The Government shall be entitled to have transported, on each all-
passenger flight and each mixed flight, 70 pounds of personal baggage (and/or
mail, courier material, cargo) for each passenger carried. If for reasons
caused by the Contractor, the Contractor can not transport all of such baggage,
the Government may withhold passengers (and their baggage) whose baggage can not
be carried and charge the Contractor a deficit for those
Page 8 of 11
<PAGE>
passengers pursuant to SECTION G. The Government may require the Contractor to
transport courier material, mail, additional baggage in any amount not in
excess of 245 pounds multiplied by the difference between the number of
passengers furnished by the Government and the passenger ACL. Mail and cargo
required to be transported will be of such weight and configuration as to fit
readily in otherwise unused space within the cargo or baggage compartment of
the aircraft, or both, without the interference with baggage stowage; and
mail, baggage, or cargo will not be stowed in the cabin or passenger
compartment.
2.5.6. The following standardized weights are used by DOD units for planning of
movements.
2.5.6.1. NORMAL PASSENGER LOADS. This is a mixed load of military members and
----------------------
their dependents. This load is very similar to that experienced by civil
carriers on scheduled flights. The DOD uses weights in accordance with FAA AC
120-27A; i.e., adults -- 175 pounds; children 2 to 12 - 80 pounds; plus 70
pounds checked baggage. TOTAL: Adults - 245 pounds.
2.5.6.2. NONCOMBAT EQUIPPED MILITARY PERSONNEL. A full load of military
-------------------------------------
personnel, without spouses and children, and without combat equipment. The DOD
uses 175 pounds plus 20 pounds of hand carried baggage, plus 70 pounds of
checked baggage. TOTAL: 265 pounds.
2.5.6.3. COMBAT EQUIPPED MILITARY PERSONNEL. This represents the standard
----------------------------------
combat soldier as would be seen in large exercise movements such as REFORGER,
TEAM SPIRIT, BRIGHT STAR, etc.
2.5.6.3.1 Combat-equipped troops with carry-on baggage and 70 pounds of checked
baggage: 280 pounds.
2.5.6.3.2 Combat-equipped troops with web gear and weapon, carry on baggage and
70 pounds of checked baggage: 302 pounds.
2.5.6.3.3 Combat-equipped troops with web gear, weapon, carry-on baggage, ruck
sack and 70 pounds of checked baggage: 380 pounds.
2.5.6.3.4 Actual scaled weights of individuals with uniform, boots, helmet,
weapon, web gear, and hand-carried baggage will be used in lieu of standard body
weights. If scales are not available, interrogated weights of individuals can
be used. Use the following additive item weights to determine the total weight
of the individual:
- Boots: 5 pounds
- Helmet: 5 pounds
- Uniform: 5 pounds
- Web Gear: 12 pounds
- Weapon: 10 pounds
- Hand-carried Baggage: 20 pounds
2.5.6.4. Contractors may request interrogated weights of passengers and baggage
8 hours prior to positioning for the flight. DOD users moving on
SAAMs/Exercises will weight all LD-3 containers and 463-L pallets and loose
loaded baggage prior to loading in aircraft baggage pits and will furnish those
weights to carrier personnel.
2.5.7. Carriers shall insure that their ground handlers meet the following
baggage off- load times:
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<PAGE>
NUMBER OF PASSENGERS ON AIRCRAFT TIME
1-189 45 minutes
190-354 1 hour
355-499 1.5 hours
2.5.8. INFLIGHT MEAL SCHEDULE AND COMPLIANCE. Contractor shall provide
-------------------------------------
inflight meals equal to those provided to economy class passengers on scheduled
commercial passenger flights. Menus will be approved by the ACO and shall be
served in accordance with the schedule set forth in Attachment 3.
3. SCHEDULED SERVICE. In addition to the requirements stated in paragraph 1.
-----------------
of this attachment, the following provisions are applicable specifically to the
performance of Scheduled Service operations. Scheduled Service transportation
means the movement of passengers in scheduled service at the Scheduled Service
rate.
3.1. SCHEDULING.
----------
3.1.1. Scheduling travel under Scheduled Service herein may only be made by the
Airlift Mobility Command (AMC). STOPOVER WILL NOT BE PERMITTED. Within AMC,
only HQ AMC/XONR, (618)256-2277, is authorized to work with the Contractor's
representatives to make scheduling arrangements.
3.1.2. The AMC passenger reservation centers will enter names into the airlines
Passenger Name Record (PNR) files as soon as they have them via the airlines
commercial reservations sets. Once names are in the airline system individual
passengers shall be able to contact the Contractor, make seat selection, special
meal orders, etc.
3.1.3. The Contractor shall arrange for ground transfer service on a
reimbursable basis between Tokyo International (Narita), Tokyo, and Yokota Air
Base, Japan.
3.2. The free baggage allowance will be two pieces per passenger. Authorized
baggage in excess of two pieces on a flight will be transported at contract's
standard commercial rates. If a passenger has more baggage than authorized by
the MTA, contractor shall collect the excess baggage charge from the passenger.
Pets will not be included in the passenger's free baggage allowance. The entire
weight of the pet and the container shall be charged for as excess baggage at
contractor's standard commercial rates. Contractor shall collect such charges
from the passenger.
3.3. POOLED BAGGAGE. All passengers traveling as a group (listed on the same
--------------
MTA or under the same orders) to a common destination on the same flight shall
be permitted a total free baggage allowance equal to the
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<PAGE>
combination of their individual free baggage allowances. Baggage in excess of
the combined free baggage allowance of the total number of passengers in that
group, who moved on the same flight, will be subject to charges for excess
baggage. Passengers with baggage in excess of the amount authorized on their
MTA or orders will pay the Contractor for the excess at rates specified.
3.4. EXCESS VALUE CHARGES.
--------------------
3.4.1 A value for baggage in excess of $20.00 per kilogram (2.2 lbs) may be
declared by the passenger. When such declaration is made, a charge for value in
excess of $20.00 per kilogram (2.2 lbs) will be assessed by each Contractor
participating in the carriage, at the rate of $.50 for each $100.00 of excess
value of fraction thereof up to a maximum total valuation of $5000.00.
3.4.2. Excess value charges are payable by the passenger and will not be paid
by the U.S. Government.
3.4.3. Valuation Limit of Baggage. No baggage of any one passenger having a
declared value in excess of $5000 will be accepted for carriage unless special
arrangements therefore have been made in advance between the passenger and
Contractor(s) concerned.
3.4.4. Collection of Excess Value Charges. Excess value charges will be
payable at the point of origin for the entire journey to final destination;
provided, that if at a stopover enroute, a passenger declares a higher excess
value than that originally declared, additional excess value charges for the
increased value from the stopover at which the higher excess value was declared
to final destination will be payable.
3.4.5 Payment of Baggage Charges. Contractor will not be obligated to carry
baggage until the passenger has paid all applicable charges or has complied with
credit arrangements established by Contractor. However, when a traveler's MTA
or orders authorized excess baggage, the carrier must issue an excess baggage
charge on the auditors coupon of the commercial ticket or issue an excess
baggage ticket. In either case AMC will reimburse the carrier for authorized
excess baggage upon receipt of the carrier's claim. The submitted claim must be
accompanied by a copy of the MTA showing excess baggage authorization and
documentation showing total passengers and total bags moved. The carrier
representative shall annotate on the MTA, auditor's coupon or baggage ticket
the number of bags the traveler actually checked in. The traveler in turn will
validate the number of bags checked in by signing the document.
3.4.6. Limitation of Liability. The liability of the Contractor for the loss
-----------------------
of, or damage to, or delay in the delivery of baggage, shall not exceed $20.99
per kilogram (2.2 pounds) for checked baggage and $400.00 for unchecked baggage
and items of personal property, except in those cases in which excess value
charges have been paid pursuant to paragraphs 3.4.1 through 3.4.5. For carriage
wholly between points in the United States, the Contractor's liability for
checked or unchecked baggage and items of personal property shall be limited to
an amount equal to the value of such property which shall not exceed $750.00
unless a higher value is declared in advance and additional charges paid,
pursuant to paragraphs 3.4.1 through 3.4.5. above.
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<PAGE>
ATTACHMENT 2
SPECIFICATIONS, TERMS, AND CONDITIONS
FOR CATEGORY-B PASSENGER AIRCRAFT
USED IN INTERNATIONAL OPERATIONS
1. FLIGHT COMFORT NEEDS The aircraft and passenger service will be
--------------------
commensurate with those used in regularly scheduled commercial international
operations. The minimum requirements are:
1.1. SEAT SPECIFICATIONS Passenger seats will be of such design as to afford
-------------------
optimum comfort during flight and shall be commensurate with the seat
specifications used in commercial international standards.
1.2. Reserved.
1.3. AISLES The aisles must allow unobstructed passage to toilets, doorways,
------
and other passenger-accessible positions. On wide-bodied aircraft the aisles
shall be at least 16 inches wide, (15 inches wide on B707/DC-8 aircraft)
measured parallel to the floor at all levels up to and including the arm rests.
The aisle may be displace laterally not more than two inches at either end of
the passenger compartment. (This provision is included to permit adjustments
necessitated by the taper of the aircraft fuselage, and will not be interpreted
to allow staggered aisles.) Seating configuration shall not exceed ten abreast
for wide-bodied aircraft.
1.4. LAVATORIES A minimum of two complete, serviceable lavatories shall be
----------
provided. An additional complete lavatory shall be provided for each 40
passengers or fraction thereof in excess of 80 passengers. The commode shall be
placed to allow adequate leg room and the fixtures shall be so arranged to
accommodate an adult and child with the door closed. The facility shall be
equipped with a door with an inside lock which can be opened with a key from the
outside, a mirror, a wash bowl, and an electric razor outlet. The lavatory
shall be supplied with adequate toilet tissue, sanitary napkins, towels, soap,
and sufficient supply of potable wash water. The wash water tanks must be
serviced with potable water; and the wash water dispensed must be potable.
Lavatories shall not be used to store company material or refuse from meal
service except that refuse from meal service may be stored in not more than two
lavatories after the passengers have been instructed to fasten seat belts in
preparation for descent prior to landing.
1.5. CABIN ENVIRONMENTAL CONTROL Cabin air temperature and ventilation shall
---------------------------
be maintained to insure a passenger comfort index, as indicated below, at all
times. Aircraft shall not be positioned for a flight unless the cabin
environmental control systems are fully operational and are capable of
maintaining a uniform inflight cabin temperature between 68 and 74 degrees
Fahrenheit without excessive drafts. The ventilating system shall supply
outside air at the rate of at least 10 cubic feet per minute per passenger. The
temperatures indicated herein will apply whenever passengers are aboard,
inflight or on the ground. When the aircraft transits a commercial airport, it
shall be the Contractor's responsibility for positioning, operation and
depositioning of Contractor furnished ground air conditioning or heating units.
1.6. FLOOR COVERING Floor covering in the passenger compartment shall be of
--------------
the fibrous or vinyl rug type commensurate with the floor covering used in
regularly scheduled commercial service. Floor covering in the aircraft
entrance, aisle and buffet area may be of the type normally found in commercial
service, i.e., fibrous, vinyl, rubber mat. Convertible aircraft must have the
same minimum floor covering when passengers are being carried. Seat tracks must
have inserts or be covered with appropriate material.
1.7. BLANKETS AND PILLOWS One blanket, commensurate with commercial scheduled
--------------------
or charter service shall be provided for at least 50 percent of the seats and at
least one pillow for 90 percent of the seats in the
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<PAGE>
aircraft. These must be maintained in a sanitary condition. The pillows
furnished shall have clean and sanitary (cloth or paper) covers.
1.8. OVERHEAD STORAGE Aircraft shall be equipped with headliners and overhead
----------------
storage facilities, equivalent to those furnished on passenger-configured
aircraft used in regular commercial scheduled service.
1.9. APPROPRIATE LIGHTING Cabin lighting shall be provided to properly serve
--------------------
the needs of the passengers.
1.10. FLIGHT ATTENDANT KIT In addition to requirements contained in FAR
--------------------
121.309, Appendix 4, the aircraft shall be equipped with a passenger service kit
(Flight Attendant Kit) which shall include, as a minimum, the following medical
items: (Wide bodied aircraft must contain twice the quantities listed.)
ITEM AMOUNT
Acetaminophen (No Aspirin) 50 tablets
Ammonia Inhalant 1 package (10 ampoules)
Motion sickness tablets; prohibit bonamine and
marezine as a safeguard 50 tablets
Ointment, Topical Bacitracin 2 ounce (two 1 ounce
or four 1/2 ounce tubes)
Alka Seltzer or Bromo Seltzer 50 tablets
Cotton, absorbent,compressed 1 each 1 ounce package
Band-aids, 3/4" x 3" 1 package (18 each)
Betadine swabs 1 package (10 ampoules)
1.11. AIRCRAFT APPEARANCE Prior to flight loading, cabin and lavatory space
-------------------
shall be appropriately serviced, removing any dirt and debris from prior flights
to assure an initially clean condition upon departure. Aircraft exterior shall
be cleaned, if necessary, to assure a presentable appearance.
1.12. HEADREST COVERS Clean and sanitary disposable headrest covers (cloth or
---------------
paper) shall be supplied for each seat designed to accommodate one (i.e.
velcro/other fastening device) prior to loading at the station of origin. If
the seat has permanent headrest covers, they will compliment the seat fabric in
decor and be replaced/cleaned whenever they become unsanitary. If the seat back
is not equipped for a headrest cover, the fabric/seat covering material will be
sanitary and free from stains.
1.13. BASSINETS Bassinets shall be provided for infants under one year of age,
---------
in addition to a seat. Bassinets shall be capable of being installed securely
in the seat without restricting the recline of adjacent passenger seats. A
supply of six (6) disposable diapers shall also be available.
1.14. AIR SICKNESS CONTAINERS Each seat shall be provided with clean
-----------------------
airsickness containers which are to be replaced as used.
1.15. POTABLE WATER All water and ice shall be potable and handled under
-------------
sanitary conditions.
1.16. INFLIGHT SERVICE Inflight service shall include collection of recurrent
----------------
debris and maintenance of cabin and lavatory facilities in clean condition.
Contractors shall insure the appropriate instruction of flight personnel as to
disposition of waste so as to prevent misuse of lavatory facilities. Trash and
garbage receptacles shall be kept sanitary and clean at all times. On those
aircraft not designed with chute disposals, trash and garbage receptacle shall
be lined with removable plastic bags.
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<PAGE>
1.17. CREW COMPARTMENT Fixed bulkheads shall be provided, separating the crew
----------------
compartment from the passenger compartment.
1.18. NOISE The acoustical noise levels in the aircraft shall not exceed the
-----
requirements of Specification MIL-A-8806 (ASG) including the normal cruise power
criteria given in Table IV.
1.19. READING MATERIAL Current reading material, to include a reasonable
----------------
supply of current popular magazines equal in number to 30 percent of the
passenger ACL, shall be provided on aircraft carrying passengers. The magazines
shall consist of a selection of twelve popular titles (six issued monthly and
six issued weekly) and these shall be placed in magazine racks located in the
fore and aft passenger compartment of the aircraft. A current magazine is one
which is dated during last sixty days. Carriers will not be penalized for
carrying additional material older than 60 days.
1.20. LAVATORIES Access to lavatories shall not be blocked to the passengers
----------
during the flight unless the latrine becomes inoperative.
1.21. SMOKING POLICY Smoking is NOT allowed on any AMC commercial contract
--------------
aircraft.
1.22. INFLIGHT AMENITIES Contractor shall provide inflight amenities kits on
------------------
each flight consisting of adult playing cards and writing portfolios equal in
number to five percent of the ACL and fun kits for children consisting of games,
puzzles, coloring/drawing materials and pilot/cabin attendants wings etc. equal
in number to ten percent of the ACL.
1.23. INFLIGHT MOVIES AND STEREO Inflight movies and stereo shall be provided
--------------------------
on all wide body aircraft used regularly in AMC operations at no cost to the
passenger or the Government. This same service shall also be provided on narrow
body aircraft that are so equipped.
1.24. TOWELLETTE SERVICE On flights over 6 hours, the Contractor shall provide
------------------
towellette service prior to each hot meal and one hour before landing. Meal
service criteria reflected in Attachment 3, will be used to establish times for
providing towellette service. Towellette service will not be required on flight
segments serving only snacks or beverages. As a minimum, towellette should be
approximately 7 3/4 X 9 3/8 inches, disposable, white, scented, of rayon fabric
and moistened with hot/cold water dependent upon season. Cloth towel suitable
but not required.
2. FLIGHT ATTENDANTS The number of flight attendants shall be as established
-----------------
by the FAA for passenger aircraft. Such attendants shall be stationed in the
passenger compartment in seats approved by FAA during takeoffs and landings. It
is required that such personnel be adequately trained in first aid, use of
emergency equipment and food sanitation. They shall be qualified in accordance
with US Public Health requirements pertaining to food handlers. All attendants
shall be thoroughly familiar with the use of the public address system,
required briefings and flight advisory information that is furnished passengers.
The attendants shall speak the English language in a fluent and coherent manner.
3. SANITATION Requirements of the International Air Transport Association
----------
'Food Hygiene in Air Transport: Recommended Code of Practice' and the World
Health Organization 'Guide to Hygiene and Sanitation in Aviation' shall apply.
4. FOOD SERVICE
------------
4.1. The Contractor shall furnish hot inflight meals, cold plates and snacks in
accordance with the schedule set forth in Attachment 3. Meal service provided
shall be no less than the standards of service provided to the economy class
passenger by the contractor on scheduled commercial or charter flights. Menu
content shall be
Page 3 of 6
<PAGE>
subject to approval by the ACO. Menus shall be rotated using the schedule used
on commercial scheduled or charter flights but at least every quarter. When
requested by the AMC representative, the contractor shall make available
representative samples of meals. (Eating utensils for breakfast, lunch and
dinner must be stainless; plastic is not acceptable). Utensils for snack
service may be plastic, approximately five" in length. Slip-on trays shall be
provided for seats without seat backtrays. The use of pillows in lieu of trays
will not be permitted.
4.2. Contractor may purchase inflight meals from military installations when a
suitable commercial source is not available. Purchase of such meals shall be
for cash or contractor check only. No credit is authorized. The price for each
meal will be the actual food costs of the basic meal and supplements as computed
monthly at base level plus applicable surcharge.
4.3. Equipment shall be available for refrigerating and warming baby foods and
formula; also, an emergency supply of baby foods, not less than two units of
meat, two vegetables, plus two desserts or fruits shall be available.
5. BRIEFING PROCEDURES Contractor shall ensure passengers are properly
-------------------
instructed by the appropriate crew member prior to take-off and briefed in
flight relative to the following: (Do not include statement that these are AMC
requirements.)
5.1. How life preservers are to be donned, stressing that they will be donned
only on the order of a member of the flight crew. (Applicable only to overwater
flight.)
5.2. The location and use of emergency oxygen equipment stressing that parents
don their own masks first and then assist their children and further that after
each passenger has donned their mask to check whether the next person has donned
theirs properly.
5.3. The physical location of emergency exits.
5.4. The physical location of life rafts. (Applicable only to overwater
flights.)
5.5. In addition, in briefing and passenger handling procedures, all aircraft
commanders shall comply with instructions received from the Contracting Officer.
5.6. In flight, a member of the crew shall brief the passengers on points of
geographical interest enroute; the altitude at which the aircraft is flying; a
statement addressing the availability of reading material, a general statement
regarding the weather (i.e., rainy, cold, good, etc.), the ground temperature
and the estimated time of arrival at the terminating station. The remark for
military destination stations will include the military designation plus the
geographical location (e.g., McGuire AFB, Wrightstown, New Jersey).
5.7. In the pre-landing announcement upon arrival at the US Port of Entry,
include a statement that USDA prohibits importation of fresh fruits and meat
sandwiches and therefore such items cannot be carried off the aircraft and that
the US Customs Service advises that in all cases where undeclared agricultural
products are found in baggage they will be seized. Further, when the aggregate
domestic value of such item(s) amounts to $3.00 or more, a penalty equal to the
domestic value shall be assessed against the passenger.
5.8. The flight crew, prior to beginning of fuel servicing, shall brief
passengers regarding the fact that fuel servicing will be conducted, and the
restrictions on smoking, operation of electronic equipment, and personnel
movement. Passengers shall not enter or exit the aircraft, and their movement
shall be limited to that necessary for personal comfort, for example, use of the
latrines. Also, the flight crew shall insure required exits are open.
6. CREW UNIFORM AND PERSONAL APPEARANCE REQUIREMENTS All crew members shall
-------------------------------------------------
wear clean, neat appearing uniforms of a standard design and color as specified
by the Contractor. The flight
Page 4 of 6
<PAGE>
attendants' uniforms shall be of such a fit as to assure the flight attendants'
unrestricted movements in rendering assistance to passengers during
emergencies in the air, on the ground or in the water.
7. INTERIOR DECOR OF THE AIRCRAFT
------------------------------
7.1. The interior decor shall be consistent with and of a style and color
combination to be commensurate with the interior of passenger aircraft used in
regularly scheduled US commercial international operations.
7.2. Windows in the passenger compartment shall be equipped with a curtain or
other acceptable device which will allow the passenger to regulate the light
coming from outside of the aircraft.
7.3. Life rafts shall be enclosed and the enclosure consistent with the color
decor of the interior of the aircraft.
7.4. The rail system with all components thereto and cargo tiedown equipment
shall be removed from the cabin on convertible aircraft when passengers are
being carried.
7.5. Any protrusions, handles, brackets or other mechanisms that may be a
safety hazard shall be removed or sufficiently padded and covered to provide
adequate safeguard from passenger injury. The covering shall be consistent with
the color decor of the interior of the aircraft.
8. SAFETY BARRIERS All passenger and/or cargo doors used for the on-
---------------
loading/off-loading of passengers and/or cargo aboard contract aircraft shall be
equipped with a safety barrier (strap, net, or bar) at chest or waist level.
The safety barrier shall be in place when the cabin/cargo door is open except
when actually on-loading/off-loading pax/cargo or when loading stairs are
positioned.
9. LD-3 BAGGAGE CONTAINERS Contractor shall furnish one complete set of
-----------------------
baggage containers for each wide body aircraft used in AMC Channel passenger
operations. Serial numbers shall be furnished to AMC/XOKM. Contractor shall
allow these containers to remain in the AMC operation and interchanged with AMC
provided containers (leased) or owned). AMC will establish a tracking system to
control the flow and location of containers as follows:
9.1. AT COMMERCIAL STATIONS Contractor shall send a departure message to HQ
----------------------
AMC via ARINC/SITA (WRIOOMC/SUUCAMC) listing by nine digit number all containers
on board. After the last departure of the Zulu day send a nine digit serial
number container inventory message to WRIOOMC or SUUCAMC as applicable.
9.2. AT MILITARY STATIONS The contractor shall send a departure message to HQ
--------------------
AMC via ARINC/SITA (WRIOOMC/SUUCAMC) listing by nine digit number, all
containers on board. After the last departure of the Zulu day, the contract
coordinator/air traffic specialist will provide the contractor representative a
nine digit container serial number container inventory. The contractor
representative shall then send this inventory message to WRIOOMC or SUUCAMC as
applicable. Contractor shall require its ground handling agency at commercial
stations to establish necessary controls to assure that AMC and contractor
containers are used only on AMC flights. If it can be established through the
AMC tracking system that the contractor's ground handling agency has lost
control of a container, contractor shall require the handling agency to
reimburse its Government or another AMC contractor as appropriate. In the event
that a carrier's containers while in the possession of the Government are lost
or damaged beyond repair, then the government shall pay to the contractor the
net book value (depreciated over a 5-year useful life) of the container. If any
of the containers are damaged while in the possession of the Government, but are
repairable, the Contractor shall arrange for repair. Repairs anticipated to
exceed $250 each will not be accomplished without prior approval of the ACO.
Upon such approval, amounts billed will be based upon the Contractor's effective
shop labor rate. If repairs are subcontracted, the Government shall pay the
amount invoiced by the subcontractor.
10. BAGGAGE COMPARTMENT BARRIER NET Barrier type nets shall be installed and
-------------------------------
used in the baggage compartment of all passenger and convertible aircraft.
11. DEODORIZATION Contractor shall deodorize the aircraft passenger
-------------
compartment before each mission at the originating and turnaround stations.
12. CARRIAGE OF WEAPONS The carriage of weapons in the passenger compartment
-------------------
aboard commercial aircraft is authorized in accordance with FAR 108-11. The
following provisions to this authorization will apply only to
SAAM/Exercise/contingency operations that specify the carriage of weapons aboard
commercial aircraft in the OPLAN or mission directive:
12.1. The total cabin load of the aircraft is under the exclusive use by US
military forces.
12.2. All firearms shall be unloaded, clip magazines removed and safety on.
Page 5 of 6
<PAGE>
12.3. All individuals with hand carried weapons shall stow the weapons flat on
the floor under the seat in front of them. Other gear will be stowed either
under the seats or in overhead compartments. Crew served weapons and any excess
gear shall be required to be put into the lower deck baggage compartments.
12.4. Hazardous materials shall not be carried in the passenger compartment.
13. PASSENGER MANIFEST The passenger manifest will list names of each
------------------
passenger on board, except in case of families only, the senior family member
name will be listed, with the total number of family members listed in the
adjacent column. For compliance with FAR Section 121.693(e), the originating
AMC terminal will maintain the full names of all passengers for a minimum of
three months.
14. AIRCRAFT IDENTIFICATION Aircraft shall have the name of the operating
-----------------------
contractor on both sides of the fuselage commensurate with industry practice.
Any name other than the operating contractor must be approved by the contracting
officer, prior to departure.
Page 6 of 6
<PAGE>
ATTACHMENT 3
INFLIGHT MEAL SCHEDULE/SERVICE
1. Inflight meal schedule/service for Category B missions is as follows:
1.1. LOCAL TIME AT ORIGINATING STATION OF MISSION:
---------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
When a mission is scheduled
to depart originating station
between the hours of: 0201-0800 0801-1400 1401-2200 2201-0200
Breakfast Noon Meal Evening Meal Snack
Meals shall be served in
the following sequence
between the hours of: 0230-0930 1000-1500 1600-2300 2330-0300
</TABLE>
1.2. Required meal service shall be based on the above serving times and
scheduled duration (in hours and minutes) of non-stop mission segments specified
below:
1.2.1. LONG RANGE MISSIONS: Those missions where the entire mission is over 6
-------------------
hours in duration, according to the AMC published schedule.
1.2.1.1. Segment less than 2 + 00 - no meal or snack required unless specified
by the ACO. EXCEPTION: A heavy snack shall be served between St Louis and
Philadelphia (both ways) and between Osan and Yokota (one way only). Also, when
a mission consists of two or more consecutive segments, each less than two hours
in duration, a heavy snack shall be served on one segment.
1.2.1.2. Segment 2 + 00 to 4 + 00 - One snack.
1.2.1.3. Segment 4 + 01 to 6 + 00 - One meal.
1.2.1.4. Segment 6 + 01 to 9 + 00 - One meal plus one snack.
1.2.1.5. Segment over 9 + 01 - Two meals (No EXCEPTION).
1.2.2. SHORT RANGE MISSIONS: Those missions where the entire mission is 6
--------------------
hours or less in duration, according to the AMC published schedule.
1.2.2.1. Segment less than 1 + 30 - No meal or snack required.
1.2.2.2. Segment 1 + 31 to 3 + 00 - One snack.
1.2.2.3. Segment 3 + 01 to 6 + 00 - One meal. EXCEPTION: A snack may be
served if a meal was served on the immediate preceding segment or if the mission
is scheduled to depart between 2200-0200 local.
1.3. No more than 6 hours shall elapse between servings.
1.4. In the event of mission delays occurring at originating, enroute, or
turnaround stations not in excess of 4 hours, the originally scheduled meal
service shall be utilized upon departure, except the passengers may be ground
fed with the appropriate meal.
Page 1 of 2
<PAGE>
1.5. Eating utensils for breakfast, lunch, and dinner meals shall be stainless.
EXCEPTION: Eating utensils for snack service may be plastic, approximately 5
inches. On SAAM or exercise missions, heavy duty plastic utensils at least 6
inches in overall length may be used.
1.6. Passengers shall be offered a choice of two entrees for the
breakfast/lunch and dinner meals. Where the noon and evening meal are served on
the same flight, a different entree shall be offered for each meal.
1.7. Beverages; that is, coffee, tea, milk, and carbonated drinks shall be
available to passengers throughout each leg of each mission. Contractor shall
have a minimum of 6 ounces of carbonated soft drinks per passenger on board
when departing the normal catering station. Non carbonated beverages also may
be served, but shall be in addition to the minimum required quantity of
carbonated beverages. Full alcoholic beverage service, beer, wine, and mixed
drinks will be made available to passengers on all contract flights subject to
carriers' normal rules as to age, sobriety and schedule unless otherwise
directed by the Contracting Officer. Charges may be made to passengers
commensurate with commercial operation.
1.8. Special holiday menus shall be served on Thanksgiving and Christmas.
2. When an unusual flight schedule reasonably precludes meeting above
requirements, appropriate deviations may be approved by the contract
administrator.
3. USDA/USCS Preclearance Program (SAAMs/exercise missions only). Red meats
and fresh fruits can not be served in snacks on precleared flights to CONUS.
Foods prohibited by USDA can not be taken on board to be consumed enroute.
Garbage will be controlled as foreign material. Routings must allow disposal at
approved airports or bases.
Page 2 of 2
<PAGE>
ATTACHMENT 4
PROCEDURES FOR INTERLINING BAGGAGE FOR PASSENGERS
1. Procedures for Interlining Baggage for Passengers to/from Domestic Scheduled
Flights of Participating Carriers from/to Air Mobility Command (AMC) Category B
Charters.
2. The AMC Transportation Authorization (MTA) will also allow for through
checking of baggage for passengers with confirmed reservations connecting
to/from an Air Traffic Conference of America (ATC) Member Carrier for military
personnel utilizing AMC Category B charter service into/out of the Charleston,
Los Angeles, St Louis, and Philadelphia International Airports and at the same
terminal complex.
3. BAGGAGE ACCEPTANCE.
-------------------
3.1. FREE ALLOWANCE. The AMC standard piece allowance will apply for baggage
---------------
accepted for travel when the passenger's travel is in either direction, i.e., US
points to overseas international points or from overseas international points to
US points. Standard AMC free piece allowance is two pieces of checked baggage.
(Reference Atch 1, para 1.6.3.1.)
3.2. EXCESS BAGGAGE. Passengers with baggage in excess of the free allowance
---------------
as stated in paragraph 3.1. will not be authorized baggage interlining.
3.3. FRAGILE ITEMS/DANGEROUS GOODS. Fragile items and dangerous goods
------------------------------
acceptance will be in accordance with individual carriers established rules and
appropriate federal regulations.
3.4. EXCESS VALUATION. Excess valuation declarations will be accepted on-line,
-----------------
i.e., high value baggage is not acceptable on an interline basis. Excess
valuation will be in accordance with individual carrier established rules.
4. BAGGAGE CHECKING. Military personnel traveling to/from overseas
-----------------
international points through Charleston, Los Angeles, St Louis, and Philadelphia
commercial gateways will have baggage interlined as follows:
4.1. To overseas international points via the commercial gateways from points
within the US.
4.1.1. The passenger must have a confirmed reservation from the originating
city to the commercial gateway and will present a ticket or Government
Transportation Request (GTR) to the originating airline for transportation to
the commercial gateway.
4.1.2. An MTA will be presented also, indicating the AMC two-letter airline
code (MC) along with a two digit flight number (30) and final destination. The
flight number will be indicated MC plus a two digit number, i.e., MC30, MC50,
etc. Category B charter passenger missions operate through the commercial
gateways of Los Angeles, St Louis, Philadelphia, and Charleston.
4.1.3. Standard international minimum connecting times will be applicable for
connecting baggage at commercial gateways. (The time indicated on the MTA will
be a minimum of 1 1/2 hours prior to departure time.)
4.1.4. The originating Carrier shall deliver the interline baggage to the
designated AMC transfer point at the commercial gateways. The AMC transfer
point will be in accord with the normal interline baggage transfer areas
(immediate vicinity) in the same terminal complex. AMCs contract carrier ground
handler shall transfer the baggage to the designated contract flight, in
accordance with normal interline baggage transfer procedures.
Page 1 of 4
<PAGE>
4.2. From overseas international points via the commercial gateways to points
within the US.
4.2.1. The passenger must have confirmed reservations from the commercial
gateway to final destination within the US. The confirmed reservations must be
indicated by the passenger holding a confirmed ticket.
4.2.2. US CUSTOMS CLEARANCE. All baggage will have cleared US Customs before
---------------------
interlining with participating Carriers.
4.2.3. AMC will adopt the standard interline and expedite baggage tags as
outlined in ATC Resolutions. AMC personnel will be trained in the preparation
of the standard interline baggage tags. They will check baggage through to the
passenger's final domestic destination. Standard interline minimum connection
times from domestic to international and international to domestic will apply.
4.2.4. AMC personnel will not check baggage for interline transferring if the
originating contract flight is expected to be delayed departing in excess of 1
hour.
4.2.5. AMCs contract carrier ground handler at the commercial gateway shall
transfer the baggage in accordance with normal interline baggage transfer
procedures, to the connecting Carrier.
5. BAGGAGE - LOST CLAIMS.
----------------------
5.1. TRACING.
--------
5.1.1. US POINTS.
----------
5.1.1.1. Delivering Carrier shall initiate a lost baggage search using standard
interline baggage tracing procedures.
5.1.1.2. Delivering Carrier shall advise AMC who will initiate a search using
standard AMC baggage tracing procedures.
5.1.2. OVERSEAS INTERNATIONAL POINTS.
------------------------------
5.1.2.1. AMC will initiate a lost baggage search using standard AMC tracing
procedures.
5.1.2.2. AMC will alert its contract carrier ground handler at the commercial
gateway who will search locally.
5.1.2.3. AMCs contract carrier ground handler shall contact the delivering
carrier at the commercial gateway, who will initiate a lost baggage search using
standard interline tracing procedures.
5.2. FORWARDING.
-----------
5.2.1. FROM US POINTS. Baggage will be forwarded via expedite tag to the
---------------
overseas international point.
5.2.2. FROM POINTS OUTSIDE US. AMC will forward bag(s) via standard expedite
-----------------------
tag to the AMC contract carrier ground handler at the commercial gateway. AMC
(AMCs contract carrier ground handler) will forward the bag(s) to the
appropriate airline/station.
5.3. DELIVERY. All delivery charges incurred as a result of lost/delayed
---------
baggage will be paid by the Carrier to whom the claim is filed. Charges will be
billed to AMC and subsequently paid by the AMC contract carrier. The AMC
contractor will be able to recover such net charges and claims through the AMC
uniform negotiated rate. "Net charges and claims" are defined as those charges
and claims which exceed the amount, if any,
Page 2 of 4
<PAGE>
recovered by the contractor from its insurer or self-insurance fund or pool.
Provided, however, that the contractor's recovery from the Government will be
limited to those net charges and claims which exceed, as calculated over a
fiscal year, those actual costs for net charges and claims that the contractor
experienced during performance of AMC Category B flights during a
representative period, prior to implementation of this interlining agreement.
(The Carrier shall include the following passenger data with the bill that is
sent to AMC: AMC flight passenger traveled on, passenger name, date of travel,
origination point, amount claimed, amount paid.)
5.4. DAMAGE CLAIMS. Any and all damage claims will be filed with the final
--------------
delivering domestic carrier and baggage repaired and/or replaced in accordance
with established procedures. Costs for repairs/replacement will be billed to
AMC and subsequently paid by the AMC contract carrier. The AMC contractor will
be able to recover such net charges and claims through the AMC uniform
negotiated rate. "Net charges and claims" are defined as those charges and
claims which exceed the amount, if any, recovered by the contractor from its
insurer or self-insurance fund or pool. Provided, however, that the
contractor's recovery from the Government will be limited to those net charges
and claims which exceed, as calculated over a fiscal year, those actual costs
for net charges and claims that the contractor experienced during performance of
AMC Category B flights during a representative period, prior to implementation
of this interlining agreement. (The carrier shall include the following
passenger data with the bill that is sent to AMC: AMC flight passenger traveled
on, passenger name, date of travel, origination point, amount claimed, amount
paid.)
5.5. PILFERAGE CLAIMS. Any and all pilferage claims will be filed with the
-----------------
final delivering domestic carrier and settled following established procedures.
Costs incurred settling pilferage claims will be billed to AMC and subsequently
paid by the AMC contract carrier. The AMC contractor will be able to recover
such net charges and claim through the AMC uniform negotiated rate. "Net
charges and claims" are defined as those charges and claims which exceed the
amount, if any, recovered by the contractor from its insurer or self-insurance
fund or pool. Provided, however, that the contractor's recovery from the
Government will be limited to those net charges and claims which exceed, as
calculated over a fiscal year, those actual costs for net charges and claims
that the contractor experienced during performance of AMC Category B flights
during a representative period, prior to implementation of this interlining
agreement. (The carrier shall include the following passenger data with the
bill that is sent to AMC: AMC flight passenger traveled on, passenger name,
date of travel, origination point, amount claimed, amount paid.)
5.6. SETTLEMENT.
-----------
5.6.1. All carriers shall follow normal established procedures for settlement
of baggage claims up to carrier's international limitation of liability. Once
settled, the dollar amount of settlement will be billed to AMC and subsequently
paid by the AMC contract carrier. The AMC contractor will be able to recover
such net charges and claims through the AMC uniform negotiated rate. "Net
charges and claims" are defined as those charges and claims which exceed the
amount, if any, recovered by the contractor from its insurer or self-insurance
fund or pool. Provided, however, that the contractor's recovery from the
Government shall be limited to those net charges and claims which exceed, as
calculated over a fiscal year, those actual costs for net charges and claims
that the contractor experienced during performance of AMC Category B flights
during a representative period, prior to implementation of this interlining
agreement. (The carrier shall include the following passenger data with the
bill that is sent to AMC: AMC flight passenger traveled on, passenger name,
date of travel, origination point, amount claimed, amount paid.)
5.6.2. AMC will provide the carrier a copy of AMC Form 134, Baggage
Irregularity Report, and AMC Form 136, Baggage Irregularity Report File. The
carrier shall provide required documents to the passenger to complete claim.
The Baggage Service Center (BSC) at Lambert International Airport will be
provided a notification giving passenger name, date of travel, origination
point, amount claimed and amount paid.
5.6.3. The carrier shall provides the BSC a copy of their specific settlement
requirements, e.g., notarized statement of loss, itemization of claim (4 pr
slacks at $22.50) etc.
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<PAGE>
5.7. BAGGAGE LIABILITY. Individual carrier liability will be limited to the
------------------
amounts specified in appropriate tariffs for international liability and in
accordance with the Warsaw Convention. Any claims over and above these dollar
amounts will be filed by the passenger with appropriate military branch - Army -
Air Force, etc.
Page 4 of 4
<PAGE>
ATTACHMENT 5
PERFORMANCE WORK STATEMENT CARGO SERVICE
CATEGORY B CARGO
The following provisions apply to movement of Category B Cargo. Category B
transportation means the transportation in planeload lots of cargo.
1. LOADING
-------
1.1. The Contractor shall be responsible for the safe loading and off-loading
of the aircraft in accordance with applicable Federal Aviation Regulations
(FARs) and individual aircraft specifications. A member of the Contractor's
crew shall be responsible for weight and balance of the cargo loading, shall
make a visual check of cargo load, and if required, indicate approval of loading
by signing the station compartment breakdown. The Government shall be
responsible for the accuracy of the weights entered on the form by the loading
supervisor. Four hours prior to scheduled departure time from originating
station of cargo or mixed missions being loaded by Government personnel, the
Contractor's representative or a crew member shall provide the AMC traffic
representative with an appropriate form showing the planned load breakdown. For
wide-body aircraft the planned load breakdown shall be furnished six hours prior
to scheduled departure time from originating station. Contractor should request
estimated amount of fuel on-load one and one-half hours prior to scheduled
departure time. The Government will provide the actual load information to the
Contractor at least one hour prior to scheduled departure time for computation
for actual fuel on-load. The Government loading supervisor will annotate the
form to show the actual load aboard the aircraft by compartment and total
weight. A Contractor's crew shall be responsible for weight and balance of the
aircraft.
1.2 Prior to positioning the aircraft for flight, all unauthorized restrictions
to cube shall be removed from the cargo compartment and the compartment shall be
appropriately cleaned and serviced by removing all dirt and debris to ensure an
initially clean condition before the cargo is loaded. All cargo doors utilized
for loading/unloading cargo aboard contract aircraft will be equipped with a
safety barrier (net or bar) at chest level. It will be installed when the cabin
door remains open before or after loading has been completed. B727 aircraft
must be equipped with threshold assembly (cargo door lock guards) when on/off-
loading cargo.
1.3. MECHANIZED LOADING SYSTEM.
--------------------------
1.3.1. Aircraft shall be equipped with 463-L equipment or a rail system
compatible with and configured for the 463-L pallets. The load will include
the weight of the cargo and the pallet combined. Pallet restraint criteria
must meet FAA requirements and shall, at a minimum, be able to restrain
against the inertia forces listed in FAR 25.561.
1.3.2. Palletized cargo shall be secured to the Government pallets with
Government furnished pallet nets. If additional tie down equipment is necessary
to secure the load to the pallet, the Government will furnish it; if additional
tie down equipment is necessary to secure the loaded pallet to the aircraft, the
Contractor shall furnish it. In addition, sufficient quantities of tie down
equipment shall be provided by the Contractor for separate tie down of heavy
items such as engines or other types of non palletized cargo which must be
secured separately.
1.4. PROVISIONS FOR HAND LOADING
---------------------------
1.4.1. When aircraft are required to be positioned for hand loading the
aircraft shall be loaded in accordance with FAA requirements. Aircraft may be
solid loaded provided they comply with FAR 25.857(e). Under solid loading a
fire aisle is not required. The load will be secured with adequate barrier and
cage nets. In addition, the Contractor shall provide sufficient quantities of
tie down equipment for separate tie down of heavy items such as engines or other
types of cargo which must be secured separately.
Page 1 of 5
<PAGE>
1.4.2. The aircraft shall be equipped with floors of sufficient strength and
smoothness to permit the use of material handling equipment without damage to
the aircraft. The floor shall be designed to withstand a minimum uniform
distributed cargo load of 200 pounds per square foot. The aircraft shall be
conspicuously placard to indicate the floor loading strength throughout the
cabin. Shoring as required, will be provided by the Government.
1.5. At civil airports, Contractor shall provide for loading and unloading of
cargo (and mail, if applicable), in accordance with all applicable FARs and the
following:
1.5.1. If at the beginning of a month, scheduled frequency into a station is
three or more transits during that month:
1.5.1.1. The Contractor shall furnish personnel to provide necessary
information and coordination with Government representatives at all originating,
enroute, turnaround, and terminating points.
1.5.1.2. These Contractor personnel must be available at least three hours in
advance of all scheduled trip departures or actual arrivals, whichever is
earlier.
1.5.1.3. A station may waive the three hour reporting requirement and establish
acceptable reporting times through coordination with the cognizant contract
administrator.
1.5.2. At the originating station of a cargo or mixed mission, Contractor
personnel must be available four hours prior to scheduled departure time (six
hours for wide-body aircraft).
1.5.3. For months in which there are less than three transits scheduled at any
station (originating, enroute, turnaround, and terminating) as originally
published in the monthly AMC Cargo Schedule, the Contractor's crew members can
serve as the Contractor's representatives to provide necessary information and
coordination with Government personnel.
1.5.4. Three hours prior to departure time, Contractor personnel shall provide
the Government QAE with aircraft capability in pounds, based on the critical leg
of the mission.
1.5.5. The Government representative will furnish the Contractor personnel with
flight manifests listing the cargo to be moved.
1.6. CARGO DELAYED ENROUTE
---------------------
1.6.1. Cargo delayed enroute in excess of 24 hours will be expedited by routing
on other available contract or military flights. Delays will be handled in
accordance with procedures set forth in AMC FARS 5352.247-1002, Section G,
paragraph 11. If it is necessary to off-load cargo at any civilian airport
other than at the direction of the Contracting Officer, the Contractor is
responsible for such off-loading safeguarding, and moving the cargo to such
location as directed by the Contracting Officer.
1.6.2. The Contractor must take care of any cargo off-loaded at a civil airport
at the direction of the Contracting Officer. Any costs incurred by the
Contractor in safeguarding such cargo off-loaded will be reimbursable to the
Contractor.
1.7. The Government shall have the right to on-load and/or off-load traffic at
all points listed in the item descriptions set forth in SECTION B, at any
operational stops made enroute for the Contractor's convenience, or at any
diversion stops to the extent that it does not interfere with the Contractor's
scheduled ground operation.
Page 2 of 5
<PAGE>
Scheduled ground operation is the work and time required by the Contractor to
ready his aircraft for departure regardless of the time listed in the
Operations Bulletin and/or Schedule.
1.8. In all cases where landings are made at stations where AMC Command Control
facilities or units are not established, Contractor (crew member, local
representatives, or responsible dispatch office) shall report advisory arrival
and departure information within ten minutes of occurrence by telephone as
follows:
1.8.1. CONUS For missions operating in the Twenty-First Air Force (21 AF)
-----
area, call 21AF Operations Center, McGuire AFB NJ, (609)724-3637/2314 or
(609)723-7979. For missions operating in the Twenty-Second Air Force (22 AF)
area, call 22 AF Operations Center, Travis AFB CA, (707)438-2192/3411.
1.8.2. OVERSEAS Notify the nearest AMC Operations Center/Command Post by
--------
telephone or electronic means.
1.8.3. Arrival and departure information for paragraphs 1.8.1. and 1.8.2. above
will include the following:
ARRIVAL DEPARTURE
Mission Number Mission Number
FAA Aircraft Registration Number FAA Aircraft Registration Number
(Tail Number) (Tail Number)
Station Station
Time of Arrival Actual Departure Time (ADT)
*Estimated Time of Departure (ETD) Next Station
Next Station Estimated Time of Arrival (ETA)
* If mission is delayed beyond ETD, report cause of delay and estimated time
aircraft will be in commission (ETIC) along with the revised ETD.
2. SPECIAL CARGO
-------------
2.1. Contractor shall provide Signature Service from origin to destination of
the shipment for Registered Mail, AMC Pouches, High Value, and life or death
urgency shipments. The purpose of Signature Service is to provide continuous
responsibility for custody of the material during transit. Contractor station
representative or crew member, who must be a US national, shall be responsible
for signing for such shipments at station of origin and obtaining the signature
of an authorized Government representative at destination. The AF Form 127, DD
Form 1907, DD Form 191, or the manifest accompanying the shipment may be used to
sign for shipments. At enroute military stations the Government will provide a
guard or otherwise secure shipments during the ground time of the aircraft
provided the Contractor's crew request same of the Operations Center/Command
Post at least one hour prior to landing. At enroute commercial stations, the
Contractor is required to provide its own security. When a crew change is made
enroute, the Contractor's station representative shall be responsible for
briefing the incoming crew of the Signature Service shipments on board the
aircraft.
2.2. In the event a flight containing SECRET or CONFIDENTIAL material is
delayed, interrupted or terminated at an unscheduled point, immediate notice to
that effect shall be given to the ACO. Prompt and strict compliance with
instructions received pertaining to the security of the SECRET or CONFIDENTIAL
material will be maintained. If unsuccessful, then contact the Defense
Investigative Service Clearance Office (DISCO) at (614)238-2133 or AUTOVON 850-
2133 (during duty hours) or (614)238-2058 (after duty hours).
2.3. The Contractor shall transport hazardous material in accordance with Air
Force Regulation (AFR) 71-4 as provided by the Department of Transportation
(DOT) Exemption 7573, DOT, FAA, and ICAO/IATA regulations for all cargo and
mixed configured flights. All hazardous materials shall be properly prepared
and cleared for air movement prior to loading the aircraft. Whenever hazardous
materials are on board the aircraft, the aircraft captain shall advise tower or
ground control prior to taxiing and landing. Identification will include
aircraft identification number, NET explosive weight (NEW), or quantity of other
hazardous materials, hazard
Page 3 of 5
<PAGE>
class/division proper shipping name, UN number, and ETA/ETD. Prior to
departure the Government will furnish aircraft captain a written briefing to
include the following:
2.3.1. Proper shipping name, UN number, and hazard class/division.
2.3.2. Quantity in terms of weight or volume.
2.3.3. Location of the hazardous item in the aircraft.
2.3.4. NEW for UN hazard class/division 1.1., 1.2., or 1.3.
2.3.5. Passenger authorization.
2.3.6. Cabin smoking restrictions.
2.3.7. Special handling instructions.
Aircraft captain shall enter in the remarks section of the flight plan (DD Form
175, FAA Form 398, or ICAO Form 1801) the proper shipping name, classification,
and NET explosive weight. In addition, the aircraft captain shall insure that
smoking and ignition of matches or lighters in the cargo compartment is
prohibited. Packages showing evidence of leaking, moisture, staining, or
otherwise suspected of being damaged will be rejected. When transporting items
whose vapors are toxic, flammable, explosive or which have a low boiling
temperature, the aircraft captain must insure that the aircraft is properly
ventilated.
2.4. Carrier shall ensure each aircraft transporting explosives and other
hazardous materials has on board a current copy of the ICAO, "Emergency Response
Guidance for Aircraft Incidents Involving Dangerous Goods" handbook or DOT-P-
5800 (Series), "Emergency Response Guidebook." The guidebook can be obtained by
contacting the following company:
INTERG
A Division of American Labelmark Co.
5724 N. Pulaski Rd
Chicago IL 60646
Phone: (312) 478-0900
3. AIRCRAFT TIE DOWN PROVISIONS
----------------------------
3.1. Tie down restraints shall be as specified in the aircraft operating manual
and shall be in compliance with FAA requirements for the type of aircraft.
3.2. All cargo shall be adequately secured to prevent damage of cargo during
the flight.
3.3. High density or nonstackable cargo units shall be tied down individually.
4. AIRCRAFT LIGHTING Lighting system must be an integral part of the aircraft
-----------------
equipment and provide adequate interior lighting for loading and unloading
operations.
4.1. The lighting system will consist of a minimum of 200 watts total, with
bulbs spaced so as to provide adequate lighting in the main cargo compartment.
All bulbs will be protected by wire bulb guards, except in those aircraft having
recessed lights which provide the equivalent protection of wire bulb guards.
4.2. A minimum of one 25 watt bulb will be provided in each subcompartment.
Page 4 of 5
<PAGE>
4.3. One or more bulbs will be located at or near each cargo loading door to
provide light for loading and unloading operations through the cargo door.
5. EXCESS ACL The Government may utilize excess ACL including excess ACL on
----------
substitute service as follows, subject to excess ACL not being utilized by the
Contractor:
5.1. On all cargo flights, the Government shall be entitled to transport
additional cargo over the guaranteed ACL to the entire capacity (including
baggage compartment) of the aircraft at no additional cost to the Government.
5.2. The amount of space utilized over the guaranteed ACL constituting "excess
ACL" will be determined by the limits of the gross take-off weight of the
aircraft and by the aircraft captain's judgment with respect to other
operational limitations. In this regard, it is understood that the Government
shall not be entitled to transport "excess ACL" if the Contractor would be
required, on any specific flight, to make an otherwise unrequired operational
stop as a result of the carriage of "excess ACL".
6. SEATS FOR GOVERNMENT SPONSORED PERSONNEL ON CARGO AIRCRAFT
----------------------------------------------------------
6.1. The Contractor shall provide two seats, if physically possible, at no
extra cost, for the Government sponsored personnel, in the heated portion of the
aircraft. Subject to the availability of space and configuration of the
aircraft, one additional seat will be provided. Government sponsored personnel
are those individuals under military orders stating that they are escorts,
couriers, and/or guards for cargo or human remains. In addition, such seats may
be used by CAs and QAEs in performance of their duties. The Government shall
advise the Contractor 24 hours prior to scheduled departure of the mission of
the number of seats required. The seats may be side front or rear facing. They
may be jump, observer, or passenger seats. They must comply with the safety and
structural specifications outlined in FAR 25.785. Such seats must be readily
accessible to the crew compartment.
6.2. The seats above shall be provided on ferry legs of cargo flights, on a
space available basis, for use by CAs and QAEs in performance of their duties.
6.3. MEALS FOR GOVERNMENT SPONSORED PERSONNEL ON CARGO AIRCRAFT Government
----------------------------------------------------------
sponsored personnel on cargo aircraft shall be served a meal or snack equivalent
to that served the flight crew members in accordance with the schedule set for
in Attachment 3.
6.4. BRIEFING PROCEDURES Each Contractor shall assure the Government sponsored
-------------------
personnel aboard cargo aircraft are properly briefed in accordance with
Attachment 2.
Page 5 of 5
<PAGE>
ATTACHMENT 6
PERFORMANCE WORK STATEMENT CARGO SERVICE
CATEGORY A CARGO
The following applies to Category A (CAT-A) cargo:
1. GENERAL. CAT-A cargo is individually waybilled cargo transported on
-------
scheduled commercial flights between the Continental United States (CONUS) and
overseas stations or between overseas stations.
2. ACCEPTABILITY OF GOODS FOR CARRIAGE
-----------------------------------
2.1. PACKAGING AND MARKING OF CARGO Cargo will be packed by the Government so
------------------------------
as to ensure safe carriage with ordinary care in handling and so as not to
injure or damage any persons, goods or property. Each package shall be legibly
and durably marked with the name and full street address of the shipper and
consignee.
2.2. CARGO ACCEPTABILITY Contractor agrees to transport, subject to the
-------------------
availability of suitable equipment and space, general merchandise, goods, wares,
and products of all kinds, unless otherwise excluded by Contractor's
regulations, and provided:
2.2.1. The transportation, or the exportation or importation thereof, is not
prohibited by the laws or regulations of any country to be flown from, to,
into, or over;
2.2.2. They are packed in a manner suitable for carriage by aircraft;
2.2.3. They are accompanied by the requisite shipping documents;
2.2.4. They are not likely to endanger aircraft, persons or property, or cause
annoyance to passengers.
2.2.5. Shipments of material identified by the Department of Transportation
(DOT) as regulated must be packaged marked and labeled in accordance with
applicable FAA, IATA, and DOT regulations.
3. Each CAT-A cargo shipment will be accompanied by cargo manifests and cargo
detail records. Contractor shall annotate two copies of the cargo manifest with
the following certificate and return them to the AMC Air Terminal Operations
Section at station of origin within 24 hours after the flight departs.
"I certify the above manifested cargo was loaded aboard __________________ (name
of CAT-A Carrier), flight number _________________________________ (indicate
number) by
(AMC transportation or Contractor) loading personnel on ______________________
(date)."
--------------------------------------
Signature of Contractor Representative
Page 1 of 3
<PAGE>
4. GOODS ACCEPTABLE ONLY UNDER PRESCRIBED CONDITIONS
-------------------------------------------------
4.1. The Contractor has the right to refuse to transport animals, baby chicks,
turkeys and ducklings, bees and insects, birds, frogs, tropical fish, fish or
seafood, on any aircraft on which passengers are being carried.
4.2. Contractor shall accept dogs and cats for transportation only if prior
special arrangements have been made and if the dog or cat is confined in a
suitable container. A dog or cat confined in a container supplied by the
shipper will be accepted for transportation by the Contractor only if the
container is inspected and approved by the Contractor prior to flight departure
time.
4.3. CORPSES Contractor has the right to refuse to transport corpses or
-------
disinterred remains on any aircraft carrying passengers.
4.4. FIREARMS Sporting firearms, including pistols, shotguns, rifles, and
--------
trapline guns, may be carried.
4.5. PERISHABLES (Shipment contents which are liable to deteriorate or perish
-----------
due to changes in climate, temperature, altitude, or other ordinary exposure, or
because of length of time in transit). Such shipments will be accepted without
responsibility on the part of the Contractor for loss or damage due to the
foregoing. Shipper is responsible for insuring that the following precautions
are carefully followed:
4.5.1. Advance reservation (or ample notification).
4.5.2. Adequate packing.
4.5.3. Prominent and clear marking or labeling of package(s): "PERISHABLE".
NOTE 1: Suitable labels may be secured from any cargo traffic office of the
Contractor.
NOTE 2: Seafood and fish will be accepted upon advance arrangements only, and
when packed in odor-proof and leak-proof containers.
4.6. UNUSUAL SHIPMENTS Contractor does not have to accept packages or pieces
-----------------
of extreme length or of unusual shape or of excessive weight for transportation
unless arrangements for handling same have been made previously.
4.7. CONTRACTOR'S RIGHT OF INSPECTION Contractor has the right to examine the
--------------------------------
contents of all consignment, but shall be under no obligation to do so.
5. The transit time between origin (Military APOE) and destination (Military
Aerial Port of Debarkation (APOD)) for purposes of performance evaluation will
be no more than the following:
<TABLE>
<CAPTION>
BETWEEN HOURS
------- -----
<S> <C>
East Cost and UK/Europe 24
East Cost and Tokyo 72
East Cost and Pacific beyond Tokyo 96
West Cost and Honolulu 24
West Cost and Tokyo 36
West Cost and Seoul/Taipei/Kadena 48
</TABLE>
As soon as the Contractor knows that the flight on which the cargo is scheduled
to move will be or is delayed or canceled, the Contractor shall notify the
applicable AMC/AF Port Management Center (PMC) by telephone (21
Page 2 of 3
<PAGE>
AF, (609)724-3781 or 22 AF, (707)438-[_]3714) of the reason for the delay or
cancellation and when the cargo will be moved.
6. MOVEMENT OF COURIERS When required by the Government, Contractor shall
--------------------
provide a seat for a courier accompanying the CAT-A cargo. The rate for such
courier will be at the applicable CAT-Y passenger rate between the commercial
stations as set forth in SECTION B or at no cost to the Government in those
instances where the Contractor does not provide scheduled commercial passenger
service.
7. A member of the Contractor's crew shall be responsible for weight and
balance of the cargo loading and shall make a visual check of cargo load and, if
required, indicate approval of loading by signing the station compartment
breakdown. The Government shall be responsible for the accuracy of the weights
entered on the form by the loading supervisor. Contractor should request
estimated amount of fuel on-load one and one-half hours prior to scheduled
departure time.
8. Whenever practical, a minimum of two hours notification will be provided
contract carriers when Government sponsored personnel are scheduled to move on
cargo trips. When an armed courier is aboard a contract aircraft, a responsible
crew member shall ensure that ammunition and magazine are removed from the
courier's weapon immediately after takeoff, or will request the weapon be
surrendered to the aircraft commander until the aircraft lands at the next
destination. Custody of the weapon/ammunition will be retained by the courier
until takeoff and regained immediately after landing, so adequate protection can
be given material while the aircraft is on the ground.
Page 3 of 3
<PAGE>
ATTACHMENT 7
SPECIFICATIONS, TERMS, AND CONDITIONS
FOR MIXED PASSENGER AND CARGO AIRCRAFT
USED IN INTERNATIONAL OPERATIONS
1. TYPE OF AIRCRAFT Aircraft used for mixed passenger and cargo operations
----------------
shall be pressurized, weather avoidance radar equipped, and capable of carrying
mixed traffic. They shall also have either a nose, side forward, or side aft
loading cargo door. All the provisions of Attachment 5 will apply to the cargo
operation. All the provisions of Attachment 1, 2 and 3 will apply to the
passenger operation.
2. Contractor shall furnish barrier type nets for belly compartment of aircraft
when in mixed configuration.
Page 1 of 1
<PAGE>
ATTACHMENT 9
CIVIL RESERVE AIR FLEET (CRAF)
CHAPTER 1
---------
The CRAF program is a national plan (based on The Defense Production Act of 1950
and Executive Order 12656) to utilize airlift resources of US air carriers to
support Department of Defense airlift requirements in a national security
contingency. The CRAF is composed of US registered aircraft owned or controlled
by the US "air carriers" specifically allocated (by FAA registration number) for
this purpose by the Department of Transportation. As used in this contract,
CRAF aircraft are those allocated aircraft, which a carrier has contractually
committed to the Department of Defense, under stated CRAF conditions of this
contract. This contractual commitment of the aircraft includes the supporting
resources required to provide the contract airlift services. Reference is also
made to Memorandum of Understanding By and Between the Secretary of Defense and
the Secretary of Transportation with Respect to the Civil Reserve Air Fleet
Program, dated January 1988 and Air Mobility Command Regulation (AMCR) 55-8.
The Contractor's obligation to perform services hereunder during any period when
the CRAF is activated, as described in the Contract, is expressly conditioned on
there being in existence a valid determination made pursuant to the provisions
of Public Law 85-804 and Executive Order 10789, as amended, that the national
defense shall be facilitated by obligating the Government to indemnify the
Contractor under the terms and conditions stated in the Contract. Upon
activation of CRAF, the aircraft listed in Attachment 8 of this contract which
are requested by the Government, must be positioned where directed by the
Government, with maximum fuel aboard, consistent with aircraft performance
limitations and mission requirements, as quickly as possible, but in no event
more than 24 or 48 hours (as appropriate) after the Contractor receives the
request from the Government for the aircraft required. The Government, in
ordering services under the provisions of this contract shall, to the extent
practicable and to the extent that military requirements permit, order services
from all AMC airlift service Contractors on an equitable pro rata basis, giving
consideration to each Contractor's aircraft commitment to the stage of
requirements which has been activated, and giving consideration to the amount of
capacity which each Contractor has already scheduled for fixed and expansion
service under this contract.
Page 1 of 47
<PAGE>
CHAPTER 2
---------
CRAF GENERAL
SECTION A--POLICIES
2.1. BASIC POLICIES. Basic Policies for the CRAF program are directed toward
--------------
identification, organization, and development of a source of civil airlift
capability readily available to augment the Department of Defense (DOD). The
CRAF may be activated in increments of three stages. The Government retains the
option of activating any portion of each stage or segment, as required. During
CRAF activation, AMC has mission control and the carrier retains operational
control. Any reference to the CRAF cell or XOC implies the office of the
Assistant for Civil Air.
2.2. COMPOSITION OF THE FLEET. The CRAF is composed of US-registered civil
------------------------
transport aircraft that are suitable and operationally capable of performing DOD
airlift. The number and type of aircraft are identified to satisfy long range
international, short range international, domestic, aeromedical evacuation, and
Alaskan airlift requirements. Principal considerations in determining aircraft
suitability are range, payload, block speed, and configuration.
2.3. USE OF THE FLEET. Use of the CRAF resources shall be based on military
----------------
operational plans and the terms and conditions of this Contract.
2.4. AIRLIFT CONTRACTS. AMC peacetime airlift services contracts are offered
-----------------
to carriers that are CRAF participants or are eligible and agree to become CRAF
participants and have aircraft suitable for allocation to CRAF.
2.5. AIRCRAFT OPERATIONS. CRAF aircraft supporting DOD airlift requirements
-------------------
during a CRAF activation shall be operated in accordance with appropriate
Federal Aviation Regulations (FARs) and such waivers as are applicable.
2.6. AIRCRAFT MAINTENANCE. Maintenance of CRAF airlift is the responsibility
--------------------
of the operating carrier and shall be performed in accordance with appropriate
FARs and such waivers, when applicable.
2.7. LOGISTICS SUPPORT. CRAF logistics support shall be coordinated with the
-----------------
AMC CAT and shall be monitored by HQ AMC/XOK.
2.7.1. USE OF EXISTING CARRIER ASSETS. To the maximum extent possible,
-------------------------------
logistics support of CRAF aircraft shall be provided by the participating
carrier and obtained from existing carrier assets. Shortages in such support
may be supplemented by carrier contract and/or arrangements with other sources.
If CRAF carriers cannot support themselves, requests for assistance are to be
forwarded to the HQ AMC CAT.
2.7.2. USE OF GOVERNMENT-FURNISHED MATERIAL HANDLING EQUIPMENT (MHE).
--------------------------------------------------------------
Government- furnished MHE shall be used at military onload/offload airfields
whenever possible. Upon HQ AMC CAT approval, augmenting commercial resources
may be acquired under the Changes clause of the Airlift Services Contract in
situations where government- furnished MHE is unavailable or inadequate.
2.7.3. PETROLEUM, OIL, AND LUBRICANTS (POL). Upon the activation of any stage
------------------------------------
of CRAF, CRAF carriers may purchase POL products at military airfields and/or
civil airports.
2.7.4. REIMBURSABLE OR EQUITABLE EXCHANGE. Logistics support, other than that
----------------------------------
listed in this Contract, shall be furnished at military bases, if available, on
a reimbursable or equitable exchange basis.
Page 2 of 47
<PAGE>
2.7.5. GOVERNMENT-FURNISHED CARGO EQUIPMENT. Cargo tie-down equipment shall be
------------------------------------
furnished by AMC.
2.8. PERSONNEL. All personnel required in the performance of CRAF operations
----------
at civil bases shall be furnished by the CRAF carriers. (EXCEPTION: Passenger
Service Agents shall be furnished by AMC.) During CRAF operations, CRAF
carriers shall procure, position, supervise, and train their own employees.
2.8.1. CRAF LOADING SUPERVISORS. During CRAF activation, the HQ AMC Crisis
-------------------------
Action Team (CAT) may require participating carriers to provide supervisory
personnel who are highly qualified and certified in the loading operations of
civil aircraft. These personnel shall report where directed by AMC CAT.
2.8.2. US NATIONAL VERSUS INDIGENOUS PERSONNEL. All cockpit crewmember and
----------------------------------------
Senior Lodger positions shall be manned by US citizens during CRAF activation.
Indigenous personnel may be used to fulfill other personnel requirements.
2.9. USE OF CIVIL AIRFIELDS. CRAF aircraft shall use enroute civil airports
-----------------------
wherever possible to reduce saturation at military airfields.
2.10. LEASED AIRCRAFT. Aircraft which lose their US registration, or are wet
----------------
or dry leased, either to U.S. carriers with whom AMC cannot execute a CRAF
contract or to foreign carriers not approved by the Secretary of the Air Force,
are not considered available for CRAF purposes.
2.11. AIRCRAFT ALLOCATION.
--------------------
2.11.1. POLICY. HQ AMC/XOC determines aircraft suitability prior to submitting
------
allocation requests to Department of Transportation (DOT), Office of Emergency
Transportation (OET). The Director, OET, allocates US-registered civil aircraft
to the CRAF program by FAA registration number. Issues regarding the DOT
allocation of CRAF aircraft or DOD requirement for CRAF aircraft should be
presented to the Director, Federal Emergency Management Agency (FEMA) for review
and resolution.
2.11.2. ALLOCATION DETERMINATION. Long-range international, short-range
-------------------------
international, and aeromedical evacuation CRAF aircraft are allocated by OET to
satisfy the DOD wartime airlift requirements, as identified by the CINCs and
major commands.
SECTION B--CONCEPTS
2.12. DEFINITIONS
-----------
2.12.1. CRAF ACTIVATION. The formal act of notifying CRAF carriers that a CRAF
----------------
stage, segment, and/or section or portions thereof are operational.
2.12.2. CRAF DEACTIVATION. The formal act of notifying CRAF carriers that a
------------------
CRAF stage, segment, and/or section or portions thereof are no longer
operational.
2.12.3. AIRCRAFT CALL UP. After a stage, segment, and/or section of CRAF is
-----------------
activated, the formal act of notifying a CRAF carrier that certain aircraft are
required to meet DOD airlift requirements in response to a CRAF activation.
Aircraft called up shall be given specific direction on where to relocate and
scheduled departure times, etc. Aircraft are called up by registration number.
2.12.4. CRAF SEGMENT. There are five CRAF segments. The CRAF segments are the
-------------
Long- range International, Short-range International, Aeromedical Evacuation,
Domestic, and Alaskan.
Page 3 of 47
<PAGE>
2.12.5. CRAF SECTION. A CRAF section is a subelement of the Long-range
-------------
International, Short-range International segments. The CRAF sections for both
of these segments are the passenger and the cargo sections.
2.12.6. NOTIFICATION. Notification is considered acceptable if received by
-------------
either party by telephone, followed in writing by facsimile or by ARINC.
2.13. CRAF ACTIVATION/DEACTIVATION. The CRAF may be activated or deactivated
-----------------------------
either incrementally or in total, by stage, segment, and/or section. Cargo,
passenger, and aeromedical evacuation aircraft may be activated separately.
2.14. AIRCRAFT CALLUP/RELEASE. Within each activated stage, segment, and
------------------------
section, AMC may select and call up specific CRAF aircraft needed to fulfill the
DOD airlift requirement. AMC may elect to call up only a portion of the
available aircraft, and is not obligated to call up aircraft from every carrier.
Aircraft selection shall be prorated based on mobilization value (MV) of
aircraft within the stage, segment, and section activated. Those carriers not
called up shall be notified in writing and shall receive a minimum of 5 days
notice of any subsequent call up, unless a higher stage of CRAF is mandated by
DOD contingency requirements. If DOD contingency requirements mandate a higher
state activation (i.e. Stage II of III), the 5 days minimum notification
requirement is nullified and the appropriate response time to the newly
activated stage shall apply.
2.15. AIRCRAFT SUBSTITUTION. Carriers may request to substitute aircraft of
----------------------
equal capability to replace aircraft called up. HQ AMC/XOK is the approval
authority for aircraft substitutions.
2.16. VOLUNTEER CARRIERS. Carriers may volunteer to perform missions prior to
-------------------
and during CRAF activation. Volunteers supporting contingency requirements
prior to CRAF activation, time permitting, shall be given the option to be
considered activated when the CRAF, and the segment in which their aircraft
would normally qualify is activated, but only to the level of aircraft required.
These aircraft shall be called up first and released last. After volunteers
have committed to activation and call up, additional aircraft, if required,
shall be determined and prorated based on MV of aircraft within the stage and
segment and section activated.
2.17. RESPONSE TIME. Response time for carriers, after mission assignment, is
--------------
24 hours for Stages I and II and 48 hours for aircraft called up for Stage III.
Response time for carriers, after mission assignment, for aeromedical
evacuation aircraft is 48 hours for Stages II and III. In those cases where the
entire stage is not called, written notification of release from the 24 and 48
hour response requirements shall be given within 72 hours of the activation of
the CRAF stage, segment and section. AMC shall provide a minimum of 5 calendar
days notice for subsequent call up of those aircraft released. If DOD
contingency requirements mandate a higher stage activation (i.e. Stage II or
III) the 5 day minimum notification requirement is nullified, and the 24 hour
response to Stage II and 48 hour response to Stage III will apply.
2.18. MINIMUM UTILIZATION OF LONG-RANGE INTERNATIONAL, AND LONG-RANGE
---------------------------------------------------------------
AEROMEDICAL EVACUATION SEGMENTS. Carriers with long-range international and
- --------------------------------
long-range aeromedical evacuation aircraft called up for CRAF service shall be
guaranteed an average utilization by carrier and aircraft type of 8 hours per
day per aircraft called up for the duration of the call up or for a minimum of
30 days, whichever is longer. Only aircraft called up are guaranteed minimum
utilization. AMC shall give at least 15 days notice of release of an aircraft
call up or stage, segment and/or section deactivation. Negotiation of
compensation for underutilization shall be in accordance with the procedures
outlined in this contract and shall include all commercial business obtained by
the carrier using called up aircraft. Carriers are obligated to utilize their
best efforts to obtain commercial business to minimize Government costs during
any period of guaranteed utilization including but not limited to the 15 day
period following notice of release. Carriers may waive these minimum
utilization provisions by notifying HQ AMC/XOK in writing.
2.19. MISSION ASSIGNMENT Specific mission assignments shall be based on
------------------
airlift requirements and aircraft availability.
Page 4 of 47
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2.20. THE THREE STAGES OF THE CRAF ARE:
---------------------------------
2.20.1 STAGE I - COMMITTED EXPANSION. This is airlift capability, from the
------------------------------
long range international segment, committed to Commander, Air Mobility Command.
It can be used to perform airlift services when the AMC airlift force can not
meet both deployment and other traffic requirements simultaneously. CINCTRANS,
on approval by the Secretary of Defense (SECDEF), has the authority to activate
Stage I of CRAF.
2.20.2. STAGE II - DEFENSE AIRLIFT EMERGENCY. This is an airlift expansion
------------------------------------
identified for an airlift emergency not warranting national mobilization.
CINCTRANS, on approval by the SECDEF, has the authority to activate Stage II of
CRAF.
2.20.3. STAGE III - NATIONAL EMERGENCY. CRAF Activation. This is the total
------------------------------
CRAF airlift capability made available when required for DOD operations during
major military emergencies involving US forces.
2.20.3.1. The Secretary of Defense shall issue the order to CINCTRANS to
activate Stage III of the CRAF:
2.20.3.1.1. In time of war or during a defense-oriented national emergency
declared by the President, or in time of national emergency declared by
Congress.
2.20.3.1.2. In a national security situation short of a declared defense-
oriented national emergency.
2.20.3.2. Activation of CRAF Stage III presumes that the Secretary of
Transportation has been authorized to exercise presidential priorities and
allocation authority.
2.20.3.3. The notice that the total CRAF has been activated shall be
communicated by the AMC CAT CRAF Cell to all CRAF carriers. Upon activation of
any stage of CRAF, the total capability of all aircraft in that stage may be
used.
2.21. PRESERVATION OF THE FLEET.
-------------------------
2.21.1. In the event of a war or a national disaster, it is paramount that our
Nation's airlift resources survive for they shall be used to help reconstruct
our Nation's economy and reconstitute its military forces.
2.21.2. Since various stages of CRAF may be activated prior to the United
States' entry into an all-out war, all CRAF carriers shall, when directed, take
immediate survival measures to minimize destruction and damage to CRAF aircraft.
Corporate management, equipment, and facilities shall be used as long as they
are tenable.
2.22. PLANNING CONSIDERATIONS.
-----------------------
2.22.1. Planning for use of CRAF shall be predicated upon the following:
2.22.1.1. Availability, upon 24-hour notice, of those aircraft identified as
Stage I and Stage II resources, to perform airlift services as required by the
Government.
2.22.1.2. Availability, upon 48 hour notice, of those aircraft identified as
Stage III resources, to perform airlift services as required by the Government.
2.22.1.3. Effective command and control through commercial and military
communication capabilities.
2.22.1.4. Use of carrier resources to the maximum extent possible.
2.22.2. Carriers are allowed three percent of available ACL, by weight, for
necessary self-support.
Page 5 of 47
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2.23. AIRLIFT REQUIREMENTS. Long range international airlift requirements are
--------------------
based on Joint Chiefs-of-Staff (JCS) approved contingency plans. Civil eligible
cargo and personnel requirements are extracted from these plans. They range
from channel missions that maintain manageable port levels, to augmenting the
active force in deployment and resupply. This becomes the basis for DOD sizing
of the fleet.
2.24. NAVIGATION ROUTE KIT. Upon activation of the CRAF, those aircraft
--------------------
allocated for CRAF operations are required to have aboard a navigation route kit
which provides appropriate coverage. A Government furnished kit is available
and may be used aboard these aircraft during peacetime.
SECTION C--ORGANIZATION
2.25. HQ AMC CAT DIRECTOR (AMC CAT-D). Under an activated CRAF, the management
-------------------------------
of CRAF resources is the responsibility of the AMC CAT-D.
2.26. CRAF CELL. The function within the HQ AMC CAT that is directly
---------
responsible for the management of the CRAF.
2.27. TECHNICAL ADVISORY GROUPS (TAGs). TAGs are persons provided by carriers
--------------------------------
to furnish technical advice and information designed to provide maximum
coordination, efficiency, and effectiveness in the use of the CRAF. Adequate
CRAF planning cannot be accomplished without employing the technical capability
of industry representatives. TAG representation shall be selected from all
carriers participating in the CRAF program. The overriding prerequisite for
selection must be the specific technical assistance needed for the development
and maintenance of adequate CRAF plans.
2.28 SENIOR LODGER. The Senior Lodger is the name given to the CRAF carrier
--------------
who shall be the AMC representative designated to manage CRAF operations at a
specified airport(s) during CRAF activation. (See Chapter 4).
2.29. COMMAND AND CONTROL. When the CRAF is activated, management of the Long
-------------------
and Short Range International and aeromedical evacuation CRAF missions shall be
the responsibility of AMC, exercised through the AMC CAT CRAF Cell.
SECTION D--CRAF CONTRACTS
2.30. CONTRACT OPERATIONS. The AMC Airlift Services Contract is the AMC
-------------------
commercial airlift procurement document and incorporates all the contractual
provisions necessary to operate CRAF. It establishes a legal obligation to
perform, and is the basis for payment for all services rendered, whether for
personnel, ground support, or airlift.
2.31. TECHNICAL ASSISTANCE: This portion of the contract provides for
---------------------
reimbursement of expenses to the carrier for services rendered. For example:
providing Technical Advisory Group representatives to participate in meetings
and exercises; preparing or assisting with manuals, documents, listings,
reports, specifications, plans, etc. Services to be rendered are specified in
Change Orders issued by the AF Contracting Officer (HQ AMC/XOK).
SECTION E--RESERVED
SECTION F--AIRCRAFT EQUIPMENT REQUIREMENTS
2.32. AIRCRAFT PASSENGER/CARGO EQUIPMENT.
----------------------------------
2.32.1. PASSENGER AIRCRAFT. All passenger aircraft shall be configured in
------------------
accordance with Federal Air Regulations.
Page 6 of 47
<PAGE>
2.32.2 LOWER LOBE BAGGAGE CONTAINERS. Current contingency plans do not require
------------------------------
the use of baggage containers; however, should the need arise, carriers shall be
required to furnish appropriate containers.
2.32.3 COMMERCIAL PALLETS. In some cases, military necessity may require hand
-------------------
loading of passenger baggage on B-747s. Should the need arise, carriers shall
be required to furnish commercial pallets to be used as a subfloor for the lower
lobes.
2.32.4. CARGO AIRCRAFT. Cargo aircraft must be configured in accordance with
--------------
Federal Air Regulations and be equipped with a cargo handling system compatible
with military 463L pallets (except Alaskan CRAF). Pallets and tie-down
equipment shall be provided by AMC.
2.33. EMERGENCY AND SAFETY EQUIPMENT. Emergency and safety equipment required
------------------------------ --------
by FAR 121.353 satisfy CRAF extended overwater requirements.
2.34. NAVIGATION ROUTE KIT.
--------------------
2.34.1. Navigation route kits described are provided by the Government. During
CRAF activation, the carriers are required to have aboard each CRAF allocated
aircraft a navigation route kit which shall provide world wide area coverage.
The carriers are required to retain and maintain in serviceable condition the
publications and charts required in the kit. Those carriers receiving flight
information publications and charts from the Government are authorized to use
them during peacetime commercial and military contract operations; however, the
kits must be maintained in a ready status to support any stage of CRAF
activation.
2.34.2. STORAGE AND MAINTENANCE. Government-furnished navigation route kits
-----------------------
are stored and maintained by the carrier at no expense to the Government. Upon
activation of any stage of the CRAF, the kit shall be placed aboard and remain
with the aircraft during CRAF operations.
2.34.3. REPLACEMENT CHARTS AND FLIPS. When participating in DOD contract
----------------------------
airlift, the aircraft captain may obtain replacement charts, FLIPs, etc., from
any USAF Base Operations.
CHAPTER 3
---------
CRAF MISSION SCHEDULING AND ACTIVATION
SECTION A--MISSION SCHEDULING
3.1. GENERAL. CRAF long and short-range international and aeromedical
-------
evacuation mission scheduling is the responsibility of the HQ AMC CAT. The
scheduling of CRAF missions is similar to the current procedures used by AMC and
the CRAF carriers in scheduling peacetime DOD airlift missions. The primary
objective is to schedule CRAF missions effectively. To this end, the HQ AMC/CAT
will exercise mission management to include such activities as capability
reporting, mission scheduling, flight monitoring, and logistics monitoring.
Mission scheduling shall be accomplished at HQ AMC through direct coordination
with appropriate CRAF carrier's operations center. This chapter contains
guidance pertaining to the procedures employed to manage the additional workload
created by CRAF activation.
3.2. MANPOWER AND PERSONNEL. When requested by the HQ AMC CAT Director, CRAF
----------------------
carriers shall establish a 24-hour/day operations center manned by qualified
personnel and located at the carriers designated operations centers. Subsequent
to the activation of Stage II and prior to Stage III activation the CRAF
carriers shall, upon the request of the HQ AMC CAT Director, provide
predesignated carrier liaison and communications supervisor personnel to HQ AMC,
Scott AFB IL, and predesignated Numbered Air Forces. To assure appropriate
liaison representation and to facilitate assimilation of tasks, carriers should
provide personnel with a high degree of knowledge and experience in the
carriers' overall operations and management.
Page 7 of 47
<PAGE>
3.3. COMMUNICATIONS. Existing commercial communications and company-owned
--------------
facilities shall expand as required to maintain operational control of CRAF
resources. When CRAF is activated, Aeronautical Radio, Inc. (ARINC) facilities
shall continue to be a means of recorded communications between AMC and CRAF
carriers. However, secure telephone, secure facsimile, and unsecure telephone
shall be the primary means used to schedule missions and communicate essential
operational information.
3.4. CRAF CARRIER RESPONSIBILITIES:
-----------------------------
3.4.1. Respond to requests for airlift missions.
3.4.2. Schedule crews to support assigned mission, and deploy stage crews.
3.4.3. Develop mission itinerary in line with airlift requests and required
pickup/ delivery times.
3.4.4. Flight follow CRAF aircraft.
3.4.5. Forward aircraft arrival/departure/advisory messages and mission status
to the NAF Operations Centers.
SECTION B--CRAF ACTIVATION
3.5. NOTIFICATION. CRAF activation messages are transmitted over civil
------------
circuits to each CRAF carrier. These messages, prepared in advance, are
released as directed by the HQ AMC CAT Director and described as follows:
3.5.1. HQ AMC CAT ACTIVATION. This message, if required, shall be addressed
---------------------
to all CRAF carriers. It shall advise the long- and short-range international
and aeromedical evacuation segment operators that the HQ AMC CAT has been
activated, and where CRAF communications should be directed. The message
provides necessary guidance to CRAF carriers and authorizes the manning of the
operations control center at the carrier's home station, if necessary.
3.5.2. STAGE I ACTIVATION. This message shall be addressed to all CRAF
------------------
carriers with information copy to AMCALT and the AMC Numbered Air Forces (AMC
NAFs) and is to be released by the HQ AMC CAT-D upon receipt of proper authority
from Commander, Air Mobility Command.
3.5.3. STAGE II ACTIVATION. This message shall be addressed to all CRAF
-------------------
carriers, with information copy to AMCALT, AMC NAFs, AFLC, NAVMTO, 11AF and
16MAG. It shall be released by the HQ AMC Contracting Officer or HQ AMC CAT-D
upon receipt of proper authority from the Chief-of-Staff Air Force (approved by
the Secretary of Defense).
3.5.4. STAGE III ACTIVATION WARNING. This message shall be addressed to all
----------------------------
CRAF carriers with information copy to AMCALT, AMC NAFs, AFLC, NAVMTO, DOT/OET
DPB-30, AND 616 MAG and is to be released by the HQ AMC CAT-D.
3.5.5. STAGE III ACTIVATION NOTIFICATION. This message shall be addressed to
---------------------------------
all CRAF carriers with information copy to AMCALT, AMC NAFs, AFLC, NAVMTO, 11AF,
DOT/OET DPB-30, and 616 MAG and is to be released by the HQ AMC CAT-D upon
receipt of proper authority from the Chief-of-Staff Air Force (after a national
emergency has been declared by the President or the Congress or their designee).
Should communications with HQ USAF be lost, the HQ AMC CAT-D shall release the
Stage III activation message. The message shall include the approximate
percentage of aircraft and type of airlift (cargo or passenger) which may be
required. This message serves as an advisory for carrier company planning.
Page 8 of 47
<PAGE>
3.5.6. PRESIDENTIAL AUTHORITY (10 USC 9742)--Control of Transportation Systems
--------------------------------------
in Time of War. This message is addressed to all CRAF carriers, with
information to all military and governmental agencies associated with CRAF
operations. It advises all concerned that the President has invoked his
authority under Title 10, USC, and provides the effective date (GMT). It also
advises the CRAF carriers that mission assignment and AMC Command and Control
will function from the HQ AMC CAT to the aircrews, through the Senior Lodger
Station manager, when corporate management and facilities are no longer intact.
The message shall be released by the HQ AMC CAT Director upon receipt of proper
authority from HQ USAF and after coordination with the CAT Staff.
3.5.7. SENIOR LODGER STATION ACTIVATION. This three part message is addressed
--------------------------------
to the NAFs and applicable carriers. Part I contains the date and time (GMT)
stations identified in Part III are activated. Part II is for carriers who have
Senior Lodger responsibilities at stations identified in Part III. Part III
identifies the carrier responsible, and Senior Lodger station being activated,
depending upon the requirement.
3.5.8. SENIOR LODGER STATION WORKLOAD. This message is addressed to the
------------------------------
applicable Senior Lodger Station, with information copy to AMCALT and AMC NAFs.
It shall be sent on a continuing basis and shall advise the station manager of
the number of aircraft, by can be determined. Station workload information
shall be sent to all activated Senior Lodger locations as necessary.
SECTION C--HQ AMC CAT CHECKLIST FOR ACTIVATING AN USING THE CRAF
- ----------------------------------------------------------------
3.6. AIRCRAFT MANAGEMENT. To minimize cost to the Government and disruption of
-------------------
the carriers' civil schedules and services, only those aircraft actually needed
by AMC shall be called, and only as they are needed. Also, those no longer
needed shall be released to the carrier for commercial operations as soon as
practical.
SECTION D--CRAF CARRIER ACTIVATION ACTIONS
3.7. CRAF CARRIER ACTIVATION CHECKLIST. During CRAF activation, carriers shall
---------------------------------
receive the messages specified in this chapter. The conditions and a suggested
checklist of actions to be taken by the carrier follow:
3.7.1. HQ AMC CAT ACTIVATION MESSAGE. Upon receipt of this message, carriers
------------------------------
shall ensure that:
3.7.1.1. Personnel are assigned to its operations control center so as to
provide 24- hour coverage.
3.7.1.2. Personnel who have been requested by the HQ AMC CAT shall report to HQ
AMC at Scott AFB or AMCALT at Travis Air Force Base, CA.
3.7.2. STAGE III ACTIVATION WARNING MESSAGE. When this message is received
------------------------------------
carriers should:
3.7.2.1. Review the operational and maintenance status of all company aircraft
allocated to support Stage III of CRAF.
3.7.2.2. Prepare to recall and mobilize aircraft and aircrews designated to
participate in CRAF.
3.7.2.3. Review personnel support requirements.
3.7.2.4. If the carrier has Senior Lodger responsibilities, review actions
required to assume these duties and responsibilities.
3.7.2.5. Review the availability of aircraft spares and support equipment.
3.7.2.6. Ensure navigation route kits are current and available for use.
Page 9 of 47
<PAGE>
3.7.2.7. Assure all personnel scheduled to travel overseas have a current
passport or an application for a passport.
3.8. STAGE III ACTIVATION MESSAGE. Upon receipt of this message, CRAF carriers
----------------------------
shall if directed:
3.8.1. Issue Geneva Convention ID cards, as appropriate, to carrier personnel
going overseas.
3.8.2. If assigned Senior Lodger responsibilities, take immediate action to
assure that those assigned duties and responsibilities can be fulfilled.
3.8.3. Standby for aircraft callup and a AMC airlift mission assignment.
3.9. AIRLIFT MISSION ASSIGNMENT. All airlift services performed by CRAF
--------------------------
carriers shall be substantiated by delivery orders executed by the Contracting
Officer. Upon receipt of a AMC airlift mission assignment, the carrier shall:
3.9.1. Make available aircraft and aircrews required to perform the mission.
(Maximum time allowable for positioning aircraft and aircrews is 48 hours for
Stage III.) Cargo aircraft shall require a loading supervisor as part of the
crew.
3.9.2. Ensure navigation route kits are current and aboard allocated aircraft.
3.9.3. Service mission aircraft so as to position at on-load base with
sufficient fuel to make an east or west coast senior lodger station. This
allows for maximum ACL use.
3.10. SENIOR LODGER STATION ACTIVATION MESSAGE. Upon receipt of this message,
----------------------------------------
the following actions should be taken:
3.10.1. Senior Lodger carriers take immediate action to assure that Senior
Lodger duties and responsibilities are fulfilled. Advise the HQ AMC CAT of
operational or support limitations at each station activated.
3.10.2. Carriers having personnel committed to stations being activated shall
make them available for immediate deployment.
CHAPTER 4
---------
SENIOR LODGER
SECTION A--GENERAL
4.1. CONCEPT. During a CRAF activation, carriers shall utilize existing
-------
contracts and arrangements for aircraft servicing and support to the greatest
extent possible. The aircrew shall contact the Senior Lodger only when such
services are not available through normal commercial means, or when special
requirements exist (such as classified materials storage) which exceed normal
commercial arrangements.
4.2. DEFINITION.
----------
4.2.1. SENIOR LODGER. Senior Lodger is a term applied to the CRAF carrier that
-------------
contractually commits itself to support civil aircraft and crews flying in
support of the AMC operations at any stage of CRAF activation as they transit a
specific civil airports.
Page 10 of 47
<PAGE>
4.2.2. SENIOR LODGER STATION. AMC/XOC selects airdromes as Senior Lodger
---------------------
stations based on the facilities available and the needs of CRAF and AMC.
4.2.3. AUGMENTING CARRIER PERSONNEL. Personnel provided by other CRAF
-----------------------------
carriers, who shall, when requested, augment a Senior Lodger station, and
perform duties as required by the Senior Lodger.
4.2.4. AUGMENTING DOD PERSONNEL. DOD personnel provided as augmentees to
-------------------------
support a Senior Lodger station. The support provided by these personnel may
include but not be limited to chemical warfare, intelligence, weather, and
mission briefings.
4.2.5. CIVIL AIRLIFT SUPPORT ELEMENT (CASE). A team of two to four personnel,
-------------------------------------
possessing cargo and passenger expertise, and volunteered by civil air carrier
resources, that shall augment a AMC ALCE at an onload or offload site. The CASE
shall act as a liaison between the DOD and the civil carriers and shall provide
the necessary liaison support for civil aircraft and aircrews as they transit
specific airfields.
4.3. SENIOR LODGER CONTRACT PROVISIONS. All Senior Lodger services provided in
---------------------------------
connection with the CRAF shall be through provisions of a contract modification
issued by HQ AMC. The Airlift Services Contract makes provisions for the HQ AMC
Contracting Officer, as the HQ AMC CAT Director directs, to activate Senior
Lodger stations as required during CRAF activation. The Contracting Officer
shall issue a contract modification for stations activated.
4.4. SENIOR LODGER STATIONS. The following Senior Lodger stations, with the
-----------------------
responsible air carrier indicated, shall be activated as required.
4.4.1. CONUS
-----
4.4.1.1 Bangor International, ME -- Federal Express
4.4.1.2 Boston/General Edward L. Logan International, MA -- TWA
4.4.1.3 Houston Intercontinental, TX -- Continental
4.4.1.4 JFK International, NY -- TWA
4.4.1.5 Miami International, FL -- Southern Air Transport
4.4.1.6 San Francisco International, CA -- United
4.4.1.7 Seattle-Tacoma International, WA -- Northwest
4.4.2 OVERSEAS
--------
4.4.2.1 Agana NAS, Guam -- Northwest
4.4.2.2 Anchorage International, Alaska -- Federal Express
4.4.2.3 Brussels National, Belgium -- Delta
4.4.2.4 Cairo International, Egypt -- TWA
4.4.2.5 Frankfurt Main, Germany -- Delta
4.4.2.6 Honolulu International, Hawaii -- United
Page 11 of 47
<PAGE>
4.4.2.7 Lisboa/Lisbon, Portugal -- TWA
4.4.2.8 London/Gatwick, England -- Continental
4.4.2.9 Naha, Okinawa, Japan -- Northwest
4.4.2.10 New Tokyo International, Japan -- Northwest
4.4.2.11 Prestwick, Scotland -- Northwest
4.4.2.12 Roma/Fiumicino, Italy -- TWA
4.5. LIMITING FACTORS Upon station activation, the Senior Lodger shall advise
----------------
the AMC CAT CRAF Cell of any limiting factors that may affect the assigned CRAF
mission.
4.6. SENIOR LODGER SERVICES. Senior Lodgers shall act as the primary agent for
----------------------
any services required, whether specifically providing them or acquiring them
through alternative sources. Should appropriate support be unavailable, the
Senior Lodger should contact AMC CAT CRAF Cell, either through the CRAF carrier
operations, directly, or by any other expeditious means.
4.6.1. CIVIL AIRCRAFT SUPPORT. Senior Lodger services consist of ground
----------------------
support for all civil aircraft and crews participating in US military airlift
operations. Services which the Senior Lodger performs will vary from station to
station depending upon the workload involved.
4.6.2. DOD AIRCRAFT SUPPORT. AMC may occasionally request the Senior Lodger to
--------------------
provide or obtain service for DOD aircraft. Should a priority determination be
required, the Senior Lodger manager shall communicate with the HQ AMC CRAF Cell
through the CRAF carrier operations.
4.7. ACCOUNTING AND FINANCE.
----------------------
4.7.1. A Change Order to the Contract shall specify period of obligation and
the limits of payments for services.
4.7.2. BILLING PROCEDURE FOR PERSONNEL. A CRAF carrier, other than the Senior
-------------------------------
Lodger carrier, providing augmenting personnel to a Senior Lodger station, shall
bill the Senior Lodger for the costs incurred.
4.7.3. CHARGES TO THE GOVERNMENT. In the event of Senior Lodger activation, HQ
-------------------------
AMC will forecast the traffic for each Senior Lodger Station for planning
purposes. Normally, the Senior Lodger operation at a given station should be
self-sustaining, provided the traffic forecasted is generated. In the event
such traffic is not generated, the Senior Lodger shall charge the excess cost to
the US Government in accordance with the Change Order limitation.
4.7.4. SERVICES. Normally, civil carriers shall pay the Senior Lodger for
--------
services required and rendered. However, AMC may require the Senior Lodger to
provide or arrange the services listed below, for CRAF aircraft, at no cost to
the using CRAF carrier. In such cases Senior Lodger services are chargeable to
the US Government.
4.7.4.1. Transient alert and ramp services.
4.7.4.2. Passenger and cargo handling services.
4.7.4.3. Fire and crash rescue support.
4.7.4.4. Aircraft clearance facilities.
Page 12 of 47
<PAGE>
4.7.4.5. Emergency medical services.
4.7.4.6. Aeromedical hub or spoke support.
4.7.4.7. Physical survey of selected Senior Lodger airports.
4.7.4.8. Physical security provisions.
4.7.4.9. Digital and voice communications capability.
SECTION B--FLIGHT OPERATIONS
4.9. AUTHENTICATORS.
--------------
4.9.1. Procedures. Authenticators may be used during CRAF operations.
Normally, the aircraft captain or first officer shall be issued the appropriate
authentication material at a carrier's hub in sufficient quantity to support the
mission to the destination base and return to the CONUS, including possible
delays en route. Carrier personnel issuing authentication material shall
instruct the aircrews in the proper use of the authenticators. Aircraft
captains and first officers with proper SECRET security clearances shall be
authorized access to the classified authentication material affecting their
mission. If updated authentication material is required at a Senior Lodger
station, the Senior Lodger shall assist the flight crew in obtaining the current
material, and shall insure they are instructed in its proper use. To verify a
crewmember's access to classified material, the following must be checked:
4.9.1.1 Crewmembers' airline identification card with picture.
4.9.1.2 The DD Form 489, Geneva Convention's Identity Card for Civilians who
Accompany the Armed Forces.
4.9.2. STORAGE and SECURITY. Senior Lodgers must be prepared to provide
--------------------
security for classified cryptographic material up to and including SECRET. To
handle US SECRET cryptographic materials, the handler must have a SECRET
security clearance and, unlike non-cryptographic material, must be a US citizen.
4.9.2.1. Stateside storage facilities require a facility clearance for
classified storage. An alternative to storage is "constant vigilance," where
the cryptographic material is kept at all times in the field of view of a US
citizen with a SECRET clearance. Carriers can identify employees at US Senior
Lodger sites to fulfill this function.
4.9.2.2. Storage of classified material at overseas Senior Lodger stations is
not authorized. Therefore, when an aircraft has been delayed, the Senior Lodger
shall assign a minimum of three employees who are US citizens and have SECRET
clearances for constant vigilance of cryptographic material. Should there be
less than three SECRET- carrier employees at the Senior Lodger site, or should
those at the overseas site be required for other tasks not permitting constant
vigilance, the Senior Lodger carrier should identify a minimum of three
employees who can be spared during a CRAF activation (such as reservations
clerks, etc.) and who are US citizens to receive a US SECRET clearance and
deploy to the overseas site. If the Senior Lodger carrier is unable to supply
the needed personnel, the Senior Lodger shall contact the HQ AMC CAT for
assistance.
4.9.2.3. If delays are incurred at locations other than military installations
or Senior Lodger stations, the aircraft captain shall insure the security of the
authentication materials
4.9.3. Disposition of Authenticator:
4.9.3.1. The transfer of authentication material between aircrews at staging
points shall be accomplished by the use of the Standard Form (SF) 153 or Comsec
Material Report comparable receipt form.
Page 13 of 47
<PAGE>
4.9.3.2. When no longer needed, authentication materials must be promptly
returned to any AMC Operations Center/Command Post or USAF Base Operations.
Retain the SF 153 or other receipt for 2 years.
4.9.3.3. In an emergency, burn or finely shred the authenticators, widely
scatter the remains, and complete the destruction portion of the SF 153.
Provide a copy of this form to the issuing US Government agency/facility, and
retain one copy for 2 years.
SECTION C--TRAFFIC SERVICES RESPONSIBILITIES
4.10. AIRFIELDS.
---------
4.10.1. CIVIL AIRFIELDS. AMC may require Senior Lodger to provide the traffic
---------------
services for CRAF aircraft as specified in paragraphs 4.11 through 4.18.
4.10.2. MILITARY AIRFIELDS. AMC will provide or arrange for traffic services
------------------
for CRAF aircraft at military airfields. Normally, these services will consist
of on/off-load operations, including documentation. AMC may provide other
traffic functions when necessary to expedite the CRAF mission.
4.11. PASSENGER SERVICE If circumstances require passenger handling, the
-----------------
following services may be required.
4.11.1. Onload Passengers:
4.11.1.1. Ascertain proper boarding authority has been provided prior to
onloading passengers.
4.11.1.2. Ascertain documentation papers are in order and ensure proper
ticketing (Warsaw Convention), valid passports, visas, and health records are
possessed by those passengers departing for overseas. The contractor is not
responsible to ticket a passenger when the passengers are moved outside the
commerical terminal structure and using mobility passenger movement procedures.
The services are responsible to brief their passengers on Warsaw Convention
liability limits, through the use of handouts and signs containing the Warsaw
Convention language, and briefings to passengers using direct quotations of the
convention language. Additional insurance packets are handed out to the
passengers at that time.
4.11.1.3. Provide special handling for all courier and diplomatic passengers.
4.11.1.4. Provide passenger conveyance from terminal to aircraft, as required.
4.11.2. Offload Passengers:
4.11.2.1. Ascertain that passengers possess required passports, visas, and
health records prior to government processing.
4.11.2.2. Arrange for customs, public health, immigration, and ground
transportation.
4.11.2.3. Provide or arrange for adequate baggage handling.
4.11.2.4. Assure passengers process through customs, public health,
immigration, etc.
4.11.2.5. Provide special handling for courier and diplomatic passengers.
4.12. CARGO SERVICE Senior Lodger stations will normally not be cargo onload
-------------
or offload sites. If circumstances require cargo handling, the following
services may be required.
Page 14 of 47
<PAGE>
4.12.1. Outbound Cargo:
4.12.1.1. Ensure onload capability exists.
4.12.1.2. Receipt of cargo or mail from shipper.
4.12.1.3. Prepare necessary waybills, forms, etc.
4.12.1.4. Provide special handling and facilities for high value and hazardous
cargo.
4.12.2. Inbound Cargo:
4.12.2.1. Ensure offload capability exists.
4.12.2.2. Arrange for notifying consignee of shipment arrival or availability.
4.12.2.3. Arrange for government processing (customs, agriculture) or
shipments.
4.12.2.4. Provide necessary facilities for tracing lost or mishandled
shipments.
4.12.3. Records: Provide adequate facilities for maintenance of current
records and handling all invoicing.
4.13. ADDITIONAL GROUND SERVICE SUPPORT. The following factors must be
---------------------------------
considered:
4.13.1. Ramp parking assignments for aircraft.
4.13.2. Weight and balance planning and coordination.
4.13.3. Issuance of fuel load instructions to those responsible for aircraft
fueling.
4.13.4. Preparing and transmitting flight movement report which includes
passenger and cargo breakdowns, delays, crewmembers on board, aircraft
registration number, and fuel load.
4.13.5. Dissemination of accurate flight information.
4.13.6. Alerting and/or advising crew of dangerous cargo or high-value
shipments on board and its location.
4.13.7. Alerting flight crews as to flight readiness or availability.
4.13.8. Preparation or procurement of required food and beverages for
passengers, patients and flight crew.
4.13.8.1. Delivery of the food and beverages to the aircraft.
4.13.8.2. Galley servicing and supply.
4.14. CABIN SERVICE
-------------
4.14.1. Services and Supplies. Lavatory servicing and supply, including
operation of the necessary vehicles.
4.14.2. Cleaning. All cabin and cockpit areas.
4.14.3. Water. Water service necessary for aircraft operation and passenger
convenience.
Page 15 of 47
<PAGE>
4.15. TRAFFIC SUPPORT AND FORMS If a CRAF aircraft requires additional
-------------------------
supplies and AMC traffic forms while on a CRAF airlift mission, the Senior
Lodger shall provide company supplies and AMC (or equivalent substitute) forms.
4.16. AMC PERSONNEL. AMC shall provide traffic personnel to effect liaison on
-------------
traffic matters between AMC and the Senior Lodger at those stations where there
is a traffic function.
SECTION D--COMMUNICATIONS RESPONSIBILITIES
4.17. COMMUNICATIONS POLICY.
---------------------
4.17.1. SERVICES. Senior Lodgers shall use existing civil communications
--------
circuits. Military circuits, where available, are for backup service only.
4.17.2. RECORD COMMUNICATIONS.
---------------------
4.17.2.1. Senior Lodgers shall have the means to communicate with the HQ AMC
CAT, the carrier's home station, appropriate air traffic control center,
meteorological services, and adjacent stations served by CRAF. Facilities may
consist of, but are not necessarily limited to, the following:
4.17.2.1.1. International Civil Aviation Organization (ICAO)/Aeronautical Fixed
Telecommunications Network (AFTN).
4.17.2.1.2. Airline multiple user circuits, Aeronautical Radio, Inc. (ARINC),
International Aeradio, Ltd., and Societe Internationale de Telecommunicata
Aeronautiques (SITA).
4.17.2.2. The carrier shall coordinate with AMC for connection to the nearest
military communications center to provide for alternate message routing.
4.18. COMMUNICATIONS STATUS REPORT. Each Senior Lodger shall advise the HQ AMC
----------------------------
CAT and the air carrier's headquarters of available communications (ARINC, STU
III, Secure Fax machines, telephone, etc.), immediately upon the activation of
the Senior Lodger station. Carriers shall review Senior Lodger phone numbers,
ARINC addresses, etc., annually for currency.
SECTION E--SAFETY RESPONSIBILITIES
4.19. HAZARD REPORTING. The Senior Lodger or carrier representatives shall
----------------
report any condition involving cargo which, in their opinion, constitutes a
hazard to operations to the carrier and airport safety personnel. This report
should contain the following information:
4.19.1. Location.
4.19.2. Date and time (GMT).
4.19.3. Nomenclature of cargo (proper shipping name of hazardous cargo).
4.19.4. Shipper's organization/unit and name of cargo representative.
4.19.5. Destination of cargo.
4.19.6. Transportation control number (TCN) or Bumper/Increment number.
4.19.7. Facts and circumstances.
Page 16 of 47
<PAGE>
CHAPTER 5
---------
FLIGHT OPERATIONS
SECTION A--CONCEPT
5.1. GENERAL. CRAF flight operations shall be conducted in accordance with all
-------
applicable Federal Aviation Regulations (FARs) and all other applicable
governing directives.
5.2. OPERATIONS. There are many identified CRAF missions which support DOD
----------
airlift requirements during airlift or national emergencies. Primarily, these
are overseas deployment and resupply missions. The airlift capability in
support of these missions is based on a daily aircraft utilization rate of 10
hours.
5.2.1 LONG-RANGE INTERNATIONAL AND SHORT-RANGE INTERNATIONAL. The Long-range
-------------------------------------------------------
International segment satisfies requirements that exceed the capability of AMC's
organic long-range aircraft. The Short-range segment satisfies medium-range
offshore airlift requirements such as the Pacific inter-island complex, Western
Pacific, and from the CONUS to such places as Alaska, Greenland, Panama, and
Puerto Rico. AMC applies a 10-hour a day utilization rate to these two segments
for contingency planning. To arrive at a productive aircraft utilization rate,
the following known factors apply:
5.2.1.1 Aircraft ferry, position, and deposition time computed at .6 hours a
day.
5.2.1.2 DOD contingency plans identify wartime deployment airlift requirements;
therefore, productive utilization is one-half of the remaining 9.4 hours a day.
This equates to 4.7 hour a day.
5.2.2 AEROMEDICAL. Boeing B767 aircraft shall be configured to carry litter
------------
and ambulatory patients and provide all necessary electrical and oxygen systems
necessary for patient support. B767 aircraft are to be utilized in a strategic
role to augment existing military cargo aircraft such as the C141. The
utilization rate for planning is 10 hours per aircraft per day.
5.3. CRAF OPERATIONS AUTHORITY. CRAF operations shall be conducted in
-------------------------
accordance with procedures outlined in AMCR 55-8; AMCR 76-8; AMCR 76-1, Volume
I; and terms of the current AMC Airlift Services contract. Any situation or
subject not covered herein shall be resolved by the HQ AMC CAT-D or the
contracting officer.
5.4. FEDERAL AVIATION REGULATIONS (FARs). The basic policy is that CRAF shall
-----------------------------------
operate under FARs with waivers as necessary.
5.5. ALLOCATION OF THE FLEET. Aircraft are allocated to the CRAF by the
-----------------------
Department of Transportation (DOT)/Officer of Emergency Transportation (OET),
under the authority of Defense Production Act of 1950, as amended (50 USC App.
2061, et seg.). This allocation is based upon such factors as Department of
Defense (DOD)-approved airlift requirements and suitability of civil aircraft.
5.6. PASSENGER AIRCRAFT. These aircraft, allocated against long range
------------------
international airlift, shall arrive at on-load site prepared to receive
passengers/troops.
5.7. CARGO AIRCRAFT. Cargo aircraft allocated against long range international
--------------
airlift requirements shall arrive at on-load site prepared to receive cargo
loaded on military 463L pallets.
5.8. CONVERTIBLE AIRCRAFT. Convertible aircraft shall be configured by the
--------------------
carriers for cargo missions unless otherwise specified by the AMC CAT CRAF Cell.
Page 17 of 47
<PAGE>
SECTION B--COMMUNICATIONS
5.9. IN-FLIGHT COMMAND COMMUNICATION PROCEDURES.
------------------------------------------
5.9.1. MISSION POSITION REPORTING. All CRAF aircraft shall keep appropriate
--------------------------
AMC Command and Control agencies (Tanker Airlift Control Center (TACC), or
Tanker Airlift Control Elements (TALCE)), informed of mission progress. This
shall be done via direct radio contact when possible or through relays via
company operations centers, or any suitable ground radio station.
5.9.2. ARRIVAL/DEPARTURE MESSAGES. CRAF aircraft on active AMC missions or
--------------------------
positioning to an active AMC mission shall pass AMC mission number, aircraft
number, actual time of arrival/departure and estimated time of departure/arrival
within 15 minutes of arriving or departing a station without a AMC command and
control agency.
5.9.3. ENROUTE COMMUNICATIONS WITH THEATER ALCC. On all missions into an area
-----------------------------------------
of operations that has a designated ALCC, CRAF aircraft must contact the ALCC
prior to passing geographical boundaries of the operational area. The following
information shall be passed.
5.9.3.1. Mission number and FAA aircraft registration (Tail) number.
5.9.3.2. Estimated Time of Arrival (ETA) for destination or alternate, and
delay if anticipated.
5.9.3.3. Any significant maintenance problems.
5.9.3.4. Thirty minutes prior to landing, pass the information requested in
5.9.3. above to the destination TALCE.
5.9.4. ESTABLISHING COMMUNICATIONS WITH DESTINATION STATION. On all flights,
----------------------------------------------------
when an aircraft is approximately two hours from destination, the aircraft
captain shall establish contact with or have information relayed to the
destination station. The following data shall be passed:
5.9.4.1. Mission number and FAA aircraft registration (Tail) number.
5.9.4.2. ETA destination or alternate and delay time if anticipated.
5.9.4.3. Any significant maintenance problems.
5.9.5. THE AMC TALCE COMMANDER, SENIOR AMC REPRESENTATIVE, OR SENIOR LODGER
--------------------------------------------------------------------
Shall assure the CRAF aircrew receives (see AMCR 55-25):
5.9.5.1. The latest available communications information concerning the
proposed route of flight.
5.9.5.2. Enough authentication material (tables) to cover the subsequent 72
hours.
5.10. MESSAGES. The following air traffic control (ATC) and operational
--------
messages are necessary for proper control and flight following of the CRAF by
the HQ AMC CAT over standard communication channels.
5.10.1. ATC MESSAGES. These shall be filed in accordance with established
------------
procedures.
5.10.2. OPERATIONAL MESSAGES. There are three kinds: departure, arrival, and
--------------------
advisory. Addressees should be the next intended landing site operation center,
the appropriate carrier, and the TACC.
5.10.3. When standard communications are not possible, the crew should
communicate the following information to their company headquarters (or the most
accessible military flight facility) by the most rapid and efficient method
Page 18 of 47
<PAGE>
at their disposal:
5.10.3.1. Greenwich (Z) Time of Arrival.
5.10.3.2. Estimated (Z) Time of Departure.
5.10.3.3. Proposed destination and estimated arrival times (Z).
5.10.3.4. Maintenance Problems.
5.10.3.5. Other information as necessary.
SECTION C--AIRCREW, SCHEDULING, AND MISSION MANAGEMENT.
5.11. GENERAL. During CRAF activation, mission scheduling shall be accomplished
-------
by the AMC CAT CRAF Cell. Carriers shall schedule aircrews and aircraft.
5.12. DEVIATION FROM MISSION SCHEDULE. Except for emergency or safety reasons,
-------------------------------
deviations from mission schedules must be authorized by the AMC CAT.
5.13. CREW SCHEDULING AND STAGING RESPONSIBILITY. Aircrew scheduling and
------------------------------------------
staging shall be the responsibility of the CRAF carrier. Under emergency
conditions, the responsibility for crew scheduling may be delegated by the
carrier to the Senior Lodger station manager.
5.14. CREW COMPLEMENT.
---------------
5.14.1. Aircrew composition is the decision of the CRAF carrier and in
accordance with carrier operating manuals and Part 121 of the FAR.
5.14.2. The composition of the aeromedical crew shall be determined by the
Chief Nurse of the aeromedical crew organization, based upon patient load and
acuity. A minimum B767 aeromedical crew is 4 flight nurses and 6 aeromedical
technicians.
5.14.3. Assignment of carrier or FAA personnel as check or instructor personnel
is authorized. These additional crewmembers shall be limited, whenever
possible, to flights which shall not have a reduced ACL as a result of the
additional crewmember(s) being aboard. However, should the additional
crewmember require a cabin seat that reduces the ACL, the ACO must grant
approval.
5.14.4. Prior to boarding the aircraft, written authority for FAA and carrier
personnel, signed by properly designated personnel of the carrier concerned,
must be presented to the appropriate operations officer, dispatch center, Senior
Lodger station manager, or AMC representative.
5.15. CREW NOTIFICATION.
-----------------
5.15.1. CONUS. Crew notification shall be accomplished by the CRAF carrier.
-----
Should CRAF be in a dispersed posture, notification shall be accomplished by the
CONUS Senior Lodger station manager.
5.15.2. OVERSEAS. Crew notification shall be accomplished by the Senior Lodger
--------
station manager at civil airports and by Base Operations or AMC Command and
Control agency at military airfields.
Page 19 of 47
<PAGE>
5.16. AIRCRAFT GROUND TIME. For planning purposes the following ground times
--------------------
shall be used:
<TABLE>
<CAPTION>
CONCURRENT OFF-LOAD TURN
TYPE LOADING ENROUTE AT AROUND/1/
CARGO SERVICING/1/ STATIONS DESTINATION/5/ STATION/2/
- ----- ------------ -------- -------------- ----------
<S> <C> <C> <C> <C>
Palletized Bulk 3/
1-7 pallets 3 + 00 1 + 30 0 + 45 3 + 00
8-13 pallets 3 + 00 1 + 30 1 + 15 3 + 00
14-18 pallets 3 + 30 1 + 30 1 + 15 3 + 30
19 or more 5 + 00/4/ 1 + 30 3 + 00 5 + 00/4/
Oversize/Rolling Stock
1-25 ST ACL 4 + 00 1 + 30 2 + 00 4 + 00
26 ST or more 5 + 00/4/ 1 + 30 3 + 00 5 + 00/4/
Passengers
105-250 PAX 2 + 00 1 + 30 2 + 00 2 + 30
251 or more 3 + 00 1 + 30 3 + 00 3 + 30
Aeromed Evac Patients
All 5 + 00 3 + 00 3 + 00 6 + 00
</TABLE>
/1/ Add one hour at station where concurrent loading and servicing are not
authorized.
/2/ Stations where off-load, servicing, and/or on-loading shall occur.
/3/ Assumes palletized bulk cargo load and that aircraft is properly configured
to accommodate 463L pallets.
/4/ Add one hour if subfloor must be installed or removed.
/5/ No aircraft servicing is planned.
SECTION D--AIRCREW RESTRICTIONS
5.17. FLIGHT TIME LIMITATIONS. The flight time limitation for CRAF crewmembers
is specified in the FAR and the carriers' aircraft operating manual, unless
otherwise waived by FAA. Carriers with union agreements, which have flight time
limitations less than those identified in Chapter 10, must consider this in
planning aircrew requirements. Where possible, carriers should have agreements
with crew members that permit flight operations during CRAF activation up to the
maximum limits specified by FAR and safe operating practices.
SECTION E--AIR CARRIER DISPATCH PROCEDURES
5.24. AIRCRAFT CAPTAIN'S AUTHORITY. Aircraft captains may:
5.24.1. DELAY OR DISCONTINUE FLIGHT. Delay of discontinue their flight when,
in their opinion, operating conditions are unsafe for starting or continuing a
flight.
5.24.2. CHANGE FLIGHT PLAN. Initiate a change in their flight plan when, in
their opinion, this change is necessary for reasons of safety.
5.24.3. RELEASE FLIGHT Release their own flight when operating in support of
CRAF.
Page 20 of 47
<PAGE>
5.25. ALTERNATE AIRPORTS.
5.25.1. SELECTION. In flight planning alternate airports for CRAF missions,
CRAF carriers shall consider the following:
5.25.1.1. For foreign off-load destinations, a Senior Lodger station, a US
military airfield, or airfield with US military facilities should be given first
priority. (AMC command and control agencies shall provide preferred
alternatives for each mission based on forces and supplies requirements and
desired off-load locations.)
5.25.1.2. Availability and proximity of billeting and messing facilities for
passenger missions.
5.25.1.3. Diplomatic clearance, overflight agreements, and security
considerations for missions carrying dangerous or special handling cargo.
5.25.2. COORDINATION. The nearest or most available AMC operations
center/command post should be contacted before proceeding to an alternate.
5.25.3. AEROMED EVAC MISSION In addition to the above considerations, casualty
transport Systems or equivalent MHE must be available. A satisfactory patient
holding facility may also be required.
SECTION F--SPECIAL OPERATING PROCEDURE
5.26. HANDLING OF COMPLETED MISSION PAPERS. Disposition of Flight Forms. All
flight papers that have been used or collected during flight shall be disposed
of in accordance with carrier directives.
5.27. EARLY DEPARTURE. The HQ AMC CAT may authorize early departure from any
station. Early departures must be approved by the aircraft captain.
5.28. EMERGENCY AND SURVIVAL EQUIPMENT. CRAF carriers are responsible for
providing overwater, emergency, and survival equipment in compliance with
Federal Aviation Regulations.
5.29. PRIORITY OF AIRCRAFT. During CRAF activation, military and civil
transport aircraft flying in support of the contingency shall receive the same
priority.
SECTION G--DISPERSAL AND REGROUP PLANNING
5.30. CRAF REGROUP OPERATIONS. CRAF aircraft and resources shall be considered
dispersed in place and regrouped in accordance with the provisions of this
attachment and the HQ AMC CAT.
5.30.1. In planning for employment of civil airlift augmentation during a
national emergency, consideration must be given to the preservation of airlift
resources.
5.30.2. Aircraft inflight over the CONUS shall be dispersed to safe haven
bases, as directed by air traffic control authorities. When conditions permit,
control of these dispersed aircraft shall be retained by company management who
shall direct reassembly at predetermined regroup operating bases, or dispatch to
specified on-load bases. Airlift mission assignments shall be routed through
corporate management. Airlift mission assignments shall be from the HQ AMC CAT.
5.30.3. Allocated aircraft that are offshore when safe passage procedures
(contained in SECRET NORAD Regulations 55-67 and 55-68) have been implemented
shall divert into the nearest base listed below so as to obtain specific
procedural information required for penetration and operation in the NORAD area.
Base operations at one of the following locations shall provide the NORAD
information prior to departing for entry into the NORAD defense area.
Page 21 of 47
<PAGE>
5.30.3.1. ATLANTIC AREA. Rhein-Main AB, Germany; Incirlik AB, Turkey; and
Lajes Field, Azores.
5.30.3.2. PACIFIC AREA. Andersen AFB, Guam; Yokota AB, Japan; Kadena AB,
Okinawa; Hickam AFB, Hawaii; Elmendorf AFB/Cold Bay AFS (714 ACWS), Alaska. (If
aircraft is on the ground at Anchorage International, contact Elemendorf AFB.
If aircraft is airborne within the Alaska area, divert to Cold Bay AFS.)
5.30.4. After obtaining a copy of the NORAD Safe Passage procedures, aircraft
identified in paragraph 5.30.3. above, shall be directed to:
5.30.4.1. A CONUS regroup base, or
5.30.4.2. A CONUS on-load base.
CHAPTER 6
---------
TRAFFIC (TERMINAL SERVICES)
6.1. GENERAL. This chapter covers the broad aspects of traffic/terminal
-------
services as they apply to the Long Range International CRAF. Traffic/terminal
services include the receiving, processing, documenting, on/off-loading of
passengers and cargo, cabin servicing, preparing and submitting necessary
reports, maintaining records, and accomplishing other applicable tasks.
6.2. TRAFFIC FUNCTIONS RESPONSIBILITIES. During CRAF activation,
----------------------------------
responsibility for traffic functions shall be:
6.2.1. SENIOR LODGER. The Senior Lodger station manager shall be responsible
-------------
for enroute traffic functions for CRAF aircraft. When required, military
personnel shall provide liaison between the military and the Senior Lodger
station manager.
6.2.2. MILITARY INSTALLATIONS. When CRAF has been activated, CRAF aircraft
----------------------
shall use traffic terminals as directed. When military stations are used by
CRAF aircraft, services and equipment, as set forth in this Contract, shall be
provided by the Government.
6.2.3. AMC NUMBERED AIR FORCE (AMC NAF)-CONUS. The responsible AMC NAF shall
--------------------------------------
provide all serial port of embarkation (APOE) functions required for CRAF
operation.
6.3. CRAF ROUTE SUPPORT.
------------------
6.3.1. MOVEMENT ON CRAF AIRCRAFT. CRAF carriers shall move support traffic
-------------------------
aboard their own or other civil carriers aircraft in accordance with Section C
of the contract except that, during CRAF activation, three percent of the
aircraft's ACL, by weight, shall be considered available for route
support/resupply.
6.3.2. MOVEMENT ON MILITARY AIRCRAFT. CRAF carriers that are unable to move
-----------------------------
support traffic aboard CRAF/non-CRAF civil aircraft shall request assistance
from AMC Crisis Action Team.
6.3.3. PRIORITIES. CRAF route support traffic shall be assigned the same
----------
movement priority as AMC route support traffic.
6.4. TRAFFIC DOCUMENTATION AND PROCEDURES.
------------------------------------
Page 22 of 47
<PAGE>
6.4.1. ROUTING OF TRAFFIC DOCUMENTS. All traffic moved on CRAF aircraft shall
----------------------------
be documented and processed in the same manner as traffic moved on AMC aircraft.
Manifests, and supporting documents, prepared at non-AMC CONUS on-load bases
shall be forwarded by AMC personnel to the appropriate AMC Air Force.
6.5. MATERIAL HANDLING EQUIPMENT (MHE).
---------------------------------
6.5.1. The HQ AMC CAT Director shall be responsible for assuring availability
of adequate MHE, cargo and passenger, to support planned workload at all on-load
and off-load 42 locations. See Note in paragraph 7.2.1.7.
6.5.2. CRAF carriers shall be tasked to provide wide-body MHE from their
resources, when available, unless compatible military equipment is
prepositioned.
6.5.2.1. Positioning of carrier MHE will normally be their responsibility.
6.5.2.2. AMC shall position MHE that exceeds the carrier capability to
position.
6.5.2.3. Payment to carriers for use of MHE and equipment operators shall be
settled under the authority of the Changes clause of the Airlift Services
contracts.
6.6. CARGO TIE-DOWN POLICY. AMC is responsible for providing the tie-down
---------------------
equipment for palletized and non-palletized cargo. For non-palletized cargo,
AMC is also responsible for providing pallets required for sub-flooring. The
carrier is responsible for securing pallets to the aircraft.
6.7. PASSENGER FEEDING.
-----------------
6.7.1. CRITERIA. All passengers shall be provided with inflight meals or
--------
snacks.
6.7.2. RESPONSIBILITY. Obtaining, preparing, and serving inflight meals are
--------------
the carrier's responsibilities. The contractor is required to provide ground
feeding when appropriate.
6.7.3. PURCHASE OF INFLIGHT MEALS FROM MILITARY. The contractor may purchase
----------------------------------------
inflight meals from military installations when a suitable commercial source is
not available.
6.7.4. GROUND FEEDING. Ground feeding at military installations shall be in
--------------
accordance with this contract.
6.8. PATIENT MEALS. Patients receiving regular diets shall be served by the
-------------
Flight Attendants. When special meals are required and are available,
aeromedical evacuation crewmembers shall coordinate with flight attendants on
meal preparation and delivery.
Page 23 of 47
<PAGE>
CHAPTER 7
---------
LOGISTICS
SECTION A--RESPONSIBILITIES
7.1. AMC. AMC shall be responsible for programming, budgeting, funding,
---
contracting, and monitoring logistics support in the following areas:
7.1.1. INITIAL MOVEMENT AND RESUPPLY. Upon Stage III CRAF activation, HQ AMC
-----------------------------
CAT will ensure that sufficient support airlift is made available, if requested,
to CRAF carriers for the initial movement and subsequent resupply of their route
support materials and personnel.
7.1.1.1. Transportation of resupply support shall be via route support airlift,
or via government surface transportation, as dictated by the urgency of the
requirement.
7.1.1.2. Should route support be required, request shall be forwarded to HQ AMC
CAT.
7.1.2. LOGISTIC SUPPORT PLANNING. HQ AMC CAT will monitor and coordinate CRAF
-------------------------
logistic support effectiveness under the airline self-support concept.
7.1.3. POL FACILITIES AND RESUPPLY CAPABILITY. AMC shall ensure that adequate
--------------------------------------
POL facilities and resupply capability are available at all planned contingency
bases (both commercial and military). If fuel cannot be made available,
suitable alternate airfields shall be recommended. Standard fuels will normally
be available. Unusual POL requirements shall be managed by either the Senior
Lodger or the using carrier.
7.1.4. TO-PLANE POL SERVICES. Headquarters AMC CAT shall ensure that to-plane
---------------------
servicing of POL is provided at military bases. To-plane servicing of POL at
commercial bases shall be the responsibility of the carrier or Senior Lodger
station manager.
7.2. MILITARY BASES. Commanders of military bases identified in USAF WAR and
--------------
Mobilization Plan, through which CRAF aircraft may transit, shall be responsible
for the following:
7.2.1. GROUND SERVICES. Provide services to include the furnishing of
---------------
necessary equipment and personnel for all CRAF aircraft arrivals:
7.2.1.1. Ramp services. To include: landing, towing, parking, ramp sweeping,
snow removal service, APUs, fire guard, turbine engine starting units, loading
ramps, crew and passenger stairs/ramps, baggage carts, lavatory, and potable
water service units.
7.2.1.2. To-plane fueling.
NOTE: A technically qualified carrier representative must be present to perform
the into-plane portion of the fueling operations.
7.2.1.3. Cargo handling.
7.2.1.4. Ground-to-plane air conditioning, where available and required.
7.2.1.5. Engine water (demineralized) and alcohol.
7.2.1.6. Aircraft deicing.
Page 24 of 47
<PAGE>
7.2.1.7. Ground heater.
NOTE: Peculiar Ground Equipment (equipment not common to normal base
requirements in support of military aircraft or not compatible with CRAF
aircraft) may not be available; therefore, must be provided by the carrier.
7.2.2. SERVICES FOR CRAF AIR CREWS. Where commercial services are not
---------------------------
available at or near military bases, arrangement for the billeting and messing
facilities for CRAF air crews shall be accomplished by the US Government, as
required. Services or property furnished on military bases, pursuant to this
paragraph, shall be on a reimbursable basis in accordance with provisions of:
7.2.2.1. Air Force Bases--AFM 67-1, Volume I, part 1.
7.2.2.2. Naval Air Stations--Naval Supply Systems Command Manuel, Volume II.
7.2.2.3. Army Air Fields--AR 210-95 (POL only).
7.2.3. HOUSEKEEPING SUPPORT AND SERVICES. Providing the CRAF operation with
---------------------------------
normal housekeeping support and services.
7.2.4. REIMBURSABLE OR EQUATABLE CREDIT EXCHANGE. Logistic support provided by
-----------------------------------------
the Government to CRAF carriers shall be on a reimbursable or equitable credit
exchange basis, as contractually agreed.
7.2.5. PURCHASE OF PETROLEUM PRODUCTS. The Contract may purchase at any
------------------------------
military base other than Rhein-Main AB, Germany (unless specific approval is
granted by supplemental agreement), for the use in performing services
hereunder.
7.3. CRAF CARRIER.
------------
7.3.1. SUPPLY LEVELS. Maintain adequate supply levels to assure expeditious
-------------
unit replacement for unserviceable parts.
7.3.2. TRANSPORTATION PRIORITIES. Assign transportation priorities to
-------------------------
shipments consigned to the Senior Lodger station manager.
7.3.3. SUPPLY PRIORITIES. Honor the supply priority on Senior Lodger station
-----------------
manager requests for resupply.
7.3.4. SHIPPING RESUPPLY ITEMS. Ship routine resupply rotatable items within
-----------------------
48 hours, if possible.
7.3.5. REPORTING SUPPLY DIFFICULTIES. Advise Senior Lodger station managers
-----------------------------
when difficulty in filling requests is anticipated within the time limit or the
priority indicated.
7.3.6. STATUS OF SUPPLY ACTIONS. Keep the Senior Lodger station managers
------------------------
advised as to the status of their requests for supply action.
7.3.7. MAINTENANCE SERVICE. Provide or make arrangements for requirements to
-------------------
support CRAF maintenance services within the CONUS.
7.3.8. SPECIAL CLOTHING. Ensure that company personnel are adequately clothed
----------------
and equipped for assigned locations and particular job specialty.
Page 25 of 47
<PAGE>
SECTION B--SUPPLY AND SERVICES
7.4. AIRCRAFT SPARES. Each CRAF carrier shall determine spares required for
---------------
each station or individual aircraft to accomplish their assigned mission based
upon station workload and route structure. Allocation of spares to, and
placement of spares on, individual aircraft for selected stations shall be in
consonance with the carrier's best estimate of the support capability required.
Carriers will consider all available sources of supply in planning for
anticipated spares support.
7.5. GROUND EQUIPMENT AND AIRCRAFT SERVICE.
-------------------------------------
7.5.1. MILITARY BASES. At military installations, common ground support
--------------
equipment shall be provided CRAF carriers, as required.
7.5.2. COMMERCIAL BASES. At commercial bases, Senior Lodger station managers
----------------
will provide required support to the maximum extent possible, exhausting all
civil sources. Deficiencies in support requirements shall be reported to the HQ
AMC CAT.
7.6. POL (PETROLEUM - OIL - LUBRICANTS).
----------------------------------
7.6.1. MILITARY BASES. POL products of military specifications shall be
--------------
provided carriers, as required, on a reimbursable basis (see paragraph 7.2.).
Military fuels JP-4 and JP-5 are acceptable substitutes for commercial fuels.
CRAF carriers and Senior Lodger station managers will provide their own peculiar
requirements of commercial type oils, lubricants, and fluids.
7.6.2. COMMERCIAL BASES. Senior Lodger station managers will help arrange for
----------------
all CRAF POL, using all available civil sources to obtain full support.
Deficiencies shall be reported to the HQ AMC CAT.
SECTION C--MAINTENANCE
7.7. MAINTENANCE POLICY. Normally, maintenance shall be accomplished at the
------------------
operator's facilities or other agencies contracted by the carrier. Aircraft
maintenance at en route and turnaround bases shall be performed in accordance
with policies and procedures of respective carriers and this contract.
7.8. EMERGENCY MAINTENANCE. At military bases, military commanders are
---------------------
authorized to furnish aircraft maintenance, within the limits of existing
capability, on a reimbursable basis. Carrier shall provide a qualified
supervisor (flight deck crew member, if available) when maintenance is performed
by the military.
7.9. MAINTENANCE OF GROUND SUPPORT EQUIPMENT.
---------------------------------------
7.9.1. MILITARY BASES. Peculiar equipment required by the carriers shall be
--------------
the responsibility of the using carrier.
7.9.2. COMMERCIAL AIRPORTS. Equipment provided from airline industry resources
-------------------
shall be maintained by the Senior Lodger Station Manager.
7.10. AIRCRAFT INSPECTIONS AND ENGINE CHANGES. Individual CRAF carriers shall
---------------------------------------
control their scheduled aircraft maintenance inspections and time limited
components through their scheduling sections in accordance with company policy.
7.11. MINIMUM EQUIPMENT REQUIREMENTS. Instructions contained in each CRAF
------------------------------
carrier's aircraft operating manual shall be used when releasing aircraft with
inoperative items.
Page 26 of 47
<PAGE>
7.12. MANDATORY AIRCRAFT MODIFICATION AND INSPECTION. Each CRAF carrier shall
----------------------------------------------
ensure its aircraft are in compliance with applicable FAA standards and
directives. In those instances where the FAA and the carrier's mandatory
inspection or modification work is to be performed, the Senior Lodger Station
Manger shall perform such work or inspection in accordance with instruction
from the carrier.
7.13. AIRBORNE COMMUNICATIONS AND NAVIGATION EQUIPMENT MAINTENANCE.
------------------------------------------------------------
Maintenance of aircraft communications and navigational equipment shall be
predicated on unit replacement and accomplishment of limited repairs within the
capability of each Senior Lodger Station Manger. Equipment that cannot be
repaired shall be returned to the carrier from whose aircraft the unit was
removed.
CHAPTER 8
---------
COMMUNICATIONS
SECTION A--CONCEPT
8.1. GENERAL. This chapter establishes communication policies and procedures
-------
to be used during the employment of the CRAF.
8.2. ACTIVATION OF CRAF. Activation of the CRAF will require continuous
------------------
communication between the HQ AMC CAT and the carriers. The means of
communication shall be those facilities normally used during the average
business day. They include: telephone, Aeronautical Radio, Inc. (ARINC),
Automatic Digital Network (AUTODIN), secure telephone and secure fax machine.
8.3. FEDERAL AVIATION REGULATIONS (FARs). FARs are applicable in all civil
-----------------------------------
aviation operations.
SECTION B--OPERATING PROCEDURES
8.4. GENERAL.
-------
8.4.1. USE OF COMMUNICATIONS EQUIPMENT. CRAF aircraft shall be equipped with
-------------------------------
radios that are capable of communicating with all appropriate control agencies.
CRAF air crews shall use International Civil Aviation Organization (ICAO)
procedures unless otherwise instructed.
8.4.2. PRIMARY AND SECONDARY GROUND/AIR CONTACT. ICAO and other civil
----------------------------------------
ground/air stations presently used by CRAF carriers shall be the primary
aircraft contact. USAF Global Command and Control System (GCCS) stations shall
be for secondary contact when civil facilities are not available.
8.5. COMMUNICATION NETWORKS.
----------------------
8.5.1. REQUIRED SERVICES. Reliable continuous communications service is
-----------------
necessary to support CRAF mission control. Additional point-to-point circuits
essential to CRAF carrier operations shall be provided by the carrier to include
those required at Senior Lodger locations.
8.5.2. AIR-TO-GROUND.
-------------
8.5.2.1. The primary facility for HF en route voice contact shall be those
civil facilities which are presently used; e.g., ICAO, ARINC, or company
commercial air/ground facilities.
8.5.2.2. Existing USAF GCCS facilities shall be used as an alternate when civil
facilities are not available. Frequencies for USAF GCCS stations are listed in
the current DOD Flight Information Publication (FLIP).
Page 27 of 47
<PAGE>
8.5.2.3. Carrier aircraft shall be capable of communicating with US Air Force
Communications Control Stations as outlined in the current FLIP en route
supplement, National, and International section.
8.5.2.4. Strict radio discipline is mandatory.
8.5.2.5. Voice call signs for individual CRAF aircraft shall be as directed by
the HQ AMC CAT.
8.5.3. POINT-TO-POINT.
--------------
8.5.3.1. Presently used civil communications shall be used for communication
between the HQ AMC CAT, CRAF carrier operating bases, and Senior Lodger
locations.
8.5.3.2. Military communications shall be used as an alternative when civil
communications are not available.
8.5.3.3. When at military facilities, AMC Command Center communications shall
be used. If they are not available, the Defense Communications System Teletype
Net or other available system shall be used, as appropriate.
8.5.3.4. CRAF aircraft movement messages shall be transmitted in the clear.
8.5.3.5. Messages regarding classified missions shall be classified and
transmitted over Stu III/secure facsimile equipment.
8.5.3.6. When a carrier has a special message handling requirement, it becomes
that carrier's responsibility to contact the Senior Lodger Station Manager and
make arrangements for such handling.
8.5.3.7. Carriers and Senior Lodger stations using TELEX (Telex Communications,
Inc.) and ARINC facilities will follow appropriate message addresses and format.
Message exchange between carriers, Senior Lodger Station Manager, and the HQ AMC
CAT shall be routed in accordance with the International Air Transport
Association (IATA) Airline seven-letter addresses and the ICAO/AFTN eight-letter
addresses. These addresses are the central contact point at each location. It
then becomes the responsibility of each contact point to establish procedures to
ensure international routing of all CRAF messages. These messages shall be in
the format applicable to the circuit over which the message is to be sent (e.g.,
ICAO/AFTN, commercial, IATA/Airline, military).
8.5.3.8. When necessary to relay messages between circuits when using different
procedures, it shall be accomplished through automated interchange between ARINC
and FAA operated AFTN relay station (KMKM) at Kansas City MO.
SECTION C - CRAF COMMUNICATIONS
- -------------------------------
8.6. GENERAL. Voice and teletype circuits are required from the HQ AMC CAT to
-------
the CRAF carriers' operations control center locations and the Senior Lodger
stations. An ARINC teletype system shall be installed upon the direction of the
HQ AMC CAT/CRAF representative. The location for the CRAF ARINC shall be
specified at that time by the CRAF representative. Operators shall be
identified for the ARINC on a 24-hour-a-day standby basis.
8.7 SECURE COMMUNICATIONS.
----------------------
8.7.1. All CRAF carrier operations centers and Senior Lodger sites shall be
equipped with a Government furnished STU III/secure facsimile machine to receive
or transmit material up to the SECRET level.
8.7.2. All CRAF carrier operations center, Senior Lodger sites, and CRAF pilots
will have KL43D DATA
Page 28 of 47
<PAGE>
Encryption Devices issued to them which will allow them to authenticate and
pass encoded messages to AMC command and control agencies over very high
frequency (VHF) and HF frequencies, phone patch, or telephone.
CHAPTER 9
---------
MANPOWER AND PERSONNEL
SECTION A--CONCEPT
9.1. GENERAL.
-------
9.1.1. TRANSITION FROM CIVIL TO MILITARY SUPPORT OPERATIONS. The CRAF program
----------------------------------------------------
structure is designed to permit supporting personnel to transition from
commercial operations to military support operations in the most expeditious and
efficient manner.
9.1.2. PROCUREMENT AND SUPERVISION. Procurement and supervision of all
---------------------------
personnel required by the CRAF carriers to conduct military support operations
shall remain the responsibility of each carrier.
SECTION B--POLICIES
9.2. BENEFITS AND COMPENSATIONS. Persons assigned to CRAF will remain on the
--------------------------
payroll of their original employer and will receive personnel benefits accorded
by that employer. Rates of compensation shall be determined by the employing
carrier.
9.3. OFFICER STATUS AUTHORIZED FOR CRAF PERSONNEL. CRAF personnel in the
--------------------------------------------
following categories shall be afforded the courtesies of officer grade.
9.3.1. All aircrew personnel.
9.3.2. All supervisory personnel.
9.3.3. All professional and technical personnel including:
9.3.3.1. Dispatchers.
9.3.3.2. Meteorologists.
9.3.3.3. Doctors.
9.3.3.4. Nurses.
9.4. COOPERATION BETWEEN CRAF PERSONNEL AND MILITARY BASE COMMANDERS. CRAF
---------------------------------------------------------------
personnel shall be expected to cooperate with military base commanders on all
policy matters pertaining to safety, security, overall administration, and
personal conduct.
SECTION C--REQUIREMENTS AND ALLOCATIONS
9.5. PERSONNEL REQUIREMENTS AND MANPOWER ALLOCATION. Personnel resources to
----------------------------------------------
support CRAF operations (except AMC liaison personnel) shall be furnished by
parties in accordance with the following:
Page 29 of 47
<PAGE>
9.5.1. SENIOR LODGER PERSONNEL REQUIREMENTS. Senior Lodger carriers shall
------------------------------------
designate, by name, qualified company personnel, including courier officer, if
required, to provide 24-hour service in operations, maintenance, supply
communications, and traffic services. Other Senior Lodger personnel
requirements at each CONUS and overseas station will depend upon the type and
magnitude of the CRAF missions planned to be operated through the station.
Headquarters AMC will provide the Senior Lodger carrier(s) concerned the best
possible definition of the potential station workload. Senior Lodger carriers
will determine the additional personnel, by skill, required for the Senior
Lodger station concerned. The HQ AMC CAT shall be advised of personnel
requirements that cannot be satisfied.
SECTION D--PERSONNEL PROCEDURES UPON STAGE III CRAF ACTIVATION
9.6. SENIOR LODGER SUPPORT. Upon receipt of notification, each CRAF carrier
---------------------
who has an overseas Senior Lodger personnel commitment and/or an overseas crew
staging requirement shall accomplish the following:
9.6.1. OVERSEAS ASSIGNED. Alert personnel in the CONUS who have been selected
-----------------
for overseas duty. Reporting instructions for transportation overseas shall be
forwarded from the HQ AMC CAT. Prior to departing designated embarkation
points, personnel will have in their possession:
9.6.1.1. Travel Authorization Document. In order to identify properly those
individuals reporting to a CONUS pickup point for further movement to an
overseas station, a Travel Authorization Document shall be provided by each CRAF
carrier to its personnel. Each individual shall be furnished two copies: one
for their own use and one to turn in at the CONUS reporting point.
9.6.1.2. Passport. Issue instructions for obtaining passports.
9.6.1.3. Geneva Convention Identity Card (DD Form 489).
9.6.1.4. International Certificate of Vaccination (Public Health Service Form
731).
9.6.2. CONUS ASSIGNED. Alert personnel in the CONUS who have been designated
--------------
to support CONUS Senior Lodger stations and issue appropriate reporting
instructions for their CRAF duty assignment.
9.6.3. ALREADY OVERSEAS. Alert personnel overseas who have been designated as
----------------
CRAF support personnel, and issue them appropriate instructions regarding their
reporting to and overseas Senior Lodger Station Manager.
NOTE: Prior to CRAF activation, it shall be necessary for CRAF carriers
contributing personnel to coordinate with the appropriate overseas Senior
Lodger.
9.7. PASSPORTS.
---------
9.7.1. PROCEDURES. CRAF personnel will report to the State Department
----------
representative at the nearest and most convenient State Department passport
location and provide a completed passport application, two duplicate passport
photographs (2 1/2" X 2 1/2"), and satisfactory birth evidence as outlined in
the passport regulations. In lieu of such birth evidence, a signed statement
from the employing airlines, based upon company records, may suffice. The
statement from the airline should contain the following information:
9.7.1.1. Name.
9.7.1.2. Date of Birth.
9.7.1.3. Place of Birth.
9.7.1.4. Citizenship.
Page 30 of 47
<PAGE>
9.7.1.5. Length of time employed by the airline.
9.7.1.6. Name and address of relatives and/or references shown in company
record.
9.7.2. STATE DEPARTMENT RESPONSIBILITY. The State Department will provide the
-------------------------------
applicant a receipt evidencing application, showing date and office of
acceptance. Every effort shall be made by the State Department representative
to issue a passport prior to the overseas departure of the individual.
9.7.3. EMERGENCY CONDITIONS. In an emergency condition where hostilities or
--------------------
enemy action preclude sufficient time to issue a passport, the individual CRAF
member shall be required to show proof of US citizenship (birth certificate, or
statement from airline) upon departing from and arriving in the United States.
9.8. GENEVA CONVENTION IDENTITY CARD (DD FORM 489). Hereafter referred to as
---------------------------------------------
the Geneva Convention Card. Civilian noncombatant personnel authorized to
accompany military forces of the US in regions of war shall be issued a Geneva
Convention Card. Authority is AFR 30-20.
9.8.1. PERSONNEL AUTHORIZED THE CARD. Carrier personnel, both US and foreign
-----------------------------
nationals, authorized by the carrier to enter regions of war in performance of
AMC Airlift Services contracts shall be issued this card. The bearer's Social
Security Account Number (SSAN) shall be entered on the front side of the DD Form
489 under "SERVICE". The card will not make any reference to nationality. The
Geneva Convention Card shall be issued to the following company personnel;
9.8.1.1. Aircrew members designed to perform peacetime DOD as well as wartime
CRAF airlift missions.
9.8.1.2. Ground support personnel assigned to overseas CRAF Senior Lodger
stations, to include indigenous personnel (non-US citizen) already overseas.
9.8.1.3. Selected supervisory personnel responsible for overall supervision of
the company's participation in peacetime contract and CRAF operations.
9.8.2. ISSUING FOR WARTIME USE. The DD Form 489 should be completed by company
-----------------------
personnel after notification of Stage III CRAF activation. It must be issued
within 48 hours after Stage III CRAF activation.
9.8.3. CONTROL. Control of Geneva Convention Cards and their issue to air
-------
carriers is a responsibility of Headquarters AMC. The following procedures
apply:
9.8.3.1. Each CRAF carrier shall determine the total number of carrier
personnel (those physically located in the CONUS as well as those already
overseas) needed by support the overseas CRAF operations, and notify HQ AMC/XOC
of their requirements. (HQ AMC/XOC, 402 Scott Drive, Room 132, Scott AFB IL
62225-5363, (618)256-6751.)
9.8.3.2. HQ AMC/XOC will forward the forms by certified mail to the carriers.
To simplify accountability, the form shall be issued by HQ AMC/XOC.
9.8.4. RESPONSIBLE COMPANY AGENT. Each CRAF carrier shall designate its
-------------------------
company security officer as the company agent responsible for accountability,
control, and issue of the DD Form 489.
9.8.5. CONTROL AND ACCOUNTABILITY. Each CRAF carrier shall establish control
--------------------------
and accountability procedures for inventorying, storing, issuing, reporting,
controlling, and accounting for the DD Forms 489, to include:
Page 31 of 47
<PAGE>
9.8.5.1. Performing a physical inventory, by serial number, upon receipt from
HQ AMC/XOC and advise immediately of any discrepancies. When the inventory has
been satisfied, enter each serial number on the log (AF Form 335) (see paragraph
9.8.5.3., below).
9.8.5.2. Providing a storage facility to ensure the security of blank forms and
maintain control to prevent the issuance of this form to unauthorized persons.
9.8.5.3. Maintaining an issuance record/log to identify the disposition of each
DD Form 489, by recording the serial numbers on AF Form 335, Issuance Record-
Accountability Identification Card. This log will serve to identify damaged,
lost, destroyed, and issued DD Form 489. (Annual Report, see paragraph
9.8.5.4., below). A supply of the AF Form 335 shall be furnished by HQ AMC/XOC.
9.8.5.4. An annual report as of 1 February, shall be submitted to HQ AMC/XOC
during that month, reflecting the number of blank cards in possession at the
time of the report, the number issued that are still valid, and the number of
forms received from Headquarters AMC. It is not necessary to report each time a
card is lost or destroyed. Retain this data for the annual report.
9.8.5.5. Investigation responsibilities for lost cards.
9.8.5.6. Notification responsibility for lost cards is provided for through the
submission of an annual report of DD Form 489.
NOTE: The blank DD Forms 489 should be stored in a secure container.
9.8.6. CARRIER ACTION WHEN CARD IS LOST. The following actions must be
--------------------------------
accomplished by the company security officer upon receiving notice that a Geneva
Convention Card has been lost:
9.8.6.1. Obtain a written statement, if possible, signed by the employee,
describing the circumstances connected with loss of the card.
9.8.6.2. Issue the employee a new DD Form 489 after determining that the
employee's requirement still exists.
9.8.7. DISPOSITION OF OUTDATED CARDS.
-----------------------------
9.8.7.1. DD Form 489 that have been surrendered to the company agent for any
reason shall be destroyed as classified material. The same is also true for a
card that is no longer usable because of a typing error, smudged fingerprint,
outdated form, etc. Erasures and strikeovers are not permitted.
9.8.8. ISSUING AUTHORITY. When the DD Forms 489 are ready for issue, the
-----------------
company security officer is authorized to sign as the issuing agency.
9.8.9. PHOTOGRAPHIC SERVICE. Commercial (or company) facilities shall be used
--------------------
to laminate the DD Form 489 prior to issue. If company lamination facilities
are not available, and the carrier chooses not to use commercial facilities, the
Security Police Office at designated military bases may be used for this
service. In order to obtain lamination service from the military, the completed
DD Form 489 may be dispatched (by certified mail or hand-carried) by the company
security officer (or an authored representative) to the "CRAF Security Police"
at the nearest designated military base.
9.8.9.1. AMC bases designated to provide necessary services are:
9.8.9.1.1. McGuire AFB NJ 08641
9.8.9.1.2. Dover AFB DE 19901
Page 32 of 47
<PAGE>
9.8.9.1.3. Charleston AFB SC 29404
9.8.9.1.4. Scott AFB IL 62225
9.8.9.1.5. Altus AFB OK 73521
9.8.9.1.6. McChord AFB WA 98438
9.8.9.1.7. Travis AFB CA 94535
9.8.9.1.8. Norton AFB CA 92409
9.8.9.1.9. Little Rock AFB AR 72076
9.8.9.1.10. Pope AFB NC 28308
9.8.9.1.11. Rhein-Main AFB NY 09057
9.8.9.2. CRAF carriers located in Alaska shall be provided processing and
laminating service by the 21st Combat Support Group, Elmendorf AFB, Alaska
98743.
9.8.9.3. CRAF carriers, which have aircrews and support personnel located
outside the Continental United States (CONUS), shall issue the DD Form 489
prior to departing the CONUS. However, CRAF carriers with indigenous personnel
(non-US citizens) who have been designated to support CRAF and are already
overseas should contact the nearest military installation for laminating
service. This service may be performed, during peacetime, by any military
facility; however, one of the AMC bases should be used, if possible.
9.9. CARRIERS' INSTRUCTIONS TO EMPLOYEE AT TIME OF ISSUE. After the DD Form
---------------------------------------------------
489 has been signed by the company security officer (issuing officer), and
laminated, the card shall be issued to the individual concerned, specifically
advising the bearer of the following at time of issue:
9.9.1. Read the DD Form 489 (PA), Privacy Act Statement-Geneva Conventions
Identity Card for Civilians Who Accompany the Armed Forces, as required by the
Privacy Act of 1974. A copy of this statement shall be issued at the time
individual is handed the laminated Geneva Convention Card (July 1974 edition).
NOTE: A resupply of the DD Form 489 (PA), Privacy Act Statement. may be
obtained by contracting HQ AMC/XOC, or local reproduction is authorized.
9.9.2. Read the NOTICE STATEMENT on the reverse side of the DD Form 489.
9.9.4. Notify the company security officer immediately if the card is lost or
stolen.
9.9.5. Surrender the card to the company security officer when:
9.9.5.1. No longer employed by the company.
9.9.5.2. The carrier no longer has a AMC Airlift Services or CRAF Stage III
contract.
9.9.5.3. The individual is no longer designated by carrier for duty during
peacetime and wartime DOD contract airlift operations.
9.9.5.4. When any of the information on the present card has changed.
Page 33 of 47
<PAGE>
9.9.5.5. The card has expired (four years from date of issue for those cards
issued when an expiration date was required).
9.9.6. The card is for use only when captured and held as a prisoner of war.
9.9.7. The military civilian grade relationship is based upon the individual's
standing in the company and the responsibility of the duties to be performed.
The equivalent grade is shown on the card to ensure that the bearer, if
captured, will receive appropriate treatment.
9.9.8. In no instance will the equivalent grade grant any privilege or wearing
of military insignia not otherwise authorized.
9.9.9. Keep the card on the person of the bearer. In the event the individual
becomes a prisoner of war, name, equivalent grade, social security account
number, and date of birth shall be provided the capturing authority. The
convention articles require this identity card be shown by the prisoner upon
demand, but in no case is to be taken away from the prisoner. The convention
further provides for prisoners of war to be treated with regard to their age.
9.9.10. AMC BASE RESPONSIBILITIES. Should the CRAF carrier choose not to
-------------------------
laminate the DD Form 489, then the commanders of AMC bases shall be responsible
for laminating and trimming each completed form, and return the forms to the
carrier security officer by certified mail.
9.9.11. ALASKA AIR COMMAND SUPPORT. The 21st Combat Support Group, Elmendorf
--------------------------
AFB, Alaska 98743, has agreed to provide the same support as identified in
paragraph 9.9.10. above, for the CRAF carriers located in Alaska (Anchorage
International Airport).
9.10. MEDICAL. Emergency medical treatment shall be provided on military
-------
installation for CRAF carrier personnel assigned to support the CRAF program;
i.e., ground support, aircrew, etc. Medical services performed by the military
shall be fully reimbursed at the appropriate rate as prescribed in AFR 168-6.
CHAPTER 10
----------
WAIVERS AND EXEMPTIONS
PART I-FEDERAL AVIATION REGULATION (FAR) WAIVERS
SECTION A--GENERAL
10.1. GENERAL. Chapter 10 identifies FAR waivers that MAY be enacted under any
-------
CRAF activation. The provisions of PART 121 of the FAR, with the following
authorizations and limitations shall apply to all CRAF operations. Waivers in
this attachment apply when carriers operate off their certificated routes.
These waivers are not applicable until FAA has issued approval direction to
flight standards district offices.
SECTION B--CERTIFICATION RULES FOR DOMESTIC AND FLAG AIR CARRIERS
10.2. FAR 121.25. CONTENTS OF CERTIFICATE AND OPERATIONS SPECIFICATIONS.
------------------------------------------------------------------
Overhaul and inspection time limitations may be increased up to a maximum of 25
percent above the time limitations shown on the specifications. Such time
limitation increase may be used only under general war conditions and only if
the circumstances of time provide an alternative to continue operation.
Page 34 of 47
<PAGE>
SECTION C--CERTIFICATION RULES FOR SUPPLEMENTAL AIR CARRIERS AND COMMERCIAL
OPERATORS
10.3. FAR 121.45. CONTENTS OF CERTIFICATE AND OPERATIONS SPECIFICATIONS.
------------------------------------------------------------------
Overhaul and inspection time limitations may be increased up to a maximum of 25
percent above the time limitations shown on the specifications. Such time
limitation increase may be used only under general war conditions and only if
the circumstances of time provide no alternative to continue operation.
SECTION D--APPROVAL OF ROUTES: DOMESTIC AND FLAG AIR CARRIERS
10.4. FAR 121.93. AREA AND ROUTE REQUIREMENTS: General. The operator may
----------------------------------------
conduct operations over routes and into areas without listing such routes or
areas in its approved operations specifications or be required to show that it
is competent to operate over such routes or into such areas.
10.5. FAR 121.101. WEATHER REPORTING FACILITIES. If weather information
------------------------------------------
required by this section is not available, the operator may use, in lieu
thereof, any appropriate weather data prepared by the military.
SECTION E--APPROVAL OF AREAS AND ROUTES FOR SUPPLEMENTAL AIR CARRIERS AND
COMMERCIAL OPERATORS
10.6. FAR 121.113. AREA AND ROUTE REQUIREMENTS: General. The operator may
-----------------------------------------
conduct operations over routes and into areas without listing such routes or
areas in its approved operations specifications or be required to show that it
is competent to operate over such routes or into such areas.
10.7. FAR 121.119. WEATHER REPORTING FACILITIES. If weather information
------------------------------------------
required by this section is not available, the operator may use, in lieu
thereof, any appropriate weather data prepared by the military.
10.8. FAR 121.125. FLIGHT FOLLOWING SYSTEM. The operator may conduct flights
-------------------------------------
which are not monitored in accordance with the requirements of this section.
10.9. FAR 121.127. FLIGHT FOLLOWING SYSTEM: Requirements. The operator need
-------------------------------------
not meet the "show" requirements specified in this section.
SECTION F--AIRCRAFT REQUIREMENTS
10.10. FAR 121.153. AIRCRAFT REQUIREMENTS: General. The operator may operate
-----------------------------------
any airworthy aircraft upon prior written approval of an authorized
representative of the administrator, provided the aircraft meets the
requirements of FAR Section 121.57.
10.11. FAR 121.161. AIRPLANE LIMITATIONS: Type of Route. The operator may
----------------------------------
operate any CRAF-capable twin-engine airplane in an extended overwater operation
over a route that contains a point farther than one hour, but not farther than
two hours forty minutes, flight time (in stall air at normal cruising speed with
one engine inoperative) from an adequate airport.
10.12. FAR 121.163. AIRCRAFT PROVING TESTS. The operator need not conduct
------------------------------------
proving tests required by this section unless an authorized representative of
the administrator specifically requires it by notifying the operator in writing.
SECTION G--AIRPLANE PERFORMANCE OPERATING LIMITATIONS
10.13. FAR 121.198. TRANSPORT CATEGORY CARGO SERVICE AIRPLANES: Increased
--------------------------------------------------------
Zero Fuel and Landing Weights. The applicable structural provisions of the FARs
notwithstanding, transport type aircraft may be operated in cargo-only service
in accordance with the following conditions:
Page 35 of 47
<PAGE>
10.13.1. The zero fuel weight (maximum weight of aircraft with no disposable
fuel and oil) may be increased up to five percent beyond the maximum approved in
full compliance with the FARs, and the structural landing weight may be
increased to a weight not to exceed the amount, in points, of the increase in
zero fuel weight.
10.13.2. Inspection procedures shall be established in addition to those
normally performed to safeguard against possible structural damage from the
higher operating stress levels.
10.13.3. The flight manual of each aircraft operated with increased weights as
provided herein shall be appropriately revised so as to include the necessary
operating limitations and operating information.
10.13.4. An aircraft which has been operated at increased weights as prescribed
herein shall not be used for the carriage of passengers, except under the
following conditions:
10.13.4.1. Special inspections established by the manufacturer and approved by
the Administrator of the Federal Aviation Administration shall have been
accomplished.
10.13.4.2. The effects of the operation at increased weights on structural
fatigue shall have been evaluated by the aircraft manufacturer and taken into
account in any fatigue limitations established for the airplane.
SECTION H--INSTRUMENT AND EQUIPMENT REQUIREMENTS
10.14. FAR 121.303. AIRPLANE INSTRUMENTS AND EQUIPMENT. Components and parts
------------------------------------------------
approved by the military shall be considered as approved parts for the purpose
of meeting the requirements of this section and 121.605, provided they are
compatible with the aircraft components and systems and test equipment used for
conducting ground checks.
10.15. FAR 121.345 through 121.351. RADIO EQUIPMENT--AIRCRAFT. Any comparable
-------------------------------------------------------
military radio communications system may be substituted for FAA-approved
equipment and its use continued until replaced by equipment approved by FAA.
SECTION I--MAINTENANCE, PREVENTATIVE MAINTENANCE, AND ALTERNATIONS
10.16. FAR 121.363 through 121.375. MAINTENANCE AND INSPECTION REQUIREMENTS.
---------------------------------------------------------------------
Compatible engines, components, propellers, parts, and accessories approved by
the military may be substituted for FAA-approved equipment and may be installed
by personnel who normally conduct such maintenance functions for the military.
The certificate holder may use qualified persons, other than those listed in
their operating manual, to perform inspections, provided the other requirements
of FAR 121.369 are met.
SECTION J--FLIGHT TIME LIMITATIONS: FLAG AIR CARRIERS
10.17. FAR 121.481 through 121.493. FLIGHT TIME LIMITATIONS--ALL AIRMEN:
-----------------------------------------------------------------
Airplanes. The following flight time limitations are authorized for
international operations:
10.17.1. Aircraft having two pilots and an additional flight crewmember:
10.17.1.1. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 13 hours during any 24 consecutive hours. A
flight crewmember who has been aloft, as a member of flight crew, more than 13
hours during any 24 consecutive hours, shall be given a rest period of not
less than 12 hours. For Pacific and Southwest Asia operations a flight
crewmember may be scheduled to be aloft, as a member of the flight crew, up to
16 hours.
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<PAGE>
10.17.1.2. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 120 hours during any calendar month.
10.17.1.3. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 1200 hours during any calendar year.
10.17.2. Aircraft having three or more pilots and an additional flight
crewmember:
10.17.2.1. Flight hours shall be scheduled in such a manner as to provide for
adequate rest periods on the ground while the flight crew personnel are away
from their base.
10.17.2.2. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 340 hours during any calendar quarter.
10.17.2.3. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 1200 hours during any calendar year.
10.17.2.4. A flight crewmember, upon returning to home base from any flight or
series of flights and after an absence from home base of more than one day,
shall receive a rest period of not less than twice the total number of hours
aloft, as a member of the flight crew, since the last rest period at home base,
provided that the required rest period need not exceed seven days.
SECTION K--FLIGHT TIME LIMITATIONS: SUPPLEMENTAL AIR CARRIERS AND COMMERCIAL
OPERATORS
10.18. FAR 121.503 through 121.525. FLIGHT TIME LIMITATIONS--ALL AIRMEN:
-----------------------------------------------------------------
Airplanes. The following flight time limitations are authorized for
international operations:
10.18.1. Aircraft having two pilots and an additional flight crewmember:
10.18.1.1. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 13 hours during any 24 consecutive hours. A
flight crewmember who has been aloft, as a member of flight crew, more than 13
hours during any 24 consecutive hours, shall be given a rest period of not less
than 12 hours. For Pacific and Southwest Asia operations a flight crewmember
may be scheduled to be aloft, as a member of the flight crew, up to 16 hours.
10.18.1.2. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 120 hours during any calendar month.
10.18.1.3. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 1200 hours during any calendar year.
10.18.2. Aircraft having three or more pilots and an additional flight
crewmember:
10.18.2.1. Flight hours shall be scheduled in such a manner as to provide for
adequate rest periods on the ground while the flight crew personnel are away
from their base.
10.18.2.2. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 340 hours during any calendar quarter.
10.18.2.3. A flight crewmember shall not be scheduled to be aloft, as a member
of the flight crew, more than 1200 hours during any calendar year.
Page 37 of 47
<PAGE>
10.18.2.4. A flight crewmember, upon returning to home base from any flight or
series of flights and after an absence from home base of more than one day,
shall receive a rest period of not less than twice the total number of hours
aloft, as a member of the flight crew, since the last rest period at home base,
provided that the required rest period need not exceed seven days.
SECTION L--FLIGHT OPERATIONS
10.19. FAR 121.557. EMERGENCIES: DOMESTIC AND FLAG AIR CARRIERS. The
----------------------------------------------------------
requirement for filing emergency reports shall not apply.
10.20. FAR 121.559. EMERGENCIES: SUPPLEMENTAL AIR CARRIERS AND COMMERCIAL
--------------------------------------------------------------------
OPERATORS. The requirement for filing emergency reports shall not apply.
- ---------
10.21. FAR 121.567. INSTRUMENTAL APPROACH PROCEDURES AND IFR LANDING MINIMUMS.
-----------------------------------------------------------------------
When conducting an IFR takeoff or landing, or an instrument approach at a
military airport, the operator may use the instrument approach procedures and
weather minimum prescribed by the military on its approach charts (plates) for
use at such an airport.
10.22. FAR 121.583. CARRIAGE OF PERSONS ABOARD ALL-CARGO AIRCRAFT. Persons
-----------------------------------------------------------
other than crewmembers may be carried aboard any all-cargo aircraft provided
such persons meet the requirements of section 121.583.
SECTION M--DISPATCHING AND FLIGHT RELEASE RULES
10.23. FAR 121.617 through 121.623. ALTERNATE AIRPORT REQUIREMENTS FOR
----------------------------------------------------------------
DEPARTURE AND DESTINATION: All Certificate Holders. The alternate airport
- -------------------------
requirements specified by the military in accordance with appropriate military
directives may be used for compliance.
10.24. FAR 121.625 and 121.631. ALTERNATE AIRPORT WEATHER MINIMUM AND FLIGHT
----------------------------------------------------------------------
PLANS FILING/AMENDING PROCEDURES. The alternate weather minimums and flight
- --------------------------------
planning procedures specified by the military in accordance with appropriate
military directives may be used for compliance.
10.25. FAR 121.651. TAKEOFF AND LANDING WEATHER MINIMUMS. IFR: All
--------------------------------------------------
Certificate Holders.
10.25.1. The takeoff and landing weather minimums specified by the military on
its approach charts (plates) may be used for compliance with the weather
minimums of 121.651(a) and (b).
10.25.2. In addition to the provisions of 121.651(c), an instrument approach
procedure may be executed when the weather report indicates that the ceiling or
visibility is less than approved minimum for landing, if the airport is serviced
by ILS and GCA in operative condition and both are used by the pilot and,
thereafter, a landing may be made, if weather conditions are equal to or better
than the prescribed minimums are found to exist by the pilot-in-command upon
reaching the authorized landing minimum altitude.
PART II--DEPARTMENT OF TRANSPORTATION (DOT) EXEMPTIONS
10.26. TRANSPORTATION OF EXPLOSIVES AND OTHER DANGEROUS ARTICLES. The
---------------------------------------------------------
Department of Defense (DOD) has been exempted from provisions of Title 49 Code
of Federal Regulations (49 CFR), Subpart B of Part 107, Parts 172 and 175, to
the extent necessary to permit the transportation of hazardous materials via DOD
contract airlift, under DOT Exemption 7573 and DOT Exemption 9232. Hazardous
materials authorized by these exemptions are limited to materials authorized to
be transported by motor vehicle in conformance with 49 CFR parts 107 and 171-
179. All hazardous material must be packed according to the requirements of 49
CFR and Air Force Regulation 71-4 (Preparation of Hazardous Material of Military
Air Shipment).
Page 38 of 47
<PAGE>
10.26.1. DOT EXEMPTION 7573. This exemption applies to cargo aircraft only of
------------------
the QUICKTRANS fleet and those contract airlift services and civil air operators
under contract to AMC to include Stages I and II.
10.26.1.1. Transport of materials authorized by this exemption is restricted to
US military bases and specific identified civil airports.
10.26.1.2. Hazardous materials and explosives must be deemed essential to
national defense prior to shipment.
10.26.1.3. Transportation of hazardous materials is authorized in aircraft of
United States registry only.
10.26.1.4. No persons other than required flight crewmembers and mission
essential personnel may be carried on the aircraft.
10.26.1.5. Prior to using this exemption, approval must be obtained from either
the Deputy Chief of Staff, Operations and Transportation, AMC; the Director of
Transportation, Air Force Logistics Command; the Naval Material Transportation
Office; or their authorized representatives.
10.26.1.6. Shipping papers (including the certifications required by 49 CFR
147.204) are required for all hazardous material carried under this exemption.
10.26.2. DOT EXEMPTION 9232. This exemption applies to cargo and passenger-
------------------
carrying aircraft for emergency movements during a declared National Emergency
and during contingencies (expedited movement of US Forces as approved by the
Secretary of Defense and directed by the Commander in Chief, US Transportation
Command).
10.26.2.1. Aircraft used must be those civil aircraft of the Civil Reserve Air
Fleet that are necessary to augment military operations and operated under the
contract and mission control of Commander, Air Mobility Command.
10.26.2.2. DOD must have advance permission from the owner or operator of each
manned airport where the material is to be on-loaded or off-loaded or where the
aircraft is to land while the material is on board.
10.26.2.3. Additional fuel may be carried in five gallon packaging meeting or
equivalent to DOT specification. See DOT Exemption 9232.
10.26.2.4. No person other than a required flight crewmwmber, of FAA inspector,
the shipper or consignee of the material or a representative of the shipper or
consignee so designated in writing, or a person necessary for handling the
material may be carried on the aircraft.
10.26.2.5. Shipping papers are required for all hazardous material carried
under this exemption.
10.26.2.6. This exemption authorized transportation of hazardous materials in
aircraft of US registry or in aircraft of foreign registry operating within the
jurisdiction of the US.
10.26.3. Common requirements that apply to DOT Exemption 7573 and DOT Exemption
9232.
10 26.3.1. Loading and storage of hazardous materials aboard the aircraft must
be in accordance with AFR 71-4. Loading and unloading operations shall be
monitored by a qualified DOD representative or a technician qualified in
accordance with 14 CFR 121.433a or AFR 71-4.
10.26.3.2, During loading or unloading no persons may smoke or operate any
device capable of causing an open flame within 50 feet of the aircraft.
Page 39 of 47
<PAGE>
10.26.3.3. Unless emergency conditions prescribe otherwise, loading and
unloading of the aircraft shall be conducted at a safe distance from heavily
populated areas and any place of human abode. However, if an airport has a
designated area for loading and unloading, explosives shall be loaded and
unloaded in this area.
10.26.3.4. No fueling operations of the aircraft may be conducted during the
loading and unloading of explosives.
10.26.3.5. Fuel tanks of vehicles may not be filled to more than 75 percent of
their capacity.
10.26.3.6. Operation of the aircraft during take-off, en route, and landing
must be conducted at a safe distance from heavily populated areas.
10.26.3.6.1. Before movement of the aircraft, the pilot shall notify the
control tower of the class(es) of explosives on board and request this
information be relayed to the appropriate officials.
10.26.3.6.2. The pilot, prior to entering an airport traffic area, shall notify
the control tower of the class(es) of explosives on board and request this
information be relayed to the appropriate officials.
10.26.3.6.3. When under radar control during the approach and landing phase,
the pilot shall request appropriate vectors so as to avoid heavily populated
areas.
10.26.3.7. A copy of this exemption must be carried aboard each aircraft
operating under these exemptions.
10.26.3.8. Any incident involving loss of contents of the packages must be
reported to the Office of Hazardous Materials Regulation as soon as practicable.
10.26.3.9. Prior to take-off, all crewmembers shall be instructed in proper
procedures to be followed during an emergency involving hazardous materials.
10.26.3.10. When destination is changed after departure because of weather or
other unforeseen circumstances, permission from the owner or operator of the
alternate airport shall be obtained as soon as practicable.
10.26.3.11 These exemptions do not grant authority to use foreign controlled
airspace or airports outside the US.
CHAPTER 11
----------
SECURITY
SECTION A--GENERAL
11.1. SECURITY REQUIREMENTS FOR CRAF. This chapter is consolidation of
------------------------------
security requirements applicable to CRAF.
11.2. DIRECTIVES
----------
11.2.1. Air Force Regulations in the 205-series (Security) and the DOD
Industrial Security Regulations (specifically DOD 5200.1-R/AFR 205-1 and DOD
5220.22-R/AFR 205-4).
11.2.2. The DOD Industrial Security Manual for Safeguarding Classified
Information (DOD 5220.22M), January 1991, or superseded by subsequent
publications, establishes requirements for safeguarding of classified
information by DOD contractors, subcontractors, vendors, or suppliers. Federal
Statutes and Executive Orders set forth in the DOD Industrial Security Manual
are also applicable.
Page 40 of 47
<PAGE>
SECTION B--CRAF SECURITY
11.3. REQUIREMENTS.
------------
11.3.1. FACILITY SECURITY CLEARANCE. A facility clearance of SECRET and
---------------------------
classified safeguarding capability is required in accordance with DOD 5220.22M
where there is a need for the storage or development of classified documents
supporting the CRAF program.
11.3.2. NON-AIRCREW SECURITY CLEARANCES. All participants in CRAF planning are
-------------------------------
required to possess a security clearance of SECRET, in accordance with the
Industrial Security Program. Former Defense Air Transportation Administration
(DATA) clearances must be converted to SECRET clearances under the Industrial
Security Program. Personnel eligible for such clearances are limited to US
personnel (defined as citizens of, national of, and immigrant aliens to, the
United States). Personnel designated by the carrier to perform duties specified
as follows must possess a SECRET security clearance.
11.3.2.1. Carrier personnel involved with overall CRAF planning.
11.3.2.2. Carrier personnel assigned for liaison and communications supervisory
duty at either HQ AMC or its alternate.
11.3.2.3. Carrier personnel who will attend Technical Advisory Group (TAG)
meetings.
11.3.2.4. Carrier personnel designated as Senior Lodger Courier Officers.
11.3.2.5. All flight operations dispatchers involved in CRAF missions.
11.3.2.6. Carrier personnel at Senior Lodger locations designated to handle or
safeguard classified materials.
11.3.3. AIRCREW SECURITY CLEARANCES. Carriers are not required to maintain
---------------------------
active security clearances for CRAF flight deck crewmembers during peacetime.
SECRET clearances shall be granted by USCINCTRANS in conjunction with activation
of the CRAF. Carriers must ensure that crewmembers designated to support CRAF
operations are US citizens and eligible for a SECRET clearance.
11.4. PROCEDURES.
----------
11.4.1. FACILITY SECURITY CLEARANCE. CRAF carriers must inform HQ AMC/XOC of
---------------------------
the correct address of any company agency requiring a secure facility. HQ
AMC/XOC will provide HQ AMC/XOK with a listing of these agencies.
11.4.1.1. If a contract is to be negotiated with an air carrier not having a
current contract, HQ AMC/XOC will furnish the Information Security Division,
Security Police (HQ AMC/SPI) with the name and address of the company so that
they can determine the actions required to provide a facility security
clearance. When required, HQ AMC/SPI will request the cognizant security office
to initiate necessary action to issue a facility clearance.
11.4.1.2. Action shall be taken by HQ AMC/SPI, the cognizant security officer,
and carriers concerned to ensure completion of clearance action with minimum
delay.
11.4.2. PERSONNEL SECURITY CLEARANCE. Upon being designated as a CRAF
----------------------------
participant, security clearance applications for all required personnel shall be
completed in accordance with DOD Industrial Security Manual and instructions
received from the cognizant Defense Industrial Security Officer, Defense
Investigative Service (DIS). All required clearance actions shall be forwarded
to the cognizant Defense Industrial Security Officer.
Page 41 of 47
<PAGE>
11.5. SAFEGUARDING CLASSIFIED INFORMATION. Administrative procedures shall be
-----------------------------------
developed in accordance with directives referenced in paragraph 11.2. to ensure
a maximum degree of safeguarding for classified information. This shall be
accomplished in accordance with the carrier's approved Standard Practice
Procedure for Handling of Classified Documents.
SECTION C--RESPONSIBILITIES
11.6. CRAF RESPONSIBILITIES.
---------------------
11.6.1. INDIVIDUAL CRAF PERSONNEL AND COMPANY SECURITY OFFICER. Responsibility
------------------------------------------------------
for security of classified information and material rests with each individual
authorized access. To ensure that all carrier personnel handling classified
material are familiar with requirements for safeguarding of this material, the
company security officer must periodically review company procedures. The CRAF
carrier must establish appropriate safeguards to assure that the individuals who
are not cleared do not gain access to classified information.
11.6.2. MILITARY BASE COMMANDER. CRAF aircraft at military installations will
-----------------------
receive the same degree of physical security as provided military aircraft in
like status. Ingress and egress procedures to and through control points and
restricted or controlled areas shall be established to permit CRAF crews access
to their aircraft.
11.6.3. SENIOR LODGER STATION MANAGER AND CRAF CARRIER. Upon CRAF activation,
----------------------------------------------
the Senior Lodger Station Manager and/or CRAF carrier will employ any necessary
procedure to deny unauthorized persons access to facilities, equipment, and
aircraft in support of the overall CRAF mission.
11.7. AUTHORITY FOR ACCESS TO CLASSIFIED DOCUMENTS.
--------------------------------------------
11.7.1. AUTHORITY TO HANDLE AUTHENTICATOR EXTRACTS. CRAF aircrew members shall
------------------------------------------
require certain authentication systems in order to perform CRAF missions. When
needed, these documents shall be made available to specified aircrew members at
military bases and Senior Lodger stations, providing the individual possesses a
SECRET clearance.
11.7.2. AUTHORITY FOR ACCESS TO SAFE PASSAGE PROCEDURES. NORAD Regulations 55-
-----------------------------------------------
67 and 55-68 (S), provide the safe passage procedures for CRAF aircraft
departing from and returning to the Continental United States (CONUS). Upon
activation of CRAF and when required by NORAD Safe Passage Procedures providing
each individual possess a SECRET clearance.
11.8. CLASSIFIED CORRESPONDENCE. Any time classified material is forwarded to
-------------------------
CRAF carriers, the originator will notify, in writing, the cognizant security
officer in the carrier's area. This notification will contain the subject and
date of the material, number of copies, and mailing address. The written
notification will ensure a current inventory of classified material being stored
by the carrier.
11.9. RESERVED.
11.10. PERSONNEL SECURITY CLEARANCE AUTHORIZATION.
------------------------------------------
11.10.1. GENERAL. Authority for carriers to certify the personnel security
-------
clearance status of company employees is contained in the Industrial Security
Manual, DOD 5220.22M. This reference makes provisions for the carrier
(contractor) who has a valid facility security clearance of SECRET to verify the
security clearance status of its employees.
11.10.2. SECURITY CLEARANCE IDENTIFICATION. A valid passport, company ID card,
---------------------------------
or Geneva Convention Card, any of which as a picture of the bearer, will provide
sufficient identification for releasing SECRET material to CRAF personnel.
Page 42 of 47
<PAGE>
11.10.3. SECURITY CLEARANCE VERIFICATION OF AIRCREWS. The CRAF carrier shall
-------------------------------------------
validate security access information on the flight release form. Carriers may
use company formats, but will ensure that security access statements are clear
and unambiguous. An example of a proper statement is "SECRET security access
current and valid for Ira A Eaker, James J. Doolittle, and Amelia N. Earhart."
11.10.4. SECURITY CLEARANCE CONFIRMATION. If validity of the clearance status
-------------------------------
or the identity of the bearer is questioned during peacetime or wartime DOD
contract airlift operations, confirmation may be obtained by contacting the
appropriate CRAF carrier's company security officer. Should this situation
arise when Stage III CRAF is activated and the carrier security officer cannot
be contacted, the questioner may contact the Defense Investigative Service
Clearance Office (DISCO), (614)236-2133 or AUTOVON 695- 2265, during duty hours
or (614)236-2058 after duty hours.
11.10.5. COMPANY SECURITY OFFICER'S RESPONSIBILITY. The company security
-----------------------------------------
officer shall maintain a current list of cleared personnel. This list shall be
verified during on- site surveys by DOD air carrier survey office.
11.10.6. MILITARY BASE COMMANDERS. All CRAF carrier personnel, after proper
------------------------
clearance verification or confirmation and after proper identification by means
of a valid passport, company ID card, or Geneva Convention Card, and receive
classified material as necessary to support the DOD airlift mission.
Additionally, each individual who is listed with the Company Security Officer
and DISCO has been the subject of at least a National Agency Check which may be
used as the basis for issuance of a restricted area badge.
11.11. AUTHENTICATION MATERIALS. Authentication materials and IFF/SIF
-------------------------
operating instructions shall be made available to CRAF aircrews at military Base
Operations and Route Briefing sections, and Senior Lodger stations. Initial
issue of these documents shall be as required to cover elapsed time from
departure station to destination and return, or to the first enroute station
having the capability to provides additional distribution.
11.12. CLASSIFIED/UNCLASSIFIED OPERATIONS BRIEFING. An operations briefing,
--------------------------------------------
including communications and security, shall be the responsibility of AMC.
11.13. HANDLING OF CLASSIFIED MATERIAL. In addition to the briefing outlined
--------------------------------
above, the briefing officer will insure that the aircraft captain, or the first
officer, is aware of the following:
11.13.1. RECEIPT FOR CLASSIFIED MATERIAL. The contents of the briefing
--------------------------------
envelope contain information affecting the national defense of the United States
and is issued for use while flying. Part of this information is classified and
extreme care should be exercised to preclude its being compromised. Upon
terminating the flight, all material shall be given to the military base
operations officer or destroyed in accordance with paragraph 11.13.2. below.
All classified material shall be accounted for by means of the AF Form 310,
Document Receipt and Destruction Certificate, or a comparable receipt. Prior to
accepting material, the aircraft captain should insure that sufficient legible
copies of the receipt form are available to allow one copy for the recipient at
the destination and one copy for the aircraft captain's personal file.
11.13.2. DESTRUCTION OF CLASSIFIED MATERIAL. In the event of a emergency where
-----------------------------------
it appears that the classified material cannot be protected, it shall be burned
or destroyed by other means to render recognition impossible. In this event,
complete the destruction certificate on the SF 153 or AF Form 310. Provide a
copy of this form to the issuing office and retain one copy to be held for the
required 2 years.
Page 43 of 47
<PAGE>
CHAPTER 12
(RESERVED)
CHAPTER 13
AEROMEDICAL EVACUATION
13.1 DEFINITIONS.
-----------
13.1.1. Aeromedical Evacuation (AE): The movement of patients under medical
supervision to and between medical treatment facilities by air transportation.
13.1.2. Aeromedical Evacuation Control Center (AECC): The control facility
established by an airlift division, AMC, another major air command or USAF. It
operates in conjunction with the command and control centers and coordinates
medical requirements with airlift capabilities. It also assigns medical
missions to the appropriate AE element in the system and monitors patient
movements.
13.1.3. Aeromedical Evacuation Control Element (AECE): This element of the AE
system will exercise operational control over all strategic AE activities and
personnel within its area of responsibility in conjunction with the regional
AECC.
13.1.4. Aeromedical Evacuation Crew Member(s)(AECMs): Qualified flight nurses
and AE technicians.
13.1.5. Medical Crew Director (MCD): A qualified flight nurse responsible for
the overall supervision of patient care and management of AECMs assigned to AE
missions.
13.1.6. LOX: Liquid Oxygen
13.2. PERFORMANCE REQUIRED
--------------------
13.2.1. The contractor shall position the aircraft to a designated location as
specified by the government (DOD) when any stage of the CRAF Aeromedical
Evacuation segment is activated. The aircraft must be in place, ready to be
configured within 24 hours after stage activation. All unpacking and
installation of the CRAF Aeromedical Evacuation Shipset (AESS) on the aircraft
shall be done by a separate contractor. When CRAF Aeromedical Evacuation
aircraft are no longer required, the contractor shall return the aircraft to
the designated location for removal and repacking of the CRAF AESS. Response
times and minimum utilization requirements are outlined in Attachment 9, Chapter
2, para 2.17 and 2.18.
13.2.2. The government (DOD) will pay for the positioning and depositioning
legs to the specified reconfiguration location.
13.2.3. Contractor shall apply for FAA deviations to Part 121 of the Federal
Aviation Regulations (FAR's). Deviations shall be provided when finalized.
13.2.4. Contractor shall develop an FAA approved training program if required
to facilitate operation of CRAF AE under PART 121 of the FAR's with deviations
referenced above.
13.2.5. The contractor shall provide the following:
13.2.5.1. Five portable, high flow, emergency oxygen sources for AECM use with
each aircraft. p6 3
13.2.5.2. One life vest/emergency egress card/air sickness bag for each AECM
and patient listed on manifest per aircraft. These life vests shall be removed
from the seats and placed in the overhead storage compartments when the
Page 44 of 47
<PAGE>
aircraft is "base lined" by the contractor airline.
13.2.6. The maximum number of litter patients is 111 with up to 40 ambulatory
patients on the B767-300 series or zero (0) on the B767-200 series.
13.2.7. Meal service shall be IAW Atch 3. Additionally, the contractor shall
provide the following:
13.2.7.1. Cold chilled water in lieu of alcoholic beverages.
13.2.7.2. Cold juice/sodas. These shall be primarily orange, apple, and grape
juices. Mixed soda flavors shall be provided.
13.2.7.3. Coffee, tea and bouillon.
13.2.8. If special patient meals are necessary they shall be provided from the
originating hospital.
13.2.9. There shall be no smoking (including flight and medical crew) on any AE
aircraft configured for patient carriage. The "No Smoking" sign shall remain
lighted at all times.
13.2.10. There shall be no hazardous cargo on AE flights.
13.2.11. The contractor shall take necessary actions to add medical equipment
certified for inflight use to its operations specifications certificate.
Medical equipment shall be certified for inflight use. Equipment not approved
for inflight use on B767s will undergo an operational checkout IAW the aircraft
supplemental flight manual procedures provided by the government in the CRAF
AESS packaging.
13.2.12. The scheduled ground time in CONUS shall be four (4) hours. An
additional one (1) hour shall be added if liquid oxygen (LOX) servicing is
required.
13.3..EXECUTION OF FLIGHT
-------------------
13.3.1. CRAF AE B-767s shall be used to return AECMs and medical equipment,
from AE hubs to overseas AE hubs.
13.3.2. Refueling should normally be accomplished prior to enplaning patients;
however, if this is not possible an emergency crash/rescue vehicle shall be
required to stand by the aircraft during concurrent servicing IAW T.O.00-25-172.
Contractor pilot shall request through the command post at military airfields;
crash/rescue support prior to taxi, take off, landing, or aircraft servicing of
fuel or LOX with patients on board.
13.3.3. The contractor pilot and inflight manager are responsible for mission
management and shall contact the MCD#1 for a briefing on medical requirements.
This shall be accomplished thirty (30) minutes prior to takeoff. The following
information shall be provided:
13.3.3.1. Weather enroute.
13.3.3.2. Enroute flying time.
13.3.3.3. Any additional information that may be pertinent.
13.3.3.4. Patient status that may affect aircraft operation shall be provided
to the aircraft captain by the MCD.
13.3.3.5. MCD will provide a list suitable medical emergency alternate
airfields.
Page 45 of 47
<PAGE>
13.3.4. The number of AECMs is four (4) flight nurses and six (6) medical
technicians. This number may be augmented by an additional one (1) or two (2)
personnel.
13.3.5. Air Force/military medical personnel are responsible for the following:
13.3.5.1. MCD #1 is the military mission manager. Prior to the MCD arriving at
the aircraft the AECE has overall AE mission management responsibilities.
13.3.5.2. The AECC/AECE will provide information on any altitude or flight
restrictions due to medical reasons to the AMC CAT CRAF Cell who will relay this
information to the contractor operations center when received (minimum 12 hours
prior to flight departure). AECC/AECE or the MCD will also brief this
information to the contractor pilot in command.
13.3.5.3. The MCD will have the final decision on medical emergencies affecting
manifested patients. Should a medical diversion become necessary, the
contractor pilot will make every effort to comply with the request of the MCD.
13.3.5.4. Enplaning and deplaning all patients.
13.3.5.5. Medical care and treatment of all patients.
13.3.5.6. AECMs will secure all medical equipment IAW current Air Force
procedures.
13.3.5.7. AECMs will collect and properly dispose of all medical wastes.
Medical waste shall be collected and stored separately from common waste.
13.3.6. Should the medical condition of any patient require attention during
takeoff, enroute cruise or landing, and if the seat belt sign is on, AECMs shall
be secured with straps to the litter and remain standing during these phases of
flight.
13.3.7. AECMs will assist flight attendants and flight crew during aircraft
emergencies, including the deplaning of patients during an emergency. AECM
qualification is based on AFR 60-1, AFP 164-2, AMCR 55-1/51-164, Vol 1/60-1/164-
3, Operational Manual Supplement, and abbreviated checklist.
13.3.8. Should an enroute aircraft diversion be necessary for reasons other
than a medical emergency, the aircraft commander will coordinate with the MCD,
when possible, before deciding the point of landing. The welfare of the
patients is a prime consideration in all such decisions; however, safety is the
final determinant. The command and control center shall be advised and guidance
requested for all aircraft or medical emergencies which require diversions.
13.3.9. In matters of flight safety, decisions of the contractor operations
personnel are final. In matters of all patient care, decisions of MCD are
final.
13.3.10. The contractor flight attendant personnel shall accomplish the
following duties:
13.3.10.1. Direct the AECMs and patients during all ground or inflight
emergencies.
13.3.10.2. All briefings, including the addition of remarks that "during a
cabin decompression the TOP litter patient will pass the emergency oxygen mask
to the lower litter patients".
13.3.10.3. Meal and beverage service shall be IAW attachment 3. The medical
crew will designate which patients can or cannot receive meals or beverages.
13.4. AIRCRAFT IDENTIFICATION The aircraft shall use the call sign of "Air
-----------------------
Evac" for all scheduled flights.
Page 46 of 47
<PAGE>
13.5. ADDITIONAL INFORMATION Configuration Control. The contractor shall
----------------------
provide information on aircraft configuration changes which affects the ability
to install the CRAF AESS on designated aircraft to HQ AMC/SGAL.
13.6. MISSION SCHEDULING HQ AMC CAT CRAF Cell is responsible for scheduling
------------------
all CRAF AESS missions. The CRAF Cell will receive requirements from the HQ AMC
CAT.
Page 47 of 47
<PAGE>
TEAM ARRANGEMENT AGREEMENT CERTIFICATE
The parties hereto expressly understand and agree as follows:
a. Vance Fort
-----------------------------------------------------------------------
(Name)
Senior Vice President
- ------------------------------------------------------------------------------
(Title)
World Airways
- ------------------------------------------------------------------------------
(Company)
is the principal representative of the team arrangement. As such, all
communications regarding the administration of the contract and the
performance of the work thereunder may be directed to him or her. In the
absence of
Vance Fort
- ------------------------------------------------------------------------------
(Name)
Senior Vice President
- ------------------------------------------------------------------------------
(Title)
World Airways
- ------------------------------------------------------------------------------
(Company)
Robert M. Perry
- ------------------------------------------------------------------------------
(Name of Alternate)
Vice President
- ------------------------------------------------------------------------------
(Title of Alternate)
World Airways
- ------------------------------------------------------------------------------
(Company of Alternate)
is the alternate principal representative of the team arrangement.
b. Direction, approvals, required notices, and all other
communications from the Government to the team arrangement, including
transmittal of payments by the government, shall be directed to
Vance Fort
- ------------------------------------------------------------------------------
(Name)
Senior Vice President
- ------------------------------------------------------------------------------
(Title)
World Airways
- ------------------------------------------------------------------------------
(Company)
principal representative of the team arrangement.
Page 1 of 6
<PAGE>
IN WITNESS WHEREOF, the undersigned agree that World Airways is the
principal representative of your team arrangement.
WORLD AIRWAYS, INC.
By: /s/ Vance Fort
----------------------------
NAME: Vance Fort
Title: Sr. V.P. Govt. Affairs
& Sales Administration
EVERGREEN INTERNATIONAL AIRLINES, INC.
BY:
----------------------------
Name:
Title:
EMERY WORLDWIDE AIRLINES, INC.
BY:
----------------------------
Name:
Title:
RICH INTERNATIONAL AIRWAYS, INC.
By:
-----------------------------
Name:
Title:
SUN COUNTRY AIRLINES
By:
------------------------------
Name:
Title:
Page 2 of 6
<PAGE>
IN WITNESS WHEREOF, the undersigned agree that World Airways is the
principal representative of your team arrangement.
WORLD AIRWAYS, INC.
By:
------------------------------
Name:
Title:
EVERGREEN INTERNATIONAL AIRLINES, INC.
By: /s/ Robert D. Kelley
------------------------------
Name: Robert D. Kelley
Title: Vice President
EMERY WORLDWIDE AIRLINES, INC.
By:
------------------------------
Name:
Title:
RICH INTERNATIONAL AIRWAYS, INC.
By:
------------------------------
Name:
Title:
SUN COUNTRY AIRLINES
By:
------------------------------
Name:
Title:
Page 3 of 6
<PAGE>
IN WITNESS WHEREOF, the undersigned agree that World Airways is the
principal representative of your team arrangement.
WORLD AIRWAYS, INC.
By:
----------------------------
Name:
Title:
EVERGREEN INTERNATIONAL AIRLINES, INC.
By:
----------------------------
Name:
Title:
EMERY WORLDWIDE AIRLINES, INC.
By: /s/ Charles J. Greene
----------------------------
Name: Charles J. Greene
Title: Director, Charter Services
RICH INTERNATIONAL AIRWAYS, INC.
By:
----------------------------
Name:
Title:
SUN COUNTRY AIRLINES
By:
----------------------------
Name:
Title:
Page 4 of 6
<PAGE>
IN WITNESS WHEREOF, the undersigned agree that World Airways is the
principal representative of your team arrangement.
WORLD AIRWAYS, INC.
By:
----------------------------
Name:
Title:
EVERGREEN INTERNATIONAL AIRLINES, INC.
By:
----------------------------
Name:
Title:
EMERY WORLDWIDE AIRLINES, INC.
By:
----------------------------
Name:
Title:
RICH INTERNATIONAL AIRWAYS, INC.
By: /s/ Mark Hutchinson
----------------------------
Name: Mark Hutchinson
Title: Vice President Sales and Marketing
SUN COUNTRY AIRLINES
By:
----------------------------
Name:
Title:
Page 5 of 6
<PAGE>
IN WITNESS WHEREOF, the undersigned agree that World Airways is the
principal representative of your team arrangement.
WORLD AIRWAYS, INC.
By:
----------------------------
Name:
Title:
EVERGREEN INTERNATIONAL AIRLINES, INC.
By:
----------------------------
Name:
Title:
EMERY WORLDWIDE AIRLINES, INC.
By:
----------------------------
Name:
Title:
RICH INTERNATIONAL AIRWAYS, INC.
By:
----------------------------
Name:
Title:
SUN COUNTRY AIRLINES
By: /s/ Lawrence J. Tighe
----------------------------
Name: Lawrence J. Tighe
Title: VP Marketing
Page 6 of 6
<PAGE>
SUBSCRIPTION PROCEDURES
Dear Prospective US Order, Inc. Stockholder:
To become a stockholder of US Order, Inc. ("US Order" or the
"Company") please carefully follow the subscription procedures detailed below:
1. Please read the Confidential Private Placement Memorandum dated
July 15, 1993 (together with any supplements thereto) and the Subscription and
Preferred Stock Purchase Agreement. If you would like to receive any additional
information, or if you have any questions regarding US Order or the terms of the
offering, please contact Mark S. Lynch at (703) 834-9401.
2. Please complete and sign the Subscription and Preferred Stock
Purchase Agreement enclosed herewith (the "Subscription Agreement"). When
completing the Subscription Agreement, please be sure to respond to the
inquiries contained in Sections 6 and 7 thereof.
3. If you are subscribing for shares on behalf of an entity (i.e.,
other than an individual), please complete and sign the Certificate of Signatory
which is attached as the last page of the Subscription Agreement.
4. Enclose the original Promissory Note \a check for the amount of
the purchase price made payable to "US Order-Escrow Account" and mail it
together with your completed Subscription Agreement to:
US Order, Inc.
13873 Park Center Road
Suite 230
Herndon, VA 22071
Attention: Mark S. Lynch
5. Should you prefer to utilize a wire transfer, please first
contact Mark S. Lynch at (703) 834-9401 to make arrangements and receive wiring
instructions.
All subscription proceeds will be deposited by US Order in a
segregated interest-bearing account and held for the benefit of subscribers
pending the receipt and acceptance of subscriptions for the minimum offering, as
described more fully in the Subscription Agreement. Subscription Agreements are
not binding on US Order until accepted by US Order, which reserves the right to
reject, in whole or in part, in its sole discretion, any lesser number of shares
than the number for which a person has subscribed. If US Order rejects all or a
portion of any subscription, US Order will promptly mail to the subscriber a
check for all, or the appropriate portion of, the amount submitted with its
subscription.
Thank you for your interest in US Order.
US Order, Inc.
<PAGE>
Exhibit 10.50
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") made as
of the date set forth on the signature page hereof between US Order, Inc., a
Delaware corporation with its principal offices at 13873 Park Center Road, Suite
230, Herndon, Virginia 22071 (the "Company") and the undersigned (the
"Subscriber").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to issue an aggregate of up to three
million (3,000,000) shares (the "Shares") of Series C Preferred Stock (the
"Series C Preferred Stock"), par value $.001 per share, of the Company in a
private placement offering (the "Offering"), which shares of Series C Preferred
Stock are convertible into shares of the Company's common stock, $.001 par value
per share (the "Common Stock"), on the terms and conditions hereinafter set
forth, and the Subscriber desires to acquire that number of Shares set forth on
the signature page hereof (the Series C Preferred Stock and the Common Stock
issuable upon conversion thereof being sometimes referred to collectively herein
as the "Securities");
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
1. Subscription for Shares and Representations by Subscriber
a. Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company and the
Company agrees to sell to the Subscriber 841,515 Shares, which constitute not
less than six percent (6%) of the fully diluted common equity and convertible
preferred equity of the Company (excluding unvested employee stock options) as
of the date of closing, for $3,500,000 cash and for other mutually agreeable
valuable consideration, as set forth in the contract, a copy of which is
attached hereto and incorporated herein by reference as Attachment "A". The
rights and preferences of the Series C Preferred Stock are set forth in the
Certificate of Designation included in the Company's Amended and Restated
Certificate of Incorporation available upon request from the Company. The cash
portion of the purchase price is payable by bank check made payable to "US
Order-Escrow Account" or wire transfer of immediately available funds
contemporaneously with the execution and delivery of this Agreement.
b. The Subscriber hereby acknowledges (i) receipt of the Company's
Confidential Private Placement Memorandum dated July 15, 1993 (the
"Confidential Memorandum"), the Supplement to the Confidential Private
Placement Memorandum dated July 22, 1993 (the "Supplement"), the Second
Supplement to the Confidential Private Placement Memorandum dated July 29,
1993 (the "Second Supplement"), the Third Supplement to the Confidential
Private Placement Memorandum dated October 22, 1993 (the
<PAGE>
"Third Supplement"), and the Fourth Supplement to the Confidential Private
Placement Memorandum dated December 10, 1993, (the "Fourth Supplement"), and
(ii) that the Subscriber has carefully reviewed the Confidential Memorandum
and the Supplements thereto. The Subscriber hereby acknowledges that the
purchase of Shares involves a high degree of risk in that (i) an investment in
the Company is highly speculative, and only investors who can afford the loss
of their entire investment should consider investing in the Company and the
Shares; (ii) the Subscriber may not be able to liquidate his investment; (iii)
transferability of the Securities is extremely limited; and (iv) the
Subscriber could sustain the loss of his entire investment.
c. The Subscriber hereby acknowledges that he must be a qualified
investor, as described herein, in order to qualify for the purchase of Shares,
and that he must be able to bear the economic risk of an investment in the
Shares.
d. The Subscriber hereby represents that he is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the questions contained in Section 6 hereof, and that he is able to
bear the economic risk of an investment in the Shares.
e. The Subscriber hereby represents that he has prior investment
experience, including investment in non-listed and non-registered securities, or
he has employed the services of an investment advisor, attorney and/or
accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Shares and to
evaluate the merits and risks of such an investment on his behalf and that he is
able to bear the economic risk he hereby assumes.
f. The Subscriber hereby represents that he has been furnished by the
Company during the course of this transaction with all information regarding the
Company which he has requested or desired to know; that he has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering, and any additional information which he had
requested.
g. The Subscriber hereby acknowledges that the Securities have not
been registered under the Act or any state securities or "blue sky" laws and
that the Offering of Shares has not been reviewed by the United States
Securities and Exchange Commission (the "Commission") or any state regulatory
authority, since the Offering is intended to be exempt from the registration
requirements of Section 5 of the Act pursuant to Section 4(2) of the Act and
pursuant to similar exemptions from registration provided by certain state
securities laws. The Subscriber hereby represents that he is purchasing the
Shares for his own account, for investment and not with a view to the resale or
distribution of the Series C Preferred Stock or the underlying Common Stock.
The Subscriber agrees that he will not sell or otherwise transfer the
Securities unless they are registered under the Act or unless an exemption
from such registration is available.
2
<PAGE>
h. The Subscriber understands that there is no market for the
Securities and that no market is expected to develop for the Securities. The
Subscriber understands that even if a public market develops for the Common
Stock issuable upon conversion of the Series C Preferred Stock, Rule 144 (the
"Rule") promulgated under the Act requires, among other conditions, a two year
holding period prior to the resale (in limited amounts) of securities acquired
in a non-public offering without having to satisfy the registration
requirements under the Act. The Subscriber understands that the Company is not
obligated to comply with any reporting requirements under the Securities
Exchange Act of 1934, as amended, and that the Company makes no representation
or warranty that it will disseminate to the public any current financial or
other information concerning the Company, as is required by the Rule as one of
the conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the Series C
Preferred Stock under the Act or any state securities or "blue sky" laws. The
Subscriber consents that the Company may, if it desires, permit the transfer
of the Securities, subject to the provisions set forth in Section 6, out of
his name only when his request for transfer is accompanied by an opinion of
counsel reasonably satisfactory to the Company that neither the sale nor the
proposed transfer results in a violation of the Act or any applicable state
securities or "blue sky" laws. The Subscriber agrees to hold the Company and
its directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by him contained herein or in the Confidential Investor
Questionnaire as set forth in Section 6 hereof or any sale or distribution by
the undersigned Subscriber in violation of the Act or any applicable state
securities or "blue sky" laws.
i. The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Series C Preferred Stock or the
Common Stock, stating that such Securities have not been registered under the
Act or any state securities or "blue sky" laws and setting forth or referring to
the restrictions on transferability and sale thereof. The Subscriber is aware
that the Company will make a notation in its appropriate records with respect to
the restrictions on the transferability of such Securities.
j. The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the undersigned to call his bank or
place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right to reject subscriptions in whole or in part and to close the Offer to the
Subscriber at any time.
k. The Subscriber hereby represents that the address of the
Subscriber furnished by him on the signature page hereof is the undersigned's
principal residence if he is an individual or its principal business address
if it is a corporation or other entity.
3
<PAGE>
l. The Subscriber hereby represents that his total investment in the
Shares does not represent more than five percent (5%) of his net worth and that
his overall commitment to investments which are not readily marketable is
reasonable in relation to his net worth.
m. The Subscriber hereby represents that he is willing and able to
bear the economic risk of this investment, has no need for liquidity of this
investment and is able to sustain a complete loss of the investment.
n. The Subscriber understands the significance to the Company of its
representations, including those in Section 8, and they are made with the
intention that the Company will rely on them.
2. Representations by the Company
The Company represents and warrants to the Subscriber that on the date
of consummation of the Offering:
a. The Company is and will be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
and will have the corporate power to conduct the business which it now conducts;
b. The execution, delivery and performance of this Agreement by the
Company will have been duly approved by the Board of Directors of the Company
and all other actions required to authorize and effect the offer and sale of the
Series C Preferred Stock will have been duly taken and approved;
c. The Shares will have been duly and validly authorized and when
issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable;
d. The Company will, at all times that the Shares are outstanding,
have authorized and reserved a sufficient number of shares of Common Stock to
provide for conversion of the Shares;
e. The shares of Common Stock issuable upon conversion of the Series
C Preferred Stock, when issued and paid for in accordance with the terms of the
Series C Preferred Stock, will be duly and validly issued, fully paid and
nonassessable;
f. The Company will not be in any material respect in violation of or
in default in any material respect under, nor will the execution and delivery of
this Agreement, or the issuance of the Series C Preferred Stock and the
incurrence of the obligations herein set forth and the consummation of the
transactions herein contemplated, result in a material violation of, or
constitute a material default under, the Amended and Restated Certificate of
4
<PAGE>
Incorporation or the By-laws of the Company; and
g. The Company shall provide each holder of at least 5% of the
original issuance of Series C Preferred Stock (or that number of shares of
Common Stock into which all or part of such percentage of the original issuance
of Series C Preferred Stock is converted) with unaudited quarterly financial
statements within 60 days of the end of each quarter, audited annual financial
statements within 90 days of the end of each fiscal year and such other
financial information as such holders of Series C Preferred Stock may reasonably
request from time to time. The right to receive such financial information
pursuant to this Agreement shall not be assignable by the Subscriber without the
prior written consent of the Company and shall terminate upon the sale by the
Company of Common Stock or any class or series of securities convertible into
Common Stock in an initial public offering.
3. Terms of Subscription
a. The subscription period will terminate at 11:59 p.m., Washington,
D.C. time, on December 15, 1993, unless extended by the Company at its
discretion for an additional period not to exceed 90 days (the "Termination
Date").
b. The minimum subscription per Subscriber shall be for $1,000,000
of the Series C Preferred Stock, subject to the Company's right to accept or
reject subscriptions in whole or in part.
c. A closing will take place if the Company receives subscriptions
for purchases aggregating at least $12,000,000 of Shares on or prior to the
Termination Date, which condition may not be waived by the Company without the
written consent of the Subscriber. The Company may hold one or more closings on
any additional subscriptions it may receive. The certificates representing the
Series C Preferred Stock will delivered by the Company within ten (10) days
following the Termination Date.
4. Incidental Registration. If the Company at any time proposes to register
any of its common Stock under the Act, for its own account or for the account of
any other person or entity (other than any registration of an offering solely to
employees of the Company or its subsidiaries), it shall promptly give written
notice to Subscriber of its intention to do so, and the Company shall include in
such registration, subject to Section 5 hereof, all Shares that Subscriber shall
specify in a written notice delivered to the Company within 20 days after its
receipt of the Company's notice of the proposed filing of the registration
statement, provided that the Company shall not be required to include in such
registration any Shares that Subscriber shall so specify if, in the
unqualified opinion of counsel to the Company reasonably acceptable to the
Subscriber so specifying, registration under the Act is not required for the
transfer of such Shares in the manner requested by Subscriber or that a post-
effective amendment to an existing registration statement would be legally
sufficient for such a transfer and the Company shall have obtained such a post-
effective amendment.
5
<PAGE>
5. Exclusion. If the proposed or required registration is to be underwritten
(whether on a "best efforts" or a "firm commitment" basis), the managing
underwriter shall have the right to exclude all or any part of Subscriber's
Shares if the underwriter advises the Company in writing that it reasonably
believes that such securities should be withdrawn therefrom. Any exclusion of
Shares shall be made pro rata among Subscriber and all other persons and/or
entities participating in the registration in proportion to the respective
number of Shares or other securities for which Subscriber and each such other
person or entity have requested registration.
6. Miscellaneous
a. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to the Company, US Order, Inc., 13873 Park Center Road, Suite 230,
---
Herndon, VA 22071 and to the Subscriber at his address indicated on the
signature page of this Agreement. Notices shall be deemed to have been given on
the date of mailing, except notices of change of address, which shall be deemed
to have been given when received.
b. This Agreement shall not be changed, modified or amended except by
a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
c. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
d. Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Securities as herein provided; subject, however,
to the right hereby reserved to the Company to enter into substantially the same
agreement with other subscribers and to add and/or delete other persons as
subscribers.
e. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
f. In order to discourage frivolous claims, the parties agree that
unless a claimant in any proceeding succeeds in establishing his claim and
recovering a judgment against another party (regardless of whether such claimant
succeeds against one of the other parties to the action), then
6
<PAGE>
the other party shall be entitled to recover from such claimant all of
its/their legal costs and expenses relating to such proceeding and/or incurred
in preparation therefor.
g. The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
h. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
i. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
j. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
7. Notice to Pennsylvania Residents
The undersigned hereby acknowledges that the Company is relying upon
the exemption from registration of securities set forth in Section 203(d) of the
Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act"), in
connection with the sale of the Shares to the undersigned.
In accordance with the requirements of the Pennsylvania Act, the
undersigned hereby acknowledges and agrees that (a) the securities purchased
cannot be sold for a period of twelve (12) months from the date of purchase,
except as permitted under Section 204.011 of the Pennsylvania Securities
Regulations, and (b) PURSUANT TO SECTION 207(M) OF THE PENNSYLVANIA ACT, EACH
PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA ACT DIRECTLY FROM THE
COMPANY OR AN AFFILIATE OF THE COMPANY HAS THE RIGHT TO WITHDRAW HIS ACCEPTANCE
WITHOUT INCURRING ANY LIABILITY TO THE COMPANY OR ANY OTHER PERSON WITHIN TWO
(2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE COMPANY OF THIS AGREEMENT.
8. Confidential Investor Questionnaire
The Subscriber represents and warrants that the undersigned comes
within each category checked below, and that for any category checked, the
undersigned has truthfully set forth the factual basis or reason the Subscriber
comes within that category. ALL INFORMATION IN RESPONSE TO THIS PARAGRAPH WILL
BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional
information which
7
<PAGE>
the Company deems necessary in order to verify the answers set forth below.
[ ] 1. The undersigned is a corporation, partnership, Massachusetts
business trust, or non-profit organization within the meaning of
Section 501(c)(3) of the Internal Revenue Code, in each case not
formed for the specific purpose of acquiring the Shares and with total
assets in excess of $5,000,000.
Florida Corporation
-----------------------------------
-----------------------------------
[ ] 2. The undersigned is an individual (not a partnership, corporation,
etc.) who had an income in excess of $200,000 in each of the two
most recent years, or joint income with his or her spouse in excess
of $300,000 in each of those years (in each case including foreign
income, tax exempt income and full amount of capital gains and
losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of
reaching the same income level in the current year.
[ ] 3. The undersigned is a director or executive officer of the Company
which is issuing and selling the Shares.
[ ] 4. The undersigned is a bank; a savings and loan association, insurance
company, registered investment company; registered business
development company; licensed small business investment company
("SBIC"); or employee benefit plan within the meaning of Title 1 of
ERISA and (a) the investment decision is made by a plan fiduciary
which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or is a self directed plan with
investment decisions made solely by persons that are accredited
investors.
-----------------------------------
----------------------------------- (describe entity)
[ ] 5. The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act of
1940.
-----------------------------------
8
<PAGE>
----------------------------------- (describe entity)
[ ] 6. The undersigned is an individual (not a partnership, corporation,
etc.) whose individual net worth, or joint net worth with his or her
spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may include equity in
personal property and real estate, including your principal residence,
cash, short term investments, stock and securities. Equity in personal
property and real estate should be based on the fair market value of
such property less debt secured by such property.
[ ] 7. The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
Shares, where the purchase is directed by a "sophisticated person"
as defined in Regulation 506(b)(2)(ii).
[ ] 8. The undersigned is an entity all the equity owners of which are
"accredited investors" within one or more of the above categories. If
--
relying upon this Category alone, each equity owner must complete a
-------------------------------------------------------------------
separate copy of this Agreement.
--------------------------------
-----------------------------------
----------------------------------- (describe entity)
9. Manner in Which Title to be Held (check one)
[ ] Corporation*
[ ] Community Property
[ ] Joint Tenants with Right of Survivorship (both parties must sign)
[ ] Partnership*
[ ] Tenants in Common
[ ] Individual Ownership
[ ] Trust*
[ ] Other
* If Shares are being subscribed for by an entity, the attached Certificate
of Signatory must also be completed.
9
<PAGE>
Number of Shares Subscribed For: 841,515
Dollar Amount Enclosed or Wired: $3,500,000
Dollar Value of Contractual Consideration: $2,500,000
Name(s) Exactly as Intended to Appear on Stock Certificate
/s/ ROSS JONES
- ------------------------------------- --------------------------------------
Signature Signature (if purchasing jointly)
ROSS JONES
- ------------------------------------- --------------------------------------
Name Typed or Printed Name Typed or Printed
- ------------------------------------- --------------------------------------
Address Address
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
City, State and Zip Code City, State and Zip Code
- ------------------------------------- --------------------------------------
Telephone Telephone
- ------------------------------------- --------------------------------------
Tax Id. or Social Security No. Tax Id. or Social Security No.
Dated: 12/20 , 1993 Dated: , 1993
-------------- ---------------
This Subscription and Preferred Stock Purchase Agreement is agreed to and
accepted as of , 1993.
----------------
US Order, Inc.
By /s/ SIGNATURE APPEARS HERE
---------------------------- Subscription Accepted For:
Its: PRESIDENT 841,515
---------------------------- --------------------- Shares
10
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Shares are being subscribed for by an entity)
I, , am the of
---------------------------------- ---------------------
- ----------------------------------- (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription and Preferred Stock Purchase Agreement
and to purchase and hold the Shares, and certify further that the Subscription
and Preferred Stock Purchase Agreement has been duly and validly executed on
behalf of the Entity and constitutes a legal and binding obligation of the
Entity.
IN WITNESS WHEREOF, I have set my hand this day of
----------
1993
- -------------------------
- --------------------------------------------
Signature
11
<PAGE>
SUBSCRIPTION PROCEDURES
Dear Prospective US Order, Inc. Stockholder:
To become a stockholder of US Order, Inc. ("US Order" or the
"Company") please carefully follow the subscription procedures detailed below:
1. Please read the Confidential Private Placement Memorandum dated
July 15, 1993 (together with any supplements thereto) and the Subscription and
Preferred Stock Purchase Agreement. If you would like to receive any additional
information, or if you have any questions regarding US Order or the terms of the
offering, please contact Mark S. Lynch at (703) 834-9401.
2. Please complete and sign the Subscription and Preferred Stock
Purchase Agreement enclosed herewith (the "Subscription Agreement"). When
completing the Subscription Agreement, please be sure to respond to the
inquiries contained in Sections 6 and 7 thereof.
3. If you are subscribing for shares on behalf of an entity (i.e.,
other than an individual), please complete and sign the Certificate of Signatory
which is attached as the last page of the Subscription Agreement.
4. Enclose the original Promissory Note \a check for the amount of
the purchase price made payable to "US Order-Escrow Account" and mail it
together with your completed Subscription Agreement to:
US Order, Inc.
13873 Park Center Road
Suite 230
Herndon, VA 22071
Attention: Mark S. Lynch
5. Should you prefer to utilize a wire transfer, please first
contact Mark S. Lynch at (703) 834-9401 to make arrangements and receive wiring
instructions.
All subscription proceeds will be deposited by US Order in a
segregated interest-bearing account and held for the benefit of subscribers
pending the receipt and acceptance of subscriptions for the minimum offering, as
described more fully in the Subscription Agreement. Subscription Agreements are
not binding on US Order until accepted by US Order, which reserves the right to
reject, in whole or in part, in its sole discretion, any lesser number of shares
than the number for which a person has subscribed. If US Order rejects all or a
portion of any subscription, US Order will promptly mail to the subscriber a
check for all, or the appropriate portion of, the amount submitted with its
subscription.
Thank you for your interest in US Order.
US Order, Inc.
<PAGE>
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") made as
of the date set forth on the signature page hereof between US Order, Inc., a
Delaware corporation with its principal offices at 13873 Park Center Road, Suite
230, Herndon, Virginia 22071 (the "Company") and the undersigned (the
"Subscriber").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to issue an aggregate of up to three
million (3,000,000) shares (the "Shares") of Series C Preferred Stock (the
"Series C Preferred Stock"), par value $.001 per share, of the Company in a
private placement offering (the "Offering"), which shares of Series C Preferred
Stock are convertible into shares of the Company's common stock, $.001 par value
per share (the "Common Stock"), on the terms and conditions hereinafter set
forth, and the Subscriber desires to acquire that number of Shares set forth on
the signature page hereof (the Series C Preferred Stock and the Common Stock
issuable upon conversion thereof being sometimes referred to collectively herein
as the "Securities");
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
1. Subscription for Shares and Representations by Subscriber
a. Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company and the
Company agrees to sell to the Subscriber 236,083 Shares for $1,683,272 cash.
The rights and preferences of the Series C Preferred Stock are set forth in the
Certificate of Designation included in the Company's Amended and Restated
Certificate of Incorporation available upon request from the Company and in the
Registration Rights Agreement of even date herewith. The purchase price is
payable by bank check made payable to "US Order-Escrow Account" or wire transfer
of immediately available funds contemporaneously with the execution and delivery
of this Agreement.
b. The Subscriber hereby acknowledges (i) receipt of the Company's
Confidential Private Placement Memorandum dated July 15, 1993 (the "Confidential
Memorandum"), the Supplement to the Confidential Private Placement Memorandum
dated July 22, 1993 (the "Supplement"), the Second Supplement to the
Confidential Private Placement Memorandum dated July 29, 1993 (the "Second
Supplement"), the Third Supplement to the Confidential Private Placement
Memorandum dated October 22, 1993 (the "Third Supplement"), and the Fourth
Supplement to the Confidential Private Placement Memorandum dated December 10,
1993, (the "Fourth Supplement"), and (ii) that the Subscriber has carefully
reviewed the Confidential Memorandum and the Supplements thereto.
<PAGE>
The Subscriber hereby acknowledges that the purchase of Shares involves a high
degree of risk in that (i) an investment in the Company is highly speculative,
and only investors who can afford the loss of their entire investment should
consider investing in the Company and the Shares; (ii) the Subscriber may not be
able to liquidate his investment; (iii) transferability of the Securities is
extremely limited; and (iv) the Subscriber could sustain the loss of his entire
investment.
c. The Subscriber hereby acknowledges that he must be a qualified
investor, as described herein, in order to qualify for the purchase of Shares,
and that he must be able to bear the economic risk of an investment in the
Shares.
d. The Subscriber hereby represents that he is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the questions contained in Section 6 hereof, and that he is able to
bear the economic risk of an investment in the Shares.
e. The Subscriber hereby represents that he has prior investment
experience, including investment in non-listed and non-registered securities, or
he has employed the services of an investment advisor, attorney and/or
accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Shares and to
evaluate the merits and risks of such an investment on his behalf and that he is
able to bear the economic risk he hereby assumes.
f. The Subscriber hereby represents that he has been furnished by the
Company during the course of this transaction with all information regarding the
Company which he has requested or desired to know; that he has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering, and any additional information which he had
requested.
g. The Subscriber hereby acknowledges that the Securities have not
been registered under the Act or any state securities or "blue sky" laws and
that the Offering of Shares has not been reviewed by the United States
Securities and Exchange Commission (the "Commission") or any state regulatory
authority, since the Offering is intended to be exempt from the registration
requirements of Section 5 of the Act pursuant to Section 4(2) of the Act and
pursuant to similar exemptions from registration provided by certain state
securities laws. The Subscriber hereby represents that he is purchasing the
Shares for his own account, for investment and not with a view to the resale or
distribution of the Series C Preferred Stock or the underlying Common Stock.
The Subscriber agrees that he will not sell or otherwise transfer the Securities
unless they are registered under the Act or unless an exemption from such
registration is available.
2
<PAGE>
h. The Subscriber understands that there is no market for the
Securities and that no market is expected to develop for the Securities. The
Subscriber understands that even if a public market develops for the Common
Stock issuable upon conversion of the Series C Preferred Stock, Rule 144 (the
"Rule") promulgated under the Act requires, among other conditions, a two year
holding period prior to the resale (in limited amounts) of securities acquired
in a non-public offering without having to satisfy the registration
requirements under the Act. The Subscriber understands that the Company is not
obligated to comply with any reporting requirements under the Securities
Exchange Act of 1934, as amended, and that the Company makes no representation
or warranty that it will disseminate to the public any current financial or
other information concerning the Company, as is required by the Rule as one of
the conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the Series C
Preferred Stock under the Act or any state securities or "blue sky" laws. The
Subscriber consents that the Company may, if it desires, permit the transfer
of the Securities, subject to the provisions set forth in Section 6, out of
his name only when his request for transfer is accompanied by an opinion of
counsel reasonably satisfactory to the Company that neither the sale nor the
proposed transfer results in a violation of the Act or any applicable state
securities or "blue sky" laws. The Subscriber agrees to hold the Company and
its directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by him contained herein or in the Confidential Investor
Questionnaire as set forth in Section 6 hereof or any sale or distribution by
the undersigned Subscriber in violation of the Act or any applicable state
securities or "blue sky" laws.
i. The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Series C Preferred Stock or the
Common Stock, stating that such Securities have not been registered under the
Act or any state securities or "blue sky" laws and setting forth or referring to
the restrictions on transferability and sale thereof. The Subscriber is aware
that the Company will make a notation in its appropriate records with respect to
the restrictions on the transferability of such Securities.
j. The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the undersigned to call his bank or
place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right to reject subscriptions in whole or in part and to close the Offer to the
Subscriber at any time.
k. The Subscriber hereby represents that the address of the
Subscriber furnished by him on the signature page hereof is the undersigned's
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.
l. The Subscriber hereby represents that his total investment in the
Shares does
3
<PAGE>
not represent more than five percent (5%) of his net worth and that his overall
commitment to investments which are not readily marketable is reasonable in
relation to his net worth.
m. The Subscriber hereby represents that he is willing and able to
bear the economic risk of this investment, has no need for liquidity of this
investment and is able to sustain a complete loss of the investment.
n. The Subscriber understands the significance to the Company of its
representations, including those in Section 8, and they are made with the
intention that the Company will rely on them.
2. Representations by the Company
The Company represents and warrants to the Subscriber that on the date
of consummation of the Offering:
a. The Company is and will be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
and will have the corporate power to conduct the business which it now conducts;
b. The execution, delivery and performance of this Agreement by the
Company will have been duly approved by the Board of Directors of the Company
and all other actions required to authorize and effect the offer and sale of the
Series C Preferred Stock will have been duly taken and approved;
c. The Shares will have been duly and validly authorized and when
issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable;
d. The Company will, at all times that the Shares are outstanding,
have authorized and reserved a sufficient number of shares of Common Stock to
provide for conversion of the Shares;
e. The shares of Common Stock issuable upon conversion of the Series
C Preferred Stock, when issued and paid for in accordance with the terms of the
Series C Preferred Stock, will be duly and validly issued, fully paid and
nonassessable;
f. The Company will not be in any material respect in violation of or
in default in any material respect under, nor will the execution and delivery of
this Agreement, or the issuance of the Series C Preferred Stock and the
incurrence of the obligations herein set forth and the consummation of the
transactions herein contemplated, result in a material violation of, or
constitute a material default under, the Amended and Restated Certificate of
Incorporation or the By-laws of the Company; and
4
<PAGE>
g. The Company shall provide each holder of at least 5% of the
original issuance of Series C Preferred Stock (or that number of shares of
Common Stock into which all or part of such percentage of the original issuance
of Series C Preferred Stock is converted) with unaudited quarterly financial
statements within 60 days of the end of each quarter, audited annual financial
statements within 90 days of the end of each fiscal year and such other
financial information as such holders of Series C Preferred Stock may reasonably
request from time to time. The right to receive such financial information
pursuant to this Agreement shall not be assignable by the Subscriber without the
prior written consent of the Company and shall terminate upon the sale by the
Company of Common Stock or any class or series of securities convertible into
Common Stock in an initial public offering.
3. Terms of Subscription
a. The subscription period will terminate at 11:59 p.m., Washington,
D.C. time, on December 15, 1993, unless extended by the Company at its
discretion for an additional period not to exceed 90 days (the "Termination
Date").
b. The minimum subscription per Subscriber shall be for $1,000,000
of the Series C Preferred Stock, subject to the Company's right to accept or
reject subscriptions in whole or in part.
c. A closing will take place if the Company receives subscriptions
for purchases aggregating at least $12,000,000 of Shares on or prior to the
Termination Date, which condition may not be waived by the Company without the
written consent of the Subscriber. The Company may hold one or more closings on
any additional subscriptions it may receive. The certificates representing the
Series C Preferred Stock will delivered by the Company within ten (10) days
following the Termination Date.
4. Incidental Registration. If the Company at any time proposes to register
any of its common Stock under the Act, for its own account or for the account of
any other person or entity (other than any registration of an offering solely to
employees of the Company or its subsidiaries), it shall promptly give written
notice to Subscriber of its intention to do so, and the Company shall include in
such registration, subject to Section 5 hereof, all Shares that Subscriber shall
specify in a written notice delivered to the Company within 20 days after its
receipt of the Company's notice of the proposed filing of the registration
statement, provided that the Company shall not be required to include in such
registration any Shares that Subscriber shall so specify if, in the unqualified
opinion of counsel to the Company reasonably acceptable to the Subscriber so
specifying, registration under the Act is not required for the transfer of such
Shares in the manner requested by Subscriber or that a post-effective amendment
to an existing registration statement would be legally sufficient for such a
transfer and the Company shall have obtained such a post-effective amendment.
5. Exclusion. If the proposed or required registration is to be underwritten
(whether on a
5
<PAGE>
"best efforts" or a "firm commitment" basis), the managing underwriter shall
have the right to exclude all or any part of Subscriber's Shares if the
underwriter advises the Company in writing that it reasonably believes that such
securities should be withdrawn therefrom. Any exclusion of Shares shall be made
pro rata among Subscriber and all other persons and/or entities participating in
the registration in proportion to the respective number of Shares or other
securities for which Subscriber and each such other person or entity have
requested registration.
6. Miscellaneous
a. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to the Company, US Order, Inc., 13873 Park Center Road, Suite 230,
---
Herndon, VA 22071 and to the Subscriber at his address indicated on the
signature page of this Agreement. Notices shall be deemed to have been given on
the date of mailing, except notices of change of address, which shall be deemed
to have been given when received.
b. This Agreement shall not be changed, modified or amended except by
a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
c. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
d. Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Securities as herein provided; subject, however,
to the right hereby reserved to the Company to enter into substantially the same
agreement with other subscribers and to add and/or delete other persons as
subscribers.
e. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
f. In order to discourage frivolous claims, the parties agree that
unless a claimant in any proceeding succeeds in establishing his claim and
recovering a judgment against another party (regardless of whether such claimant
succeeds against one of the other parties to the action), then the other party
shall be entitled to recover from such claimant all of its/their legal costs and
6
<PAGE>
expenses relating to such proceeding and/or incurred in preparation therefor.
g. The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
h. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
i. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
j. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
7. Notice to Pennsylvania Residents
The undersigned hereby acknowledges that the Company is relying upon
the exemption from registration of securities set forth in Section 203(d) of the
Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act"), in
connection with the sale of the Shares to the undersigned.
In accordance with the requirements of the Pennsylvania Act, the
undersigned hereby acknowledges and agrees that (a) the securities purchased
cannot be sold for a period of twelve (12) months from the date of purchase,
except as permitted under Section 204.011 of the Pennsylvania Securities
Regulations, and (b) PURSUANT TO SECTION 207(M) OF THE PENNSYLVANIA ACT, EACH
PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA ACT DIRECTLY FROM THE
COMPANY OR AN AFFILIATE OF THE COMPANY HAS THE RIGHT TO WITHDRAW HIS ACCEPTANCE
WITHOUT INCURRING ANY LIABILITY TO THE COMPANY OR ANY OTHER PERSON WITHIN TWO
(2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE COMPANY OF THIS AGREEMENT.
8. Confidential Investor Questionnaire
The Subscriber represents and warrants that the undersigned comes
within each category checked below, and that for any category checked, the
undersigned has truthfully set forth the factual basis or reason the Subscriber
comes within that category. ALL INFORMATION IN RESPONSE TO THIS PARAGRAPH WILL
BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional
information which the Company deems necessary in order to verify the answers set
forth below.
7
<PAGE>
[X] 1. The undersigned is a corporation, partnership,Massachusetts business
trust, or non-profit organization within the meaning of Section
501(c)(3) of the Internal Revenue Code, in each case not formed for the
specific purpose of acquiring the Shares and with total assets in
excess of $5,000,000.
Delaware Corporation
----------------------------------------------------
-------------------------------------------------------
[ ] 2. The undersigned is an individual (not a partnership, corporation,etc.)
who had an income in excess of $200,000 in each of the two most recent
years, or joint income with his or her spouse in excess of $300,000 in
each of those years (in each case including foreign income, tax exempt
income and full amount of capital gains and losses but excluding any
income of other family members and any unrealized capital appreciation)
and has a reasonable expectation of reaching the same income level in
the current year.
[X] 3. The undersigned is a director or executive officer of the Company
which is issuing and selling the Shares.
[ ] 4. The undersigned is a bank; a savings and loan association, insurance
company, registered investment company; registered business development
company; licensed small business investment company ("SBIC"); or
employee benefit plan within the meaning of Title 1 of ERISA and (a)
the investment decision is made by a plan fiduciary which is either a
bank, savings and loan association, insurance company or registered
investment advisor, or (b) the plan has total assets in excess of
$5,000,000 or is a self directed plan with investment decisions made
solely by persons that are accredited investors.
------------------------------------
------------------------------------ (describe entity)
[ ] 5. The undersigned is a private business development company as defined in
section 202(a)(22) of the Investment Advisors Act of 1940.
------------------------------------
8
<PAGE>
-------------------------------- (describe entity)
[ ] 6. The undersigned is an individual (not a partnership, corporation, etc.)
whose individual net worth, or joint net worth with his or her spouse,
presently exceeds $1,000,000.
Explanation. In calculating net worth you may include equity in
personal property and real estate, including your principal residence,
cash, short term investments, stock and securities. Equity in personal
property and real estate should be based on the fair market value of
such property less debt secured by such property.
[ ] 7. The undersigned is a trust with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the Shares, where the
purchase is directed by a "sophisticated person" as defined in
Regulation 506(b)(2)(ii).
[ ] 8. The undersigned is an entity all the equity owners of which are
"accredited investors" within one or more of the above categories. If
--
relying upon this Category alone, each equity owner must complete a
-------------------------------------------------------------------
separate copy of this Agreement.
--------------------------------
------------------------------------
------------------------------------ (describe entity)
9. Manner in Which Title to be Held (check one)
[X] Corporation*
[ ] Community Property
[ ] Joint Tenants with Right of Survivorship (both parties must sign)
[ ] Partnership*
[ ] Tenants in Common
[ ] Individual Ownership
[ ] Trust*
[ ] Other
* If Shares are being subscribed for by an entity, the attached Certificate
of Signatory must also be completed.
9
<PAGE>
Number of Shares Subscribed For: 236,083
Dollar Amount Enclosed or Wired: $1,683,272
Name(s) Exactly as Intended to Appear on Stock Certificate
WORLDCORP, INC.
By:/s/ A. Scott Andrews
- ------------------------------------- ------------------------------------
Signature A. Scott Andrews Signature (if purchasing jointly)
Chief Financial Officer
WorldCorp, Inc., by A. Scott Andrews, CFO
- ------------------------------------- ------------------------------------
Name Typed or Printed Name Typed or Printed
13873 Park Center Road
Suite 490, Herndon, Virginia 22071
- ------------------------------------- ------------------------------------
Address Address
- ------------------------------------- ------------------------------------
- ------------------------------------- ------------------------------------
City, State and Zip Code City, State and Zip Code
(703) 834-9291
- ------------------------------------- ------------------------------------
Telephone Telephone
WorldCorp, Inc. Tax ID No.
94-3040585
- ------------------------------------- ------------------------------------
Tax Id. or Social Security No. Tax Id. or Social Security No.
Dated: December 21, 1993 Dated: ________________ , 1993
-------------
This Subscription and Preferred Stock Purchase Agreement is agreed to and
accepted as of December 21, 1993.
------------
US Order, Inc.
By /s/ Jerry Bullock Subscription Accepted For:
--------------------------
Its: President 236,083 Shares
-------------------------- -------------------
10
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Shares are being subscribed for by an entity)
I, A. Scott Andrews am the Chief Financial Officer of
----------------------------------, -------------------------
WorldCorp, Inc.
- ----------------------------------- (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription and Preferred Stock Purchase Agreement
and to purchase and hold the Shares, and certify further that the Subscription
and Preferred Stock Purchase Agreement has been duly and validly executed on
behalf of the Entity and constitutes a legal and binding obligation of the
Entity.
IN WITNESS WHEREOF, I have set my hand this 21st day of
----------
December, 1993
- -------------------------
/s/ A. Scott Andrews
- --------------------------------------------
Signature A. Scott Andrews
Chief Financial Officer
11
<PAGE>
SUBSCRIPTION PROCEDURES
Dear Prospective US Order, Inc. Stockholder:
To become a stockholder of US Order, Inc. ("US Order" or the
"Company") please carefully follow the subscription procedures detailed below:
1. Please read the Confidential Private Placement Memorandum dated
July 15, 1993 (together with any supplements thereto) and the Subscription and
Preferred Stock Purchase Agreement. If you would like to receive any additional
information, or if you have any questions regarding US Order or the terms of the
offering, please contact Mark S. Lynch at (703) 834-9401.
2. Please complete and sign the Subscription and Preferred Stock
Purchase Agreement enclosed herewith (the "Subscription Agreement"). When
completing the Subscription Agreement, please be sure to respond to the
inquiries contained in Sections 6 and 7 thereof.
3. If you are subscribing for shares on behalf of an entity (i.e.,
other than an individual), please complete and sign the Certificate of Signatory
which is attached as the last page of the Subscription Agreement.
4. Enclose the original Promissory Note indicating it has been
cancelled and mail it together with your completed Subscription Agreement to:
US Order, Inc.
13873 Park Center Road
Suite 230
Herndon, VA 22071
Attention: Mark S. Lynch
5. Please fax a copy of the cancelled Promissory Note to the
attention of Mark S. Lynch at fax number (703) 834-9668. In addition to
receiving the Stock Certificate upon execution of the subscription, you will
also receive a separate check for the interest accrued on the Promissory Note
from the date of the Note through the date of the First Closing of the Series C
Preferred Stock Subscription.
All subscription proceeds will be deposited by US Order in a
segregated interest-bearing account and held for the benefit of subscribers
pending the receipt and acceptance of subscriptions for the minimum offering, as
described more fully in the Subscription Agreement. Subscription Agreements are
not binding on US Order until accepted by US Order, which reserves the right to
reject, in whole or in part, in its sole discretion, any lesser number of shares
than the number for which a person has subscribed. If US Order rejects all or a
portion of any subscription, US Order will promptly mail to the subscriber a
check for all, or the appropriate portion of, the amount submitted with its
subscription.
Thank you for your interest in US Order.
US Order, Inc.
<PAGE>
EXHIBIT 10.52
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") made as
of the date set forth on the signature page hereof between US Order, Inc., a
Delaware corporation with its principal offices at 13873 Park Center Road, Suite
230, Herndon, Virginia 22071 (the "Company") and the undersigned (the
"Subscriber").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to issue an aggregate of up to three
million (3,000,000) shares (the "Shares") of Series C Preferred Stock (the
"Series C Preferred Stock"), par value $.001 per share, of the Company in a
private placement offering (the "Offering"), which shares of Series C Preferred
Stock are convertible into shares of the Company's common stock, $.001 par value
per share (the "Common Stock"), on the terms and conditions hereinafter set
forth, and the Subscriber desires to acquire that number of Shares set forth on
the signature page hereof (the Series C Preferred Stock and the Common Stock
issuable upon conversion thereof being sometimes referred to collectively herein
as the "Securities");
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
1. Subscription for Shares and Representations by Subscriber
a. Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company and the
Company agrees to sell to the Subscriber 28,051 Shares of Series C Preferred
Stock for cancellation of the Promissory Note dated November 12, 1993, in the
amount of $200,000, the cancelled original of which is attached hereto and
incorporated herein by reference as Attachment "A". The rights and preferences
of the Series C Preferred Stock are set forth in the Certificate of Designation
included in the Company's Amended and Restated Certificate of Incorporation
available upon request from the Company.
b. The Subscriber hereby acknowledges (i) receipt of the Company's
Confidential Private Placement Memorandum dated July 15, 1993 (the "Confidential
Memorandum"), the Supplement to the Confidential Private Placement Memorandum
dated July 22, 1993 (the "Supplement"), the Second Supplement to the
Confidential Private Placement Memorandum dated July 29, 1993 (the "Second
Supplement"), the Third Supplement to the Confidential Private Placement
Memorandum dated October 22, 1993 (the "Third Supplement"), and the Fourth
Supplement to the Confidential Private Placement Memorandum dated December 10,
1993, (the "Fourth Supplement"), and (ii) that the Subscriber has carefully
reviewed the Confidential Memorandum and the Supplements thereto. The
Subscriber hereby acknowledges that the purchase of Shares involves a high
degree of risk in that (i) an investment in the Company is highly speculative,
and only investors who
<PAGE>
can afford the loss of their entire investment should consider investing in
the Company and the Shares; (ii) the Subscriber may not be able to liquidate
his investment; (iii) transferability of the Securities is extremely limited;
and (iv) the Subscriber could sustain the loss of his entire investment.
c. The Subscriber hereby acknowledges that he must be a qualified
investor, as described herein, in order to qualify for the purchase of Shares,
and that he must be able to bear the economic risk of an investment in the
Shares.
d. The Subscriber hereby represents that he is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the questions contained in Section 6 hereof, and that he is able to
bear the economic risk of an investment in the Shares.
e. The Subscriber hereby represents that he has prior investment
experience, including investment in non-listed and non-registered securities, or
he has employed the services of an investment advisor, attorney and/or
accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Shares and to
evaluate the merits and risks of such an investment on his behalf and that he is
able to bear the economic risk he hereby assumes.
f. The Subscriber hereby represents that he has been furnished by the
Company during the course of this transaction with all information regarding the
Company which he has requested or desired to know; that he has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering, and any additional information which he had
requested.
g. The Subscriber hereby acknowledges that the Securities have not
been registered under the Act or any state securities or "blue sky" laws and
that the Offering of Shares has not been reviewed by the United States
Securities and Exchange Commission (the "Commission") or any state regulatory
authority, since the Offering is intended to be exempt from the registration
requirements of Section 5 of the Act pursuant to Section 4(2) of the Act and
pursuant to similar exemptions from registration provided by certain state
securities laws. The Subscriber hereby represents that he is purchasing the
Shares for his own account, for investment and not with a view to the resale or
distribution of the Series C Preferred Stock or the underlying Common Stock.
The Subscriber agrees that he will not sell or otherwise transfer the Securities
unless they are registered under the Act or unless an exemption from such
registration is available.
h. The Subscriber understands that there is no market for the
Securities and that no market is expected to develop for the Securities. The
Subscriber understands that even if a public market develops for the Common
Stock issuable upon conversion of the Series C Preferred Stock, Rule 144 (the
"Rule") promulgated under the Act requires, among other
2
<PAGE>
conditions, a two year holding period prior to the resale (in limited amounts)
of securities acquired in a non-public offering without having to satisfy the
registration requirements under the Act. The Subscriber understands that the
Company is not obligated to comply with any reporting requirements under the
Securities Exchange Act of 1934, as amended, and that the Company makes no
representation or warranty that it will disseminate to the public any current
financial or other information concerning the Company, as is required by the
Rule as one of the conditions of its availability. The Subscriber understands
and hereby acknowledges that the Company is under no obligation to register
the Series C Preferred Stock under the Act or any state securities or "blue
sky" laws. The Subscriber consents that the Company may, if it desires, permit
the transfer of the Securities, subject to the provisions set forth in Section
6, out of his name only when his request for transfer is accompanied by an
opinion of counsel reasonably satisfactory to the Company that neither the
sale nor the proposed transfer results in a violation of the Act or any
applicable state securities or "blue sky" laws. The Subscriber agrees to hold
the Company and its directors, officers and controlling persons and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as
a result of any misrepresentation made by him contained herein or in the
Confidential Investor Questionnaire as set forth in Section 6 hereof or any
sale or distribution by the undersigned Subscriber in violation of the Act or
any applicable state securities or "blue sky" laws.
i. The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Series C Preferred Stock or the
Common Stock, stating that such Securities have not been registered under the
Act or any state securities or "blue sky" laws and setting forth or referring to
the restrictions on transferability and sale thereof. The Subscriber is aware
that the Company will make a notation in its appropriate records with respect to
the restrictions on the transferability of such Securities.
j. The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the undersigned to call his bank or
place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right to reject subscriptions in whole or in part and to close the Offer to the
Subscriber at any time.
k. The Subscriber hereby represents that the address of the
Subscriber furnished by him on the signature page hereof is the undersigned's
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.
l. The Subscriber hereby represents that his total investment in the
Shares does not represent more than five percent (5%) of his net worth and that
his overall commitment to investments which are not readily marketable is
reasonable in relation to his net worth.
m. The Subscriber hereby represents that he is willing and able to
bear the economic risk of this investment, has no need for liquidity of this
investment and is able to sustain a complete loss of the investment.
3
<PAGE>
n. The Subscriber understands the significance to the Company of its
representations, including those in Section 8, and they are made with the
intention that the Company will rely on them.
2. Representations by the Company
The Company represents and warrants to the Subscriber that on the date
of consummation of the Offering:
a. The Company is and will be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
and will have the corporate power to conduct the business which it now conducts;
b. The execution, delivery and performance of this Agreement by the
Company will have been duly approved by the Board of Directors of the Company
and all other actions required to authorize and effect the offer and sale of the
Series C Preferred Stock will have been duly taken and approved;
c. The Shares will have been duly and validly authorized and when
issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable;
d. The Company will, at all times that the Shares are outstanding,
have authorized and reserved a sufficient number of shares of Common Stock to
provide for conversion of the Shares;
e. The shares of Common Stock issuable upon conversion of the Series
C Preferred Stock, when issued and paid for in accordance with the terms of the
Series C Preferred Stock, will be duly and validly issued, fully paid and
nonassessable;
f. The Company will not be in any material respect in violation of or
in default in any material respect under, nor will the execution and delivery of
this Agreement, or the issuance of the Series C Preferred Stock and the
incurrence of the obligations herein set forth and the consummation of the
transactions herein contemplated, result in a material violation of, or
constitute a material default under, the Amended and Restated Certificate of
Incorporation or the By-laws of the Company; and
g. The Company shall provide each holder of at least 5% of the
original issuance of Series C Preferred Stock (or that number of shares of
Common Stock into which all or part of such percentage of the original
issuance of Series C Preferred Stock is converted) with unaudited quarterly
financial statements within 60 days of the end of each quarter, audited annual
financial statements within 90 days of the end of each fiscal year and such
other financial information as such holders of Series C Preferred Stock may
reasonably
4
<PAGE>
request from time to time. The right to receive such financial information
pursuant to this Agreement shall not be assignable by the Subscriber without the
prior written consent of the Company and shall terminate upon the sale by the
Company of Common Stock or any class or series of securities convertible into
Common Stock in an initial public offering.
3. Terms of Subscription
a. The subscription period will terminate at 11:59 p.m., Washington,
D.C. time, on December 15, 1993, unless extended by the Company at its
discretion for an additional period not to exceed 90 days (the "Termination
Date").
b. The minimum subscription per Subscriber shall be for $1,000,000
of the Series C Preferred Stock, subject to the Company's right to accept or
reject subscriptions in whole or in part.
c. A closing will take place if the Company receives subscriptions
for purchases aggregating at least $12,000,000 of Shares on or prior to the
Termination Date, which condition may not be waived by the Company without the
written consent of the Subscriber. The Company may hold one or more closings on
any additional subscriptions it may receive. The certificates representing the
Series C Preferred Stock will be delivered by the Company within ten (10) days
following the Termination Date.
4. Incidental Registration. If the Company at any time proposes to register
any of its common Stock under the Act, for its own account or for the account of
any other person or entity (other than any registration of an offering solely to
employees of the Company or its subsidiaries), it shall promptly give written
notice to Subscriber of its intention to do so, and the Company shall include in
such registration, subject to Section 5 hereof, all Shares that Subscriber shall
specify in a written notice delivered to the Company within 20 days after its
receipt of the Company's notice of the proposed filing of the registration
statement, provided that the Company shall not be required to include in such
registration any Shares that Subscriber shall so specify if, in the unqualified
opinion of counsel to the Company reasonably acceptable to the Subscriber so
specifying, registration under the Act is not required for the transfer of such
Shares in the manner requested by Subscriber or that a post-effective amendment
to an existing registration statement would be legally sufficient for such a
transfer and the Company shall have obtained such a post-effective amendment.
5. Exclusion. If the proposed or required registration is to be underwritten
(whether on a "best efforts" or a "firm commitment" basis), the managing
underwriter shall have the right to exclude all or any part of Subscriber's
Shares if the underwriter advises the Company in writing that it reasonably
believes that such securities should be withdrawn therefrom. Any exclusion of
Shares shall be made pro rata among Subscriber and all other persons and/or
entities participating in the registration in proportion to the respective
number of Shares or other securities for which Subscriber and each such other
person or entity have requested
5
<PAGE>
registration.
6. Miscellaneous
a. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to the Company, US Order, Inc., 13873 Park Center Road, Suite 230,
Herndon, VA 22071 and to the Subscriber at his address indicated on the
signature page of this Agreement. Notices shall be deemed to have been given on
the date of mailing, except notices of change of address, which shall be deemed
to have been given when received.
b. This Agreement shall not be changed, modified or amended except by
a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
c. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
d. Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Securities as herein provided; subject, however,
to the right hereby reserved to the Company to enter into substantially the same
agreement with other subscribers and to add and/or delete other persons as
subscribers.
e. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
f. In order to discourage frivolous claims, the parties agree that
unless a claimant in any proceeding succeeds in establishing his claim and
recovering a judgment against another party (regardless of whether such claimant
succeeds against one of the other parties to the action), then the other party
shall be entitled to recover from such claimant all of its/their legal costs and
expenses relating to such proceeding and/or incurred in preparation therefor.
g. The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
6
<PAGE>
h. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
i. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
j. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
7. Notice to Pennsylvania Residents
The undersigned hereby acknowledges that the Company is relying upon
the exemption from registration of securities set forth in Section 203(d) of the
Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act"), in
connection with the sale of the Shares to the undersigned.
In accordance with the requirements of the Pennsylvania Act, the
undersigned hereby acknowledges and agrees that (a) the securities purchased
cannot be sold for a period of twelve (12) months from the date of purchase,
except as permitted under Section 204.011 of the Pennsylvania Securities
Regulations, and (b) PURSUANT TO SECTION 207(M) OF THE PENNSYLVANIA ACT, EACH
PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA ACT DIRECTLY FROM THE
COMPANY OR AN AFFILIATE OF THE COMPANY HAS THE RIGHT TO WITHDRAW HIS ACCEPTANCE
WITHOUT INCURRING ANY LIABILITY TO THE COMPANY OR ANY OTHER PERSON WITHIN TWO
(2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE COMPANY OF THIS AGREEMENT.
8. Confidential Investor Questionnaire
The Subscriber represents and warrants that the undersigned comes
within each category checked below, and that for any category checked, the
undersigned has truthfully set forth the factual basis or reason the Subscriber
comes within that category. ALL INFORMATION IN RESPONSE TO THIS PARAGRAPH WILL
BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional
information which the Company deems necessary in order to verify the answers set
forth below.
/ / 1. The undersigned is a corporation, partnership, Massachusetts
business trust, or non-profit organization within the meaning of
Section 501(c)(3) of the Internal Revenue Code, in each case not
formed for the specific purpose of acquiring the Shares and with total
assets in excess of $5,000,000.
7
<PAGE>
------------------------------------
------------------------------------
/ / 2. The undersigned is an individual (not a partnership, corporation,
etc.) who had an income in excess of $200,000 in each of the two
most recent years, or joint income with his or her spouse in excess
of $300,000 in each of those years (in each case including foreign
income, tax exempt income and full amount of capital gains and
losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of
reaching the same income level in the current year.
/ / 3. The undersigned is a director or executive officer of the Company
which is issuing and selling the Shares.
/ / 4. The undersigned is a bank; a savings and loan association, insurance
company, registered investment company; registered business
development company; licensed small business investment company
("SBIC"); or employee benefit plan within the meaning of Title 1 of
ERISA and (a) the investment decision is made by a plan fiduciary
which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or is a self directed plan with
investment decisions made solely by persons that are accredited
investors.
----------------------------------
---------------------------------- (describe entity)
/ / 5. The undersigned is a private business development company as defined
in section 202(a)(22) of the Investment Advisors Act of 1940.
----------------------------------
---------------------------------- (describe entity)
/X/ 6. The undersigned is an individual (not a partnership, corporation,
etc.) whose individual net worth, or joint net worth with his or her
spouse, presently exceeds $1,000,000.
8
<PAGE>
Explanation. In calculating net worth you may include equity in
personal property and real estate, including your principal residence,
cash, short term investments, stock and securities. Equity in personal
property and real estate should be based on the fair market value of
such property less debt secured by such property.
/ / 7. The undersigned is a trust with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the Shares, where the
purchase is directed by a "sophisticated person" as defined in
Regulation 506(b)(2)(ii).
/ / 8. The undersigned is an entity all the equity owners of which are
"accredited investors" within one or more of the above categories. If
--
relying upon this Category alone, each equity owner must complete a
-------------------------------------------------------------------
separate copy of this Agreement.
--------------------------------
----------------------------------
---------------------------------- (describe entity)
9. Manner in Which Title to be Held (check one)
/ / Corporation*
/ / Community Property
/ / Joint Tenants with Right of Survivorship (both parties must sign)
/ / Partnership*
/ / Tenants in Common
/X/ Individual Ownership
/ / Trust*
/ / Other
* If Shares are being subscribed for by an entity, the attached Certificate of
Signatory must also be completed.
Number of Shares Subscribed For: 28,051
Dollar Value of Retired Debt: $200,000
9
<PAGE>
Name(s) Exactly as Intended to Appear on Stock Certificate
/s/ Glenn S. Koach
- --------------------------------- ---------------------------------
Signature Glenn S. Koach, Signature (if purchasing jointly)
Principal
Riverside Capital Advisers, Inc.
as Agent for Jerome Kohlberg
- --------------------------------- ---------------------------------
Name Typed or Printed Name Typed or Printed
2320 N.E. 9th Street, Suite 300
- --------------------------------- ---------------------------------
Address Address
- --------------------------------- ---------------------------------
Fort Lauderdale, FL 33304
- --------------------------------- ---------------------------------
City, State and Zip Code City, State and Zip Code
305/568-2002
- --------------------------------- ---------------------------------
Telephone Telephone
13-3604093
- --------------------------------- ---------------------------------
Tax Id. or Social Security No. Tax Id. or Social Security No.
Dated: December 20, 1993 Dated: , 1993
------------ ---------------
This Subscription and Preferred Stock Purchase Agreement is agreed to and
accepted as of December 20, 1993.
------------
US Order, Inc.
By /s/ Subscription Accepted For:
--------------------------
Its: President 28,051 Shares
-------------------------- --------------------
10
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Shares are being subscribed for by an entity)
I, Glenn S. Koach , am the Investment Manager of
---------------------------------- ---------------------
Jerome Kohlberg, Jr. (the "Entity").
- -----------------------------------
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription and Preferred Stock Purchase Agreement
and to purchase and hold the Shares, and certify further that the Subscription
and Preferred Stock Purchase Agreement has been duly and validly executed on
behalf of the Entity and constitutes a legal and binding obligation of the
Entity.
IN WITNESS WHEREOF, I have set my hand this 20th day of
----------
December 1993
- -------------------------
/s/ Glenn S. Koach
- --------------------------------------------
Signature Glenn S. Koach, Principal
11
<PAGE>
SUBSCRIPTION PROCEDURES
Dear Prospective US Order, Inc. Stockholder:
To become a stockholder of US Order, Inc. ("US Order" or the
"Company") please carefully follow the subscription procedures detailed below:
1. Please read the Confidential Private Placement Memorandum dated
July 15, 1993 (together with any supplements thereto) and the Subscription and
Preferred Stock Purchase Agreement. If you would like to receive any additional
information, or if you have any questions regarding US Order or the terms of the
offering, please contact Mark S. Lynch at (703) 834-9401.
2. Please complete and sign the Subscription and Preferred Stock
Purchase Agreement enclosed herewith (the "Subscription Agreement"). When
completing the Subscription Agreement, please be sure to respond to the
inquiries contained in Sections 6 and 7 thereof.
3. If you are subscribing for shares on behalf of an entity (i.e.,
other than an individual), please complete and sign the Certificate of Signatory
which is attached as the last page of the Subscription Agreement.
4. Enclose the original Promissory Note indicating it has been
cancelled and mail it together with your completed Subscription Agreement to:
US Order, Inc.
13873 Park Center Road
Suite 230
Herndon, VA 22071
Attention: Mark S. Lynch
5. Please fax a copy of the cancelled Promissory Note to the
attention of Mark S. Lynch at fax number (703) 834-9668. In addition to
receiving the Stock Certificate upon execution of the subscription, you will
also receive a separate check for the interest accrued on the Promissory Note
from the date of the Note through the date of the First Closing of the Series C
Preferred Stock Subscription.
All subscription proceeds will be deposited by US Order in a
segregated interest-bearing account and held for the benefit of subscribers
pending the receipt and acceptance of subscriptions for the minimum offering, as
described more fully in the Subscription Agreement. Subscription Agreements are
not binding on US Order until accepted by US Order, which reserves the right to
reject, in whole or in part, in its sole discretion, any lesser number of shares
than the number for which a person has subscribed. If US Order rejects all or a
portion of any subscription, US Order will promptly mail to the subscriber a
check for all, or the appropriate portion of, the amount submitted with its
subscription.
Thank you for your interest in US Order.
US Order, Inc.
<PAGE>
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT
SUBSCRIPTION AND PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") made as
of the date set forth on the signature page hereof between US Order, Inc., a
Delaware corporation with its principal offices at 13873 Park Center Road, Suite
230, Herndon, Virginia 22071 (the "Company") and the undersigned (the
"Subscriber").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to issue an aggregate of up to three
million (3,000,000) shares (the "Shares") of Series C Preferred Stock (the
"Series C Preferred Stock"), par value $.001 per share, of the Company in a
private placement offering (the "Offering"), which shares of Series C Preferred
Stock are convertible into shares of the Company's common stock, $.001 par value
per share (the "Common Stock"), on the terms and conditions hereinafter set
forth, and the Subscriber desires to acquire that number of Shares set forth on
the signature page hereof (the Series C Preferred Stock and the Common Stock
issuable upon conversion thereof being sometimes referred to collectively herein
as the "Securities");
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
1. Subscription for Shares and Representations by Subscriber
a. Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company and the
Company agrees to sell to the Subscriber 112,202 Shares of Series C Preferred
Stock, for cancellation of the Promissory Note dated November 12, 1993, in the
amount of $800,000, the cancelled original of which is attached hereto and
incorporated herein by reference as Attachment "A". The rights and preferences
of the Series C Preferred Stock are set forth in the Certificate of Designation
included in the Company's Amended and Restated Certificate of Incorporation
available upon request from the Company.
b. The Subscriber hereby acknowledges (i) receipt of the Company's
Confidential Private Placement Memorandum dated July 15, 1993 (the "Confidential
Memorandum"), the Supplement to the Confidential Private Placement Memorandum
dated July 22, 1993 (the "Supplement"), the Second Supplement to the
Confidential Private Placement Memorandum dated July 29, 1993 (the "Second
Supplement"), the Third Supplement to the Confidential Private Placement
Memorandum dated October 22, 1993 (the "Third Supplement"), and the Fourth
Supplement to the Confidential Private Placement Memorandum dated December 10,
1993, (the "Fourth Supplement"), and (ii) that the Subscriber has carefully
reviewed the Confidential Memorandum and the Supplements thereto. The
Subscriber hereby acknowledges that the purchase of Shares involves a high
degree of
<PAGE>
risk in that (i) an investment in the Company is highly speculative, and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Shares; (ii) the Subscriber may not be able to
liquidate his investment; (iii) transferability of the Securities is extremely
limited; and (iv) the Subscriber could sustain the loss of his entire
investment.
c. The Subscriber hereby acknowledges that he must be a qualified
investor, as described herein, in order to qualify for the purchase of Shares,
and that he must be able to bear the economic risk of an investment in the
Shares.
d. The Subscriber hereby represents that he is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the questions contained in Section 6 hereof, and that he is able to
bear the economic risk of an investment in the Shares.
e. The Subscriber hereby represents that he has prior investment
experience, including investment in non-listed and non-registered securities, or
he has employed the services of an investment advisor, attorney and/or
accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Shares and to
evaluate the merits and risks of such an investment on his behalf and that he is
able to bear the economic risk he hereby assumes.
f. The Subscriber hereby represents that he has been furnished by the
Company during the course of this transaction with all information regarding the
Company which he has requested or desired to know; that he has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering, and any additional information which he had
requested.
g. The Subscriber hereby acknowledges that the Securities have not
been registered under the Act or any state securities or "blue sky" laws and
that the Offering of Shares has not been reviewed by the United States
Securities and Exchange Commission (the "Commission") or any state regulatory
authority, since the Offering is intended to be exempt from the registration
requirements of Section 5 of the Act pursuant to Section 4(2) of the Act and
pursuant to similar exemptions from registration provided by certain state
securities laws. The Subscriber hereby represents that he is purchasing the
Shares for his own account, for investment and not with a view to the resale or
distribution of the Series C Preferred Stock or the underlying Common Stock.
The Subscriber agrees that he will not sell or otherwise transfer the Securities
unless they are registered under the Act or unless an exemption from such
registration is available.
h. The Subscriber understands that there is no market for the
Securities and that no market is expected to develop for the Securities. The
Subscriber understands that even if a public market develops for the Common
Stock issuable upon conversion of the Series C
2
<PAGE>
Preferred Stock, Rule 144 (the "Rule") promulgated under the Act requires, among
other conditions, a two year holding period prior to the resale (in limited
amounts) of securities acquired in a non-public offering without having to
satisfy the registration requirements under the Act. The Subscriber understands
that the Company is not obligated to comply with any reporting requirements
under the Securities Exchange Act of 1934, as amended, and that the Company
makes no representation or warranty that it will disseminate to the public any
current financial or other information concerning the Company, as is required by
the Rule as one of the conditions of its availability. The Subscriber
understands and hereby acknowledges that the Company is under no obligation to
register the Series C Preferred Stock under the Act or any state securities or
"blue sky" laws. The Subscriber consents that the Company may, if it desires,
permit the transfer of the Securities, subject to the provisions set forth in
Section 6, out of his name only when his request for transfer is accompanied by
an opinion of counsel reasonably satisfactory to the Company that neither the
sale nor the proposed transfer results in a violation of the Act or any
applicable state securities or "blue sky" laws. The Subscriber agrees to hold
the Company and its directors, officers and controlling persons and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of any misrepresentation made by him contained herein or in the
Confidential Investor Questionnaire as set forth in Section 6 hereof or any sale
or distribution by the undersigned Subscriber in violation of the Act or any
applicable state securities or "blue sky" laws.
i. The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Series C Preferred Stock or the
Common Stock, stating that such Securities have not been registered under the
Act or any state securities or "blue sky" laws and setting forth or referring to
the restrictions on transferability and sale thereof. The Subscriber is aware
that the Company will make a notation in its appropriate records with respect to
the restrictions on the transferability of such Securities.
j. The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the undersigned to call his bank or
place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right to reject subscriptions in whole or in part and to close the Offer to the
Subscriber at any time.
k. The Subscriber hereby represents that the address of the
Subscriber furnished by him on the signature page hereof is the undersigned's
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.
l. The Subscriber hereby represents that his total investment in the
Shares does not represent more than five percent (5%) of his net worth and that
his overall commitment to investments which are not readily marketable is
reasonable in relation to his net worth.
m. The Subscriber hereby represents that he is willing and able to
bear the
3
<PAGE>
economic risk of this investment, has no need for liquidity of this investment
and is able to sustain a complete loss of the investment.
n. The Subscriber understands the significance to the Company of its
representations, including those in Section 8, and they are made with the
intention that the Company will rely on them.
2. Representations by the Company
The Company represents and warrants to the Subscriber that on the date
of consummation of the Offering:
a. The Company is and will be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
and will have the corporate power to conduct the business which it now conducts;
b. The execution, delivery and performance of this Agreement by the
Company will have been duly approved by the Board of Directors of the Company
and all other actions required to authorize and effect the offer and sale of the
Series C Preferred Stock will have been duly taken and approved;
c. The Shares will have been duly and validly authorized and when
issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable;
d. The Company will, at all times that the Shares are outstanding,
have authorized and reserved a sufficient number of shares of Common Stock to
provide for conversion of the Shares;
e. The shares of Common Stock issuable upon conversion of the Series
C Preferred Stock, when issued and paid for in accordance with the terms of the
Series C Preferred Stock, will be duly and validly issued, fully paid and
nonassessable;
f. The Company will not be in any material respect in violation of or
in default in any material respect under, nor will the execution and delivery of
this Agreement, or the issuance of the Series C Preferred Stock and the
incurrence of the obligations herein set forth and the consummation of the
transactions herein contemplated, result in a material violation of, or
constitute a material default under, the Amended and Restated Certificate of
Incorporation or the By-laws of the Company; and
g. The Company shall provide each holder of at least 5% of the
original issuance of Series C Preferred Stock (or that number of shares of
Common Stock into which all or part of such percentage of the original issuance
4
<PAGE>
of Series C Preferred Stock is converted) with unaudited quarterly financial
statements within 60 days of the end of each quarter, audited annual financial
statements within 90 days of the end of each fiscal year and such other
financial information as such holders of Series C Preferred Stock may
reasonably request from time to time. The right to receive such financial
information pursuant to this Agreement shall not be assignable by the
Subscriber without the prior written consent of the Company and shall
terminate upon the sale by the Company of Common Stock or any class or series
of securities convertible into Common Stock in an initial public offering.
3. Terms of Subscription
a. The subscription period will terminate at 11:59 p.m., Washington,
D.C. time, on December 15, 1993, unless extended by the Company at its
discretion for an additional period not to exceed 90 days (the "Termination
Date").
b. The minimum subscription per Subscriber shall be for $1,000,000
of the Series C Preferred Stock, subject to the Company's right to accept or
reject subscriptions in whole or in part.
c. A closing will take place if the Company receives subscriptions
for purchases aggregating at least $12,000,000 of Shares on or prior to the
Termination Date, which condition may not be waived by the Company without the
written consent of the Subscriber. The Company may hold one or more closings on
any additional subscriptions it may receive. The certificates representing the
Series C Preferred Stock will delivered by the Company within ten (10) days
following the Termination Date.
4. Incidental Registration. If the Company at any time proposes to register
any of its common Stock under the Act, for its own account or for the account of
any other person or entity (other than any registration of an offering solely to
employees of the Company or its subsidiaries), it shall promptly give written
notice to Subscriber of its intention to do so, and the Company shall include in
such registration, subject to Section 5 hereof, all Shares that Subscriber shall
specify in a written notice delivered to the Company within 20 days after its
receipt of the Company's notice of the proposed filing of the registration
statement, provided that the Company shall not be required to include in such
registration any Shares that Subscriber shall so specify if, in the unqualified
opinion of counsel to the Company reasonably acceptable to the Subscriber so
specifying, registration under the Act is not required for the transfer of such
Shares in the manner requested by Subscriber or that a post-effective amendment
to an existing registration statement would be legally sufficient for such a
transfer and the Company shall have obtained such a post-effective amendment.
5. Exclusion. If the proposed or required registration is to be underwritten
(whether on a "best efforts" or a "firm commitment" basis), the managing
underwriter shall have the right to exclude all or any part of Subscriber's
Shares if the underwriter advises the Company in writing that it reasonably
believes that such securities should be withdrawn therefrom. Any
5
<PAGE>
exclusion of Shares shall be made pro rata among Subscriber and all other
persons and/or entities participating in the registration in proportion to the
respective number of Shares or other securities for which Subscriber and each
such other person or entity have requested registration.
6. Miscellaneous
a. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to the Company, US Order, Inc., 13873 Park Center Road, Suite 230,
Herndon, VA 22071 and to the Subscriber at his address indicated on the
signature page of this Agreement. Notices shall be deemed to have been given on
the date of mailing, except notices of change of address, which shall be deemed
to have been given when received.
b. This Agreement shall not be changed, modified or amended except by
a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
c. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
d. Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Securities as herein provided; subject, however,
to the right hereby reserved to the Company to enter into substantially the same
agreement with other subscribers and to add and/or delete other persons as
subscribers.
e. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
f. In order to discourage frivolous claims, the parties agree that
unless a claimant in any proceeding succeeds in establishing his claim and
recovering a judgment against another party (regardless of whether such claimant
succeeds against one of the other parties to the action), then the other party
shall be entitled to recover from such claimant all of its/their legal costs and
expenses relating to such proceeding and/or incurred in preparation therefor.
g. The holding of any provision of this Agreement to be invalid or
unenforceable by
6
<PAGE>
a court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect.
h. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
i. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
j. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
7. Notice to Pennsylvania Residents
The undersigned hereby acknowledges that the Company is relying upon
the exemption from registration of securities set forth in Section 203(d) of the
Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act"), in
connection with the sale of the Shares to the undersigned.
In accordance with the requirements of the Pennsylvania Act, the
undersigned hereby acknowledges and agrees that (a) the securities purchased
cannot be sold for a period of twelve (12) months from the date of purchase,
except as permitted under Section 204.011 of the Pennsylvania Securities
Regulations, and (b) PURSUANT TO SECTION 207(M) OF THE PENNSYLVANIA ACT, EACH
PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA ACT DIRECTLY FROM THE
COMPANY OR AN AFFILIATE OF THE COMPANY HAS THE RIGHT TO WITHDRAW HIS ACCEPTANCE
WITHOUT INCURRING ANY LIABILITY TO THE COMPANY OR ANY OTHER PERSON WITHIN TWO
(2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE COMPANY OF THIS AGREEMENT.
8. Confidential Investor Questionnaire
The Subscriber represents and warrants that the undersigned comes
within each category checked below, and that for any category checked, the
undersigned has truthfully set forth the factual basis or reason the Subscriber
comes within that category. ALL INFORMATION IN RESPONSE TO THIS PARAGRAPH WILL
BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional
information which the Company deems necessary in order to verify the answers set
forth below.
[_] 1. The undersigned is a corporation, partnership,Massachusetts
business trust, or non-profit organization within the
meaning of Section
7
<PAGE>
501(c)(3) of the Internal Revenue Code, in each case not
formed for the specific purpose of acquiring the Shares
and with total assets in excess of $5,000,000.
____________________________________
____________________________________
- --------------------------------------------------------------------------------
[_] 2. The undersigned is an individual (not a partnership,
corporation,etc.) who had an income in excess of $200,000
in each of the two most recent years, or joint income with
his or her spouse in excess of $300,000 in each of those
years (in each case including foreign income, tax exempt
income and full amount of capital gains and losses but
excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
[_] 3. The undersigned is a director or executive officer of the
Company which is issuing and selling the Shares.
[_] 4. The undersigned is a bank; a savings and loan association,
insurance company, registered investment company;
registered business development company; licensed small
business investment company ("SBIC"); or employee benefit
plan within the meaning of Title 1 of ERISA and (a) the
investment decision is made by a plan fiduciary which is
either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan
has total assets in excess of $5,000,000 or is a self
directed plan with investment decisions made solely by
persons that are accredited investors.
_____________________________
_____________________________ (describe entity)
[_] 5. The undersigned is a private business development company
as defined in section 202(a)(22) of the Investment
Advisors Act of 1940.
_____________________________
_____________________________ (describe entity)
8
<PAGE>
[_] 6. The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint
net worth with his or her spouse, presently exceeds
$1,000,000.
Explanation. In calculating net worth you may include
equity in personal property and real estate, including
your principal residence, cash, short term investments,
stock and securities. Equity in personal property and real
estate should be based on the fair market value of such
property less debt secured by such property.
[x] 7. The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the Shares, where the purchase is directed by a
"sophisticated person" as defined in Regulation
506(b)(2)(ii).
[_] 8. The undersigned is an entity all the equity owners of which
are "accredited investors" within one or more of the above
categories. If relying upon this Category alone, each
equity owner must complete a separate copy of this
Agreement.
_____________________________
_____________________________ (describe entity)
9. Manner in Which Title to be Held (check one)
[_] Corporation*
[_] Community Property
[_] Joint Tenants with Right of Survivorship (both parties must sign)
[_] Partnership*
[_] Tenants in Common
[_] Individual Ownership
[X] Trust*
[_] Other
* If Shares are being subscribed for by an entity, the attached Certificate of
Signatory must also be completed.
9
<PAGE>
Number of Shares Subscribed For: 112,202
Dollar Value of Retired Debt: $800,000
Name(s) Exactly as Intended to Appear on Stock Certificate
/s/ Kevin F. Mawe
- ------------------------ ------------------------------------
Signature MELLON BANK, N.A., Signature (if purchasing jointly)
AS TRUSTEE FOR THE HOECHST
CELANESE CORPORATION EMPLOYEE
BENEFIT MASTER TRUST AS DIRECTED BY
RIVERSIDE CAPITAL ADVISERS
Kevin F. Mawe, Associate Counsel
- -------------------------------- -------------------------------------
Name Typed or Printed Name Typed or Printed
One Mellon Bank Center
- -------------------------------- -------------------------------------
Address Address
500 Grant Street
- -------------------------------- -------------------------------------
Pittsburgh, PA 15258
- -------------------------------- -------------------------------------
City, State and Zip Code City, State and Zip Code
- -------------------------------- -------------------------------------
Telephone Telephone
23-6779246
- -------------------------------- -------------------------------------
Tax Id. or Social Security No. Tax Id. or Social Security No.
Dated: December 21, 1993 Dated: , 1993
----------- -----------------
This Subscription and Preferred Stock Purchase Agreement is agreed to and
accepted as of December 21st, 1993.
US Order, Inc.
By /s/ Subscription Accepted For:
--------------------------- 112,202 Shares
Its: President -------------
--------------------------
10
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Shares are being subscribed for by an entity)
I, KEVIN F. MAWE, am the ASSOCIATE COUNSEL of
MELLON BANK, N.A., TRUSTEE (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription and Preferred Stock Purchase Agreement
and to purchase and hold the Shares, and certify further that the Subscription
and Preferred Stock Purchase Agreement has been duly and validly executed on
behalf of the Entity and constitutes a legal and binding obligation of the
Entity.
IN WITNESS WHEREOF, I have set my hand this 21st day of December 1993
/s/ Kevin F. Mawe
- ---------------------------------
Signature Kevin F. Mawe
Associate Counsel
11
<PAGE>
EXHIBIT 10.54
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
between
US Order, Inc.
and
VeriFone, Inc.
December 21, 1993
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. PURCHASE AND SALE OF STOCK............................................. 1.
1.1 Sale and Issuance of Series C Preferred Stock.................... 1.
1.2 Closing.......................................................... 1.
1.3 Subsequent Sale of Series C Preferred Stock...................... 1.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 2.
2.1 Organization; Good Standing; Qualification....................... 2.
2.2 Authorization.................................................... 2.
2.3 Valid Issuance of Preferred and Common Stock..................... 3.
2.4 Governmental Consents............................................ 3.
2.5 Capitalization and Voting Rights................................. 3.
2.6 Subsidiaries..................................................... 4.
2.7 Contracts and Other Commitments.................................. 4.
2.8 Related-Party Transactions....................................... 5.
2.9 Registration Rights.............................................. 5.
2.10 Permits.......................................................... 5.
2.11 Compliance With Other Instruments................................ 5.
2.12 Litigation....................................................... 6.
2.13 Returns and Complaints........................................... 6.
2.14 Disclosure....................................................... 6.
2.15 Confidential Private Placement Memorandum Plan................... 6.
2.16 Offering......................................................... 7.
2.17 Title to Property and Assets; Leases............................. 7.
2.18 Financial Statements............................................. 7.
2.19 Changes.......................................................... 8.
2.20 Patents and Trademarks........................................... 9.
2.21 Manufacturing and Marketing Rights...............................10.
2.22 Employees: Employee Compensation.................................10.
2.23 Proprietary Information and Inventions Agreements................10.
2.24 Tax Returns, Payments, and Elections.............................11.
2.25 Insurance........................................................11.
2.26 Environmental and Safety Laws....................................11.
2.27 Section 83(b) Elections..........................................11.
2.28 Minute Books.....................................................12.
2.29 Real Property Holding Corporation................................12.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.............................12.
3.1 Authorization....................................................12.
3.2 Purchase Entirely for Own Account................................12.
3.3 Reliance Upon Investor's Representations.........................12.
3.4 Receipt of Information...........................................13.
3.5 Investment Experience............................................13.
3.6 Accredited Investor..............................................13.
3.7 Restricted Securities............................................15.
3.8 Legends..........................................................15.
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<C> <S> <C>
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.........................15.
4.1 Representations and Warranties....................................16.
4.2 Performance.......................................................16.
4.3 Compliance Certificate............................................16.
4.4 Qualifications....................................................16.
4.5 Proceedings and Documents.........................................16.
4.6 Opinion of Company Counsel........................................16.
4.7 Investment Agreement, Registration Rights Agreement and Any
Ancillary Agreements.............................................18.
4.8 Minimum Investment................................................18.
4.9 Amendment of Series A
Stock Purchase Agreement..........................................19.
4.10 Amendment of Note and Loan
Agreement.........................................................19.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING......................19.
5.1 Representations and Warranties....................................19.
5.2 Performance.......................................................20.
5.3 Qualifications....................................................20.
5.4 Minimum Investment................................................20.
6. MISCELLANEOUS...........................................................20.
6.1 Entire Agreement..................................................20.
6.2 Survival of Warranties............................................20.
6.3 Successors and Assigns............................................20.
6.4 Governing Law.....................................................21.
6.5 Counterparts......................................................21.
6.6 Titles and Subtitles..............................................21.
6.7 Notices...........................................................21.
6.8 Finder's Fees.....................................................21.
6.9 Expenses..........................................................22.
6.10 Attorneys' Fees...................................................22.
6.11 Amendments and Waivers............................................22.
6.12 Severability......................................................22.
</TABLE>
ii.
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
EXHIBITS:
Exhibit A - Investment Agreement
Exhibit B - Amended and Restated Certificate of Incorporation
Exhibit C - Registration Rights Agreement
</TABLE>
iii.
<PAGE>
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 21st day
of December, 1993, by and between US ORDER, INC., a Delaware corporation (the
"Company"), and VeriFone, Inc., a Delaware corporation ("Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 Sale and Issuance of Series C Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State of
Delaware on or before the First Closing, as defined in the Investment
Agreement attached hereto as Exhibit A (the "Investment Agreement") an Amended
---------
and Restated Certificate of Incorporation in the form attached hereto as
Exhibit B (the "Restated Certificate").
- ---------
(b) Subject to the terms and conditions of this Agreement, Investor
agrees to purchase at the First Closing and the Company agrees to sell and
issue to Investor at the First Closing, 465,180 shares of the Company's Series
C Preferred Stock at a price of $7.13 per share, for an aggregate purchase
price of $3,316,733.40. The Series C Preferred Stock will have the rights,
preferences and privileges set forth in the Restated Certificate.
1.2 Closing.
The purchase and sale of the Series C Preferred Stock shall take place
at the offices of the Company, 13873 Park Center Road, Suite 230, Herndon, VA
22071, at 1:00 p.m. EST on December 21, 1993, or at such other time and place as
the Company and Investor shall mutually agree, either orally or in writing
(which time and place shall be the same as that on the First Closing with the
"Other Purchasers," as defined in the Investment Agreement (the "Other
Purchasers"). At the First Closing, the Company shall deliver to Investor a
certificate representing the shares of Series C Preferred Stock that Investor is
purchasing against payment of the purchase price therefor in accordance with the
Investment Agreement.
1.3 Subsequent Sale of Series C Preferred Stock.
The Company and Investor hereby agree that the Company may sell, on or
before June 30, 1994, up to the difference between 2,805,050 shares of Series C
Preferred Stock and the number of shares of Series C Preferred Stock sold to
Investor and the other Purchasers at the First Closing, at a price of $7.13 per
share pursuant to a Subscription Agreement, as defined in the Investment
Agreement, and the Company shall not otherwise sell or issue any Series C
Preferred Stock after the First Closing.
1.
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Investor that, except as set
forth on a Schedule of Exceptions furnished to Investor and Cooley Godward
Castro Huddleson & Tatum, counsel for Investor ("Investor's Counsel"),
specifically identifying the relevant subparagraph(s) hereof, which exceptions
shall be deemed to be representations and warranties as if made hereunder, as
follows:
2.1 Organization; Good Standing; Qualification.
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and as proposed to be conducted, to
execute and deliver this Agreement, the Investment Agreement, the Registration
Rights Agreement dated as of December 21, 1993 by and between the Company,
Investor and the "Other Purchasers," the form of which is attached hereto as
Exhibit C (the "Registration Rights Agreement"), and any other agreement to
- ---------
which the Company is a party, the execution and delivery of which is
contemplated hereby or by the Investment Agreement (the "Ancillary Agreements"),
to issue and sell the Series C Preferred Stock and the Common Stock issuable
upon conversion thereof, and to carry out the provisions of this Agreement, the
Investment Agreement, the Registration Rights Agreement, the Restated
Certificate and any Ancillary Agreement. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
properties, prospects, or financial condition.
2.2 Authorization.
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the Investment Agreement, the Registration Rights
Agreement and any Ancillary Agreement, the performance of all obligations of the
Company hereunder and thereunder at the First Closing and the authorization,
issuance (or reservation for issuance), sale, and delivery of the Series C
Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion thereof has been taken or will be taken prior to the First Closing,
and this Agreement, the Investment Agreement, the Registration Rights Agreement,
and any Ancillary Agreement constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Registration Rights
Agreement may be limited by applicable federal or state securities law.
2.
<PAGE>
2.3 Valid Issuance of Preferred and Common Stock.
The Series C Preferred Stock that is being purchased by Investor
hereunder, when issued, sold, and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Registration Rights Agreement and under applicable state and federal securities
laws. The Common Stock issuable upon conversion of the Series C Preferred Stock
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Certificate,
will be duly and validly issued, fully paid, and nonassessable and will be free
of restrictions on transfer other than restrictions on transfer under this
Agreement and the Registration Rights Agreement and under applicable state and
federal securities laws.
2.4 Governmental Consents.
No consent, approval, qualification, order or authorization of, or
filing with, any local, state, or federal governmental authority is required on
the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement, the offer, sale or issuance of the
Series C Preferred Stock by the Company or the issuance of Common Stock upon
conversion of the Series C Preferred Stock, except (i) the filing of the
Restated Certificate with the Secretary of State of the Sate of Delaware; (ii)
such filings as have been made prior to the Closing; and (iii) any notices of
sale required to be filed with the Securities and Exchange Commission under
Regulation D of the Securities Act of 1933, as amended (the "Securities Act"),
or such post-closing filings as may be required under applicable state
securities laws, which will be timely filed within the applicable periods
therefor.
2.5 Capitalization and Voting Rights.
The authorized capital of the Company consists, or will consist
prior to the Closing, of:
(i) Preferred Stock. 11,010,000 shares of Preferred Stock, par
value $.001 (the "Preferred Stock"), of which 6,000,000 shares have been
designated Series A Preferred Stock, 5,204,082 shares of which are issued and
outstanding, 10,000 shares have been designated Series B Preferred Stock,
7,550 shares of which are issued and outstanding, and of which 5,000,000 have
been designated Series C Preferred Stock, up to 2,805,050 shares of which will
be sold as described in the Investment Agreement. The rights, privileges and
preferences of the Series A, Series B and Series C Preferred Stock will be as
stated in the Restated Certificate.
(ii) Common Stock. 30,000,000 shares of Common Stock ("Common
Stock"), par value $.001, of which 5,000,000 shares are issued and
outstanding.
3.
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(iii) The outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Common Stock are owned by the stockholders
and in the numbers specified in Schedule 2.5 previously delivered by the Company
to Investor's Counsel.
(iv) The outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Common Stock have been issued in accordance with the
registration or qualification provisions of the Securities Act and any
relevant state securities laws or pursuant to valid exemptions therefrom.
(v) Except for (A) the conversion privileges of the Series A
Preferred Stock, (B) currently outstanding options to purchase an aggregate of
2,285,236 shares of Common Stock at exercise prices ranging from $0.98 to
$4.00 per share granted to employees pursuant to the Company's Stock Option
Plan (the "Option Plan"), 1,090,783 shares of which have vested as of November
30, 1993, and (C) warrants to purchase 271,429 shares of Common Stock at a
price of $4.00 per share, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), or
agreements for the purchase or acquisition from the Company of any shares of
its capital stock. In addition to the aforementioned options, the Company has
reserved an additional 1,409,217 shares of its Common Stock for purchase upon
exercise of options to be granted in the future under the Option Plan. The
Company is not a party or subject to any agreement or understanding, and, to
the best of the Company's knowledge, there is no agreement or understanding
between any persons that affects or relates to the voting or giving of written
consents with respect to any security or the voting by a director of the
Company.
(vi) To the best of the Company's knowledge, there is no agreement
or understanding between a stockholder of the Company and any other person
giving the other person an option or right of first refusal to purchase, or a
security interest in or lien on, the stockholder's stock in the Company.
2.6 Subsidiaries.
The Company does not own or control, directly or indirectly, any
interest in any other corporation, association, or other business entity. The
Company is not a participant in any joint venture, partnership, or similar
arrangement.
2.7 Contracts and Other Commitments.
The Company does not have any contract, agreement, lease, commitment,
or proposed transaction, written or oral, absolute or contingent, other than (i)
contracts for the purchase of supplies and services that were entered into in
the ordinary course of business and that do not involve more than $100,000, and
do not extend for more than one (1) year beyond the date hereof, (ii) sales,
rental or service contracts entered into in the ordinary course of business, and
(iii) contracts terminable at will by the Company on no more than thirty (30)
days' notice without cost or liability to the Company and that do not involve
any employment or consulting arrangement and are not material to the conduct of
the Company's business. For the
4.
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purpose of this paragraph, employment and consulting contracts and contracts
with labor unions, and license agreements and any other agreements relating to
the acquisition or disposition of the Company's technology (other than standard
end-user license agreements) shall not be considered to be contracts entered
into in the ordinary course of business.
2.8 Related-Party Transactions.
No officer, director or affiliate of the Company or, in the case of an
officer or director, member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company. To the best of the Company's knowledge, no officer, director or
affiliate or, in the case of an officer or director, any member of their
immediate families is, directly or indirectly, interested in any material
contract with the Company.
2.9 Registration Rights.
Except as provided in the Registration Rights Agreement, the Company
is not obligated to register under the Securities Act any of its presently
outstanding securities or any of its securities that may subsequently be issued.
2.10 Permits.
The Company has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted. The Company is not in default in
any material respect under any of such franchises, permits, licenses or other
similar authority.
2.11 Compliance With Other Instruments.
The Company is not in violation or default in any material respect of
any provision of its Restated Certificate or Bylaws or in any material respect
of any provision of any mortgage, indenture, agreement, instrument, or contract
to which it is a party or by which it is bound or, to the best of its knowledge,
of any federal or state judgment, order, writ, decree, statute, rule, or
regulation applicable to the Company. The execution, delivery, and performance
by the Company of this Agreement, the Investment Agreement, the Registration
Rights Agreement and any Ancillary Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not result in any such
violation or be in material conflict with or constitute, with or without the
passage of time or giving of notice, either a material default under any such
provision or an event that results in the creation of any material lien, charge,
or encumbrance upon any assets of the Company or the
5.
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suspension, revocation, impairment, forfeiture, or nonrenewal of any material
permit, license, authorization, or approval applicable to the Company, its
business or operations, or any of its assets or properties.
2.12 Litigation.
There is no action, suit, proceeding, or investigation pending or
currently threatened against the Company that questions the validity of this
Agreement, the Investment Agreement, the Registration Rights Agreement, or any
Ancillary Agreement or the right of the Company to enter into such agreements,
or to consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse change
in the assets, business, properties, prospects, or financial condition of the
Company, or in any material change in the current equity ownership of the
Company (other than that directly attributable to the sale of Series C Preferred
Stock). The foregoing includes, without limitation, any action, suit,
proceeding, or investigation pending or currently threatened involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, their obligations under any agreements with prior
employers, or negotiations by the Company with potential backers of, or
investors in, the Company or its proposed business. The Company is not a party
to, or to the best of its knowledge, named in any order, writ, injunction,
judgment, or decree of any court, government agency, or instrumentality. There
is no action, suit, or proceeding by the Company currently pending or that the
Company currently intends to initiate.
2.13 Returns and Complaints.
The Company has received no customer complaints concerning alleged
defects in its products or system (or the design thereof) that, if true, would
materially adversely affect the operations or financial condition of the
Company.
2.14 Disclosure.
The Company has provided Investor with all the information reasonably
available to it that Investor has requested for deciding whether to purchase the
Series C Preferred Stock and all information that the Company believes is
reasonably necessary to enable Investor to make such decision. Neither this
Agreement nor any other written statements or certificates made or delivered in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein or therein not
misleading.
2.15 Confidential Private Placement Memorandum Plan.
The Confidential Private Placement Memorandum, as amended by the
Fourth Supplement thereto, dated December 10, 1993 previously delivered to
Investor (the "Private Placement Memorandum") was prepared in good faith by the
Company and does not, to the
6.
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best of the Company's knowledge after reasonable investigation, contain any
untrue statement of a material fact nor does it omit to state a material fact
necessary to make the statements therein not misleading, except that with
respect to projections and expressions of opinion or predictions contained in
the Private Placement Memorandum, the Company represents only that such
projections and expressions of opinion and predictions were made in good faith
and that there is a reasonable basis therefor.
2.16 Offering.
Subject in part to the truth and accuracy of Investor's
representations set forth in this Agreement, the offer, sale and issuance of the
Series C Preferred Stock are and will be exempt from the registration
requirements of the Securities Act, and neither the Company nor any authorized
agent acting on its behalf will take any action hereafter that would cause the
loss of such exemption.
2.17 Title to Property and Assets; Leases.
Except (i) as reflected in the Financial Statements (defined in
paragraph 2.18), (ii) for liens for current taxes not yet delinquent, (iii) for
liens imposed by law and incurred in the ordinary course of business for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, (iv) for liens in respect of pledges or deposits under workers'
compensation laws or similar legislation or (v) for minor defects in title, none
of which, individually or in the aggregate, materially interferes with the use
of such property, the Company owns its property and assets free and clear of all
mortgages, liens, claims, and encumbrances. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to the best
of its knowledge, holds a valid leasehold interest free of any liens, claims, or
encumbrances, subject to clauses (i)-(v) above.
2.18 Financial Statements.
The Company has delivered to Investor and Investor's Counsel its
audited financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and statement of cash flows including notes
thereto) for all fiscal years since inception ended two or more months prior to
the date of this Agreement and its unaudited financial statements as at, and for
the eleven-month period ended November 30, 1993 (the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and with each other, except that unaudited Financial
Statements may not contain all footnotes required by generally accepted
accounting principles. The Financial Statements fairly present the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject in the case of the unaudited Financial
Statements to normal year end audit adjustments, which shall not be materially
adverse. Except as set forth in the Financial Statements, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to November 30, 1993 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of
7.
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business and not required under generally accepted accounting principles to be
reflected in the Financial Statements, which, in both cases, individually or in
the aggregate, are not material to the financial condition or operating results
of the Company. Except as disclosed in the Financial Statements, the Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm, or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.19 Changes.
To the best of the Company's knowledge, since November 30, 1993,
there has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right or
of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and that is not material to the business,
properties, prospects, or financial condition of the Company (as such business
is presently conducted and as it is proposed to be conducted);
(e) any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(g) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets, or other intangible assets;
(h) any resignation or termination of employment of any officer or
key employee of the Company; and the Company, to the best of its knowledge,
does not know of the impending resignation or termination of employment of any
such officer or key employee;
8.
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(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major distributor or marketing partner of the
Company;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties
or assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the
benefit of its employees, officers, or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) any declaration, setting aside, or payment or other
distribution in respect of any of the Company's capital stock, or any direct
or indirect redemption, purchase, or other acquisition of any of such stock by
the Company;
(m) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
business, properties, prospects, or financial condition of the Company (as
such business is presently conducted and as it is proposed to be conducted);
or
(n) any agreement or commitment by the Company to do any of the
things described in this paragraph 2.19.
2.20 Patents and Trademarks.
To the best of its knowledge, the Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, and proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any conflict with, or infringement of, the rights of others. Schedule
2.20 previously delivered by the Company to Investor's Counsel contains a
complete list of patents and pending patent applications of the Company. Except
for agreements with its own employees or consultants, substantially in the form
referenced in paragraph 2.23 below, and standard end-user license agreements,
there are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses, or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
and proprietary rights and processes of any other person or entity. The Company
has not received any communications alleging, or otherwise received notice, that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights,
trade secrets, or other proprietary rights or processes of any other person or
entity. The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants, or commitments of any nature) or
other agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
9.
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Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, the Investment Agreement or any Ancillary Agreement,
nor the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as proposed, will, to the best of the
Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant, or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.21 Manufacturing and Marketing Rights.
Schedule 2.21 previously delivered to Investor's Counsel lists any
instance in which the Company has granted rights to manufacture, produce,
assemble, license, market, or sell its products to any person other than
Investor and any agreement by which the Company is bound that affects the
Company's exclusive right to develop, manufacture, assemble, distribute, market,
or sell its products. True and complete copies of any such agreement have
previously been delivered to Investor's Counsel.
2.22 Employees: Employee Compensation.
To the best of the Company's knowledge, there is no strike, or labor
dispute or union organization activities pending or threatened between it and
its employees. None of the Company's employees belongs to any union or
collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of the Company's
knowledge, no employee of the Company is or will be in violation of any
judgment, decree, or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company or to the
use by the employee of his or her best efforts with respect to such business.
The Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement.
The Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.23 Proprietary Information and Inventions Agreements.
Each employee and officer of the Company has executed a Proprietary
Information and Inventions Agreement substantially in the form or forms which
have been previously delivered to Investor's Counsel.
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2.24 Tax Returns, Payments, and Elections.
The Company has filed all tax returns and reports as required by law.
These returns and reports are true and correct in all material respects. The
Company has paid all taxes and other assessments due, except those contested by
it in good faith. The provision for taxes of the Company as shown in the
Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended ("Code"), to be treated as an S corporation or a collapsible
corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has
it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation, or amortization) that
would have a material effect on the business, properties, prospects, or
financial condition of the Company. The Company has never had any tax
deficiency proposed or assessed against it and has not executed any waiver of
any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's federal income tax returns and none
of its state income or franchise tax or sales or use tax returns has ever been
audited by governmental authorities. Since the date of the Financial
Statements, the Company has made adequate provisions on its books of account for
all taxes, assessments, and governmental charges with respect to its business,
properties, and operations for such period. The Company has withheld or
collected from each payment made to each of its employees, the amount of all
taxes, including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositaries.
2.25 Insurance.
The Company has in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed. The Company has in full force and effect products liability
insurance in amounts customary for companies similarly situated.
2.26 Environmental and Safety Laws.
To the best of its knowledge, the Company is not in violation of any
applicable statute, law, or regulation relating to the environment or
occupational health and safety, and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.27 Section 83(b) Elections.
To the best of the Company's knowledge, all individuals who have
purchased shares of the Company's Common Stock subject to restrictions upon
transfer, such as vesting
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restrictions, have timely filed elections under Section 83(b) of the Internal
Revenue Code and any analogous provisions of applicable state tax laws.
2.28 Minute Books.
The copy of the minute books of the Company provided to Investor's
Counsel contains minutes of all meetings of directors (and any committees of
directors) and stockholders and all actions by written consent without a meeting
by the directors (and any committee of directors) and stockholders since the
date of incorporation and reflects all actions by the directors (and any
committee of directors) and stockholders with respect to all transactions
referred to in such minutes accurately in all material respects.
2.29 Real Property Holding Corporation.
The Company is not a real property holding corporation within the
meaning of Internal Revenue Code Section 897(c)(2) and any regulations
promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.
Investor hereby represents and warrants that:
3.1 Authorization.
Investor has full power and authority to enter into this Agreement and
that this Agreement constitutes a valid and legally binding obligation of
Investor.
3.2 Purchase Entirely for Own Account.
This Agreement is made with Investor in reliance upon Investor's
representation to the Company, which by Investor's execution of this Agreement
Investor hereby confirms, that the Series C Preferred Stock to be purchased by
Investor and the Common Stock issuable upon conversion thereof (collectively,
the "Securities") will be acquired for investment for Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, Investor further represents that Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
3.3 Reliance Upon Investor's Representations.
Investor understands that the Series C Preferred Stock is not, and any
Common Stock acquired on conversion thereof at the time of issuance may not be,
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant
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to Section 4(2) thereof, and that the Company's reliance on such exemption is
predicated on the Investor's representations set forth herein. Investor
realizes that the basis for the exemption may not be present if, notwithstanding
such representations, Investor has in mind merely acquiring shares of the Series
C Preferred Stock for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise. Investor has no such
intention.
3.4 Receipt of Information.
Investor believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Series C Preferred
Stock. Investor further represents that it has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Series C Preferred Stock and the business,
properties, prospects, and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of Investor to rely
thereon.
3.5 Investment Experience.
Investor represents that it is experienced in evaluating and investing
in securities of companies in the development state and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment in the Series C
Preferred Stock. Investor also represents it has not been organized for the
purpose of acquiring the Series C Preferred Stock.
3.6 Accredited Investor.
(a) The term "Accredited Investor" as used herein refers to:
(1) A person or entity who is a director or executive officer
of the Company;
(2) Any bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in
Section 2(13) of the Securities Act; any investment company registered under
the Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political
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subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets of
$5,000,000; any employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
(3) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(4) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;
(5) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; or
(8) Any entity in which all of the equity owners are
accredited investors.
As used in this Section 3.6(a), the term "net worth" means the excess of
total assets over total liabilities. For the purpose of determining a person's
net worth, the principal residence owned by an individual should be valued at
fair market value, including the cost of improvements, net of current
encumbrances. As used in this Section 3.6(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, the undersigned should consider whether it should add any or all of
the following items to its adjusted gross income for income tax purposes in
order to reflect more accurately its actual economic income: any amounts
attributable to tax-exempt income received, losses claimed as a limited partner
in any limited partnership, deductions claimed for depletion, contributions to
an IRA or Keogh retirement plan, and alimony payments.
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(b) Investor further represents to the Company that Investor is an
Accredited Investor.
3.7 Restricted Securities.
Investor understands that the Series C Preferred Stock (and any Common
Stock issued on conversion thereof) may not be sold, transferred, or otherwise
disposed of without registration under the 1933 Act or an exemption therefrom,
and that in the absence of an effective registration statement covering the
Stock (or the Common Stock issued on conversion thereof) or an available
exemption from registration under the 1933 Act, the Stock (and any Common Stock
issued on conversion thereof) must be held indefinitely. In particular,
Investor is aware that the Series C Preferred Stock (and any Common Stock issued
on conversion thereof) may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that Rule are met. Among the
conditions for use of Rule 144 may be the availability of current information to
the public about the Company. Such information is not now available and the
Company has no present plans to make such information available.
3.8 Legends.
To the extent applicable, each certificate or other document
evidencing any of the Series C Preferred Stock or any Common Stock issued upon
conversion thereof shall be endorsed with the following legend under the
Securities Act set forth below or any similar legend approved by Investor's
Counsel:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of Investor under subparagraph 1.1(b) of this Agreement
are subject to the fulfillment on or before the First Closing of each of the
following conditions, the waiver of which shall not be effective against
Investor without the written consent of Investor thereto:
15.
<PAGE>
4.1 Representations and Warranties.
The representations and warranties of the Company contained in
Section 2 of this Agreement or in the Investment Agreement shall be true on
and as of the First Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
First Closing.
4.2 Performance.
The Company shall have performed and complied with all agreements,
obligations, and conditions contained in this Agreement or the Investment
Agreement that are required to be performed or complied with by it on or
before the First Closing.
4.3 Compliance Certificate.
The President of the Company shall deliver to Investor at the First
Closing a certificate certifying that the conditions specified in paragraphs
4.1, 4.2, 4.4, 4.7, 4.8, 4.9 and 4.10 have been fulfilled.
4.4 Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the
Series C Preferred Stock to Investor and the Other Purchasers shall have been
duly obtained and be effective as of the First Closing.
4.5 Proceedings and Documents.
All corporate and other proceedings in connection with the
transactions contemplated at the First Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to Investor's
Counsel, which shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
4.6 Opinion of Company Counsel.
Investor shall have received from Andrew M. Paalborg, Esq., counsel
for the Company and World Corp., an affiliate of the Company, an opinion,
dated the date of the First Closing, in form and substance satisfactory to
Investor's Counsel, to the effect that:
(a) The Company has been duly incorporated and organized and is a
validly existing corporation in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its property and assets
and to conduct its business as it is currently being conducted.
16.
<PAGE>
(b) This Agreement, the Registration Rights Agreement and any
Ancillary Agreements have been duly and validly authorized, executed and
delivered by the Company and constitute valid and binding agreements of the
Company.
(c) The Investment Agreement has been duly and validly authorized,
executed and delivered by the Company and World Corp. and constitutes a valid
and binding agreement of the Company and World Corp.
(d) The capital stock of the Company is as follows:
(i) Preferred Stock. 11,010,000 shares of Preferred Stock
(the "Preferred Stock") of which 6,000,000 shares have been designated Series
A Preferred Stock, 10,000 shares have been designated Series B Preferred Stock
and 5,000,000 shares have been designated Series C Preferred Stock. 5,204,082
shares of Series A Preferred Stock and 7,550 shares of Series B Preferred
Stock have been duly authorized, issued and delivered, and are validly
outstanding, fully paid and nonassessable. The respective rights, privileges
and preferences of the Series A, Series B and Series C Preferred Stock are as
stated in the Restated Certificate. The Common Stock issuable upon the
conversion of the Series C Preferred Stock purchased under this Agreement has
been duly and validly reserved for issuance and, when issued in accordance
with the Restated Certificate, will be validly issued, fully paid and
nonassessable. The outstanding shares of Series A and Series B Preferred Stock
have been issued in transactions exempt from registration under the Securities
Act of 1933, and any applicable state securities laws, as in effect on the
date of such issuances.
(ii) Common Stock. 30,000,000 shares of Common Stock, of
which 5,000,000 shares have been duly authorized, issued and delivered and are
validly outstanding, fully paid and nonassessable. The outstanding shares of
Common Stock have been issued in transactions exempt from registration under
the Securities Act of 1933, any applicable state securities laws, as in effect
on the date of such issuances.
(iii) Except for (A) the conversion privileges of the Series A
and Series C Preferred Stock, (B) currently outstanding options to purchase an
aggregate of 2,285,236 shares of Common Stock at exercise prices ranging from
$0.98 to $4.00 per share granted to employees pursuant to the Company's Stock
Option Plan, 1,090,783 shares of which have vested as of November 30, 1993,
and (C) currently outstanding warrants to purchase 271,429 shares of Common
Stock at a price of $4.00 per share, there are no preemptive rights or
options, warrants, conversion privileges, or other rights (or agreements for
any such rights) outstanding to purchase or otherwise obtain any of the
Company's securities.
(e) The certificates representing shares of Series C Preferred
Stock are in due and proper form and have been validly executed.
17.
<PAGE>
(f) The execution, delivery and performance of this Agreement, the
Registration Rights Agreement and any Ancillary Agreement by the Company and
the execution, delivery and performance of the Investment Agreement by the
Company and World Corp. and the issuance of the shares of Series C Preferred
Stock pursuant to this Agreement do not violate any provision of the
respective Certificates of Incorporation, as amended to date, or Bylaws of the
Company and World Corp., and do not constitute a material default under the
provisions of any material agreement known to such counsel to which either the
Company or World Corp. is a party or by which either of them is bound, and do
not violate or contravene (i) any governmental statute, rule or regulation
applicable to the either of them or (ii) any order, writ, judgment,
injunction, decree, determination or award which has been entered against
either of them and of which such counsel is aware, the violation or
contravention of which would materially and adversely affect the Company or
World Corp., or their respective assets, financial condition or operations.
(g) To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of this Agreement,
the Investment Agreement, the Registration Rights Agreement or any Ancillary
Agreement or that might result, either individually or in the aggregate, in
any material adverse change in the assets, financial condition, or operations
of the Company.
(h) All consents, approvals, authorizations, or orders of, and
filings, registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by the
Company of the transactions contemplated by this Agreement, have been made or
obtained.
(i) The offer and sale of the Series C Preferred Stock to Investor
and the Other Purchasers is, and the issuance of the Common Stock upon
conversion of the Series C Preferred Stock will be, exempt from the
registration requirements of the Securities Act of 1933, as amended to date.
4.7 Investment Agreement, Registration Rights Agreement and Any Ancillary
Agreements.
The Company, Investor and all other parties thereto shall have entered
into (a) the Investment Agreement, (b) the Registration Rights Agreement and (c)
any Ancillary Agreements.
4.8 Minimum Investment.
Investors and the Other Purchasers shall purchase at least 1,683,030
shares of Series C Preferred Stock at the First Closing.
18.
<PAGE>
4.9 Amendment of Series A Stock Purchase Agreement.
The Series A Preferred Stock Purchase Agreement dated September 14,
1990 between the Company and WorldCorp, Inc., as amended, shall have been
amended to (i) amend subsection 7.4 thereof to include holders of the Series C
Preferred Stock as beneficiaries of the right of first offer granted to
WorldCorp, Inc. thereunder on a share-for-share basis; (ii) to waive subsection
6.14 thereof as it relates to the Registration Rights Agreement; and (iii) to
revise subsections 6.2, 6.3 and 6.8 to provide that "Registrable Securities,"
for purposes of subsections 6.2, 6.3 and 6.8, includes Common Stock issued or
issuable upon the conversion of the Series C Preferred Stock and any Common
Stock issued or issuable upon the conversion or exercise of any warrant, right
or other security which is issued as a dividend or other distribution with
respect to or in exchange for a replacement of the Series C Preferred Stock, and
the holders of Series C Preferred Stock or such Common Stock be treated as
"Holders" for purposes thereof.
4.10 Amendment of Note and Loan Agreement.
The Increasing Rate Note issued by the Company to WorldCorp, Inc. on
May 1, 1993 (the "Note"), and the Loan Agreement dated as of May 1, 1993
pursuant to which such Note was paid, have been amended, in form and substance
satisfactory to Investor's Counsel, as provided in Section 6 of the Investment
Agreement
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to Investor under this Agreement are subject
to the fulfillment on or before the First Closing of each of the following
conditions by Investor:
5.1 Representations and Warranties.
The representations and warranties of Investor contained in Section 3
of this Agreement shall be true on and as of the First Closing with the same
effect as though such representations and warranties had been made on and as of
the date of the First Closing.
19.
<PAGE>
5.2 Performance.
Investor shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement and the Investment
Agreement that are required to be performed or complied with by it on or before
Closing.
5.3 Qualifications.
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Series C
Preferred Stock to Investor and the Other Purchasers shall have been duly
obtained and be effective as of the Closing.
5.4 Minimum Investment.
Investors shall purchase at least 1,683,030 shares of Series C
Preferred Stock at the First Closing.
6. MISCELLANEOUS.
6.1 Entire Agreement.
This Agreement, the Investment Agreement, the Registration Rights
Agreement and any Ancillary Agreements constitute the entire agreement among the
parties and no party shall be liable or bound to any other party in any manner
by any warranties, representations, or covenants except as specifically set
forth herein or therein.
6.2 Survival of Warranties.
The warranties, representations, and covenants of the Company and
Investor contained in or made pursuant to this Agreement and the Investment
Agreement shall survive the execution and delivery of this Agreement and the
Investment Agreement and the First Closing.
6.3 Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including permitted transferees of any
shares of Series C Preferred Stock sold hereunder or any Common Stock issued
upon conversion thereof). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
20.
<PAGE>
6.4 Governing Law.
This Agreement shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.5 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.6 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.7 Notices.
All notices and other communications required or permitted under this
Agreement shall be in writing and shall be mailed by United States first-class
mail, postage prepaid, sent by facsimile or delivered personally by hand or
nationally recognized courier addressed to the party to be notified at the
address or facsimile number indicated for such person on the signature page
hereof, or at such other address or facsimile number as such party may designate
by ten (10) days' advance written notice to the other parties hereto. All such
notices and other written communications shall be effective on the date of
mailing, facsimile transfer or delivery.
6.8 Finder's Fees.
Each party represents that it neither is nor will be obligated for any
finder's fee or commission in connection with this transaction.
Investor agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finder's fee
(and the cost and expenses of defending against such liability or asserted
liability) for which Investor or any of its officers, partners, employees, or
representatives is responsible.
The Company agrees to indemnify and hold harmless Investor from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees, or
representatives is responsible.
21.
<PAGE>
6.9 Expenses.
Irrespective of whether the First Closing is effected, the Company
shall pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery, and performance of this Agreement and all Exhibits hereto,
and shall pay, or reimburse Investor for paying, upon receipt of any invoice
therefor, the fees (not exceeding $25,000) and expenses of Investor's Counsel,
in connection with the preparation, negotiation, execution, delivery and
performance of the Agreement, the Restated Certificate and the Registration
Rights Agreement, and any investigation of the Company in connection therewith.
6.10 Attorneys' Fees.
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the Investment Agreement, the Registration Rights
Agreement, any Ancillary Agreement or the Restated Certificate, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.
6.11 Amendments and Waivers.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investor. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder
of all such securities, and the Company.
6.12 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
22.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
U.S. ORDER, INC.
By:
-------------------------------
D. Fraser Bullock, President
Address: 13873 Park Center Road, Suite 230
Herndon, VA 22071
Facsimile No.: (703) 834-9668
VERIFONE, INC.
By:
------------------------------
Thomas W. Hubbs
Chief Financial Officer
Address: Three Lagoon Drive, Suite 400
Redwood City, CA 94065
Facsimile No.: (415) 598-5676
<PAGE>
SCHEDULE OF EXCEPTIONS
Section 2.6 Subsidiaries
1. Subsidiaries
US Order has established a wholly owned subsidiary, Intermedia
Marketing, Inc., a Delaware corporation which was incorporated on
August 17, 1993. None of Intermedia's shares have yet been issued,
nor has an organizational meeting been held.
2. Joint Ventures, Partnerships, etc.
a. US Order is nearing completion of negotiation of a joint
venture agreement with Litle, Inc. pursuant to which Litle
would supply all retail catalog related services (from
account management to monetary settlement services).
b. US Order is nearing completion of negotiation of an agreement
with Concept Industries, Inc., pursuant to which CI will
receive equity in Intermedia in proportion to the transaction
processing business it generates for Intermedia.
Section 2.7 Contracts and Other Commitments
1. Contracts over $100,000 and extending more than 1 year
a. Office lease with BECO Management, Inc., commencing September
1, 1993 and ending August 31, 1995 for $147,892.50 per year.
b. VAR leases with ERI for computer equipment are 60 months and
total obligation is $983,274.87 as of November 30, 1993.
c. VeriFone contracts for purchase of Eagle I and Eagle II units.
d. Bell Atlantic Trial Services Agreement Amendment No. 6 which
extends the Trial Service Agreement dated December 22, 1992
through April 7, 1994.
2. Employment and Other Material Contracts
Employment agreement with William F. Gorog dated September 14,
1990.
<PAGE>
Section 2.8 Related Party Transactions
William F. Gorog is a Director of and has an equity interest in TCI, a
telecommunications company with which US Order has an agreement pursuant to
which TCI provides telecommunications services.
The representations and warranties set forth in Section 2.8 exclude any
transactions between US Order and WorldCorp, Inc. as follows:
1. Sublease of office space
2. Utilization of the phone system, for which US Order is billed
3. Utilization of some WorldCorp employees, for which US Order is billed
4. Bridge financings
5. Series A Preferred Stock Purchase Agreement
6. Series B Preferred Stock Exchange Agreement
Section 2.9 Registration Rights
1. WorldCorp has registration rights granted pursuant to the Stock
Restriction Agreement dated September 14, 1990.
2. Bell Atlantic has certain registration rights granted pursuant to the
"Warrant Agreement between WorldCorp, Inc. and Bell Atlantic
Enterprises International, Inc." dated December 22, 1992.
Section 2.10 Permits
US Order is in the process of obtaining required licenses to sell Eagle I
Caller ID services outside the Bell Atlantic and Ameritech regions. Total
estimated costs: $10,000.
Section 2.11 Compliance with Other Instruments
US Order is not in material compliance with the payment terms of the
following agreements:
AGED PAYABLES
<TABLE>
<CAPTION>
GREATER
THAN
VENDOR TOTALS 1-30 31-60 61-90 90
<S> <C> <C> <C> <C> <C>
a. ERI $ 67,656.98 33,299.90 34,357.08 0.00
b. VeriFone 1,403,212.01 120,802.66 46,836.84 1,235,572.51
c. Chemical Bank 46,364.58 15,000.00 15,218.22 16,146.36
d. Brookstone 20,987.87 20,987.87
e. DMTG 26,090.20 1,387.20 24,703.00
f. Response Med 21,500.35 21,500.35
g. Ruder-Finn 22,734.45 7,000.00 7,000.00 8,734.45
------------- ---------- ---------- ------------
$1,608,546.44 0.00 197,602.91 104,799.34 1,306,144.19
</TABLE>
2.
<PAGE>
Section 2.12 Litigation - See Section 2.20
Section 2.15 Confidential Private Placement Memorandum
1. See Schedule 2.18 and 2.19
2. Number of terminals at year end will be approximately 12,000
3. No international revenue will be recognized.
Section 2.17 Title to Property and Assets; Leases - See Section 2.11
Section 2.18 Financial Statements
US Order is considering a write-down of the Eagle I terminals to the range
of $150 per unit. There are numerous business decisions which need to be
resolved before the write-down will be authorized and the actual amount
determined.
Section 2.19 Changes
1. Bell Atlantic's current agreement with US Order runs through
April 7, 1994. US Order is continuing discussions with Bell
Atlantic regarding an additional extension of that agreement.
Bell Atlantic, which distributed a Request for Information in
October 1993, to prospective ADSI screen-based telephone
providers under which it indicated its interest in playing a key
role in the industry, to which US Order responded, decided in
December 1993, not to pursue that project further.
2. Banc One, with which US Order signed a Letter of Intent dated
May 17, 1993, has not yet made a commitment to participate in
the business proposed and outlined by US Order. Discussions
continue .
3. Bell South, with which US Order signed a Letter of Intent dated
April 21, 1993, has not yet made a firm commitment to market the
PhonePlus product. Discussions continue.
Section 2.20 Patents and Trademarks
1. Patents
There has been increasing litigation in technology industries
with respect to the manufacture, use and sale of new products
and services that are the subject of conflicting patent rights.
There can be no assurance that any patents owned or controlled
by US Order will afford commercially significant protection of
its
3.
<PAGE>
technology. US Order's patents have not been tested in court, and
litigation may be necessary to determine validity and scope of US
Order's rights. Moreover, the patent laws of foreign countries differ
from those of the United States and the degree of protection afforded
by foreign patents may, therefore, vary. All patent applications
relate to obtaining patent coverage for US Order's existing patent in
foreign countries, with the exception of a continuation application
filed on March 30, 1993 with regard to the original patent. The grant
of a patent does not protect a company from infringement litigation by
third parties in the future.
US Order owns U.S. Patent No. 4,947,028 and pending patent
applications which cover various proprietary aspects of its automated
order and payment system. On February 3, 1992, the U.S. Patent and
Trademark Office ("PTO") issued an order granting the request of
Portel Network Services, Inc. to reexamine US Order's patent based on
a previously issued patent to that party. Additional prior patents
and printed publications were considered by the PTO as well. On April
9, 1993, the PTO issued a Notice of Intent to Reissue Reexamination
Certificate confirming patentability of most of the patent claims, as
amended during the reexamination proceedings. The PTO's Reexamination
Certificate was issued on June 8, 1993. The third party requester has
no appeal rights. While there can be no guarantee, a patent that has
undergone reexamination is generally regarded as being more likely to
withstand validity challenges in the future, where such challenges are
based upon the same or substantially the same prior patents and
printed publications as were reviewed by the PTO during the
reexamination proceedings.
In November 1991, US Order received a letter from Lawrence D'Angelis
bringing to US Order's attention a patent issued to such party,
entitled home Merchandise Ordering Telecommunications Terminal, which
such party subsequently claimed was infringed by US Order. In US
Order's patent counsel's opinion, there is no infringement, and US
Order advised such party that US Order's technology did not infringe
any claims of such patent. Nonetheless, there can be no assurance
that such party will drop its claim of infringement or that US Order
would prevail in any proceeding in relation thereto.
See also Section 2.10 Permits.
2. Trademarks
US Order received a letter dated December 6, 1993 from counsel for
Taurus Publishing, Inc. which publishes a newsletter entitled Phone+,
claiming unauthorized use by US Order of the name for the Company's
next generation product, PhonePlus. Counsel to US Order was aware of
this newsletter prior
4.
<PAGE>
to delivering his opinion that the name was available for use by
US Order, and has informed US Order it is still his opinion that
US Order may use this name.
3. Licenses
a. WorldGames
b. A Right of First Refusal was granted to TRI for
deploying US Order technology in Malaysia.
c. As part of a business agreement being negotiated
with Portel Services Network, Inc., a company
which has developed a portable transaction
processing device, the agreement currently
includes reciprocal non-exclusive, royalty free
licenses to each other's patents.
4. Inventions of Employees
US Order owns and uses software developed by Lloyd Given, Vice
President of US Order, which he developed prior to joining US
Order and while operating his own sole proprietorship business,
LGCI, said software being more fully described in Exhibit B to
the Agreement between LGCI and US Order dated July 15, 1991.
Section 2.21 Manufacturing and Marketing Rights
1. Bell Atlantic has marketing rights pursuant to the Trial Service
Agreement dated December 22, 1992 and extended through April 7,
1994, through the Trial Service Agreement Amendment No. 6.
2. WorldGames has marketing rights pursuant to the License Agreement
between US Order and WorldCorp dated March 31, 1993.
Section 2.22 Employees: Employee Compensation
1. Employee Compensation Plans
a. All full-time US Order employees may participate
in the company's Stock Option Plan, a copy of
which was previously delivered to counsel.
b. Any full-time US Order employee may participate in
the 401K plan the company offers, a copy of which
was previously delivered to counsel.
5.
<PAGE>
c. The Company has implemented in 1994 an Incentive
Compensation Plan for employees in senior
management and sales-related positions.
2. Employment Agreements
All employees of US Order, both full and part-time, have signed
a non-disclosure and non-competition agreement with US Order.
Section 2.24 Tax Returns, Payments and Elections
During 1992, the Department of Taxation of the Commonwealth of
Virginia performed a sales tax audit for the calendar year ending
December 31, 1991.
Section 2.25 Insurance
The company is in the process of procuring errors and omissions
insurance in amounts customary for companies similarly situated.
6.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
U.S. ORDER, INC.
By: /s/ Fraser Bullock
------------------------------------
D. Fraser Bullock, President
Address: 13873 Park Center Road, Suite 230
Herndon, VA 22071
Facsimile No.: (703) 834-9668
VERIFONE, INC.
By: /s/ Thomas W. Hubbs
------------------------------------
Thomas W. Hubbs
Chief Financial Officer
Address: Three Lagood Drive, Suite 400
Redwood City, CA 94065
Facsimile No.: (415) 598-5676
<PAGE>
EXHIBIT 10.55
REGISTRATION RIGHTS AGREEMENT
between
US Order, Inc.
and
VeriFone, Inc.
December 21, 1993
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions......................................... 1.
1.1 Certain Definitions............................ 1.
1.2 Restrictions on Transfer....................... 2.
1.3 Requested Registration......................... 3.
1.4 Company Registration........................... 6.
1.5 Expenses of Registration....................... 7.
1.6 Registration on Form S-3....................... 7.
1.7 Registration Procedures........................ 8.
1.8 Indemnification................................ 9.
1.9 Information by Holder.......................... 11.
1.10 Limitations on Subsequent Registration Rights. 11.
1.11 Rule 144 Reporting............................ 11.
1.12 Transfer or Assignment of Registration Right.. 12.
1.13 "Market Stand-Off" Agreement.................. 12.
1.14 Allocation of Registration Opportunities...... 13.
1.15 Delay of Registration......................... 13.
1.16 Termination of Registration Rights............ 13.
2. Miscellaneous....................................... 13.
2.1 Governing Law.................................. 13.
2.2 Successors and Assigns......................... 13.
2.3 Entire Agreement; Amendment; Waiver............ 14.
2.4 Notices, Etc................................... 14.
2.5 Delays or Omissions............................ 14.
2.6 Rights; Separability........................... 14.
2.7 Information Confidential....................... 14.
2.8 Titles and Subtitles........................... 15.
2.9 Counterparts................................... 15.
</TABLE>
i.
<PAGE>
US ORDER, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the 21st day of December 1993, by and between US ORDER, INC., a
Delaware corporation (the "Company"), and all purchasers of the Company's Series
C Preferred Stock, as listed on Schedule A attached hereto.
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the Company and each Investor, as defined below, hereby agrees as
follows:
1. DEFINITIONS.
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "Closing" shall mean the date of the initial sale of shares
of the Company's Series C Preferred Stock.
(b) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(d) "Holder" shall mean any Investor who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 1.2 and Section 1.12 hereof.
(e) "Initiating Holders" shall mean any Holder or Holders who in
the aggregate hold not less than twenty-five percent (25%) of the outstanding
Registrable Securities.
(f) "Investor" shall mean each purchaser of the Company's Series C
Preferred Stock.
(g) "Other Stockholders" shall mean persons other than Holders
who, by virtue of agreements with the Company, are entitled to include
securities in certain registrations hereunder.
(h) "Registrable Securities" shall mean (i) shares of Common
Stock issued or issuable pursuant to the conversion of the Shares, and (ii)
any Common Stock issued as a dividend or other distribution with respect to,
or in exchange or in replacement of, the Shares referred to in clause (i)
above; provided, however, that Registrable Securities shall not
1.
<PAGE>
include any shares of Common Stock which have previously been registered or
which have been sold to the public, or which have been sold in a private
transaction in which the transferor's rights under this Agreement are not
assignable or assigned.
(i) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
(j) "Registration Expenses" shall mean all expenses incurred by
the Company in effecting any registration pursuant to this Agreement,
including, without limitation, all registration, qualification, and filing
fees, printing expenses, escrow fees, fees and disbursements of counsel for
the Company, blue sky fees and expenses, and expenses of any regular or
special audits incident to or required by any such registration, but shall not
include Selling Expenses and the compensation of regular employees of the
Company, the latter of which shall be paid in any event by the Company.
(k) "Restricted Securities" shall mean any Registrable Securities
required to bear the legend set forth in Section 1.2(b) hereof.
(l) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(m) "Rule 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(o) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities and fees and disbursements of counsel for any Holder
(other than the fees and disbursements of counsel included in Registration
Expenses.).
(p) "Shares" shall mean the shares of Series C Preferred Stock of
the Company.
1.2 Restrictions on Transfer. Each Holder agrees not to make any
disposition of all or any portion of the Registrable Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 1.2, provided and to the extent such Section is then applicable
and:
2.
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(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B)
if reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or
retired partners in accordance with partnership interests, or (B) to the
Holder's family member or trust for the benefit of an individual Holder,
provided the transferee will be subject to the terms of this Section 1.2 to
the same extent as if such transferee were an original Holder hereunder.
(a) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
(b) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have
obtained an opinion at such Holder's expense of counsel (which counsel may be
counsel to the Company) reasonably acceptable to the Company to the effect
that the securities proposed to be disposed of may lawfully be so disposed of
without registration, qualification or legend.
(c) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
1.3 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders at any time or times not earlier than the earlier of (i)
three years after the date
3.
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of this Agreement or (ii) one year after the effective date of the first
registration statement filed by the Company covering an underwritten offering of
any of its securities to the general public that is declared or ordered
effective, a written request that the Company effect any registration with
respect to all or a part of the Registrable Securities, the aggregate expected
price to the public of which equals at least $7,500,000, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other state
securities laws, and appropriate compliance with the Securities Act) and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in a written request received by
the Company within ten (10) days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.3:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has initiated two such
registrations pursuant to this Section 1.3(a) (counting for these purposes only
registrations which have been declared or ordered effective and pursuant to
which securities have been sold and registrations which have been withdrawn by
the Holders as to which the Holders have not elected to bear the Registration
Expenses pursuant to Section 1.5 hereof and would, absent such election, have
been required to bear such expenses);
(C) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(D) If the Initiating Holders propose to dispose of
shares of Registrable Securities which may be immediately registered on Form S-3
pursuant to a request made under Section 1.6 hereof;
(E) If the Initiating Holders do not request that such
offering be firmly underwritten by underwriters selected by the Initiating
Holders (subject to the consent of the Company, which consent will not be
unreasonably withheld); or
4.
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(F) If the Company and the Initiating Holders are
unable to obtain the commitment of the underwriter described in clause (E)
above to firmly underwrite the offer.
(b) Subject to the foregoing clauses (A) through (F), the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders; provided, however, that if (i) in
the good faith judgment of the Board of Directors of the Company, such
registration would be seriously detrimental to the Company and the Board of
Directors of the Company concludes, as a result, that it is essential to defer
the filing of such registration statement at such time, and (ii) the Company
shall furnish to such Holders a certificate signed by the Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company for
such registration statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such registration statement, then
the Company shall have the right to defer such filing (except as provided in
clause (C) above) for a period of not more than one hundred eighty (180) days
after the receipt of the request of the Initiating Holders, and, provided
further, that the Company shall not defer its obligation in this manner more
than once in any twelve-month period.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Sections 1.3(b) and 1.14 hereof,
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
(c) Underwriting. The right of any Holder to registration
pursuant to Section 1.3 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities such Holder holds.
(d) Procedures. If the Company shall request inclusion in any
registration pursuant to Section 1.3 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to Section 1.3, the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this Section 1
(including Section 1.13). The Company shall (together with all Holders and
other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by a majority in interest of the Initiating Holders, which underwriters are
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 1.3, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 1.14
5.
<PAGE>
hereof. If a person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such person
shall be excluded therefrom by written notice from the Company, the underwriter
or the Initiating Holders. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall also be withdrawn from such
registration. If shares are so withdrawn from the registration and if the
number of shares to be included in such registration was previously reduced as a
result of marketing factors pursuant to this Section 1.3(d), then the Company
shall offer to all Holders who have retained rights to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among such Holders requesting additional inclusion in accordance
with Section 1.14.
1.4 Company Registration.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights (other than
pursuant to Section 1.3 or 1.6 hereof), other than a registration relating
solely to employee benefit plans, or a registration relating solely to a Rule
145 transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance),
except as set forth in Section 1.4(b) below, and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder and received by the Company within ten (10) days
after the written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify all or a
part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section l.4(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.4 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company.
Notwithstanding any other provision of this Section 1.4, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth
6.
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below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting.
The Company shall so advise all Holders of securities requesting registration,
and the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in Section
1.14. If any person does not agree to the terms of any such underwriting, such
person shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall also be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of shares
of Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion in accordance with
Section 1.14 hereof.
1.5 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.4 and 1.6 hereof, and the first two registrations pursuant to Section
1.3 hereof and reasonable fees of one counsel for the selling stockholders in
the case of registrations pursuant to Sections 1.3 and 1.4 shall be borne by the
Company; provided, however, that if the Holders bear the Registration Expenses
for any registration proceeding begun pursuant to Section 1.3 and subsequently
withdrawn by the Holders registering shares therein, such registration
proceeding shall not be counted as a requested registration pursuant to Section
1.3 hereof. Furthermore, in the event that a withdrawal by the Holders is based
upon material adverse information relating to the Company that is different from
the information known or available (upon request from the Company or otherwise)
to the Holders requesting registration at the time of their request for
registration under Section 1.3, such registration shall not be treated as a
counted registration for purposes of Section 1.3 hereof, even though the Holders
do not bear the Registration Expenses for such registration. All Selling
Expenses relating to securities so registered shall be borne by the Holders of
such securities pro rata on the basis of the number of shares of securities so
registered on their behalf, as shall be any other expenses in connection with
the registration required to be borne by the Holders of such securities.
1.6 Registration on Form S-3.
(a) After its initial public offering, the Company shall use its
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms. After the Company has qualified for the use of Form
S-3, as an alternative to the rights contained in subsection 1.3 of this
Section 1, the Holders of not less than fifteen percent (15%) of the
Registrable Securities then held by Holders shall have the right to request
two (2) registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders),
provided, however, that the Company shall not be obligated to
7.
<PAGE>
effect any such registration if (i) the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) on
Form S-3 at an aggregate price to the public of less than $1,000,000, or (ii) in
the event that the Company shall furnish the certification described in
paragraph 1.3(a)(ii) (but subject to the limitations set forth therein) or (iii)
in a given twelve-month period, the Company has effected one (1) such
registration in such period or (iv) it is to be effected more than five (5)
years after the Company's initial public offering.
(b) If a request complying with the requirements of Section
1.6(a) hereof is delivered to the Company, the provisions of Sections 1.3(a)(i)
and (ii) and Section 1.3(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Sections 1.3(c)
and 1.3(d) hereof shall apply to such registration.
1.7 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 1, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from, time to time may reasonably request;
8.
<PAGE>
(d) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(e) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;
(f) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(g) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.3 hereof, the Company will
enter into an underwriting agreement in form reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions.
1.8 Indemnification.
(a) The Company will indemnify each Holder, each of its
officers, directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or
9.
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underwriter and stated to be specifically for use therein. It is agreed that
the indemnity agreement contained in this Section 1.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, legal counsel, and accountants and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Holder and Other
Stockholder, and each of their officers, directors, and partners, and each
person controlling such Holder or Other Stockholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular, or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Stockholders, directors, officers, partners, legal counsel, and accountants,
persons, underwriters, or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided that in
no event shall any indemnity under this Section 1.8 exceed the gross proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section
1.8 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or
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the claim in question as an Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.8 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such toss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
1.9 Information by Holder. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.10 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder.
1.11 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to use its best efforts to:
(a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after ninety (90) days following the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;
11.
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(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements;
(c) So long as a Holder owns any Restricted Securities, furnish
to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at
any time from and after ninety (90) days following the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements),
a copy, of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder
to sell any such securities without registration.
1.12 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register securities granted to a Holder by the Company
under this Section 1 may be transferred or assigned by a Holder only to a
transferee or assignee of not less than 50,000 shares of Registrable
Securities (as presently constituted and subject to subsequent adjustments for
stock splits, stock dividends, reverse stock splits, and the like), provided
that the Company is given written notice at the time of or within a reasonable
time after said transfer or assignment, stating the name and address of the
transferee or assignee and identifying the securities with respect to which
such registration rights are being transferred or assigned, and, provided
further, that the transferee or assignee of such rights assumes in writing the
obligations of such Holder under this Section 1.
1.13 "Market Stand-Off" Agreement. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Holder shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the
registration) during the one hundred eighty (180) day period following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that:
(a) such agreement shall only apply to the first such
registration statement of the Company, including securities to be sold on its
behalf to the public in an underwritten offering; and
(b) all Holders, Other Stockholders, officers, directors,
affiliates and any persons holding securities representing 5% or more of the
normal voting power of the Company are bound by similar agreements.
The obligations described in this Section 1.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may
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impose stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day period.
1.14 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or Other Stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and Other Stockholders requesting inclusion of
shares pro rata on the basis of the number of shares of Registrable Securities
and Other Shares that would be held by such Holders and Other Stockholders,
assuming conversion; provided, however, so that such allocation shall not
operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration, if any Holder or Other Stockholder
does not request inclusion of the maximum number of shares of Registrable
Securities and Other Shares allocated to such person pursuant to the above-
described procedure, the remaining portion of such person's allocation shall be
reallocated among those requesting Holders and Other Stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by such
Holders and Other Stockholders, assuming conversion, and this procedure shall be
repeated until all of the shares of Registrable Securities and Other Shares
which may be included in the registration on behalf of the Holders and Other
Stockholders have been so allocated. The Company shall not limit the number of
Registrable Securities to be included in a registration pursuant to this
Agreement in order to include shares held by stockholders with no registration
rights or to include founder's stock or any other shares of stock issued to
employees, officers, directors, or consultants by the Company.
1.15 Delay of Registration. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.16 Termination of Registration Rights. The registration rights
granted to the Holders under this Section 1 shall terminate upon the expiration
of five years after the closing of the first registered firmly underwritten
public offering of Common Stock of the Company.
2. MISCELLANEOUS.
2.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware.
2.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
13.
<PAGE>
2.3 Entire Agreement; Amendment; Waiver. This Agreement (including
the Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated, except by a written instrument signed by the Company and the Holders
of at least fifty percent (50%) of the Registrable Securities and any such
amendment, waiver, discharge or termination shall be binding on all the Holders,
but in no event shall the obligation of any Holder hereunder be materially
increased, except upon the written consent of such Holder.
2.4 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, sent by facsimile or delivered personally by
hand or nationally recognized courier addressed (a) if to a Holder, as indicated
on the signature page hereto, or at such other address or facsimile number as
such Holder or a permitted assignee shall have furnished to the Company in
writing, or (b) if to the Company, at the address or facsimile number on the
signature page hereto, or to such other address or facsimile number as the
Company shall have furnished to each Holder in writing. All such notices and
other written communications shall be effective on the date of mailing,
facsimile transfer or delivery.
2.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.
2.6 Rights; Separability. Unless otherwise expressly provided
herein, a Holder's rights hereunder are several rights, not rights jointly held
with any of the other Holders. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
2.7 Information Confidential. Each Holder acknowledges that the
information received by such Holder pursuant hereto may be confidential and for
its use only, and it will not use such confidential information in violation of
the Exchange Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with the
exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or such Holder is required to
disclose such information by a governmental body.
14.
<PAGE>
2.8 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing or interpreting this Agreement.
2.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
15.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement effective as of the day and year first above written.
U.S. ORDER, INC. VERIFONE, INC.:
By: By:
--------------------------- ----------------------------------
D. Fraser Bullock Thomas W. Hubbs
President Chief Financial Officer
Address: 13873 Park Center Road Address: Three Lagoon Drive, Suite 400
Suite 230 Redwood City, CA 94065
Herndon, VA 22071
Facsimile No.: (703) 834-9668 Facsimile No.: (415) 598-5676
KNIGHT RIDDER, INC. WORLDCORP, INC.
By: By:
--------------------------- -------------------------------
Ross Jones A. Scott Andrews
CFO and Senior Vice President Chief Financial Officer
of Finance
Address: 6th Floor Address: 13873 Park Center Road
1 Herald Plaza Suite 230
Miami, FL. 33132 Herndon, VA 22071
Facsimile No.: (305) 376-3876 Facsimile No.: (703) 834-9212
MELLON BANK, N.A., TRUSTEE
FOR HOECHST CELANESE
CORPORATION
EMPLOYEE BENEFIT MASTER TRUST JEROME KOHLBERG, Jr.
By: By:
--------------------------- ----------------------------
Name Printed: Name Printed:
Title Printed: Title Printed:
Address: 1 Mellon Bank Center Address: 20 W. 55th Street
500 Grant Street 9th Floor
Room 151-3425 New York, NY 10019
Pittsburgh, PA 15258 Attn: Jerome Kohlberg, Jr.
Facsimile No.: (412) 234-0555 Facsimile No.: (305) 568-2005
Attn: Bernadette Rist Attn: Janet Holloway
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Shares of
Name of Investor Series C Preferred Stock Purchased
- ---------------- ----------------------------------
<S> <C>
Knight Ridder, Inc. 841,515
VeriFone, Inc. 465,180
WorldCorp, Inc. 236,083
Mellon Bank, N.A., as
Trustee for Hoechst
Celanese Corporation
Employee Benefit
Master Trust 112,202
Jerome Kohlberg, Jr. 28,051
</TABLE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement effective as of the day and year first above written.
U.S. ORDER, INC. VERIFONE, INC.:
By: /s/ FRASER BULLOCK By: /s/ THOMAS W. HUBBS
--------------------------- ----------------------------------
D. Fraser Bullock Thomas W. Hubbs
President Chief Financial Officer
Address: 13873 Park Center Road Address: Three Lagoon Drive, Suite 400
Suite 230 Redwood City, CA 94065
Herndon, VA 22071
Facsimile No.: (703) 834-9668 Facsimile No.: (415) 598-5676
KNIGHT RIDDER, INC. WORLDCORP, INC.
By: By:
--------------------------- -------------------------------
Ross Jones A. Scott Andrews
CFO and Senior Vice President Chief Financial Officer
of Finance
Address: 6th Floor Address: 13873 Park Center Road
1 Herald Plaza Suite 230
Miami, FL. 33132 Herndon, VA 22071
Facsimile No.: (305) 376-3876 Facsimile No.: (703) 834-9212
MELLON BANK, N.A., TRUSTEE
FOR HOECHST CELANESE
CORPORATION
EMPLOYEE BENEFIT MASTER TRUST JEROME KOHLBERG, Jr.
By: By:
--------------------------- ----------------------------
Name Printed: Name Printed:
Title Printed: Title Printed:
Address: 1 Mellon Bank Center Address: 20 W. 55th Street
500 Grant Street 9th Floor
Room 151-3425 New York, NY 10019
Pittsburgh, PA 15258 Attn: Jerome Kohlberg, Jr.
Facsimile No.: (412) 234-0555 Facsimile No.: (305) 568-2005
Attn: Bernadette Rist Attn: Janet Holloway
<PAGE>
EXHIBIT 10.56
Technology License Agreement
Between
US Order, Inc.,
And
VeriFone, Inc.
Dated: December 21, 1993
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 - LICENSE.................................................. 1.
1.1 License Grant............................................ 1.
1.2 Sublicenses.............................................. 2.
ARTICLE 2 - LIMITATIONS ON USE OF LICENSED RIGHTS.................... 2.
2.1 Licensee's Use of Licensed Rights........................ 2.
2.2 Licensed Technology Package.............................. 2.
2.3 License Rights in the Event of Licensor Bankruptcy....... 3.
ARTICLE 3 - OWNERSHIP; INTELLECTUAL PROPERTY......................... 3.
3.1 Ownership................................................ 3.
3.2 Future Inventions and Joint Inventions................... 3.
ARTICLE 4 - TERM..................................................... 3.
4.1 Term..................................................... 3.
4.2 Effect of Expiration of Agreement........................ 4.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES........................... 4.
5.1 Organization and Standing................................ 4.
5.2 Authority, Approval and Enforceability................... 4.
5.3 Title to Licensed Technology; Encumbrances............... 5.
5.4 Intellectual Property Rights............................. 5.
5.5 Disclosure............................................... 5.
ARTICLE 6 - INDEMNIFICATION.......................................... 6.
6.1 Indemnification.......................................... 6.
6.2 Procedure................................................ 6.
ARTICLE 7 - MISCELLANEOUS PROVISIONS................................. 6.
7.1 Relationship of the Parties.............................. 6.
7.2 Assignment............................................... 6.
7.3 Governing Law............................................ 7.
7.4 Notices.................................................. 7.
7.5 Amendment................................................ 7.
7.6 Waiver................................................... 7.
7.7 Survival................................................. 7.
7.8 Severability............................................. 7.
7.9 Entire Agreement of the Parties.......................... 7.
</TABLE>
i.
<PAGE>
TECHNOLOGY LICENSE
AGREEMENT
THIS AGREEMENT is entered into as of the 21st day of December 1993, (the
"Effective Date") by and between US Order, Inc., a Delaware corporation
("Licensor") and VeriFone, Inc., a Delaware ("Licensee").
RECITALS
WHEREAS, Licensor has developed and owns or has the license to use all
intellectual property rights of Licensor, including without limitation all
patent, copyright, trademark, trade secret and any other intellectual property
rights held by Licensor in any jurisdiction in connection with its current
application and operating system software for both front-end terminal devices as
well as the back-end host and any communications in-between, as set forth in
Exhibit A as attached hereto, together with all updates and derivative works,
developed for or on behalf of Licensor (including all source code and all
relevant documentation therefor) (the "Licensed Technology"); and
WHEREAS, the parties hereto have agreed to enter into a Stock Purchase
Agreement (the "Stock Purchase Agreement"), a Registration Rights Agreement (the
"Registration Rights Agreement"), and an Investment Agreement (the "Investment
Agreement"), all of even date herewith; and
WHEREAS, as partial consideration to induce Licensee to enter into such
Agreements, Licensor desires to grant to Licensee and Licensee desires to accept
from Licensor, a fully-paid, non-exclusive, world-wide license to practice the
Licensed Technology in order to develop, make, have made, use and sell products
and derivative works incorporating such Licensed Technology, the use of which is
triggered by a Triggering Event (as defined below) during the term of this
Agreement and in accordance with the terms hereinafter specified.
NOW THEREFORE, in consideration of the foregoing and the covenants and
premises contained in this Agreement, the parties agree as follows:
ARTICLE 1
LICENSE
1.1 License Grant. Subject to the terms and conditions of this Agreement,
including without limitation Articles 2 and 4 hereof, Licensor hereby grants to
Licensee during the term of this Agreement a fully-paid, non-exclusive, world-
wide license to reproduce, prepare derivative works, distribute, perform and
display the Licensed Technology and to practice the
1.
<PAGE>
Licensed Technology in order to develop, make, have made, use and sell products
and derivative works incorporating such Licensed Technology (the "Licensed
Rights").
1.2 Sublicenses. Licensee shall have the right to grant written
sublicenses consistent with the terms of this Agreement after the occurrence of
a Triggering Event (as defined below) and upon the written agreement of the
sublicensee to abide by the terms of this Agreement.
ARTICLE 2
LIMITATIONS ON USE OF LICENSED RIGHTS
2.1 Licensee's Use of Licensed Rights. Licensee hereby agrees that,
notwithstanding the present license grant set forth in Section 1.1 hereof, it
shall refrain from using the Licensed Rights in any way and shall keep all
Licensed Technology in the manner set forth in Section 2.2 hereof unless and
until one of the Triggering Events occurs. As used herein, a "Triggering Event"
shall mean (a) a general assignment for the benefit of creditors, or filing of
any petition in bankruptcy or for relief under the Title 11 of the United States
Code of, by or against Licensor; or (b) Licensor breaches or defaults upon any
of its material obligations hereunder and such breach or default is not cured
within twenty (20) days of notice thereof. Upon the occurrence of a Triggering
Event, all restrictions with respect to Licensee's use of the Licensed Rights
shall automatically cease without further action required on any party's part.
2.2 Licensed Technology Package.
(a) Upon execution of this Agreement, Licensor shall deliver to
Licensee a technical data package consisting of the Licensed Technology,
including without limitation all source code and documentation for the
Licensed Technology and in such detail that a person skilled in the field can
use, modify or reproduce the Licensed Technology (the "Licensed Technology
Package"). The Licensed Technology Package shall also include a detailed table
of contents and an officer's certificate executed by either the Chief
Executive Officer or the President and by the Chief Technical Officer of
Licensor (an "Officers' Certificate") to the effect that they have personally
inspected the Licensed Technology Package and that the Licensed Technology
Package contains all materials required to be delivered pursuant to this
Agreement.
(b) Licensee shall place the Licensed Technology Package in secure
storage and shall not use it except as permitted by this Agreement. If
Licensor so requests, the Licensed Technology Package shall be sealed by
Licensor in the presence of a representative of Licensor. Licensor shall have
the right, at any time during the term hereof prior to the occurrence of one
of the Triggering Events, to inspect the Licensed Technology Package during
normal business hours at the Licensee facility where it is kept, to determine
that the seal has not been broken. Such inspections shall not occur more
frequently than once in each calendar quarter.
(c) Licensor shall provide Licensee not less than once per calendar
quarter, with an update to the Licensed Technology Package containing any and
all updates, changes, fixes and derivatives to the Licensed Technology not
previously deposited in the Licensed Technology Package. If there are no such
changes or updates to the Licensed Technology
2.
<PAGE>
during a calendar quarter, Licensor shall furnish an Officers' Certificate to
Licensee certifying that there have been no such changes, updates or
modifications to the Licensed Technology. Any failure to provide updates
hereunder after notice thereof shall be considered a default under this
Agreement.
(d) The procedures set forth in subsections 2.2(a) and (b) shall
also apply to each update delivered pursuant to subsection 2.2(c).
(e) Licensee agrees to give Licensor one (1) full business day's
notice before unsealing any sealed Licensed Technology Package pursuant to
this Agreement. Licensor agrees to give Licensee immediate notice of the
happening of any event described in clause (a) of subsection 2.1 hereof.
2.3 License Rights in the Event of Licensor Bankruptcy. In the event that
Licensor or its successors or representatives reject or seek to terminate this
Agreement in breach of the provisions hereof, including as contemplated under
Section 365 of the Bankruptcy Code, it is acknowledged that this Agreement
contemplates the manner in which Licensee may retain its rights in the Licensed
Technology, including any other intellectual property rights which may be
associated therewith, if Licensee chooses to do so in accordance with Section
365(n) of the Bankruptcy Code. It is the parties' intent that the rights
Licensee shall be entitled to retain shall be of the scope provided in Section
1.1 hereof in all items delivered or required to be delivered under the
Agreement.
ARTICLE 3
OWNERSHIP; INTELLECTUAL PROPERTY
3.1 Ownership. Licensee acknowledges and agrees that Licensor is and
shall remain the sole owner of the Licensed Technology and that Licensee has no
rights in or to the Licensed Technology other than the license rights
specifically granted herein.
3.2 Future Inventions and Joint Inventions. Each party acknowledges and
agrees that any and all discoveries, know-how, inventions, methods, ideas and
the like ("Inventions") made or discovered pursuant to this Agreement solely by
its employees shall be owned solely by it and that any and all Inventions made
jointly by employees of each shall be jointly owned ("Joint Inventions"), all as
determined in accordance with U.S. laws of inventorship. Any modifications made
to the Licensed Technology by Licensee hereunder shall be the property of
Licensee, and Licensee shall own all right, title and interest in such
modifications.
ARTICLE 4
TERM
4.1 Term. This Agreement will commence as of the Effective Date of this
Agreement and, unless sooner terminated as provided hereunder, will terminate
upon the earlier of the third anniversary date of the Effective Date or the
successful completion by Licensor of
3.
<PAGE>
a firmly underwritten public offering managed by underwriters of recognized
national standing with gross proceeds to Licensor equal to or in excess of
$7,500,000.
4.2 Effect of Expiration of Agreement. Upon expiration of this Agreement,
the Licensed Technology Package shall be returned to Licensor. If no Triggering
Event occurred during the term of the Agreement, Licensee shall supply an
officer's certificate certifying that Licensee did not break the seal of the
Licensed Technology Package.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Licensor hereby represents and warrants that:
5.1 Organization and Standing. Licensor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted, and is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to so qualify could have a material adverse
effect on the Licensed Rights.
5.2 Authority, Approval and Enforceability.
(a) Licensor has full corporate power and authority to execute,
deliver and perform its obligations under this Agreement and all corporate
action of Licensor necessary for such execution, delivery and performance has
been duly taken.
(b) No approval of this Agreement or the transactions contemplated
hereby is required by the stockholders of Licensor under the Certificate of
Incorporation or Bylaws of Licensor, the Delaware General Corporation Law, or
otherwise.
(c) The execution and delivery by Licensor of this Agreement and all
documents to be executed by Licensor in connection with the transactions
contemplated hereby do not, and the performance and consummation by Licensor
of the transactions contemplated by this Agreement will not, result in any
conflict with, breach or violation of or default, termination, forfeiture or
lien under (or upon the failure to give notice or the lapse of time, or both,
result in any conflict with, breach or violation of or default, termination,
forfeiture or lien under) any terms or provisions of Licensor's Certificate of
Incorporation or Bylaws, each as amended, or any statute, rule, regulation,
judicial or governmental decree, order or judgment, agreement, lease or other
instrument to which Licensor is a party or to which it or its assets are
subject.
(d) There are no consents or approvals of third parties required in
order for Licensor to complete the transfer of the Licensed Technology to
Licensee under this Agreement. Licensor has secured, or will have secured
prior to the Effective Date, all of the consents and approvals necessary to
license and assign to Licensee all of the Licensed Technology free and
4.
<PAGE>
clear of any lien, and without violation, breach, conflict with, default under
or non-performance of any law, contract, note, debt instrument, security
agreement or mortgage, or any other commitment binding upon Licensor or any of
the Licensed Technology, without loss or diminution of benefit and use of any
Licensed Technology. Not included within the meaning of "Licensed Technology"
for purposes of this representation and warranty is any generally available
software licensed by Licensor from a third party subject to restrictions
prohibiting the transfer of Licensor's license to Licensee.
(e) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or
any other governmental body, where failure to obtain such consent, approval,
authorization, order, registration, qualification or filing has or will have a
material adverse effect on the use of the Licensed Technology, is required for
the consummation by Licensor of the transactions contemplated by this
Agreement.
(f) This Agreement and each document to be executed by Licensor in
connection with the transactions contemplated hereby is, and upon due
execution and delivery by the parties thereto will be, a legal, valid and
binding obligation of Licensor, enforceable against Licensor in accordance
with its respective terms.
5.3 Title to Licensed Technology; Encumbrances. Licensor has good, valid
and marketable title to all Licensed Technology. None of the Licensed
Technology is subject to any lien or conditional sale agreement of any kind.
Not included within the meaning of "Licensed Technology" for purposes of this
representation and warranty is any generally available software licensed by
Licensor from a third party subject to restrictions prohibiting the transfer of
Licensor's license to Licensee.
5.4 Intellectual Property Rights.
(a) Except for the Licensed Rights to be licensed pursuant to Section
1.1, there are no other intellectual property rights of Licensor necessary or
needed to permit Licensee to use the Licensed Rights. Except for Licensor's
ownership of Patent No. 4,947,028, Licensor does not own or license, nor, to
Licensor's knowledge except as specifically disclosed in the Stock Purchase
Agreement, are there any rights of a third party regarding (i) any patent or
patent applications with respect to the Licensed Technology, or (ii) any
registered trademarks, trade names, service marks, or the like, or applications
therefor.
(b) Except as specifically disclosed in the Stock Purchase Agreement,
no licenses, sub-licenses or other agreements relating to any of the Licensed
Technology exist which would limit or restrict the rights of Licensee to use the
Licensed Rights or which grant to a third party any rights in any of the
Licensed Technology.
5.5 Disclosure. All facts deemed reasonably material by the Licensor to
the Licensed Rights have been disclosed to Licensee. Licensor knows of no facts
or circumstances that would adversely affect Licensee's use of its Licensed
Rights. To Licensor's knowledge, no representation or warranty by Licensor
contained in this Agreement and no statement contained in any certificate,
schedule, list or other writing furnished or to be furnished to Licensee
5.
<PAGE>
hereunder contains or shall contain any untrue statement of a material fact or
omits or shall omit to state a material fact necessary in order to make the
statement therein not misleading.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification. Licensor agrees to indemnify, hold harmless and
defend Licensee, its agents, directors, officers, employees and consultants
against any and all claims, suits, losses, damages, costs, fees and expenses
including, without limitation, interest, penalties and reasonable attorneys' and
expert witnesses' fees resulting from or arising out of a claim that any aspect
of the Licensed Rights infringe any patent, copyright or other proprietary
rights of any third party and Licensor shall be liable for all losses, damages,
liabilities, costs and expenses incurred by Licensee including, without
limitation, interest, penalties and reasonable attorneys' and expert witnesses'
fees.
Notwithstanding the foregoing, Licensor shall have no liability to Licensee
under this section for any claim or action against Licensee charging
infringement based upon any conduct of Licensee involving (a) the use of the
Licensed Technology in combination with other products, software, technology or
equipment, device or data, if such other products, software, technology or
equipment are not recommended, specified or supplied by Licensor, or (b) the
alteration or modification of the Licensed Technology by Licensee or Licensee's
customers, if such infringement charge would have been avoided in the absence of
such combination or alteration.
6.2 Procedure. The indemnification set forth in Section 6.1 above is
effective upon the condition that (1) Licensee gives Licensor prompt written
notice of any such claim or action or Licensor is not prejudiced by any delay in
notice, and (2) Licensee gives Licensor, at Licensor's expense, full cooperation
in the investigation and defense of such claim or action.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 Relationship of the Parties. Neither party is, nor will be deemed to
be, an agent or legal representative of the other party for any purpose.
Neither party will be entitled to enter into any contracts in the name of or on
behalf of the other party, and neither party will be entitled to pledge the
credit of the other party in any way or hold itself out as having authority to
do so. No party will incur any debts or make any commitments for the other,
except to the extent, if at all, specifically provided herein.
7.2 Assignment. Except as otherwise provided herein, neither this
Agreement nor any interest hereunder will be assignable in part or in whole by
either party without the prior written consent of the other party, which consent
shall not be unreasonably withheld. Upon the occurrence of a Triggering Event,
Licensee may grant sublicenses under this Agreement; provided, however, that the
sublicensee must agree in writing to abide by the terms of this
6.
<PAGE>
Agreement. In addition, Licensee's rights hereunder may be assigned to a
directly or indirectly wholly owned subsidiary of Licensee or to an entity
merging with or acquiring Licensee or substantially all its assets, without the
prior written consent of Licensor. This Agreement will be binding upon the
successors and permitted assigns of the parties and the name of a party
appearing herein will be deemed to include the names of such party's successor's
and permitted assigns to the extent necessary to carry out the intent of this
Agreement. Any assignment which is not in accordance with this section will be
void.
7.3 Governing Law. This Agreement is made in accordance with and shall be
governed and construed in accordance with the laws of the State of California,
as applied to contracts executed and performed entirely within the State of
California, without regard to conflicts of laws rules.
7.4 Notices. All notices and other communications hereunder will be in
writing and will be deemed given if delivered personally or by facsimile
transmission (receipt verified), telexed, or sent by express courier service, to
the parties at the addresses below (or at such other address for a party as will
be specified by like notice; provided, that notices of a change or address will
be effective only upon receipt thereof).
7.5 Amendment. No amendment, modification or supplement of any provision
of the Agreement will be valid or effective unless made in writing and signed by
a duly authorized officer of each party.
7.6 Waiver. No provision of the Agreement unless such provision otherwise
provides will be waived by any act, omission or knowledge of a party or its
agents or employees except by an instrument in writing expressly waiving such
provision and signed by a duly authorized officer of the waiving party.
7.7 Survival. In the event of termination of this Agreement, Articles 2,
3, 5, 6 and 7 shall survive.
7.8 Severability. If one of more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.9 Entire Agreement of the Parties. This Agreement constitutes the
entire agreement of the parties and cancels and supersedes any and all prior
negotiations, correspondence, understandings and agreements, whether oral or
written, between the parties respecting the subject matter hereof.
7.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
including the Exhibit attached hereto and incorporated herein by reference.
VERIFONE, INC. ("Licensee") US ORDER, INC ("Licensor")
By: /s/ By: /s/
---------------------------- ----------------------------
Name: Name:
-------------------------- --------------------------
(Print) (Print)
Title: Title:
------------------------- -------------------------
(Print) (Print)
Address: Address:
Three Lagoon Drive, Suite 400 13873 Park Center Road, Suite 490
Redwood City, CA 94065 Herndon, VA 22071
Attn: Legal Department Attn: General Counsel
Telephone: (415) 591-6500 Telephone: (703) 834-9480
Fax number: (415) 598-4516 Fax number: (703) 834-9668
<PAGE>
EXHIBIT A
DETAILED DESCRIPTION OF LICENSED TECHNOLOGY
Source Code and use information is provided for each of the following processes:
Volume I: TPS (Transaction Processing System) Technical Reference
PART A: TPS Specification
A. Process Specification
B. Date Store Specification
PART A: TPS Execution
A. Front End System
B. Internal Support System
PART B: The Data Base Interface
Appendix A, Triggers Logic Chart
Appendix B, Front End System Database Interface Flow
Appendix C, the ISS System Database Interface Flow
Appendix D, (sysname)_import, (sysname)_export, (sysname)_ramtrx
Appendix E, the data format for FES and ISS
PART C: RAM/FES Table Schemes
Volume II: US Order Code
The TPS Source Files
Script and Resource Files
Volume III: Remote Terminal Technical Reference
PART A: Eagle I Remote Terminal Programmer's Manual
I. Introduction
II. Low Level Description
III. Terminal Language
IV. Support Tools
PART [B]: Eagle I remote Terminal Applications Manual
I. Introduction
II. Integrated Applications
<PAGE>
Volume IV: Eagle II Remote Terminal Technical Documentation: Specification
PART A: Eagle II Remote Terminal BIOS Interface Requirements
PART B: Eagle II Remote Terminal Operating System Design Specification
PART C: Eagle II Native Applications Design Specification
Volume V: Internal Support System
PART A: System Monitor Reference
The Schema
10.
<PAGE>
EXHIBIT 10.57
================================================================================
INVESTMENT AGREEMENT
by and among
US Order, Inc.,
WorldCorp., Inc.
and
VeriFone, Inc.
December 21, 1993
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Investment and Exchange.......................................... 1.
1.1 Purchase.................................................... 1.
1.2 No Security Interest or Waiver.............................. 2.
1.3 Any Interest of WorldCorp................................... 2.
1.4 Other Investments at First Closing.......................... 2.
2. License Agreement................................................ 3.
3. Board Observer Rights............................................ 3.
4. Right of First Refusal With Respect to Future Products........... 4.
5. Recurring Revenue Opportunities.................................. 4.
6. US Order Indebtedness to WorldCorp............................... 4.
7. Miscellaneous.................................................... 5.
7.1 Governing Law............................................... 5.
7.2 Successors and Assigns...................................... 5.
7.3 Entire Agreement; Amendment; Waiver......................... 5.
7.4 Notices, Etc................................................ 5.
7.5 Delays or Omissions......................................... 6.
7.6 Rights; Separability........................................ 6.
7.7 Titles and Subtitles........................................ 6.
7.8 Counterparts................................................ 6.
</TABLE>
<PAGE>
INVESTMENT AGREEMENT
This Agreement is made this 21st day of December 1993, by and among
VeriFone, Inc., a Delaware corporation ("VeriFone"), US Order, Inc., a Delaware
corporation ("US Order") and WorldCorp, Inc., a Delaware corporation
("WorldCorp").
Whereas, US Order has requested that VeriFone exchange certain rights to
payments from US Order for accounts receivable of VeriFone from US Order and for
amounts payable to VeriFone by US Order pursuant to the Purchase Agreement
between VeriFone and US Order dated as of September 17, 1992 (the "OEM
Agreement") and the Letter Agreement between VeriFone and US Order dated October
25, 1991 (the "OEM Letter Agreement"), and VeriFone desires to exchange such
rights, for Series C Preferred Stock of US Order and the additional
consideration specified herein;
Whereas, WorldCorp, the majority stockholder of US Order, has a potential
financial interest in certain of the amounts payable by US Order to VeriFone
pursuant to the OEM Agreement and desires VeriFone to be able to exchange the
rights to such payments with US Order pursuant to this Agreement;
Now, Therefore, in consideration of the premises and the mutual
representations and covenants hereafter set forth, the parties hereto hereby
agree as follows:
1. Investment and Exchange
1.1 Purchase.
VeriFone and US Order agree that, pursuant to the Stock Purchase
Agreement between VeriFone and US Order dated the date hereof and executed by
them concurrently with the execution of this Agreement (the "Stock Purchase
Agreement"), and subject to the terms and conditions thereof, VeriFone will
purchase 465,180 shares of Series C Preferred Stock of US Order and will receive
the license to intellectual property of US Order in the License Agreement
between US Order as Licensor and VeriFone as Licensee dated the date hereof and
executed by them concurrently with the execution of this Agreement (the "License
Agreement"), for which VeriFone will pay by:
(a) forgiveness and cancellation of indebtedness from US Order to
VeriFone in the aggregate amount of $1,612,360, representing all of VeriFone's
accounts receivable from US Order under the OEM Agreement and the OEM Letter
Agreement on December 20, 1993, with respect to products sold by VeriFone to US
Order thereunder (the "12/20/93 ARs"); and
1.
<PAGE>
(b) forgiveness and cancellation of all royalties, transaction fees
and monthly payments owed or to be owed by US Order to VeriFone under the OEM
Agreement and OEM Letter Agreement with respect to products sold by VeriFone to
US Order thereunder, in the aggregate amount of an estimated $1,704,374 (the
"Additional Payments").
1.2 No Security Interest or Waiver.
(a) VeriFone hereby represents and warrants to US Order that: (i) it
has full right, title and authority (except for any interest of WorldCorp
referred to in subsection 1.3 below) to exchange the 12/20/93 ARs and the
Additional Payments for the Series C Preferred Stock and rights under the
License Agreement, as provided herein; and (ii) it has granted no security
interest in the 12/20/93 ARs or the Additional Payments, or that, if it has
granted any such security interest, it has so informed US Order in writing and
will, prior to the First Closing, as defined in the Stock Purchase Agreement
(the "First Closing"), obtain a written release of such security interest from
the holder(s) thereof.
(b) VeriFone hereby agrees to indemnify and hold US Order harmless
against any claims, demands, causes of action or damages, including reasonable
attorneys' fees, by reason of its breach hereof.
1.3 Any Interest of WorldCorp.
(a) WorldCorp hereby waives and releases to VeriFone any interest it
may have in the 12/20/93 ARs or the Additional Payments, by reason of the OEM
Agreement or otherwise.
(b) WorldCorp hereby represents and warrants to VeriFone and US
Order that:
(i) it has full right, title and authority to waive and release
any interest it may have in the 12/20/93 ARs or the Additional Payments to
VeriFone; and
(ii) it has granted no security interest in any such interest
it may have, or that, if it has granted any such security interest, it has so
informed VeriFone and US Order in writing and will, prior to the First
Closing, obtain a written release of such security interest from the holder(s)
thereof.
(c) WorldCorp hereby agrees to indemnify and hold VeriFone and US
Order harmless against any claims, demands, causes of action or damages,
including reasonable attorneys' fees, by reason of its breach hereof.
1.4 Other Investments at First Closing.
US Order agrees that it will not hold the First Closing unless, in
addition to VeriFone's investment pursuant to subsection 1.1 hereof:
2.
<PAGE>
(a) Knight-Ridder, Inc. ("Knight-Ridder") purchases 841,515 shares of
Series C Preferred Stock for an aggregate consideration of $3,500,000 in cash
and $2,500,000 in advertising credits, as specified in Section 6 of the
Investment Agreement between US Order and Knight-Ridder dated December 21, 1993,
a true and complete copy of which has previously been delivered to VeriFone's
counsel, and the Subscription Agreement between US Order and Knight-Ridder dated
December 21, 1993, a true and complete copy of which has previously been
delivered to VeriFone's counsel;
(b) WorldCorp purchases 236,083 shares of Series C Preferred Stock
for $1,683,272 in cash pursuant to the Subscription Agreement between US Order
and WorldCorp dated December 21, 1993, a true and complete copy of which has
previously been delivered to VeriFone's counsel; and
(c) No more than two (2) other investors purchase 140,253 shares of
Series C Preferred Stock for an aggregate of $1,000,000 in cash pursuant to
Subscription Agreements between US Order and such investors dated December 21
and December 21, 1993, true and complete copies of which have previously been
delivered to VeriFone's counsel.
(d) There are no agreements relating directly or indirectly to the
purchase of Series C Preferred Stock, other than those referred to in the Stock
Purchase Agreement and in this Section 1.
2. License Agreement
VeriFone and US Order agree to execute the License Agreement concurrently
with the execution of this Agreement and the First Closing.
3. Board Observer Rights
VeriFone shall have the right, so long as it holds at least 100,000 shares
of Series C Preferred Stock or an equivalent number of shares of Common Stock
into which Series C Preferred Stock has been converted, to appoint from time to
time a representative (with an alternate) to attend all meetings of the Board of
Directors of US Order, and all committees thereof, whether held in person or by
telephone, in a nonvoting observer capacity; to receive notice of all such
meetings and to receive any written consents circulated for signature by
directors; and to receive all information provided to the Board of Directors and
any committee thereof, all on the same basis as if such representative were a
director; provided, however:
(a) US Order reserves the right to exclude the VeriFone
representative from the portion of any meeting (and to withhold any specifically
related information) which covers any matter between US Order and VeriFone; and
(b) VeriFone shall hold in confidence and trust the information
received in connection with its Board observer rights to the same extent as any
director of US Order, by reason of his or her fiduciary duties to US Order,
would be required to do so.
3.
<PAGE>
4. Right of First Refusal With Respect to Future Products
US Order hereby agrees that, with respect to any application developed by
or for US Order that requires a terminal or other hardware in addition to, or in
lieu of, PhonePlus (such terminal or other hardware, plus any firmware or
software therefor requested by US Order, being referred to as a "Future Product"
herein), VeriFone shall have a right of first refusal to develop (at VeriFone's
expense) and supply US Order on an exclusive basis with such Future Product.
Upon US Order's commitment to commercial development of any such application, US
Order will give VeriFone written notice of its need for any Future Product with
respect thereto, including all related requirements and specifications. If
VeriFone proposes to develop such Future Product and to sell it to US Order on
terms that meet US Order's requirements as to price, features, quality, delivery
and support, US Order shall enter into a mutually satisfactory OEM purchase
agreement with VeriFone so that VeriFone may develop and produce the Future
Product and sell it to US Order. If VeriFone proposes to commercially develop
and produce the Future Product, but US Order determines that VeriFone has not
met its requirements and specifications, US Order shall be free to obtain the
Future Product elsewhere, but not on requirements or specifications more
favorable to the proposed producer thereof than those utilized with respect to
VeriFone. Once VeriFone has obtained the exclusive right to commercially
develop and produce a Future Product and sell it to US Order hereunder, VeriFone
agrees to use reasonable efforts to reduce the cost of the Future Product, so
that VeriFone will be in a position to reduce the prices it charges US Order for
purchases of the Future Product.
5. Recurring Revenue Opportunities
US Order agrees to meet with representatives of VeriFone and explore
mutually acceptable ways in which VeriFone could sell VeriFone products or
provide services to US Order, US Order's customers and/or the providers of
services on US Order's systems on a basis that provides VeriFone with revenue on
a periodic, per unit, per transaction, per occurrence or other recurring basis.
US Order and VeriFone will use their best efforts to reach agreement on
potential opportunities as soon as reasonably practical.
6. US Order Indebtedness to WorldCorp
(a) US Order and WorldCorp hereby represent and warrant to VeriFone that
the only indebtedness outstanding from US Order to WorldCorp, other than (i) not
more than $1,000,000 in demand indebtedness incurred by US Order as bridge
financing until the First Closing can be completed, which bridge financing will
be repaid out of the proceeds of the sale of Series C Preferred Stock at the
First Closing and (ii) not more than $300,000 through intercompany accounts, is
$3,500,000 in aggregate principal amount under that certain Increasing Rate Note
dated May 1, 1993, in the original principal amount of $4,500,000 (the "Note"),
issued pursuant to that certain Loan Agreement between WorldCorp and US Order
dated as of May 1, 1993 (the "Loan Agreement"), together with interest accrued
but unpaid on the Note in the amount of $4,396,078 as of December 20, 1993.
4.
<PAGE>
(b) US Order and WorldCorp further represent and warrant to VeriFone that
as of completion of the First Closing, either: (i) any breach or default
existing with respect to the Note and the Loan Agreement will have been
permanently cured; or (ii) the Note and Loan Agreement shall have been amended,
in form and substance satisfactory to VeriFone and its counsel, so that any such
breach or default has been permanently waived, in either event such that the
original due date of December 31, 1995 for the principal amount of indebtedness
under the Note has been fully restored.
(c) US Order and WorldCorp hereby agree to amend the Note and the Loan
Agreement, in form and substance satisfactory to VeriFone and its counsel, so
that the Note shall not become due, and in no event shall US Order be required
to repay, nor shall US Order repay, any of the $3,500,000 in principal amount
outstanding under the Note (i) unless and until US Order has completed, after
the First Closing, sales of its Preferred Stock on a parity with or junior to
the Series C Preferred Stock (including sales of additional shares of Series C
Preferred Stock) or its Common Stock equaling or exceeding the sum of $8,000,000
plus the amount of any such principal to be repaid; or (ii) if such repayment
would constitute an act of bankruptcy on US Order's part or is likely to give
rise, within three months of such repayment, to a petition of bankruptcy being
filed by, for or against US Order.
7. Miscellaneous
7.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
7.2 Successors and Assigns. The rights of VeriFone under Sections 3, 4
and 5 hereof may only be assigned to a directly or indirectly wholly owned
subsidiary of VeriFone, or to an entity merging with or acquiring VeriFone or
substantially all of VeriFone's assets, without the prior written consent of US
Order. No other assignment of such rights by VeriFone may be made without the
prior written consent of US Order, which consent will not be unreasonably
withheld. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.
7.3 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof. This Agreement may not be amended, waived, discharged or
terminated, except by a written instrument signed by US Order and VeriFone (and,
as to subsection 1.3 and Section 6, WorldCorp).
7.4 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, sent by facsimile or delivered personally by
hand or nationally recognized courier addressed to the party to be notified at
the address or facsimile number on the signature page hereto, or to such other
address or facsimile number as such party shall have furnished to the
5.
<PAGE>
notifying party in writing. All such notices and other written communications
shall be effective on the date of mailing, facsimile transfer or delivery.
7.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party, upon any breach or default by another
party under this Agreement shall impair any such right, power or remedy of such
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement or any waiver on the part of
any party of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
7.6 Rights; Separability. Unless otherwise expressly provided herein, a
party's rights hereunder are several rights, not rights jointly held with any of
the other parties. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
7.7 Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
7.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.
<PAGE>
In Witness Whereof, the parties hereto have executed this Investment
Agreement effective as of the day and year first above written.
U.S. Order, Inc. VeriFone, Inc.:
By: /s/ D. Fraser Bullock By: /s/ Thomas W. Hubbs
---------------------------- -----------------------------------
D. Fraser Bullock Thomas W. Hubbs
President Chief Financial Officer
Address: 13873 Park Center Road Address: Three Lagoon Drive, Suite 400
Suite 230 Redwood City, CA 94065
Herndon, VA 22071
Facsimile No.: (703) 834-9668 Facsimile No.: (415) 598-5676
WorldCorp, Inc.:
By:
-------------------------------------
A. Scott Andrews
Chief Financial Officer
Address: 13873 Park Center Road
Suite 490
Herndon, VA 22071
Facsimile No.: (703) 834-9668
<PAGE>
Settlement Agreement
--------------------
This Settlement Agreement dated as of this 3rd day of February, 1994, among
Concord Asset Management, Inc. ("Concord"), Concord Leasing, Inc. ("Concord
Leasing"), The CIT Group/Equipment Financing, Inc. ("CIT"), World Airways, Inc.
("World Airways"), and WorldCorp, Inc. ("WorldCorp") (World Airways and
WorldCorp sometimes being referred to hereinafter collectively as "World").
WHEREAS, the parties to this agreement are engaged in a litigation entitled
Concord Asset Management, Inc., et al., v. The CIT/Group Equipment Financing,
Inc. et al., Index No. 133604-93 and are desirous of settling all claims and
counterclaims asserted or that might have been asserted arising out of the
subject matter of such action;
NOW THEREFORE, in consideration of the covenants and consideration set
forth below, the parties agree as follows:
1. CIT irrevocably waives any and all claims against Concord Leasing under
the Guaranty Agreement between CIT and Concord Leasing dated as of June 4, 1992.
2. CIT irrevocably waives any and all claims under the Agreement of
Subordination and Priorities entered into among Aircraft 46891, Inc., CIT, and
Concord, dated as of June 4, 1992, with respect to any consideration being
delivered to Concord from World under the terms of this Agreement.
3. In the event of a sale or a binding contract of sale of the Aircraft
(as defined below) within two years following February 8th, 1994, CIT agrees
to share with Concord 50 / 50 any proceeds from such sale to the extent that
such proceeds exceed the sum of the outstanding loan balance on CIT's senior
loan (including but not limited to interest, expense of repossession and
foreclosure, attorneys fees in connection with the foregoing and with this
lawsuit, and other amounts owed and/or secured under the loan documents) and
all expenses incurred in marketing, storing, insuring, managing, repairing,
overhauling or improving the Aircraft. CIT has complete discretion as to
whether or not to sell and at what price to sell the Aircraft during such two
year period. CIT also has complete discretion as to the manner of any such
sale without regard to the UCC requirement of commercial reasonableness.
"Aircraft" shall mean that certain McDonnell Douglas Model DC-10-3OCF aircraft
bearing manufacturer's serial number 46891 and FAA Registration Number Nl05WA
(the "Airframe") and the three (3) General Electric Model CF6 50C2 engines,
bearing Manufacturer's Serial Nos. 517316, 517218 and 455196, respectively
(the "Engines"), together with all avionics, appliances, parts, instruments,
appurtenances, accessories, furnishings, relating
<PAGE>
thereto and other equipment of whatever nature installed on or attached to the
Airframe, or Engines, or forming a part thereof (hereinafter referred to as the
"Parts"), together with all manuals or data and records relating to the
Airframe, Engines and Parts.
4. Subject to the Letter Agreement dated October 19, 1993 between CIT and
World (the "Letter Agreement"), CIT agrees that all maintenance reserves held by
CIT will be either invested in the Aircraft or applied to the balance on CIT's
senior loan, at CIT's discretion.
5. World agrees to pay $1.75 million to Concord at the time of the
foreclosure sale, or if there is no foreclosure sale, as of the date of the
transfer of title to the Aircraft pursuant to this agreement; such payment shall
be made in the form of immediately available funds by wire transfer to an
account designated by Concord.
6. WorldCorp will deliver to Concord a note in the form annexed hereto as
Exhibit A on or before February 8, 1994.
7. For the purposes of the foreclosure sale or other transfer of title to
the Collateral (as such term is defined in the aircraft mortgage between
Aircraft 46891, Inc. and CIT, dated June 22, 1992), the Collateral will be
divided into two lots: (1) the Contract Rights Collateral, to consist of the
Lease and the WorldCorp Guaranty (as such terms are defined in such mortgage),
and (2) the Aircraft Collateral, consisting of the Aircraft and the Reserves
Agreement including cash held pursuant thereto (as such terms are defined in
said mortgage). CIT and Concord will use their best efforts to obtain from
Aircraft 46891, Inc. a bill of sale or similar instrument in lieu of foreclosure
as to such all such Collateral, effective on or before February 8th, 1994. To
the extent that it proves impossible to obtain a bill of sale or similar
instrument in lieu of foreclosure with respect to either or both of the Aircraft
Collateral and the Contract Rights Collateral on or before February 8th, 1994, a
foreclosure sale will be held on that date as follows:
(a) The Aircraft Collateral will be sold first and CIT will bid in the
entire balance of its senior loan.
(b) Thereafter, Concord will conduct a foreclosure sale of the Contract
Rights Collateral and will bid in for such Contract Rights Collateral up
to the amount of the entire balance of its subordinate loan.
(c) Concurrently with the foreclosure sale, Concord will receive the
consideration described above.
(d) Concord, Concord Leasing, World and Winthrop, Stimson, Putnam &
Roberts, as escrow agent, will enter into an agreement concerning the
delivery of mutual releases and forbearance of enforcement action in the
<PAGE>
form annexed hereto as Exhibit B. Such release shall be delivered to World at
any time commencing 91 days after the date of the foreclosure sale or other
transfer of title to the Collateral upon receipt by the escrowee of a
certificate signed by an officer of World Airways and WorldCorp, certifying that
as of the date of the certificate, which shall be not less than 91 days after
the date of the foreclosure sale or other transfer of the title to the
Collateral, no case under the Bankruptcy Code is pending with respect to World
Airways or WorldCorp.
(e) The foreclosure sale, if necessary, shall be held on February 8, 1994
at 11:00 a.m. at the office of Schulte, Roth & Zabel, 900 Third Avenue, New
York, New York.
(f) No further notice of such foreclosure sale need be given.
Notwithstanding anything set forth above, the sale of the Collateral in two
lots is not intended to mean, nor does it imply that such mode of sale is
commercially reasonable. The sale in two lots is for settlement purposes only,
and no meaning or import should or may attach to the method of sale of the
Collateral.
8. On February 8, 1994, the parties shall exchange releases in the form
annexed hereto as Exhibit C, except that the mutual release of Concord, Concord
Leasing and World shall be delivered in escrow as provided above.
9. The parties waive any claim that the foreclosure sale as described above
is not commercially reasonable.
10. The parties agree to the entry of a default judgment against Aircraft
46891, Inc., the owner of the Aircraft and a defendant on the counterclaim
herein.
11. At the time of the foreclosure sale or other transfer of title to the
Collateral CIT will pay to World an amount equal to $2,171,397.66 as provided in
Paragraph 5 of the Letter Agreement and an amount equal to $381,873.43 to
Caledonian Airmotive Ltd.
12. Concord and CIT will execute such releases against the Collateral as
are necessary or advisable to effectuate the transactions contemplated hereby.
World will execute such documents as are necessary or advisable to release liens
relating to the Lease and the Aircraft at the Federal Aviation Administration.
The parties give further assurances to turn over and/or execute such documents
as may be necessary or reasonably requested to effectuate this settlement and
the transactions contemplated hereby.
<PAGE>
13. The parties agree not to commence or continue judicial proceedings with
respect to the subject matter of this action, other than to enforce the terms of
this agreement.
14. CIT and World agree that the Letter Agreement is deemed modified in
accordance with the terms of this agreement.
15. This agreement may be signed in counterparts, which together shall
constitute one instrument.
16. It is understood that World may deliver on February 8, 1994 facsimile
signatures on this Agreement, the Note referred to paragraph 6 and the releases
referred to in paragraph 7(d) and paragraph 8 above. If World delivers such
facsimile signatures on February 8, then Concord's and Concord Leasing's and
CIT's releases in favor of World shall be held in escrow by their respective
counsel pending receipt by such counsel within 10 days of original signature
pages of this Agreement and of the aforesaid releases signed on behalf of World,
and an original executed Note.
CONCORD ASSET MANAGEMENT, INC.
By:
---------------------------------------------
Robert L. Thomas
Vice President/Contracts
Concord Leading, Inc.
By:
---------------------------------------------
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By:
---------------------------------------------
<PAGE>
WORLD AIRWAYS, INC.
By:
-------------------------------------------
A. Scott Andrews
Chief Financial Officer
WORLDCORP, INC.
By:
-------------------------------------------
A. Scott Andrews
Chief Financial Officer
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE, is made this 1st day of June, 1993, between Mattei Corporation
--- ---- ------------------
(hereinafter called "Landlord"), and World Airways, Inc., (hereinafter called
-------------------
"Tenant").
In consideration of the promises and the covenants, conditions and rents
hereinafter set forth, it is agreed as follows:
1. PREMISES AND TERM:
-----------------
A. Landlord does hereby lease, demise and let to Tenant, and Tenant does
hereby lease, take and accept from Landlord, the "Premises," being comprised of
approximately Forty Thousand (40,000) square feet of warehouse and office space
-----------------------
located in a one story warehouse building (hereinafter the "Improvements") as
outlined in red on the building and site plan attached hereto as Exhibit A which
building contains a ground floor area of approximately Forty Thousand (40,000)
-----------------------
square feet and is located on all that lot of ground in New Castle County,
Delaware more fully described in Exhibit B attached hereto, containing 4.39
----
acres of land more or less, together with the use in common with other occupants
of the Improvements of the parking areas* and the right to use in common with
such other occupants of said building any access road serving the Improvements.
B. TO HAVE AND TO HOLD the same for a term commencing on November 1, 1993,
----------------
and ending five (5) years thereafter.
----
2. TENANT IMPROVEMENTS:
-------------------
All tenant improvements shall be installed by Tenant, subject to the
provisions of paragraphs 9, 10, and 11 hereof. Landlord further agrees to make
such improvements as are listed in Exhibit C at no expense to the Tenant.
Landlord has no obligation to furnish Tenant with heat, air conditioning,
ventilation, hot water, security or the equipment therefor, or any other
service, utility or equipment, lines or facilities, except as otherwise
expressly provided in this lease.
3. RENT:
----
Tenant covenants to pay to Landlord at such place as Landlord shall from
time to time direct, the basic rent ("Basic Rental") at the rate of Seven
-----
Thousand, Six Hundred, Sixty-Six Dollars and 67/100 ($7,666.67) per month for
- ---------------------------------------------------------------
the months of November and December, 1993, and at the rate of Fifteen Thousand,
----------------
Three Hundred, Thirty-Three Dollars and 33/100 ($15,333.33) per month beginning
- -----------------------------------------------------------
on January 1, 1994 and continuing throughout the term of the lease in advance
and without demand in legal tender of the United States of America.
* Landlord reserves the right to create and allocate reserved parking
spaces, provided that such spaces are allocated among all tenants in proportion
to their respective portions of the building, and provided that the allocation
is made so as to place parking spaces reserved for each tenant as conveniently
close to that tenant's portion of the building as is possible.
1
<PAGE>
Tenant covenants to pay when due, which shall be on or before the first
day of every month, without any abatement, deduction or set-off, the Basic
Rental provided for herein and to pay as additional rent when due all other
sums, costs, charges and expenses payable by Tenant under this Lease, and, in
the event of any non-payment thereof, such sums shall be collected as rent,
and Landlord shall have all the rights and remedies provided for herein or by
law in the case of non-payment of rent.
4. OCCUPANCY BY TENANT:
-------------------
Beginning with the completion of the building and upon issuance of a
Certificate of Occupancy, Tenant shall take possession of 5,000 square feet of
space. Beginning on August 1, 1993, Tenant shall take possession of an
additional 5,000 square feet of space. Beginning on October 1, 1993, Tenant
shall take possession of the balance of the building.
5. OPTION TO RENEW
---------------
Provided Tenant is not in default of any of the terms of this Lease, it
shall have the right, option and privilege of this Lease for five additional one
year terms upon the following terms and conditions:
(a) For each subsequent one year renewal, the rent shall not be
increased to an amount greater than 2% of the total yearly rent which was
charged in the most recent lease term.
(b) Tenant must give notice in writing at least 180 days prior to the
termination of the then current term of this Lease that it is exercising its
option. In the absence of such notice, the Lease will end at the termination of
the then current term and this paragraph shall be of no effect whatsoever.
6. TAXES:
-----
Tenant covenants to pay Landlord, as additional rental, its pro-rated share
of any increase in real estate taxes and assessments, as hereinafter defined,
levied on the land and Improvements of which the Premises are a part over the
amount of such taxes paid by Landlord for the 1993-1994 tax year, as follows:
---------
(a) Real estate taxes and assessments for the last year of the term
or renewal term as the case may be shall be adjusted and pro-rated to the
termination date.
(b) Tenant shall pay its share of such increase in real estate taxes
and assessments as set forth above within thirty (30) days following receipt
from the Landlord of a statement of its calculations supported by copies of
the actual billings rendered to Landlord.
(c) For purposes of this paragraph, the term "real estate taxes and
assessments" shall include any public charges against the land and
Improvements of which the Premises are a part (including assessments by any
County, Municipal, Metropolitan District or Commission).
(d) The Tenant shall have the right to contest as against the taxing
authority the amount or validity, in whole or in part, of any increase in such
real estate taxes and assessments in the name of the Landlord or the Tenant,
as required, by appropriate proceedings diligently conducted in good faith and
the Landlord agrees to fully cooperate in any such efforts by the Tenant, at
the expense of Tenant. If the payment of the tax or assessment would operate
as a bar to the proceedings or to materially interfere with its prosecution,
the Tenant may require the Landlord to postpone or to defer the payment of the
tax (and
2
<PAGE>
landlord may require the Tenant to post bond or security to defer the payment)
so long as the leased premises would not, in the reasonable opinion of Landlord
by reason of the postponement, be in danger of being liened, forfeited or lost,
or violation of any mortgage. Any interest or penalty incurred by reason of the
postponement of the payment of the taxes shall be paid by the Tenant.
(e) Notwithstanding the foregoing, Tenant shall pay the entire
increased assessment or tax, if any, resulting from leasehold improvements
made by Tenant.
7. FIRE AND EXTENDED COVERAGE INSURANCE:
------------------------------------
Tenant covenants to pay Landlord, as additional rental, Tenant's pro-rata
shared of any increase in premiums for fire and extended coverage insurance on
the Improvements of which the premises are a part over the premiums charged for
the coverage expiring on March 17, 1994, as follows:
--------------
(a) Any increase in premiums for the last year of the term shall be
adjusted and pro-rated to the termination date.
(b) Tenant shall pay its share of such increase in insurance
premiums as set forth above within thirty (30) days following receipt from the
Landlord of a statement of its calculations supported by copies of the actual
billings rendered to Landlord.
(c) The fire and extended coverage policy shall expressly waive any
right of subrogation against Landlord or Tenant.
(d) Notwithstanding the generality of the foregoing, in the event
Tenant's improvements to or occupancy or use of the Premises causes any
increase in premiums for fire and extended coverage insurance on the
Improvements of which the Premises are a part above the rate established for
other uses in the Improvements, the Tenant shall pay the entire additional
premiums resulting therefrom. Bills for such additional premiums shall be
rendered by Landlord to Tenant at such times as Landlord may elect and shall
be due from and payable by Tenant when rendered, and shall constitute
additional rent.
8. UTILITIES:
---------
Tenant shall pay all charges for gas, electricity, light, heat, all public
charges for sanitary sewage discharged from the Premises and for water consumed
on the Premises, power and all other utilities and telephone or other
communication services used, rendered or supplied upon or in connection with the
Premises. Tenant shall pay its pro-rata share of trash removal service for the
building, if any are arranged by Landlord.
9. LIENS OR ENCUMBRANCES:
---------------------
Tenant shall not suffer the Premises or any erection of improvements
thereon to become subject to any lien, charge or encumbrances, and shall
indemnify Landlord against all such liens, charges and encumbrances.
10. USE OF PREMISES:
---------------
Tenant shall use and occupy the premises throughout the term hereof solely
for the purposes of operating a warehouse and for office facilities used in
connection therewith.
3
<PAGE>
11. ALTERATIONS AND IMPROVEMENTS:
----------------------------
Tenant shall at no time or times make any alterations, improvements or
changes of any kind to the Premises without first submitting the plans and
specifications thereof and securing the written consent or unwritten lack of
objection of the Landlord, which consent or lack of objection shall not be
unreasonably withheld; provided, however, that Tenant may, at its own option and
without having to secure the consent or lack of objection, written or otherwise
of the Landlord, make any alterations or changes of any kind to the Premises
which may be required by any governmental order or regulation, and, so long as
such alterations or changes are not of a character required to be performed by
Landlord hereunder, such alterations or changes shall, if made by Tenant, be
made at no expense to Landlord. All improvements, alterations, replacements and
building service equipment made or installed by or on behalf of Tenant and
permanently affixed to the Improvements shall immediately upon completion or
installment thereof be and become the property of Landlord without payment
therefor by Landlord, but subject to the provisions of this Lease; provided that
all machinery, equipment (other than building service equipment), trade
fixtures, movable partitions, furniture and furnishings installed by Tenant or
maintained on the Premises, even if permanently affixed thereto, shall remain
the property of Tenant, and Tenant shall, if not in default, be entitled to
remove the same or any part thereof at any time during the Lease term but Tenant
shall, at its expense, repair any and all damage to the Premises resulting from
or caused by such removal. The interest of Tenant in any property which is not
so removed shall at the end of the time provided, for removal thereof vest in
Landlord. Landlord shall not be required to give written consent to any work or
alternatives proposed by Tenant, but the absence of Landlord's objection, if
none is expressed in writing by Landlord within thirty (30) days of Landlord's
receipt of Tenant's plans and specifications, shall be deemed lack of objection
for purposes of this Lease. No lack of objection by Landlord, and nothing set
forth in this Lease relating to work to be done by Tenant, shall constitute
Landlord's consent that any such work be done on the credit of Landlord or the
premises, land, structure or any part thereof; but any such work, and all labor
done or materials supplied, shall be done solely on the credit of Tenant and its
leasehold interest only.
12. REPAIRS AND MAINTENANCE:
-----------------------
A. Tenant covenants throughout the term, at its expense, to maintain in
good order and repair the interior structure, surfaces, components, systems and
equipment of the Premises, and to maintain and replace when necessary, all
windows and door glass therein, interior and exterior, to maintain and repair
but not replace except as hereinafter set forth all building service equipment
therein including, but not limited to, electrical, plumbing, heating, air
conditioning and sprinkler equipment, pipes, wires, ducts, fixtures and
appliances; to make all ordinary and necessary repairs; to keep the Premises in
a safe, clean and sanitary condition; to provide for the removal of trash and
rubbish; and to surrender the Premises at the end of the term in as good
condition as when received except for ordinary wear and use, and except for fire
or other unavoidable casualty not caused by Tenant, its employees, agents or
invitees (or if so caused, as to which Landlord receives adequate insurance
proceeds).
B. Landlord agrees to perform at its expense, maintenance and repairs to
the exterior structure of the building and roof except when repairs are
necessitated by the negligence or other act or omission of Tenant, its
employees, agents or invitees other than normal use and ordinary wear and tear.
4
<PAGE>
13. LIABILITY INSURANCE:
-------------------
Tenant shall obtain and maintain public liability insurance in form and
substance satisfactory to Landlord and Landlord's lender, insuring Landlord
against claims for bodily injury or death occurring in or about the Premises and
on, in or about the adjoining driveways, parking areas, walks and passageways,
to the limit of not less than Five Hundred Thousand Dollars ($500,000.00) in
respect of bodily injury or death to one person, and to the limit of not less
than One Million Dollars ($1,000,000.00) in respect of one occurrence, and
property damage insurance insuring against claims for damage or injury to
property of others occurring in or about the Premises and on, in or about the
adjoining streets and passageways, to the limit of not less than One Hundred
Thousand Dollars ($100,000.00) in respect to damage to the property of another.
Said policy shall provide that notwithstanding any act or omission of
Tenant which might otherwise result in its forfeiture, the policy shall not be
cancelled without at least ten (10) days written notice to each named insured,
including mortgagees.
14. DAMAGE OR DESTRUCTION:
---------------------
A. If during the term the Premises are damaged by fire or other casualty,
but not to the extent that Tenant is prevented from carrying on its business in
the Premises, Landlord shall promptly restore the Premises to their condition
immediately prior to the casualty, insofar as recovered insurance proceeds in
hand permit; provided, however, that if such damage has not been caused by
Tenant, its agents, employees or invitees, and is not restored within one
hundred twenty (120) days, Tenant may terminate this Lease, on thirty (30) days
written notice unless such restoration is substantially completed within such
thirty (30) days.
B. If during the term the Premises are destroyed or so damaged by fire or
other casualty that Tenant is prevented from carrying on business in the
Premises and Tenant and Landlord cannot agree upon mutually acceptable outline
provisions with respect to restoration within (30) days of the casualty,
Landlord shall have option either to restore the Premises to their condition
immediately prior to the casualty or to terminate the Lease. Such option shall
be exercised by Landlord by written notice to the Tenant within forty-five (45)
days after the casualty.
If Landlord chooses to restore the Premises, it shall prepare or cause to
be prepared a reasonable estimate of the time needed to restore the Premises to
their condition immediately prior to the casualty. Such estimate shall accompany
the written notice to Tenant. If the time period indicated in the notice exceeds
one hundred twenty (120) days, Tenant may rescind or terminate this Agreement
within five (5) days of receipt of Landlord's notice. If the restoration period
is less than the period indicated above or if Tenant agrees to a period in
excess of one hundred twenty (120) days, then Landlord shall promptly commence
such repair work. If the restoration is not completed within the time period
noted in the estimate plus thirty (30) days, Tenant may at any time thereafter
terminate this Lease, unless the restoration is substantially completed before
Tenant gives written notice of its election to terminate.
Tenant shall not be required to pay rent for any period that the Premises
are destroyed or damaged to the extent that Tenant is substantially prevented
from carrying on its business in the Premises, unless Tenant, its employees,
agents or invitees caused such destruction or damage.
5
<PAGE>
15. COMPLIANCE WITH REGULATIONS, ETC.:
---------------------------
Tenant covenants throughout the term at its expense to comply promptly with
all laws, codes, ordinances, administrative and court orders and directives,
rules and regulations which have the force of law, whether now in effect or
hereafter promulgated, applicable to Tenant's use and occupancy of the Premises,
however Tenant shall have the right to contest the applicability and/or validity
of any of the above so long as by reason of such action, the Premises or the
Improvements would not be in danger of lien, forfeiture or less, or violation of
any mortgage. All construction undertaken by Landlord pursuant to this Lease
shall likewise comply with all provisions of a like nature.
16. CONDEMNATION:
------------
A. If during the term of this Lease, all or a substantial part of the
Premises shall be taken by eminent domain, then at the option of the Tenant or
the Landlord the Lease shall terminate as of, and the rent shall be apportioned
to and abate from and after, the date of taking, and Tenant shall have no right
to participate in any award or damages for such taking (except as set forth in
subparagraph D hereof) and hereby assigns all of its right, title and interest
therein to Landlord. For purposes of this paragraph 16, "a substantial part of
the Premises" shall mean a taking of 20% or more of the portion of the
Improvements leased hereunder.
B. If during the term of this Lease, less than a substantial part of the
Premises (as hereinbefore defined) shall be taken by eminent domain, this Lease
shall remain in full force and effect according to its terms; and Tenant shall
have no right to participate in any award or damages for such taking and hereby
assigns all of its right, title and interest therein to Landlord, provided that
Landlord shall at its expense promptly make such repairs and improvements as
shall be necessary to restore the Premises to substantially the same efficiency
as before the taking.
C. For the purpose of this paragraph 16, "taken by eminent domain" or
"taking under the power of eminent domain" shall include a negotiated sale or
lease and transfer of possession to a condemning authority under bona fide
---------
threat of condemnation for public use, and Landlord alone shall have the right
to negotiate with the condemning authority and conduct and settle all
litigation connected with the condemnation. As hereinabove used, the words
"award of damage" shall, in the event of such sale or settlement, include the
purchase or settlement price of any such negotiated transfer.
D. Nothing herein shall be deemed to prevent Tenant from claiming,
negotiating, and receiving from the condemning authority, if legally payable,
compensation for the taking of Tenant's own tangible property, improvements upon
the leased Premises constructed at Tenant's sole expense, and damages for
Tenant's loss of business, business interruption and/or removal and relocation;
provided, however, that in no event shall Landlord receive less as a result
thereof, than if Tenant had not leased the premises. Should the condemnation be
effected without a cancellation of the Lease, there shall be an appropriate
reduction in rental commensurate with the area so taken, provided Landlord
receives compensation therefor as part of the condemnation award.
17. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS:
----------------------------------------------
If Tenant shall fail to perform any covenant or duty required of it by this
Lease or by law, Landlord shall, after notice to Tenant and expiration of the
applicable cure period, have the right (but not the duty) to enter the Premises,
if necessary, to perform the same without notice, but the reasonable cost
thereof shall be deemed to be additional rent, and Landlord shall have the
6
<PAGE>
same rights and remedies as though the additional rent were part of the monthly
rent due the Landlord under this Lease.
18. INDEMNIFICATION OF LANDLORD:
---------------------------
Except with respect to claims arising from Landlord's negligence or that of
its agents, servants or employees, Tenant covenants to indemnify and save
Landlord harmless (to the extent not reimbursed by insurance required by this
Lease to be furnished by Tenant) from any and all claims for liability of any
nature whatever arising from any use, occupancy, construction, repairs, or other
work or activity done in, on or about the Premises during the term or from any
condition of the Premises or anything thereon or therein during the term, or
from any occurrence whatever in, on or about the Premises during the term,
including all Landlord's reasonable costs, expenses and counsel fees in
connection with any such claim.
19. LANDLORD'S EXONERATION:
----------------------
Except with respect to claims arising from Landlord's negligence or that of
its agents, servants or employees, or from Landlord's failure to make repairs
required of it to be made pursuant to this Lease (and then only if such failure
continues after notice from Tenant to Landlord and expiration of the applicable
cure period), Tenant covenants to defend, save harmless, protect and indemnify
the Landlord from and against any and all losses, damages, claims, suits or
actions judgments and costs, which may arise or grow out of any injury to or
death of any person or damage to any property (including, but not by way of
limitation, Tenant and employees, agents, or invitees of Tenant and their
property) which is caused by or results from, any occurrence, event,
circumstance or condition in or upon the Premises or in the use and possession
of the Premises and the equipment thereon by Tenant or the operation of the
business conducted by Tenant on the said Premises.
20. DEFAULT PROVISIONS:
------------------
In the event of any default of Tenant hereinafter mentioned in this
paragraph 20, Landlord may elect to terminate this Lease by serving a written
notice upon Tenant of Landlord's election to terminate this Lease upon a
specified date, not less than thirty (30) days after the date of serving of
such notice, or any longer applicable cure period. If said default shall not
be corrected within the applicable cure period, this Lease shall then expire
on the date specified, as if that date had been originally fixed as the
expiration of the term hereinafter granted; provided, however, that this Lease
shall not terminate or expire if Tenant cures its default within the
applicable cure period.
Each of the following events shall be deemed an event of default by Tenant
within the meaning of this paragraph 20: (a) the failure to pay any installment
of Basic Rental or additional rent when due and payable, for which the
applicable cure period is ten (10) days; (b) the failure to perform any of the
other covenants or conditions of this Lease on the part of Tenant to be
performed, for which the applicable cure period is thirty (30) days; (c) the
making of an assignment by Tenant for the benefit of its creditors (no cure
period); (d) the appointment of a receiver or trustee of all or part of Tenant's
property (no cure period); (e) the filing by Tenant of a petition in bankruptcy
or for reorganization or for an arrangement with its creditors or for any other
relief under any bankruptcy or similar law (no cure period); (f) the filing of a
petition against Tenant for its reorganization or for an arrangement under any
bankruptcy law or other law, for which the applicable cure period is ninety (90)
days. Notwithstanding the foregoing, Landlord need not give notice and an
opportunity to cure the same kind of default more than twice in any twelve month
period; but if the same or a similar kind of default occurs a third
7
<PAGE>
time within any twelve month period, Landlord may elect to terminate this Lease
upon thirty (30) days notice regardless of any subsequent cure by Tenant.
In the event that this Lease is terminated in the manner provided for in
this paragraph 20, or by court proceedings or otherwise, or in the event that
the Premises, or any part thereof, shall be abandoned by Tenant during the said
term, Landlord or Landlord's agents, servants or representatives may, at any
time after written notice to Tenant and the times set forth in this paragraph
20, reenter and resume possession of said Premises, or any part thereof, and
remove all persons and property therefrom, either by any suitable action or
proceeding at law or by force or otherwise, without being liable for any damages
therefor. No reentry by Landlord shall be deemed to be an acceptance of a
surrender of this Lease; and Tenant agrees that in the event this Lease in
accordance with its provisions, is terminated because of Tenant's default,
Landlord's lien in and to this Lease and any improvements on or hereinafter
placed on the Premises and on any equity of Tenant in and to any furnishings,
equipment, fixtures or any other personal property, shall forthwith attach, such
lien being granted for the purposes of securing the performance of Tenant's
obligation hereunder.
In case the rent or any installment of said rent hereby agreed to be paid
shall at any time be in default, and the default shall not be cured within ten
(10) days, with or without notice, the Landlord shall have the right to distrain
therefor; and in case the rent or any installments of said rent shall remain in
arrears in violation of the default provisions, or in case the Tenant shall
violate any of the covenants on its part herein contained and shall fail to
rectify same in accordance with the provisions set forth for curing a default
herein, then in either event the Landlord shall be entitled to reenter and annul
this Lease, and all rents shall thereupon cease.
The Landlord, upon the happening of any of the events giving it the right
to annul and cancel this Lease, shall in addition to all other remedies be
entitled to the benefit of all of the provisions of law for the speedy recovery
of lands and tenements under this Lease held over by the Tenant in New Castle
County, Delaware that are now in force or may hereafter be enacted.
21. ADDITIONAL REMEDIES OF LANDLORD:
-------------------------------
In the event that this Lease is terminated in the manner set forth in
paragraph 20 hereof, or by court proceedings or otherwise, or if the Premises
shall be abandoned by Tenant during the term hereof, Landlord may for its own
account, relet the whole or any portion of said Premises for any period equal to
or greater or less than the remainder of the original term of this Lease for any
sum which it may deem reasonable, to any tenants which it may deem suitable and
satisfactory, and for any use and purposes which it may deem appropriate, but in
no event shall Landlord be under any obligation to relet the Premises for any
purpose which Landlord may regard as injurious to the Improvements, or to any
tenant which Landlord, in the exercise of reasonable discretion shall deem to be
objectionable. In the event of such termination of this Lease or if the Premises
are abandoned, or in the event of any default mentioned in paragraph 20 hereof,
and whether or not the Premises be relet, and whether this Lease be terminated
or not, Landlord shall be entitled to recover of Tenant, and Tenant hereby
agrees to pay to Landlord as damages, the following:
(i) An amount equal to the amount of the rent reserved under this Lease,
less the rent, if any, net of expenses, collected by Landlord on reletting the
Premises, which shall be due and payable by Tenant to Landlord on the several
days on which the rent herein reserved would have become payable under this
Lease.
8
<PAGE>
(ii) In addition to the damages hereinbefore provided for in this paragraph
21, an amount equal to the cost (a) of placing the Premises in the condition
in which Tenant has agreed to surrender them to Landlord and (b) of performing
any other covenant herein contained which Tenant has agreed to perform, other
than the covenant to pay rent. The damages mentioned in this subdivision (ii)
shall become immediately due and payable by Tenant to Landlord upon the
termination of this Lease.
Without any previous notice or demand, separate actions may be maintained
by Landlord against Tenant from time to time to recover any damages which, at
the commencement of any such action, have then or theretofore become due and
payable to Landlord under this paragraph 21, without waiting until the end of
the term of this Lease. Without being limited by the foregoing, Landlord shall
be entitled to recover its attorneys fees in the successful enforcement of its
rights and remedies under this Lease.
22. RIGHT TO ASSIGN AND SUBLEASE:
----------------------------
Tenant may not assign this Lease or sublet the Premises without the prior
written consent of Landlord, which consent will not be unreasonably withheld,
provided that in the event of any such assignment or subletting with consent,
Tenant shall remain liable for the performance of Tenant's obligations during
the term hereof.
23. INSPECTION BY LANDLORD, ETC.:
----------------------
Landlord and its agents shall have the right at all reasonable times during
the term to enter the Premises for the purpose of performing the maintenance and
repairs required of it by this Lease and for the purpose of inspecting the same
and, during the last one hundred and twenty (120) days of the term, to show both
the interior and exterior of the Premises to prospective Tenants or purchasers
and to place "For Rent" or "For Sale" signs thereon.
24. ASSIGNMENT OF LANDLORD'S INTEREST:
---------------------------------
If Landlord should ever assign this Lease or the rents hereunder to a
creditor as security for a debt, Tenant shall, after notice of such assignment
and upon demand by Landlord or the assignee, pay all sums thereafter becoming
due Landlord hereunder to the assignee (from and after the time Tenant is
furnished with such assignee's address) and furnish such evidence of insurance
coverages required hereunder as the lender may reasonably require so as to
protect the assignee's interest as it may appear and furnish such assurances
to the assignee.
25. ATTORNMENT:
----------
In the event the herein demised Premises are sold at any foreclosure sale
or sales, by virtue of any judicial proceedings or otherwise, the Lease shall
continue in full force and effect and Tenant agrees upon request to attorn to
and acknowledge the foreclosure purchaser or purchasers at such sale as Landlord
hereunder.
26. SUBORDINATION:
-------------
This Lease shall be subject and subordinate to the lien of any present or
future mortgage or mortgages upon the Premises or any property of which the
Premises are a part irrespective of the time of execution or the time of
recording of any such mortgage or mortgages provided that in the event of
foreclosure or other action taken under any mortgage by the holders thereof,
this Lease and the rights of Tenant hereunder shall not be disturbed but shall
continue in full force and effect so long as Tenant shall not be
9
<PAGE>
in default hereunder. The word "mortgage" as used herein includes mortgages,
deeds of trust or other similar instruments and modifications, extensions,
renewals and replacements thereof and any and all advances thereunder. Tenant
hereby agrees to execute such agreement substantially in the same form as
Exhibit E, or in any other form required by Landlord's lender.
27. MORTGAGEE PROTECTION:
--------------------
Tenant agrees to give any Mortgagees and/or Trust Deed Holders, by
registered mail, a copy of any notice of default served upon the Landlord,
provided that prior to such notice, Tenant has been notified in writing (by way
of Notice of Assignment of Rents and Leases, or otherwise) of the addresses of
such Mortgagees and/or Trust Deed Holders, and has been requested to give such
notices. Tenant further agrees that if Landlord shall have failed to cure such
default within the applicable cure period, then the Mortgagees and/or Trust Deed
Holders shall have thirty (30) days from the date of receiving notice within
which to cure such default or if such default cannot be cured within that time,
then such additional time as may be necessary if within such thirty (30) days
any Mortgagee and/or Trust Deed Holder has commenced and is diligently pursuing
the remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings if necessary to affect such cure), in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.
28. NON-DISTURBANCE:
---------------
Landlord covenants and warrants that if Tenant timely pays the rent
provided for in this Lease and timely performs all of its covenants herein set
forth, then Tenant shall peaceably and quietly have, hold and enjoy the Premises
and all appurtenances thereon during the full term of this Lease.
29. FAILURE TO INSIST UPON STRICT PERFORMANCE:
-----------------------------------------
The failure of either party to insist upon a strict performance of any of
the terms, conditions and covenants herein contained shall not be deemed a
waiver of any rights or remedies that either party may have and shall not be
deemed a waiver of any subsequent breach or default in the terms, conditions
and covenants herein contained. This instrument may not be changed, modified
or discharged orally or by course of conduct, but only by written instrument
signed with the same formalities as this Lease.
30. TENANT HOLDING OVER:
-------------------
In the event that Tenant holds over at the expiration of the original term
of this Lease or at the earlier termination thereof, Landlord shall be entitled
to all the remedies now or hereafter in effect in New Castle County, Delaware
relating to the speedy recovery of possession of lands and damages for wrongful
detention.
Nothing contained in this paragraph 30 shall be construed to limit in any
way Landlord's further remedies for nonpayment or late payment of rent.
31. UTILITY LINES AND FACILITIES:
----------------------------
Landlord reserves the right to place (or permit any other tenant in the
Improvements so to place) in, over, below and upon the Premises (in such manner
as to not significantly interfere with Tenant's use of the Premises), utility
lines, conduits, pipes, tunneling and the like to service the Premises and other
portions of the Improvements and to use, replace, repair and maintain (or permit
any other tenant so to do) such utility lines, conduits, pipes, tunneling and
the like, in, over, below and upon the
10
<PAGE>
Premises in such manner as will not significantly interfere with Tenant's
enjoyment thereof, provided that Landlord shall use its best efforts to see
that such work does not significantly interfere with the ongoing business and
operations of Tenant, that such work shall be done expeditiously and in a
workmanlike manner, and further that the Premises shall, upon conclusion of
the work, be restored to substantially the same conditions as they were prior
to the commencement of the work.
32. OTHER TENANTS:
-------------
Landlord shall have no liability to Tenant for the acts or omissions of
other tenants, nor shall any provisions of its leases with other tenants be
deemed for the benefit of Tenant. Landlord shall have the right to accomplish or
permit from time to time leasehold improvements to other portions of the
Building for other tenants and Tenant shall accept any normal, necessary or
reasonable inconvenience or disturbance resulting therefrom; but Landlord shall
endeavor to minimize such inconvenience or disturbance, insofar as practicable
without additional expense or unusual procedure.
33. SIGNS:
-----
Tenant shall not place any signs on the exterior of the premises without
the written consent of Landlord, which consent shall not be unreasonably
withheld, provided that any such signs shall be compatible with the standard
signage supplied or required by Landlord.
34. END OF TERM:
-----------
Upon the expiration or other termination of the term of this Lease, Tenant
shall quit and surrender to Landlord the demised premises, broom clean, in good
order and condition excepting only ordinary wear and tear and damage or
destruction by fire or other casualty not caused by Tenant, its employees,
agents or invitees, or the elements or any other cause beyond Tenant's
reasonable control; and Tenant shall remove all of its property prior to such
expiration.
35. SUCCESSORS AND ASSIGNS:
----------------------
Except as hereinabove expressly otherwise provided, this Lease shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns.
36. NOTICES:
-------
All notices to Tenant under this Lease shall be conclusively presumed to
have been delivered, two days after mailing by United States mail, first class,
certified or registered, and postage prepaid, addressed to Tenant, World
-----
Airways, 13873 Park Center Road, Suite 490, Herndon, Virginia 22071 or to such
- -------------------------------------------------------------------
other address as Tenant may in writing from time to time designate. All notices
to Landlord hereunder shall be conclusively presumed to have been delivered two
days after mailing by United States mail, first class, certified or registered,
and postage prepaid, addressed to Landlord, at 15 McCullough Drive, New Castle,
--------------------------------
Delaware 19720 or to such other address as Landlord may in writing from time to
- --------------
time designate. Tenant shall give Landlord prior written notice of any alleged
default herein by Landlord, and Landlord shall have at least thirty (30) days
notice within which to cure such default; or if thirty days is not clearly
adequate, Landlord shall have such longer time to cure as is reasonably
necessary, provided Landlord has commenced such cure within twenty (20) days
after notice and subsequently pursues same to completion.
11
<PAGE>
37. RECORDING:
---------
Landlord and Tenant agree to execute a Memorandum of Lease which may be
recorded among the Land Records of New Castle County, Delaware, at the expense
of the party offering the Memorandum of Lease for recording.
38. TENANT ESTOPPEL CERTIFICATES:
----------------------------
From time to time during the term of this Lease Tenant agrees to submit to
Landlord's lender, within thirty (30) days following written demand therefor, a
certificate substantially in the form attached hereto as Exhibit D, or in any
other form required by Landlord's lender.
39. CAPTIONS AND HEADINGS:
---------------------
The captions and headings throughout this Lease are for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify, or add to the
interpretation, construction or meaning of any provision of or the scope or
intent of this Lease nor in any way affect this Lease.
40. CONSTRUCTION AND INTERPRETATION:
-------------------------------
This Agreement represents the entire understanding of the parties. There
are no conditions, side agreements, representations, promises or terms, oral or
written, except those expressed herein. The provisions of this Agreement shall
not be deemed changed, modified, waived or abandoned, nor shall the terms of any
part thereof be surrendered, except by writing signed by all the parties hereto,
or their successors and assigns. The rights and obligations contained in this
Agreement shall inure to the benefit of and be binding upon and enforceable
against the parties and their respective heirs, personal representatives,
successors and assigns. In reference to the parties, the singular and the
plural, and the masculine, feminine and neuter shall be interchangeable as
required by the context and the party or parties to whom reference is made.
This Agreement shall be construed and interpreted in accordance with the
laws of the State of Delaware, except that no ambiguity shall be resolved for
or against either party on the basis of authorship or nonauthorship of this
document; and no weight shall be given to the subheadings of each article
hereof. If any term or provision of this lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this lease, or the application of such term or provisions to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of
this lease shall be valid and be enforced to the fullest extent permitted by
law.
Whenever Tenant is required under this Lease to pay a pro-rated share of
taxes, sewer, or other charges or expenses, such proration shall be based on
that ratio which Tenant's total square footage of leased space bears to the
total square footage of all leased space in the building in which the premises
are located.
This lease has been made and entered into by and between Landlord and
Tenant based on their mutual assumption that it is completely consistent with
Delaware law, particularly the Delaware Landlord Tenant Code as applicable to
commercial real estate. In the event that this assumption is refuted, disproved,
or otherwise shown to be false in whole or in part with the result that any
provision herein designed to implement this lease as a net lease to Landlord by
placing various obligations with respect to the Premises on Tenant shall be
ruled invalid or unenforceable by any Court, Magistrate, Justice of the Peace,
Attorney General opinion
12
<PAGE>
or the authority, then the basic rent herein provided for shall be raised by a
panel of three arbitrators appointed by the Chancellor of the Court of
Chancery in an annual amount sufficient to compensate Landlord for the removal
of any obligation on Tenant and/or the imposition of any obligation on
Landlord which, had the parties' assumption been correct, would not have been
removed or imposed. In establishing this amount, all doubts shall be resolved
in favor of Landlord, so that the raise in rent will clearly be adequate
compensation. Should any Court, Magistrate, Justice of the Peace, Attorney
General opinion or other authority rule that the rent may not be thus raised,
then Landlord shall have the right upon ninety (90) days written notice to
Tenant, to terminate this lease the same as if it were about to expire without
further right of renewal on the part of Tenant.
41. ENVIRONMENTAL MATTERS:
---------------------
A. Tenant represents and warrants that the use of the Premises will not
result in or involve the use, generation, manufacture, refining, transportation,
treatment, storage, handling or disposal of, or the conduct or performance of
any activity in connection with, any hazardous substance or hazardous waste, as
such terms are defined in the Delaware General Waste Management Act, 7 Del. C.,
---
Chapter 60, the Delaware Hazardous Waste Management Act, 7 Del. C., Chapter 63,
---
the Federal Resource SS6690, et seq., the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. SS9601,
et seq., and the regulations promulgated under said Acts (collectively
"substance") which would subject the Premises or Landlord to any liability,
including damages, penalties or fines, or any lien on the Premises under such
Acts or under the Federal common law or the common law of the State of Delaware.
B. Landlord and its agent(s) shall have the right from time to time, but
not more often than once in any six (6) consecutive calendar months unless a
violation is discovered or corrective actions are needed (in which event one
or more follow-up inspections may be scheduled), to conduct an environmental
audit of the Premises and of Tenant's use thereof, during normal business
hours on a business day. Tenant and its employees shall fully cooperate in
such audit including, but not limited to, identifying substances in
containers, opening closed storage spaces, and so on. Tenant will keep, and
shall produce for inspection and copying upon Landlord's request, accurate
records of all Substances brought upon the premises other than cleaning
supplies used in the ordinary course of Tenant's housekeeping procedures, in
quantities not exceeding Tenant's monthly needs. In the event that Landlord's
audit (or any other event) reveals that Tenant is violating or has violated
environmental laws and regulations or is engaged in activities or has created
conditions upon the Premises which, in the opinion of Landlord's environmental
specialist, create an unreasonable risk of environmental harm or violation,
then Tenant shall promptly at its expense comply with the written
recommendations of Landlord's environmental specialist to cease and to remedy
past violations of environmental laws, and/or follow procedures and correct
conditions so as to minimize the risk of environmental harm or violations in
the future. Tenant, Landlord and its environmental specialist shall endeavor
to protect the environment and avoid risk of further or future environmental
harm in the most practical, economic and effective way. Any disagreements
shall be resolved by the Delaware Department of Natural Resources and
Environmental Control.
C. In the event that any environmental audit reveals a violation of law or
necessitates recommended changes in conditions or procedures by Landlord's
environmental specialist, Tenant shall pay the reasonable fees of such
specialist, over and above the normal charge for a routine audit, and shall pay
for any follow-up inspection or inspections to oversee and/or approve remedial
measures. Upon termination of this Lease for any reason,
13
<PAGE>
and as a condition of Tenant's removal of its equipment, supplies and other
personal property from the Premises, Landlord's environmental specialist shall
perform a final audit and inspection of the Premises, and Tenant at its
expense shall perform or cause to be performed any remedial action recommended
by such specialist in order to leave the Premises in the same environmentally
acceptable condition as when this Lease was entered (except for harm not
caused by Tenant, its agents or invitees). Tenant's officer(s) and director(s)
if Tenant is a corporation, managing venturer(s) if Tenant is a joint venture,
or trustee(s) if Tenant is a trust, shall be personally and individually
liable to Landlord for any violation by Tenant of this Section [42] of the
Lease.
D. Tenant shall indemnify and hold harmless Landlord, its directors,
officers, partners and any of its employees, against all cost incurred
(including, without limitation, amounts paid pursuant to penalties, fines,
orders, judgment or settlements and attorney's fee originating out of any claim
made by Federal, State or local agencies or departments or private litigants or
third parties with respect to violations or alleged violations by Tenant, its
agents, employees or invitees of environmental or health laws, rules,
regulations, orders or common law, as said laws, etc. are set forth above or
otherwise.
E. Landlord shall indemnify and hold harmless Tenant, its officers,
directors, partners and any of its employees against all costs incurred
(including, without limitation, amounts paid pursuant to penalties, fines,
orders, judgments or settlements and attorneys' fees), arising out of any claim
made by Federal, State or local agencies or departments or private litigants or
third parties with respect to violations by Landlord, its agents, employees or
invitees of environmental or health laws, or regulations, orders or common law
as said laws, etc., are set forth above, or otherwise, provided that such
violations or alleged violations are not in whole or in part caused by or in
whole or in part related to Tenant or Tenant's use of the Premises. As used
herein Tenant shall mean and include Tenant and Tenants agents, employees and
invitees.
42. SECURITY DEPOSIT
----------------
Tenant has deposited with Landlord $15,333.33 as security for the full and
----------
faithful performance of each and every item, provision, covenant and condition
of this lease. In the event Tenant defaults in respect of any of the terms,
provisions, covenants, or conditions of this lease, including but not limited
to the payment of rent, Landlord may use, apply or retain the whole or any
part of such security for the payment of any rent in default or for any other
sum which Landlord may spend or be required to spend by reason of Tenant's
default. Should Tenant faithfully and fully comply with all of the terms,
provisions, covenants and conditions of this lease, the security or any
balance, thereof shall be returned to Tenant or, at the option of Landlord, to
the last assignee of Tenant's interest in this lease at the expiration of the
term hereof.
In the event of a sale of the Building, Landlord shall have the right to
transfer the aforesaid security deposit to the purchaser of the Building or to
Tenant and Landlord shall thereupon be released by Tenant all liability for the
return of said security; and Tenant agrees to look solely to the new owner of
the Building for the return of said security deposit; and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security deposit to a new owner of the Building.
14
<PAGE>
Tenant further covenants that it will not assign or encumber or attempt
to assign or encumber the monies deposited herein as security and that neither
Landlord nor its successors or assign shall be bound by any such assignment,
encumbrance, attempted assignment, or attempted encumbrance.
WITNESS the execution of this Lease under seal by the parties hereto as of
the date first above written.
WITNESS: MATTEI CORPORATION
By: (SEAL)
- --------------------------------- -------------------------
(Landlord)
Attest:
-----------------------
WITNESS: WORLD AIRWAYS, INC.
By: (SEAL)
- ------------------------------- -------------------------
(Tenant)
Charles W. Pollard (Pres.)
Attest:
----------------------------
15
<PAGE>
EXHIBIT "D"
(Sample Only)
Re: Tenant:
-----------------------------
Mailing Address:
-----------------------------
Leased Area:
-----------------------------
You have advised us that the mortgage company is planning to make a loan secured
by a first mortgage on the above in which the undersigned presently occupies
space under a lease dated _______________________________ (the "Lease") between
the undersigned (the "Tenant") _________________________ and
__________________________and (the "Landlord").
Incident to the mortgage company's loan and mortgage, and at your request, we
hereby certify as follows:
1. The undersigned is, as of the date of this letter, the holder of the
Tenant's interest under the Lease, and the Lease has not been modified,
amended or supplemented in any manner except for:
The undersigned will not enter into any modification of the Lease.
2. The term of the Lease is presently scheduled to expire on
______________________________________________________________.
If there are any rights of extension or renewal remaining under the terms
of the Lease, the same have not, as of the date of this letter, been
exercised.
3. The undersigned, as the holder of the Tenant's interest under the Lease, is
in occupancy of all the premises covered by the Lease and is actively
conducting its business therein, which business is the use stipulated as
the use of the premises demised by the Lease under the terms thereof and
the Lease is in full force and effect.
4. The undersigned is current in payment of all fixed rent and other charges
due to be paid under the Lease, with minimum rent paid, in full, for the
period ending
___________________________________________________________________________
_____.
The monthly minimum (i.e., fixed) rent is _________________. No rent or
other sum payable under the Lease is being paid in arrears.
No rent or other sum payable under the Lease has been paid in advance of
the due date thereof, and we hereby agree with you that we shall not pay
any minimum rent or other sum due to be paid under the Lease more than
fifteen (15) days in advance of the due date thereof.
5. All of the obligations on the part of the Landlord under the Lease for the
performance of any work or installation of any equipment have been carried
out, and the undersigned has no claim against the holder of the Landlord's
interest for the incomplete performance of any work or installation, or on
account of any claimed defect therein.
As of the date of this _____________________, neither the undersigned nor
the holder of the Landlord's interest under the Lease has failed to make
any payment or to perform any obligation which each has to the other.
16
<PAGE>
6. If the undersigned should assert a claim that the holder of the Landlord's
interest under the Lease has (i) failed to perform an obligation to the
undersigned under the terms of the Lease or otherwise, (ii) or is in
default under the Lease in any respect, written notice thereof shall
promptly be furnished to ______________________________, by certified mail
at the above address, and the undersigned agrees that it will not exercise
any rights which it might otherwise have on account of such failure or
default under such notice has been given, and Sun Life has had the same
opportunity to cure any such failure as the holder of the Landlord's
interest under the Lease may have.
7. A security deposit of _____________________ has been paid in connection
with the Lease.
The undersigned acknowledges that ___________________________will be
relying upon this _____________________________ in proceeding in the loan
and mortgage as described above.
EXECUTED UNDER SEAL
- ----------------------------------- -----------------------------------
17
<PAGE>
EXHIBIT "E"
(Sample Only)
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is dated the ______ day of _________________, 1990, between
____________________________________________, a
Delaware corporation, with offices at
________________________________________________________________________________
____, its successors and assigns (including but not limited to the holder of the
Note and Mortgage hereinafter described) ("Mortgagee"), and
_________________________________________________________, with its principal
place of business at
________________________________________________________________________________
_____("Tenant").
Tenant has entered into a certain leasedated_______________________________
_____ (the "Lease"), the landlord's interest in which is presently held by
Mattei Corporation ("Landlord"), covering certain premises situated and known
as______________________________________________________________________________
_____, as more particularly set forth in the Lease (the "Demised Premises"). The
Demised Premises constitute a portion of the real property described on Exhibit
-------
"A" attached hereto. Mortgagee has agreed to make a loan to Landlord, to be
- ---
evidenced by a note (the "Note") executed by Landlord, and secured inter alia by
----------
a mortgage on the Demised Premises and on other real and personal property (the
"Mortgage"), intended to be recorded in the aforesaid public records. Tenant
desires to be assured of continued occupancy of the Demised Premises under the
terms of the Lease.
NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) by each
party in hand paid to the other, the receipt of which is hereby acknowledged,
and in consideration of the mutual promises, covenants and agreements herein
contained, the parties hereto, intending to be legally bound hereby, promise,
covenant and agree as follows:
1. The Lease and all estates, rights, options, liens and charges therein
contained or created thereunder is and shall be subject and subordinate to the
lien and effect of the Mortgage insofar as it affects the real and personal
property of which the Demised Premises forms a part, and to all renewals,
modifications, consolidations, replacements and extensions thereof, to the
full extent of the principal sum secured thereby and interest thereon, with
the same force and effect as if the Mortgage had been executed, delivered, and
duly recorded among the above mentioned public records, prior to the execution
and delivery of the Lease.
2. In the event Mortgagee takes possession of the Demised premises as
mortgagee-in-possession, by foreclosure of the Mortgage, or by acquisition of
title in lieu of foreclosure, Mortgagee agrees not to affect or disturb Tenant's
right to possession of the Demised Premises in the exercise of Mortgagee's
rights so long as Tenant is not then in default under any of the terms,
covenants or conditions of the Lease.
3. (a) In the event that Mortgagee succeeds to the interest of Landlord
under the Lease by foreclosure or by acquisition of title to the Demised
Premises in lieu of foreclosure, Mortgagee and Tenant hereby agree to be bound
to one another under all of the terms, covenants and conditions of the Lease;
accordingly, from and after such event, Mortgagee and Tenant shall have the same
remedies against one another for the breach of any agreement contained in the
Lease as Tenant and Landlord had before Mortgagee succeeded to the interest of
Landlord; provided, however, that Mortgagee shall not be bound by any rent or
additional rent which Tenant might have paid for more than the current month to
Landlord, nor shall Mortgagee be liable to Tenant for any damages arising out of
events occurring prior to the date Mortgagee succeeds to the interest of
18
<PAGE>
Landlord under the Lease.
(b) This attornment shall be effective and self operative without the
execution of any further instrument by any of the parties hereto immediately
upon the Mortgagee succeeding to the interest of the Landlord under the Lease;
and the respective rights and obligations of Tenant and Mortgagee upon such
attornment, to the extent of the then remaining balance of the term of the Lease
and any extension or renewal permitted thereby, shall be and are the same as are
now set forth therein.
4. In the event that anyone else acquires title to or the right to
possession of the Demised Premises upon the foreclosure of the Mortgage, or upon
the sale of the Demised Premises by Mortgagee or its successors or assigns after
foreclosure or acquisition of title in lieu thereof or otherwise, Tenant agrees
not to seek to terminate the Lease by reason thereof, but shall remain bound
unto the new owner and the new owner agrees to be bound to Tenant under all of
the terms, covenants and conditions of the Lease, as provided in Paragraph 3
above, and any liability of Mortgagee to Tenant under the Lease or hereunder
shall terminate.
5. Tenant hereby covenants and agrees to and with Mortgagee:
(a) to deliver to Mortgagee a duplicate of each notice of default delivered
to Landlord at the same time as such notice is given to Landlord;
(b) not to seek to terminate the Lease by reason of any default of Landlord
without prior written notice thereof to Mortgagee and the lapse thereafter of
the greater of (i) thirty (30) days after giving of such notice to Mortgagee or
(ii) such time as under the Lease was offered to Landlord in which to remedy the
default, within which time Mortgagee, at its option, may remedy any such
default; provided, however, that with respect to any default of Landlord under
the Lease which cannot be remedied within such time, if Mortgagee commences to
cure such default within such time and thereafter diligently proceeds with such
efforts, Mortgagee shall have such time as is reasonably necessary to complete
curing such default;
(c) to promptly certify in writing to Mortgagee in connection with any
proposed assignment of the Mortgage, whether or not to Tenant's knowledge any
default on the part of Landlord then exists under the Lease;
(d) not to modify the Lease orally or in any other manner except by an
agreement in writing signed by the Mortgagee, for such time as the Mortgage
remains a lien on the property or the Note it secures remains unpaid;
(e) not to assign its interest in the Lease without the prior written
consent of Owner and Mortgagee. Tenant shall remain obligated under the Lease
notwithstanding any such assignment;
(f) upon receipt from Mortgagee of notice of any default under the Note or
Mortgage, to pay all rents and other sums due under the Lease directly to
Mortgagee.
6. This Agreement shall inure to and bind the heirs, administrators,
executors, successors and assigns of the parties hereto.
19
<PAGE>
WITNESS the hand and seal of the under signed the day and year first above
written.
TENANT:
Attest: By:
----------------------------- ------------------------------
[Corporate Seal]
MORTGAGEE:
Attest: By:
----------------------------- -----------------------------
[Corporate Seal]
20
<PAGE>
STATE OF DELAWARE :
: ss
COUNTY OF :
On this, the ______ day of _______________________, 1990, before me, the
undersigned Officer, personally appeared ______________________________, who
acknowledged to be the ________________________________________ of
____________________________, as such _______________________________, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by
_______________________________________________ as ____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------
NOTARY PUBLIC
COMMONWEALTH OF MASSACHUSETTS :
: ss
COUNTY OF :
I, __________________________________, a Notary Public in and for the
County and State aforesaid, do hereby certify that
_________________________________________, personally known to me to be the same
person(s) whose name(s) ___________________________ subscribed to the foregoing
instrument, appeared before me in person and acknowledged that
_________________________ signed, sealed and delivered the said instrument as
_____________________ free and voluntary act, for the uses and purposes therein
set forth.
----------------------
NOTARY PUBLIC
My Commission Expires:
- --------------------
21
<PAGE>
EXHIBIT C
Improvements will be made to the Building as per the attached floor plans
of both the building and the offices including the following:
. Office improvements to be a total of 3,620 square feet +
-
. Two additional drive doors will
EXHIBIT C ADDENDUM 6/15/93
AS A PART OF THE LEASE DATED 6/1/93 BETWEEN MATTEI CORP.
. Office improvements to be a total of approximately 3,700 square feet +
-
Reference building plan page 1, dated 6/8/93.
. Two full height demising walls on column line C and G with 10' x 10'
power operated overhead doors. These will be installed between column
lines 2 and 3 and have a 3'0" x 6'8" door installed adjacent with locking
hardware. These (4) doors shall be installed so that they prevent access
from bay 2 to bay 3 and bay 7 to bay 6.
. Reasonable distribution of 110V-20A power receptacles in the entire
warehouse area so that no point is more than 50' from an outlet.
. Restrooms to accommodate total facility head count of 15 persons in a
50:50 ratio, and meet all current ADA requirements.
. Breakroom will have a counter with sink and disposal unit and overhead
storage cabinets. The counter should have 2-110V.20A. outlets for a
coffee maker and microwave. Additional outlets on wall adjacent to
counter for a refrigerator, canned drink machine and a snack machine.
Cold water taps will be provided for coffee maker and ice maker in
refrigerator. All appliances except disposal to be supplied by World
Airways.
. All office lighting to be 2' x 4'-4 bulb lay-in fixtures with 3 way
switches to be provided at doors in restrooms, breakroom, and bay 5
front entrance and rear office door. Two fixtures in office pool areas
should be on night lite circuit.
. Electrical should provide outlets as shown on plan of 5/28/93 including a
110V.20A. circuit in a "J" box in ceiling and 2 dedicated circuits on
back wall of communications room for telephone and data equipment.
. A 4'x 8'x 3/4" A-D sheet of plywood should be installed vertically on
the rear wall of the communications room adjacent to column 3-E and
painted to match room.
. Install a light gray VCT in breakroom, ceramic tile in restrooms, and
medium gray commercial grade carpet in remainder of office area with
matching cove base. Paint entire area with heavy duty washable light
gray paint using semi-gloss on door and window trim. Ceiling to be 2'x
4' grid with lay-in tile.
. All office doors will have locking hardware as well as doors coming in
from warehouse. Restrooms and breakroom will lock at the doors that
enter the office space, not the warehouse.
. The HVAC in the office area should be able to maintain a temperature of
68 degree to 73 degree F. The HVAC in warehouse bays 3-4-5-6 should
maintain 60 degree to 80 degree F. The heating in warehouse bays 1-2-7-8
should maintain 60 degree F.
. Outside lighting should be provided to light the parking and dock area on
the front, rear and right sides of this building with automatic dusk to
dawn control.
. Interior warehouse overhead lighting will be installed so it is
controlled by bay at mutually agreeable points. Separate walk thru
lighting is provided adjacent to personnel door in rear of center bay,
doors in 2 demising walls and rear office door.
<PAGE>
AGREEMENT OF LEASE
This Agreement of Lease is entered into as of the 30th day of March, 1993
between the Landlord named below and the Tenant named below, as follows:
In consideration of the rents, covenants and conditions hereinafter
reserved and contained, Landlord hereby agrees to lease to Tenant, and Tenant
hereby agrees to hire from Landlord, the Demised Premises described herein.
Landlord and Tenant agree that the terms and conditions of this lease are
as set forth in this Agreement of Lease, and the attached General Terms of
Lease, including, without limitation, the exhibits or riders referred to in the
General Terms of Lease, all of which are incorporated herein and are hereinafter
referred to collectively as the "Lease". For purposes of this Lease, and any
supplement(s), amendment(s) or modification(s) thereof, the terms listed below
shall have the following meanings:
"LANDLORD": TINICUM PROPERTIES ASSOCIATES LIMITED PARTNERSHIP
ADDRESS: c/o DKM Properties Corp.
10 Industrial Highway
Mail Stop No. 1
Lester, Pennsylvania 19113
"TENANT": World Airways, Inc. (A Delaware Corporation)
ADDRESS: 13873 Park Center Road, Ste. 490
Herndon, Virginia 22071
"DEMISED PREMISES" shall mean the space in the Property known as "E"
Building, 15,000 American Way, Tinicum Industrial Park, 10 Industrial Highway,
MS #19, Lester, PA 19113, as shown on the plan(s) attached as Exhibit A-1 to the
General Terms of Lease, containing 5,866 rentable square feet.
"PROPERTY" shall mean the real property located in Tinicum Township,
Lester, Delaware County, Pennsylvania, as shown on the plan attached as Exhibit
A-2 to the General Terms of Lease, containing 1,624,749 rentable square feet.
"TENANT'S PRO RATA SHARE" shall mean the rentable square feet in the
Demised Premises divided by the rentable square feet in the Property.
"BASE RENT" shall mean the annual sum of $48,687.60, which will be payable
in equal monthly installments of $4,057.30. Base Rent shall increase two (2%)
percent each lease year.
"ADDITIONAL RENT" shall mean all sums designated as Additional Rent or
otherwise payable by Tenant to Landlord as set forth in the General Terms of
Lease, including, without limitation, the following items which will be paid
monthly at the same time as installments of Base Rent are paid, based on
Landlord's estimate of the annual amount thereof, subject to adjustment as set
forth in the General Terms of Lease:
1. Tenant's Pro Rata Share of Operating Expenses, currently estimated to be
$0.90 per square foot, payable in equal monthly installments during the first
lease year in the amount of $439.95.
2. Tenant's Pro Rata Share of Real Estate Taxes, currently estimated to be $0.40
per square foot, payable in equal monthly installments during the first lease
year in the amount of $195.53.
3. Electric service metered or submetered to the Demised Premises based on
actual usage.
<PAGE>
4. HVAC service metered or submetered to the building in which the Demised
Premises is located based on actual usage in the same proportion as the
rentable square footage in the Demised Premises bears to the rentable square
footage in such building.
5. Janitorial services to the Demised Premises, if provided by Landlord, based
on actual cost to Landlord plus eight percent (8%).
6. Trash removal services to the Demised Premises, if provided by Landlord,
based on actual cost to Landlord plus eight percent (8%).
"OPERATING EXPENSES" shall mean the expenses of Landlord incurred in operating
the Property, as more particularly described in Exhibit E to the General Terms
of Lease.
"REAL ESTATE TAXES" shall mean the real estate taxes on the Property, as more
particularly described in Exhibit E to the General Terms of Lease.
"COMMENCEMENT DATE" shall mean the date referred to in Section 3.1 of the
General Terms of Lease, which, subject to Section 5.3 of the General Terms of
Lease, will be the date Landlord receives a Certificate or Temporary Certificate
of Occupancy which Landlord and Tenant currently estimate will be May 15, 1993.
"TERM" shall mean a period of forty-eight (48) months from the Commencement
Date plus the Partial Month, if any, referred to in Section 3.2 of the General
Terms of Lease, and will, if the context requires, include any extension(s) of
the initial term and be subject to earlier termination as provided in the
General Terms of Lease.
"LANDLORD SERVICES AND UTILITIES" shall mean those services and
utilities specifically marked below:
Supplied by Landlord
--------------------
Category Yes No
-------- --- --
Heat X
Electricity X
Air Conditioning X
Water and Sewer X
Janitorial X
Trash Removal X
Crane Usage X
Railroad Usage X
"SECURITY DEPOSIT" shall mean the sum of $4,692.72 as referred to in
Article 17 of the General Terms of Lease, which amount shall be due and payable
upon the execution of this Lease.
"USE" shall mean Tenant's occupancy of the Demised Premises as referred to
in Section 2.1 of the General Terms of Lease for the purpose of administrative
offices, training center, and other operations which are permitted by Township
ordinance, are non-hazardous and do not conflict with other tenants, all of
which must be related to the ongoing operations of World Airways, Inc.
"BILLING ADDRESS" shall mean the address at which Tenant will be billed
which is the Tenant Address.
-2-
<PAGE>
"COMMON FACILITIES" shall mean the Property, less the Demised Premises
and any other space in the Property leased or held for lease to tenants, all
generally as shown on Exhibit A-2 to the General Terms of Lease.
"LEASE YEAR" shall mean a period of twelve (12) consecutive calendar
months, the first of which will begin on the Commencement Date, provided that if
the Commencement Date is not the first day of a calendar month the first Lease
Year will consist of the Partial Month referred to in Section 3.2 of the General
Terms of Lease and the next succeeding twelve (12) consecutive calendar months.
"MORTGAGEE" shall mean the holder of any mortgage now or hereafter
encumbering the Property or any portion thereof.
"PREMISES SHARED FACILITIES" shall mean the space consisting in the
aggregate of the rentable square feet identified as such on the plan(s) attached
as Exhibit "A-1" to the General Terms of Lease. The square feet of this area is
included in the rentable square footage of the Demised Premises. The Premises
Shared Facilities consists of: common area hallways and toilets.
"REAL ESTATE BROKER" shall mean none.
"RENT" shall mean Base Rent and Additional Rent.
"TENANT IMPROVEMENTS" shall mean the improvements to the Demised Premises
constructed for Tenant's use and occupancy of same, as described in Exhibit C to
the General Terms of Lease.
"TENANT PLANS" shall mean the final plans, specifications and working
drawings for the construction of the Demised Premises and the Tenant
Improvements, as set forth in Exhibit C to the General Terms of Lease.
"OPTION TERM" shall mean the two periods of one (1) year each from the end
of the Lease Term, as referred to in the rider attached as Exhibit "F".
IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their hands and
seals, or caused this Lease to be signed by their duly authorized general
partner(s), officers or agents, as of the date and year first above written.
LANDLORD:
TINICUM PROPERTIES ASSOCIATES
LIMITED PARTNERSHIP By:
Tinicum Industrial Park,
Inc., General Partner
Attest: By:
-------------------- --------------------
TENANT:
WORLD AIRWAYS, INC.
Attest: By:
-------------------- --------------------
Vance Fort (3/30/93)
<PAGE>
GENERAL TERMS OF LEASE
Attached to Agreement of Lease
Between:
LANDLORD: TINICUM PROPERTIES ASSOCIATES LIMITED PARTNERSHIP
and
TENANT: WORLD AIRWAYS, INC. (A DELAWARE CORPORATION)
LEASE DATED: MARCH 30, 1993
----------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<C> <S> <C>
1. Demised Premises..................................................... 1
2. Use.................................................................. 1
3. Term of Lease........................................................ 1
4. Rent and Additional Rent............................................. 1
5. Preparation for Occupancy; Excusable Delay........................... 1
6. Utilities and Services............................................... 2
7. Compliance with Laws................................................. 2
8. Events of Default; Remedies.......................................... 3
9. Cumulative Remedies; Waiver.......................................... 4
10. Surrender of Premises................................................ 4
11. Assignment or Subletting............................................. 5
12. Maintenance and Repairs; Covenant Against Waste; Right of Inspection. 6
13. Mechanic's Liens..................................................... 6
14. Alterations.......................................................... 7
15. Insurance; Waiver of Subrogation; Release............................ 7
16. Quiet Enjoyment...................................................... 8
17. Security Deposit..................................................... 8
18. Damage or Destruction................................................ 8
19. Condemnation......................................................... 9
20. Indemnification...................................................... 9
21. Self-Help............................................................ 9
22. Estoppel Certificate................................................. 10
23. Subordination and Non-Disturbance.................................... 10
24. Notices.............................................................. 10
25. Broker............................................................... 10
26. Signs................................................................ 11
27. Holdover............................................................. 11
28. Limitation of Liability.............................................. 11
29. Modifications Requested by Mortgagee................................. 11
30. Rules and Regulations................................................ 11
31. Regulation of Common Facilities...................................... 11
32. Short Form Lease..................................................... 11
33. Captions............................................................. 11
34. Applicability to Successors and Assigns.............................. 11
35. Entire Agreement; Modification....................................... 12
36. Miscellaneous........................................................ 12
37. Outside Storage...................................................... 12
38. Right to Relocate.................................................... 12
39. Removal of Trash..................................................... 12
40. Right of First Offer................................................. 12
</TABLE>
EXHIBITS
A-1 Demised Premises Designation (and Premises Shared Facilities)
A-2 Site Plan and Tenant Parking
B Lease Commencement Date Agreement
C Scope of Tenant Improvement Work - Plans and Specifications
D Rules and Regulations
E Operating Expenses and Real Estate Taxes
F Option
G Rider to General Terms of Lease
-i-
<PAGE>
ARTICLE 1. DEMISED PREMISES
---------------------------
Section 1.1 Tenant will have the right to use and occupy the Demised
Premises and the right to use in common with other tenants of the Property, and
their invitees, customers and employees, those public areas of the Common
Facilities, all subject to the terms, conditions and limitations hereinafter set
forth.
Section 1.2 The use and control of the Common Facilities is reserved to
Landlord and Landlord may at any time, and from time to time, close any Common
Facility to make repairs or renovations, effect construction, discourage non-
tenant parking and/or access, improve security or reconfigure particular Common
Facilities, and may do such other acts on, in and to the Common Facilities as in
its judgment may be desirable to insure and/or improve the convenience thereof
for Landlord and/or for present or future tenants of the Property, all without
liability to Tenant. Notwithstanding the foregoing, there will be no change to
the Demised Premises and Tenant will be entitled to reasonable access to the
Demised Premises at all times.
Section 1.3 In the event Tenant occupies any portion of the Property
without the consent of Landlord, Tenant shall be deemed to have leased same on
the terms and conditions set forth in this Lease except that Tenant shall be
deemed, at Landlord's option, (a) a tenant at will or (b) a tenant for the
balance of the term of this Lease, with respect to such space. Tenant shall
notify Landlord in writing promptly after it occupies any portion of the
Property other than the Demised Premises.
ARTICLE 2. USE
- --------------
Section 2.1 Tenant will use and occupy the Demised Premises for the Use
specified in the Agreement of Lease only and for no other use. Notwithstanding
the foregoing, Tenant's use of the Demised Premises will at all times be lawful
and Tenant will not commit waste, nuisance or unreasonable annoyance (including
without limitation excessive noise or noxious odors, dust or dirt) to Landlord
or any other tenant(s) of the Property.
Section 2.2 Tenant further warrants that it will not use refine, produce,
store, treat, handle, transfer, process, transport, dispose of, or otherwise
introduce into the Demised Premises, or any part thereof, any "Hazardous
Substances." Hazardous Substances means any hazardous waste, hazardous
substance, pollutant, contaminant or solid waste as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
--
seq., and any other applicable federal, state or local laws or ordinances, and
- ---
in the rules and regulations thereunder, as may be amended, supplemented or
superseded from time to time, including without limitation any polychlorinated
biphenyls (PCB's), urea formaldehyde, or asbestos, or any other substance
which may at any time, now or hereafter, be a violation or support a claim or
cause of action under common law or any federal, state or local environmental
statute, regulation, ordinance or other environmental regulatory requirement,
whether currently in effect or hereafter adopted. The foregoing restrictions
shall not apply to the storage and use of common office and cleaning supplies
necessary for routine office operations, which are properly stored in
reasonable quantities. In the event Tenant should breach this warranty
Landlord will have, in addition to any other remedies available, the right to
immediately terminate this Lease.
ARTICLE 3. TERM OF LEASE
- ------------------------
Section 3.1 The Demised Premises are hereby leased for the Term which will
commence on the Commencement Date. If Landlord is performing the Tenant
Improvements, Landlord will attempt to give Tenant as much advance notice of the
Commencement Date as is possible; provided, however, that Landlord's failure to
give such notice will not constitute a default under, or breach of, this Lease.
Section 3.2 If the Commencement Date is any date other than the first day
of a calendar month, the period between the Commencement Date and the last day
of the calendar month during which the Commencement Date occurs (the "Partial
Month") will be added to the Term.
Section 3.3 The parties hereto, at the request of either, will execute a
Commencement Date Agreement substantially in the form attached hereto as Exhibit
B.
Section 3.4 Tenant's inability or failure to take possession of the
Demised Premises on the Commencement Date will not delay the commencement of the
Term or Tenant's obligation to pay Base Rent or any Additional Rent or to comply
with any of its other obligations hereunder.
-1-
<PAGE>
Section 3.5 If delivery of possession of the Demised Premises to Tenant is
delayed beyond the estimated Commencement Date set forth in the agreement of
Lease, regardless of the reasons for or cause of such delay, this Lease will not
be void or voidable and the Term will commence as provided above. Further,
Landlord will not be liable to Tenant for any expenses or damages whatsoever
arising from or relating to such delay, except as may be expressly provided
elsewhere in this Lease.
ARTICLE 4. RENT AND ADDITIONAL RENT
- -----------------------------------
Section 4.1 Tenant will pay Base Rent and all Additional Rent without any
setoff, deduction or demand whatsoever. Base Rent and Additional Rent will be
paid in monthly installments, in advance, on the first day of each calendar
month during the Term in the amounts set forth in or determined pursuant to the
Agreement of Lease.
Section 4.2 Notwithstanding the foregoing, if the Commencement Date is not
the first day of a calendar month, Base Rent for the Partial Month will be
prorated on a daily basis and will be paid on the Commencement Date (and the
total Base Rent accruing for the first Lease Year of the Term will be the annual
Base Rent set forth in the Agreement of Lease plus the prorated rental for the
Partial Month).
Section 4.3 Tenant will pay to Landlord, as Additional Rent, Tenant's Pro
Rata Share of Operating Expenses and Real Estate Taxes as provided in Exhibit E,
all charges for utility services to the Demised Premises and all other items
designated as Additional Rent in the Agreement of Lease or in these General
Terms of Lease.
Section 4.4 Any and all charges and costs which Tenant is required to pay
pursuant to this Lease, together with all interest and penalties that may accrue
thereon in the event of Tenant's failure to pay such amounts, and all damages,
costs and expenses which Landlord may incur by reason of any default of Tenant
or failure on Tenant's part to comply with the terms of this Lease, will be
deemed to be Additional Rent. In the event of nonpayment by Tenant of any
Additional Rent Landlord will have all of the rights and remedies with respect
thereto which Landlord has for the nonpayment of Base Rent.
Section 4.5 In addition to any other remedies provided for herein, in the
event that any installment of Base Rent or payment of Additional Rent is more
than five (5) calendar days overdue then a "late charge" of 5% of the amount(s)
so overdue may be charged by Landlord for each month or part thereof that the
same remains overdue. This charge will be deemed compensation to Landlord for
the inconvenience and expense of policing and processing late payment(s) and
will be in addition to and not in lieu of any other remedy Landlord may have
under the circumstances and in addition to any reasonable fees and charges of
any agents or attorneys Landlord may employ in the event of any default
hereunder, whether authorized herein or by law. At the option of Landlord, any
such late charge, if not previously paid, will be added to and become part of
the next succeeding payment of Base Rent to be made hereunder.
ARTICLE 5. PREPARATION FOR OCCUPANCY; EXCUSABLE DELAY
- -----------------------------------------------------
Section 5.1 Landlord or Tenant shall construct the Tenant improvements
within the Demised Premises in accordance with Exhibit C. If performed by
Landlord, the work will be deemed completed upon the issuance of a Certificate
or Temporary Certificate of Occupancy, notwithstanding the fact that minor or
insubstantial construction, adjustment of equipment and/or fixtures and/or
decoration remains to be performed.
Section 5.2 If Landlord is prevented from or delayed in complying with its
obligations set forth in this or any other Article of this Lease because of
delay(s) (whether effecting Landlord or its contractors, subcontractors or
materialmen) caused by or due to (a) actual or threatened administrative
proceedings or litigation which interfere with Landlord's ability to begin or
complete construction, (b) delays in obtaining approval of construction plans,
building permits or Certificates or Temporary Certificates of Occupancy, (c)
strikes or other labor troubles, riots, fire, acts of God, governmental
intervention or regulations, inability to obtain materials, weather, holding
over of tenants, or any
<PAGE>
other matters which are not within the reasonable control of Landlord (all of
the foregoing hereinafter referred to collectively as "Excusable Delay"), than
the schedule set forth herein, if adversely affected by an Excusable Delay,
will be extended by one day for each day of an Excusable Delay.
Section 5.3 If Landlord's ability, when required to do so, to obtain a
building permit or Certificate of Occupancy or Temporary Certificate of
Occupancy or to complete the Tenant Improvements, or deliver possession of all
or part of the Demised Premises is delayed due to any act or omission of Tenant
or its agents, employees, contractors or subcontractors ("Tenant Delay"), then
the Demised Premises, building permit and/or Certificate or Temporary
Certificate of Occupancy will be deemed to have been completed or obtained, as
the case may be, and possession of the Demised Premises will be deemed to have
been delivered to Tenant, on the date when such event would have occurred but
for such Tenant Delay as same is certified in writing by Landlord's contractor.
Such delay shall include, but not be limited to:
(a) delay due to untimely submission of any Tenant Plans after the
Tenant Plans Deadline or delay in giving authorizations or approvals required
for the preparations for or construction of the Tenant Improvements;
(b) delay due to changes made or requested by or on behalf of Tenant in
the Tenant Plans (notwithstanding Landlord's approval of such changes);
(c) delay due to any other interference with work in the Demised
Premises or any other Act or omission, by Tenant, its agents, employees,
contractors or subcontractors;
(d) delay due to the postponement of any work at Tenant's request;
(e) delay due to performance of any work in the Demised Premises by any
person or entity employed or retained by or on behalf of Tenant;
(f) delay due to Tenant requesting materials, finishes, equipment or
supplies where delivery or installation is unavailable from Landlord's or its
contractor's ordinary trade sources in such sequence with the
delivery/installation of other equipment, fixtures and the like or as is
required under good construction scheduling practice, so as to delay Landlord in
completing the Demised Premises and obtaining a Certificate or Temporary
Certificate of Occupancy as scheduled; and
(g) delay due to tenant's failure to authorize Landlord to proceed with
the Tenant Improvements or to timely pay to Landlord the amounts, if any, due
pursuant to Exhibit C.
Section 5.4 If, as a result of any Tenant Delay pursuant to the
provisions of this Article, Landlord sustains any damages or any additional
costs or expenses for labor or material, Tenant will pay to Landlord as
Additional Rent (in addition to the rent payable as a result of the
establishing of the Commencement Date as provided in Section 5.3) all such
damages, costs and expenses that Landlord may sustain.
ARTICLE 6. UTILITIES AND SERVICES
- ---------------------------------
Section 6.1 If required under the Agreement of Lease, Landlord will
arrange to have furnished to the Demised Premises and/or the Common Facilities,
as applicable, the following services, utilities, and facilities:
(a) Heat (to maintain a minimum temperature of 45 degrees Fahrenheit
in warehouse portions of the Demised Premises), hot and cold water, and air
conditioning and heat to office portions of the Demised Premises during
regular business hours in seasons when they are required, as determined in
Landlord's reasonable judgment.
(b) Reasonably adequate electrical service, provided that Tenant's use
of electrical energy in the Demised Premises will not at any time exceed the
safe capacity of electrical service applicable to the conductors and other
electrical equipment in or servicing the Demised Premises, as determined by
Landlord. In order to insure that such capacity is not exceeded and to avert
possible adverse effect upon the Property's electrical service, Tenant will not,
without Landlord's prior written consent in such instance, (i) connect any
additional fixtures, appliances or equipment to the electric distribution system
other than (A) in accordance with plans approved by Landlord and (B) electric
typewriters, word processors, personal computers, calculators, copy machines,
and other small office machines, or (ii) make any alteration or addition to the
electric system.
(c) Removal of ice and snow from the Common
-2-
<PAGE>
Facilities during regular business hours within a reasonable time after
accumulation thereof.
(d) Maintenance of the Common Facilities.
Section 6.2 Tenant expressly agrees that Landlord will not be responsible
for the failure of supply to Tenant of any of the aforesaid or any other utility
or service, nor will Landlord be liable for any damages resulting from, nor will
there be any abatement of Base Rent or Additional Rent as a result of such
failure.
Section 6.3 Landlord and Tenant will comply with any applicable energy or
water conservation measures, voluntary or mandatory, which may be imposed by any
federal, state, county or municipal governmental agency, including, without
limitation, limits on permitted HVAC temperature settings and requirements
limiting volume of consumption. The effect of such compliance will not be deemed
an eviction, actual or constructive, or a breach of the provisions of this Lease
which will be suspended, as necessary, for the period(s) during which such
conservation measures are in effect.
Section 6.4 Tenant will pay all metered charges as Additional Rent.
ARTICLE 7. COMPLIANCE WITH LAWS
- -------------------------------
Section 7.1 Tenant will, at its expense, promptly observe and comply or
cause compliance with all laws and ordinances, orders, rules, regulations and
requirements of all federal, state, county or municipal governments, and
appropriate departments, agencies, commissions, boards and offices thereof, and
of the Board of Fire Underwriters and/or of any other body exercising similar
functions, and of all insurance companies writing policies covering the Demised
Premises, or any part thereof, foreseen or unforeseen, ordinary as well as
extraordinary, which relate or pertain to Tenant's use and occupancy of the
Demised Premises, including the conduct of Tenant's business therein, and
whether or not the same (a) involve any change of governmental policy, (b) are
now in force or are hereafter passed, enacted or directed, or (c) require
extraordinary repairs, alterations, equipment or additions or any work (or
changes to such work or any other requirements incidental thereto) of any kind
which may be applicable to, or in and about, the Demised Premises, including,
without limitation, the fixtures and equipment thereof, or the purposes to which
the Demised Premises are put, or manner of use of the Demised Premises at the
commencement or during the Term of this Lease.
Section 7.2 Tenant's obligations as set forth in Section 7.1 will
include, but not be limited to, compliance with any and all laws, orders,
rules, regulations and requirements relating to zoning and building codes,
life safety and environmental control, conservation or protection, including,
without limitation, the Occupational Safety and Health Act ("OSHA"), and any
applicable environmental laws, regulations or ordinances, with respect to the
use of and operations at the Demised Premises.
Section 7.3 In the event of Tenant's failure to comply fully with this
Article 7, Landlord may, but will not be required to, perform any or all of
Tenant's obligations as aforesaid in which event all sums paid or incurred by
Landlord in performing such obligations, together with interest thereon from the
date that Landlord made such expenditure at the rate of five (5%) percent above
the rate which CoreStates Bank, N.A. announces as its so-called prime rate or
base rate, from time to time, or the maximum rate allowed by law, whichever is
less, will be deemed Additional Rent hereunder and, except as otherwise in this
Lease expressly provided, will be payable to Landlord on demand or, at the
option of Landlord, may be added to any rent due or thereafter becoming due
under this Lease.
Section 7.4 Tenant will defend, indemnify and hold harmless Landlord, its
agents, successors and assigns from and against, and be responsible for payment
of, any and all costs, expenses, claims, fines, penalties and damages that may,
in any manner, arise out of or be imposed because of the failure of Tenant to
comply with the provisions of this Article
<PAGE>
7, including the expenses incurred by Landlord in the exercise of its rights
pursuant to Section 7.3, and all of the foregoing shall be deemed Additional
Rent.
Section 7.5 Tenant agrees to clean up all Hazardous Substances on the
Common Facilities, in the Demised Premises, or on the Property, if caused or
permitted by Tenant (or if Tenant shall be otherwise responsible therefor), in a
manner which shall comply with all applicable environmental laws and
requirements. Upon request, Tenant shall cooperate with Landlord in furnishing
to a governmental authority any information which may be required regarding
environmental matters. Tenant agrees to indemnify, defend and hold Landlord
harmless from and against any and all loss, damages, claims of third parties,
costs of correction, tests, studies, expenses (including attorney's fees and
costs of suit or administrative proceedings) or fines arising out of or in
connection with Tenant's failure to comply with the terms of this Section.
Section 7.6 Tenant's obligations under this Article 7 shall survive
termination of the Lease.
ARTICLE 8. EVENTS OF DEFAULT; REMEDIES
- ---------------------------------------
Section 8.1
(a) It will be a default hereunder if, at any time after the date
hereof, any one of the following events (herein called an "event of default")
occurs:
(i) if Tenant fails to pay any installment of Base Rent or Additional
Rent set forth in the Agreement of Lease, or any Part thereof, when same is due
and payable and such failure continues for five (5) days after the same is due
and payable; or
(ii) if Tenant fails to pay any other item of Additional Rent or any
other charges required to be paid by Tenant hereunder and such failure continues
for ten (10) days after notice thereof from Landlord to Tenant; or
(iii) if Tenant fails to perform any of the requirements of this Lease
(other than the payment of money) on the part of Tenant to be performed or
observed and such failure continues for thirty (30) days after notice thereof
from Landlord to Tenant; or
(iv) if Tenant allows the Demised Premises to become vacant, deserted
or abandoned (the fact that any of Tenant's property remains in the Demised
Premises shall not be evidence that Tenant has not vacated or abandoned the
Demised Premises); or
(v) if Tenant assigns, mortgages or encumbers this Lease, or sublets
the Demised Premises, or any part thereof, other than as expressly permitted
hereunder; or
(vii) if Tenant or any guarantor of this Lease makes an assignment for
the benefit of its creditors; or
(viii) if any petition is filed by or against Tenant or any guarantor
of this Lease in any court, whether or not pursuant to any statute of the United
States or of any State, in any bankruptcy, reorganization, extension,
arrangement or insolvency proceedings, and with regard to a petition filed
against Tenant or any guarantor the same is not dismissed within forty-five (45)
days, provided that during such period Tenant continues to pay all Base Rent and
all Additional Rent and performs all of its obligations under this Lease; or
(ix) if a receiver or trustee is appointed for all or any substantial
portion of Tenant's property or the property of any guarantor of this Lease, and
with regard to a proceeding brought against Tenant or any guarantor the same is
not dismissed in forty-five (45) days, provided that during such period Tenant
continues to pay all Base Rent and all Additional Rent and performs all of its
obligations under this Lease; or
(x) if a petition or a proceeding is filed or commenced by or against
Tenant or any guarantor of this Lease for its dissolution or liquidation (other
than in connection with any merger permitted hereunder), or if Tenant's property
or the property of any guarantor of this Lease is taken by any governmental
authority in connection with a dissolution or liquidation, and with regard to a
petition filed or commenced against Tenant or any guarantor the same is not
dismissed within forty-five (45) days, provided that during such period Tenant
continues to pay all Base Rent and all Additional Rent and performs all of its
obligations under this Lease; or
(xi) if a levy under judgment against Tenant or any guarantor of this
Lease is not satisfied or bonded within thirty (30) days.
(b) Notwithstanding the foregoing provisions
-3-
<PAGE>
of this Section 8.1, Landlord will not be required to give any notice of
default, and no cure period shall be applicable to the failure of Tenant to
observe or perform any of its agreements or obligations hereunder, if within any
180-day period Tenant has committed two or more defaults hereunder and Landlord
has transmitted to Tenant two or more default notices.
Section 8.2 Upon the occurrence of an event of default, Landlord shall have
the following rights:
(a) To accelerate the whole or any part of the Rent for the entire
unexpired balance of the term of this Lease, as well as all other charges,
payments, costs and expenses herein agreed to be paid by Tenant, and any Rent or
other charges, payments, costs and expenses if so accelerated shall, in addition
to any and all amounts of Rent already due and payable and in arrears, and any
other charge or payment herein reserved, included or agreed to be treated or
collected as Rent and any other charge, expense or cost herein agreed to be paid
by Tenant which may be due and payable and in arrears, be deemed due and payable
as if, by the terms and provisions of this Lease, such accelerated Rent and
other charges, payments, costs and expenses were on that date payable in
advance.
(b) To enter the Demised Premises and without further demand or notice
proceed to distress and sale of the goods, chattels and personal property there
found to levy the Rent and other charges herein payable as Rent, and Tenant
shall pay all costs and officers' commissions which are permitted by law,
including watchmen's wages and sums chargeable to Landlord, and further
including five percent (5%) commission[s] to the constable or other person
making the levy, and in such case all costs, officers' commissions and other
charges shall immediately attach and become part of the claim of Landlord for
Rent, and any tender of Rent without said costs, commissions and charges made
after the issuance of a warrant of distress, shall not be sufficient to satisfy
the claim of Landlord.
(c) To re-enter the Demised Premises, together with all additions,
alterations and improvements, and, at the option of Landlord, remove all
persons and all or any property therefrom, either by summary dispossess
proceedings or by any suitable action or proceeding at law or by force or
otherwise, without being liable for prosecution for damages therefor, and
repossess and enjoy the Demised Premises. Upon recovering possession of the
Demised Premises by reason of or based upon or arising out of an event of
default on the part of Tenant, Landlord may, at Landlord's option, either
terminate this Lease or make such alterations and repairs as may be necessary
in order to relet the Demised Premises or any part or parts thereof, either in
Landlord's name or otherwise, for a term or terms which may, at Landlord's
option, be less than or exceed the period which would otherwise have
constituted the balance of the Term of this Lease and at such rent or rents
and upon such other terms and conditions as in Landlord's sole discretion may
seem advisable and to such person or persons as may in Landlord's discretion
seem best; upon each such reletting all rents received by Landlord from such
reletting shall be applied: first, to the payment of any costs and expenses of
such reletting, including brokerage fees, attorney's fees, all costs of such
alterations and repairs, all costs paid or incurred by Landlord for retaking
and repossessing the Demised Premises, and the unamortized portion of any
rental concessions, Tenant Improvements or abatement; second, to the payment
of any indebtedness other than Rent due hereunder from Tenant to Landlord;
third, to the payment of Rent due and unpaid hereunder; and the residue, if
any, shall be held by Landlord and applied in payment of future Rent as it may
become due and payable hereunder. If such rentals received from such reletting
during any month shall be less than that to be paid during that month by
Tenant, Tenant shall pay any such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly. No such re-entry or taking possession of
the Demised Premises or the making of alterations or improvements thereto or
the reletting thereof shall be construed as an election on the part of
Landlord to terminate this Lease unless written notice of such intention be
given to Tenant. Landlord shall in no
<PAGE>
event be liable in any way whatsoever for failure to relet the Demised Premises
or, in the event that the Demised Premises or any part or parts thereof are
relet, for failure to collect the Rent thereof under such reletting. Tenant, for
Tenant and Tenant's successors and assigns, hereby irrevocably constitutes and
appoints Landlord Tenant's and their agent to collect the rents due and to
become due under all subleases of the Demised Premises or any parts thereof
without in any way affecting Tenant's obligation to pay any unpaid balance of
Rent due or to become due hereunder. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for such previous breach.
(d) To terminate this Lease and the term hereby created without any
right on the part of Tenant to waive the forfeiture by payment of any sum due or
by other performance of any condition, term or covenant broken. Whereupon
Landlord shall be entitled to recover, in addition to any and all sums and
damages for violation of Tenant's obligations hereunder in existence at the time
of such termination, damages for Tenant's default in an amount equal to the
amount of the Rent reserved for the balance of the Term of this Lease, as well
as all other charges, payments, costs and expenses herein agreed to be paid by
Tenant, all of which amount shall be immediately due and payable from Tenant to
Landlord.
(e) To bring a suit or suits for the recovery of any and all such
damages, or for any installments thereof, from time to time at its election, and
nothing herein contained will be deemed to require Landlord to postpone suit
until the date the Term would have expired had the Lease not been terminated as
provided herein or under any provision of law or had Landlord not re-entered the
Demised Premises.
(f) If any statute or rule of law limits the amount of Landlord's claim
for damages, to prove as and for liquidated damages and have allowed an amount
equal to the maximum allowed by or under any such statute or rule of law.
Section 8.3 Tenant, for itself and all others claiming through or under
Tenant, including, but not limited to its creditors, upon the termination of
this Lease in accordance with the terms hereof or in the event of re-entry or
recovery of possession of the Demised Premises by process of law or otherwise,
hereby waives to the fullest extent permitted by any statute, law any right of
redemption provided or permitted by any statute, law or decision now or
hereafter in force, and hereby waives, surrenders and gives up all rights or
privileges which it or they may or might have under and by reason of any present
or future law or decision to redeem the Demised Premises or for a continuation
of this Lease after having been dispossessed or ejected therefrom by process of
law.
Section 8.4 Intentionally omitted
Section 8.5 When this lease and the term or any extension or renewal
thereof shall have been terminated on account of any default by Tenant, or when
the term hereby created or any extension or renewal thereof shall have expired,
it shall be lawful for any attorney of any court of record to appear as attorney
for Tenant as well as for all persons claiming by, through or under Tenant, and
to sign an agreement for entering in any competent court an amicable action in
ejectment and judgment against Tenant and all persons claiming by, through or
under Tenant and therein confess judgment for the recovery by Landlord of
possession of the Demised Premises, for which this Lease shall be his sufficient
warrant; thereupon, if Landlord so desires, an appropriate writ of possession
may issue forthwith, without any prior writ or proceeding whatsoever, and
provided that if for any reason after such action shall have been commenced it
shall be determined and possession of the Demised Premises remain in or be
restored to Tenant, Landlord shall have the right for the same default and upon
any subsequent default or defaults, or upon the termination of this Lease or
Tenant's right of possession as hereinbefore set forth, to bring one or more
further amicable action or actions as hereinbefore set forth to recover
possession of the Demised Premises and confess judgment for the recovery of
possession of the Demised Premises as hereinbefore provided.
Section 8.6 In any amicable action of ejectment and/or for rent, Landlord
shall first cause to be filed in such action an affidavit, made by it or someone
acting for it setting forth the facts necessary to authorize the entry of
judgment, of which facts such affidavit shall be conclusive evidence, and if a
true copy of this lease (and of the truth of the copy such affidavit
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<PAGE>
shall be sufficient evidence) be filed in such action, it shall not be necessary
to file the original as a warrant of attorney, any rule of Court, custom or
practice to the contrary notwithstanding.
Section 8.7 Tenant expressly agrees that any judgment, order of decree
entered against him by or in any court or magistrate whether by virtue of the
powers of attorney contained in this Lease, or in any adverse suit or proceeding
shall be final, and that he will not take an appeal, certiorari, writ of error,
exception or objection to the same, or file a motion or rule to strike of or
open or to stay execution of the same and releases to Landlord and to any and
all attorneys who may appear for Tenant all errors in the said proceedings, and
all liability therefor. Tenant expressly waives the benefits of all laws, now or
hereafter in force, exempting any goods on the Demised Premises or elsewhere
from levy or sale in any legal proceedings taken by the Landlord to enforce any
rights under this lease. Tenant further waives the right of inquisition on any
real estate that may be levied upon to collect any amount which may become due
under the terms and conditions of this lease, and does hereby voluntarily
condemn the same and authorizes the Prothonotary to enter a fieri facias or
other process upon Tenant's voluntary condemnation, and further agrees that the
said real estate may be sold on a fieri facias or other process.
Section 8.8 Tenant represents and warrants that this is a commercial
transaction, that it has had the opportunity to seek the advice of its attorney,
and that it understands and agrees to Landlord's remedies which arise upon an
event of default by Tenant hereunder.
ARTICLE 9. CUMULATIVE REMEDIES; WAIVER
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Section 9.1 Every term, condition, agreement or provision contained in
this Lease will also be deemed to be a covenant.
Section 9.2 In addition to the other remedies provided in this Lease,
Landlord will be entitled to the restraint by injunction of any violation or
attempted or threatened violation of any of the terms or covenants of this
Lease. Landlord's remedies under the terms of this Lease are cumulative and are
not intended to be exclusive of any other remedies to which Landlord may be
lawfully entitled, at law or in equity, in case of any breach by Tenant of any
provision of this Lease.
Section 9.3 The failure of Landlord to insist in any one or more cases
upon the strict performance of any of the terms or covenants of this Lease, or
to exercise any option herein contained, will not be construed as a waiver or a
relinquishment for the future of any such term or covenant. No waiver by
Landlord of any term or covenant of this Lease will be deemed to have been made
unless made in a writing signed by Landlord.
Section 9.4 Neither the payment by Tenant nor acceptance by Landlord of
rent or any other payment, nor the acceptance by Landlord of performance of
anything required by this Lease to be performed, with the knowledge of the
breach of any term or covenant of this Lease, will be deemed a waiver of such
breach or of any of Landlord's rights hereunder. Landlord's acceptance of rent
or any other payment in a lesser amount than is due (regardless of any
endorsement on any check, or any statement in any letter accompanying any such
rent or payment) will not operate or be construed either as an accord and
satisfaction or in any manner other than as payment on account of the earliest
rent or other sums then unpaid.
Section 9.5 Tenant waives all right to trial by jury in any proceeding
instituted with respect to this Lease,
ARTICLE 10. SURRENDER OF PREMISES
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Section 10.1 Tenant will, upon the expiration or earlier termination of
this Lease, quit and surrender the Demised Premises to Landlord, together with
all Tenant Improvements and other alterations (unless Landlord elects otherwise
as hereinafter provided) and replacements thereof then on the Demised Premises,
in good order, condition and repair, except for reasonable wear and tear. Prior
to the expiration or earlier termination of this Lease, Tenant will remove all
of its property, equipment and trade fixtures from the Demised Premises without
damage, leaving the Demised Premises in broom-clean
<PAGE>
condition. All property not removed by Tenant will be deemed abandoned by
Tenant and Landlord reserves the right to charge the cost of removal, storage
and/or disposal of same to Tenant.
Section 10.2 If the Demised Premises is not surrendered at the end of the
Term or if the Demised Premises is damaged or is not in broom-clean condition,
except for reasonable wear and tear, upon surrender, Tenant will indemnify
Landlord against any loss or liability resulting, including, without limitation
and in addition to any other remedy or claim of Landlord's, any claims made or
damages sustained by any succeeding tenant founded on the delay, condition
and/or damage.
Section 10.3 Tenant's obligations under this Article 10 will survive the
expiration or earlier termination of this Lease and surrender of the Demised
Premises.
ARTICLE 11. ASSIGNMENT OR SUBLETTING
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Section 11.1 Tenant will neither assign this Lease, sublet the Demised
Premises or any part thereof nor encumber its interest in this Lease unless it
first complies with this Article 11.
Section 11.2 Provided that (a) Tenant is not then in default of any of the
terms or conditions of this Lease, and (b) Landlord gives prior written consent
to the proposed assignment or subletting, Tenant will be entitled to sublet the
Demised Premises or a portion thereof, or to assign this Lease, but only in
accordance with and subject to the provisions of Section 11.3 below. Landlord
will have the right to withhold its consent if, in Landlord's sole and
unreviewable judgment, the reputation, financial responsibility, or business of
a proposed assignee or subtenant is unsatisfactory to Landlord, or if Landlord
deems such business to be incompatible with that of other tenants in the
Property, or if the business of the proposed assignee or subtenant would expose
the Demised Premises and/or Property and/or the occupants of the Property to
increased risk of danger or injury, including environmental contamination.
Section 11.3 (a) If Tenant desires to assign this Lease or to sublet all or
part of the Demised Premises, it must, prior to entering into such assignment or
sublease, serve notice upon Landlord and Mortgagee of its intention to make such
assignment or subletting ("Tenant's Notice") which notice will contain (i) the
name and address of the proposed assignee or subtenant, (ii) the full and
complete terms and conditions of the assignment or subletting and, in the case
of subletting, the exact space to be sublet, (iii) the amount of rental and all
other consideration to be paid by the subtenant or assignee, (iv) the nature of
the proposed assignee's or subtenant's business and its proposed use of the
Demised Premises and (v) a copy of plans and, if available, specifications for
any required alterations to the Demised Premises. In the event that Landlord
or Mortgagee requires any additional or supplementary information, Landlord or
Mortgagee will advise Tenant, in writing, within twenty (20) days of
Landlord's receipt of Tenant's Notice and Tenant will supply same within a
reasonable time.
(b) Landlord has the right by giving Tenant notice of its election to do
so ("Landlord's Notice") within fourteen (14) days after the later of receipt of
Tenant's Notice or receipt of the requested additional or supplementary
information, if applicable, either (i) to terminate this Lease as to all or that
portion of the Demised Premises which is the subject of the proposed assignment
or sublease, or (ii) to require as a condition to its consent to an assignment
or sublease that Tenant shall pay to Landlord one hundred (100%) percent of (A)
any consideration received by Tenant for the assignment or sublease and (B) the
amount by which the Base Rent, Operating expenses and other Additional Rent to
be paid under the sublease or assignment exceed the Base Rent, Operating
Expenses and other Additional Rent to be paid under this Lease. Such amounts
will be paid to Landlord as and when they are received by Tenant. In the event
of an election by Landlord to terminate this Lease as provided in (i) above,
such termination shall become effective on the commencement date of the proposed
sublease or the effective date of the proposed assignment, as the case may be,
but in no event earlier than thirty (30) days after the giving of Landlord's
Notice, and Base Rent and all Additional Rent payable by Tenant will be so
adjusted and apportioned as of the date of such termination.
(c) Notwithstanding the foregoing, Tenant's right to make an assignment
or sublease and the
<PAGE>
effectiveness of any assignment or sublease is conditional upon (i) there being
no uncured default under the Lease as of the effective date of the assignment or
sublease and (ii) Tenant's delivery to Landlord, in recordable form and within
three (3) days after their execution, of a duplicate original of the assignment
or sublease and, in the event of an assignment, an agreement reasonably
acceptable to Landlord wherein the assignee assumes and agrees to keep, observe
and perform all of the covenants, conditions and obligations of Tenant under
this Lease.
Section 11.4 If this Lease is assigned, or if the Demised Premises or any
part thereof is sublet or otherwise occupied by anyone other than Tenant, after
default by Tenant, Landlord may collect rent from the assignee, subtenant or
occupant and apply the net amount collected to the amounts due hereunder, but no
such assignment, subletting, occupancy or collection will be deemed a waiver of
this covenant, an acceptance of the assignee, subtenant or occupant as tenant or
a release of Tenant from further performance of the terms, covenants and
conditions of this Lease.
Section 11.5 Notwithstanding any assignment, sublease or other occupancy,
with or without Landlord's consent, Tenant will remain primarily liable on this
Lease unless expressly agreed to by Landlord to the contrary, in writing. Any
violation of any provision of this lease, whether by act or omission, by any
assignee, subtenant or occupant, will be deemed a violation of such provision by
Tenant, it being the intention of the parties that Tenant will be liable to
Landlord for any and all acts and omissions of any and all assignees, subtenants
or other occupants of the Demised Premises.
Section 11.6 For purposes of this Article 11, if Tenant is a corporation
or partnership, any dissolution, merger, consolidation or other reorganization
of such corporation or partnership, or the sale or other transfer or disposition
of a "controlling interest" in the corporate shares or partnership interests of
Tenant, as the case may be, (whether such sale, transfer or other disposition
occurs at one time or at intervals so that, in the aggregate, such sale,
transfer or other disposition of a "controlling interest" shall have occurred),
will be deemed to constitute an assignment of this Lease. For the purposes of
this Article 11, the term "controlling interest" means (a) as to a tenant which
is a corporation, the ownership of shares possessing and having the right to
exercise more than fifty (50%) percent of the total combined voting power of all
classes of shares issued, outstanding and entitled to vote for the election of
directors, (whether direct ownership or indirect ownership through ownership of
shares possessing and having the right to exercise more than fifty (50%) percent
of the total combined voting power of all classes of shares of another
corporation or corporations), and (b) as to a tenant which is a partnership,
more than fifty (50%) percent of the partnership interests of the general
partners of such partnership (whether direct ownership or indirect ownership
through control of a corporate general partner).
Section 11.7 Without limiting any of the provisions of this Article 11, if
pursuant to the United States Bankruptcy Code or any similar law having the same
general purpose (herein the "Code") Tenant is permitted to assign its interest
in this Lease notwithstanding the restrictions set forth above, Landlord will be
entitled to assurance of future performance by an assignee expressly permitted
under such Code which will be deemed to mean, at a minimum, the deposit of cash
or cash equivalent security in an amount equal to the sum of one (1) year's Base
Rent plus an amount equal to the Additional Rent for the calendar year preceding
the year in which such assignment is intended to become effective. Such security
will be held by Landlord for the balance of the Term, without interest, as
security for the full performance of all of Tenant's obligations under this
Lease, and may be applied in the manner specified in Article 17 below.
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<PAGE>
ARTICLE 12. MAINTENANCE AND REPAIRS; COVENANT AGAINST WASTE; RIGHT OF
- ----------------------------------------------------------------------
INSPECTION
- ----------
Section 12.1 Tenant will, at its sole cost and expense, maintain the
Demised Premises and all of its fixtures, systems, equipment and improvements,
in clean, safe, orderly and sanitary condition free of accumulation of dirt and
rubbish. Unless indicated to the contrary in the Agreement of Lease, Tenant will
perform its own janitorial service and will arrange for trash removal from the
Demised Premises at its cost and expense. Tenant will not permit or suffer any
overloading of the floors of the Demised Premises and will not do or suffer any
waste or injury with respect thereto. In case of any destruction or damage of
any kind whatsoever to the Demised Premises, or any part thereof or system
therein, including, without limitation, any glass and the Tenant Improvements in
or at the Demised Premises, Tenant shall repair said damage or destruction as
speedily as possible at Tenant's own cost and expense, provided, however, that
if any such damage or destruction results solely from the act, fault or
negligence of Landlord, or anyone acting under Landlord, when making
replacements pursuant to Section 12.2 or 12.4, then it will be the
responsibility of Landlord to make the repairs at its expense. Tenant will also
be responsible, at its own cost and expense, to (a) repair HVAC, electrical or
plumbing system(s) ("Tenant System") which service only the Demised Premises,
(b) maintain throughout the Term an HVAC maintenance contract, and, if requested
by Landlord, a maintenance contract on any other Tenant systems, covering any
such Tenant System(s) in such form and with such company as is approved by
Landlord, and (c) replace bulbs, starters and ballasts for lighting fixtures.
Landlord shall, upon reasonable notice from Tenant, repair HVAC, electrical or
plumbing systems serving the Demised Premises and other space leased or held for
lease by Landlord, in which event Tenant shall pay that portion of the cost of
such repairs equal to the same ratio that the rentable square footage of the
Demised Premises bears to the rentable square footage of the space (including
the Demised Premises) served by such system(s). When used in this Article, the
term "repair(s)" includes replacement(s), restoration(s), addition(s),
improvement(s), alteration(s) and/or renewal(s) when necessary. Prior to making
any repairs, Tenant will notify Landlord of the nature of the damage or
destruction and contractors Tenant intends to employ to effect the repairs. The
provisions and conditions of Article 14 applicable to changes or alterations
(including the condition that Landlord may require that the repairs be performed
by its agents, servants, employees or contractors) will similarly apply to
repairs required to be performed by Tenant under this Article. To the extent
that there are any warranties or guaranties applicable to the Demised Premises,
including the fixtures, equipment and systems therein, which would be
applicable to the obligations of Tenant under this Article 12, Landlord will
assign said warranties or guaranties to Tenant.
Section 12.2 Landlord will be responsible for and will make all necessary
repairs to the bearing walls, foundation and roof of the Demised Property,
provided, however, that if any such repairs result from the act, fault or
negligence of Tenant, such repairs will be made by Landlord at Tenant's expense.
Section 12.3 Upon prior reasonable notice (except in case of emergency when
notice will not be required), Tenant will permit Landlord and its authorized
representatives to enter the Demised Premises during usual business hours for
the purposes of (a) inspecting the same, (b) curing any defaults on the part of
Tenant in making any necessary repairs, (c) performing any work which may be
necessary to comply with any laws ordinances, rules, regulations, or
requirements of any public authority, or which may be necessary to prevent waste
or deterioration in connection with the Demised Premises and (d) exhibiting the
Demised Premises during the last year of the Term. Nothing in this Section 12.3
imposes any duty upon the part of Landlord to do any such work or to make any
repairs to the Demised Premises of any kind whatsoever, except as specifically
provided herein, and the performance thereof by Landlord will not constitute a
waiver of Tenant's default in failing to perform the same. Landlord will
promptly, after Tenant has given Landlord notice of the necessity therefor, make
all repairs required to be made hereunder by Landlord, provided, however, that
Landlord will not in any event be liable, nor will Tenant be entitled to any
abatement or setoff or deduction from rent, nor will the obligations of Tenant
under this Lease be affected in any manner whatsoever, for
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<PAGE>
inconvenience, annoyance, disturbance, loss of business or other damage of
Tenant or any other occupant of the Demised Premises, or any part thereof, by
reason of (i) making repairs, performing any work on the Demised Premises or any
noise, vibration or other disturbance, (ii) bringing materials, supplies and
equipment into or through the Demised Premises, or (iii) the Demised Premises
being rendered wholly or partially untenantable (collectively "Inconvenience")
because of Landlord's failure to make any repairs required to be made hereunder
by Landlord. Landlord will exercise due diligence not to interfere with Tenant's
business operation, but will not be required to employ overtime labor to avoid
such, interference, provided, however, Landlord will employ overtime labor, at
Tenant's expense, if requested to do so by Tenant.
Section 12.4 (a) Tenant agrees Landlord may, at its sole discretion and at
any time or from time to time during the Term, perform structural and/or non-
structural renovation work on, in and/or to the Property, any of which work may
require access to the same from within the Demised Premises. Tenant will provide
such access at all reasonable times, upon reasonable notice (except in an
emergency), for the purpose of performing such work, and Landlord will incur no
liability to Tenant, nor will Tenant be entitled to any abatement of rent, on
account of any Inconvenience at the Demised Premises (provided that Tenant is
not denied access to said Demised Premises).
(b) Landlord will use reasonable efforts (which will not include any
obligation to employ labor at overtime rates) to avoid disruption of Tenant's
business during any such entry upon the Demised Premises and agrees to use
overtime labor, if requested by Tenant, at Tenant's expense.
(c) If Tenant commences any action or proceeding seeking injunctive,
declaratory or monetary relief in connection with the rights reserved so
Landlord under this Section, or if Landlord commences any action or proceeding
to obtain access to the Demised Premises in accordance with this Section, then
in either event if Landlord prevails in any such action or proceeding Tenant
will pay to Landlord, as Additional Rent, a sum equal to all of Landlord's
reasonable legal fees, costs and disbursements in any way related to or arising
out of such action or proceeding.
ARTICLE 13. MECHANIC'S LIENS
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Section 13.1 Tenant will not suffer or permit any lien or claim ("Lien") to
be created or to remain against the Demised Premises and/or Property or any part
thereof, by reason of any work, labor, services or materials performed or
supplied, or claimed to have been performed or supplied, for or to Tenant or any
contractor or subcontractor employed by Tenant or anyone holding the Demised
Premises or any part thereof through or under Tenant. If at any time a Lien is
filed against the Demised Premises and/or Property, Tenant will cause the same
to be discharged of record within 10 days after notice to Tenant of the filing
of same. If Tenant fails to discharge any such Lien within such period, then,
in addition to any other right or remedy of Landlord, Landlord may elect, but
shall not be obligated, either to procure the discharge of the Lien by bonding
or by payment or deposit into court of the amount claimed to be due, or to
compel the prosecution of an action for the foreclosure of such Lien by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor
with interest and costs. Any amounts paid or deposited by Landlord for any of
the aforesaid purposes, and all legal and other expenses and disbursements of
Landlord, including reasonable counsel fees, in defending any action or in or
about procuring the discharge of such Lien, together with interest thereon at
the rate which Chemical Bank announces as its so called prime rate or base
rate, from time to time, plus 5%, from the date of payment or deposit, will
become due and payable forthwith by Tenant to Landlord, as Additional Rent.
Section 13.2 Nothing in this Lease will be deemed or construed as the
consent of Landlord, express or implied, by inference or otherwise, to any
alteration or repair of or to the Demised Premises or any part thereof, or to
Tenant's contracting for or permitting the rendering of any services or the
<PAGE>
furnishing of any materials, which might give rise to the right to file any Lien
against Landlord's interest in the Demised Premises.
ARTICLE 14. ALTERATIONS
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Section 14.1 Tenant will not make, cause or permit any alterations,
additions or improvements ("alterations") in or to the Demised Premises without
in each instance obtaining Landlord's prior written consent thereto. By way of
illustration but not limitation, Landlord will be entitled to withhold its
consent if the proposed alterations (a) impair or affect the structural
soundness or integrity of the Demised Premises, the property or any of the
systems or equipment therein, (b) lessen the present or future value of the
Demised Premises or the Property, (c) change the type of use of the Demised
Premises; or (d) increase the risk of damage or injury to the Demised Premises
and/or the Property or the occupants of the Property. Any such consent by
Landlord may be upon condition that the work be performed by Landlord's agents,
servants, employees or contractors and that Tenant furnish to Landlord such
evidence of Tenant's financial ability to assure payment and/or completion as
Landlord may reasonably require. If Landlord so elects and notifies Tenant at
the time of Tenant's request to make such alterations, Tenant will, at its sole
cost and expense, remove any alterations (structural or non-structural) at the
expiration or other termination of this Lease, repair all damage caused by such
removal and restore the Demised Premises to the condition in which they were
prior to the installation of any such alterations. Nothing herein contained will
be construed to restrict Tenant's right to install or to make any changes in
Tenant's own movable trade fixtures or to qualify Landlord's obligation to make
structural replacements as provided in Section 12.2. The provisions of this
Article 14 are subject to the terms and conditions of any mortgage to which this
Lease is subordinate and if the consent of any such mortgagee is required for
such work, such consent will be obtained by Tenant before any such work is
commenced. In that regard, Landlord agrees to reasonably cooperate with Tenant
in obtaining the consent of such mortgagee.
Plans and specifications for any proposed alterations will be submitted to
Landlord for approval upon the request for its consent, together with a
reputable contractor's (which may include a contractor in Tenant's employ)
estimate of the cost thereof. Upon completion of the alterations, Landlord is to
receive one print and one reproducible copy of the "as-built" construction
plans.
Section 14.2 In making any alternation contemplated by this Article, or any
repair or restoration contemplated by other terms and conditions of this Lease,
the parties will comply with all applicable laws, regulations, ordinances and
orders and procure all requisite permits, all at Tenant's expense. Copies of
all such approvals, authorizations and permits will be delivered to and
retained by Landlord. Each party will, on written request from the other,
execute any documents necessary to be signed on its part in order to obtain
any such permit. All alterations made hereunder will be performed in a first-
class, good and workmanlike manner using new materials at least equivalent in
quality to those used in the construction of the Demised Premises. If the
alterations are not performed by Landlord or its agents, employees, servants
or contractors, Tenant shall require that each and every contractor,
subcontractor and supplier, prior to furnishing labor or materials to the
Demised Premises, file with the Prothonotary of Delaware County a written
waiver of its right to file a mechanic's lien against the Demised Premises and
Property, in form and substance satisfactory to Landlord. Landlord may impose
a reasonable charge for the supervision and inspection of the construction of
any alterations not performed by Landlord or its agents, employees, servants
or contractors.
Section 14.3 All alterations (other than Tenant's trade fixtures) made by
Tenant will, upon termination of this Lease, immediately be and become the sole
and absolute property of Landlord and will remain upon and be surrendered with
the Demised Premises unless Landlord has elected as provided in Section 14.1
that such alterations be removed, in which event they will be removed by Tenant
and the Demised Premises restored to its original condition at Tenant's expense
upon or prior to the surrender of possession.
Section 14.4 If Landlord, in its absolute discretion, determines that the
performance of any work to be completed by Tenant's contractor(s) interferes
with,
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<PAGE>
delays, hampers or prevents Landlord's contractor(s) from proceeding with
completion of its work in the Demised Premises, the premises of any other tenant
or the Common Facilities, Tenant will, at the earliest possible time within 24
hours after Landlord's determination (which need not be communicated in writing
and may be given orally by Landlord, its agents or contractors, to Tenant, or
its agents or contractors), cause its contractors to cease all work being
performed by it or on its behalf and to withdraw from the Demised Premises until
further notice from Landlord.
To the end that there will be no labor dispute which would interfere with
the construction, completion or operation of the Common Facilities or the
Property, or any part of either, including, but not limited to, the Demised
Premises, Tenant agrees that for any work which Tenant performs, whether or not
such work is permitted or required pursuant to the Lease, Tenant will engage the
services of only such contractors and subcontractors as will work in harmony,
and without causing any labor dispute, with each other, with Landlord's
contractors and subcontractors and with the contractors and subcontractors of
all others working in or upon the Common Facilities or the Property, or any part
of either, and Tenant shall require its contractors and subcontractors to employ
only such labor as will work in harmony, and without causing labor dispute, with
all other labor then working in or upon the Common Facilities or the Property,
or any part of either. Furthermore, only those contractors and subcontractors
as have been duly licensed by the authority having jurisdiction over the
appropriate profession and which have been approved in writing by Landlord may
perform any work for Tenant in or upon the Demised Premises.
Section 14.5 Tenant will maintain, or cause Tenant's contractors to
maintain, worker's compensation and comprehensive general liability insurance
and property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord and on an occurrence basis. Such insurance
will be in effect at all times during any period of such contractor's entry upon
the Demised Premises and certificates of insurance will be delivered to Landlord
prior to any such entry by Tenant or Tenant's contractors. If required by
Landlord, such insurance will name Landlord and Landlord's contractor and/or
construction manager as additional insured(s), and in all cases will be primary
insurance not contributing with other insurance Landlord or its contractor
and/or construction manager may carry. Landlord will not in any way be liable
for any injury, loss, theft or damage which may occur to any supplies or
equipment of, or any decorations or installations made by, Tenant or Tenant's
contractors, the same being at the sole risk of Tenant and Tenant's contractors.
ARTICLE 15. INSURANCE; WAIVER OF SUBROGATION; RELEASE
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Section 15.1 During the term hereof, Tenant will, at its own cost and
expense, provide and keep in force the following insurance:
(a) Comprehensive general liability insurance, with exclusions "a" and
"c" removed, written on an occurrence basis, naming Landlord and its agents and
employees as additional insureds, against claims for bodily injury, death or
property damage occurring in or about the Demised Premises and the Common
Facilities (including, without limitation, bodily injury, death or property
damage resulting directly or indirectly from or in connection with any
alteration, improvement or repair thereof made by or on behalf of Tenant), with
limits on an occurrence basis of not less than $3,000,000.00/$5,000,000.00 for
bodily injury or death and $1,000,000.00 for property damage or $5,000,000.00
combined single limit. Tenant's coverage must include (i) premises/operations,
(ii) independent contractors, and (iii) broad form contractual liability in
support of the indemnity provisions of Article 20. [To satisfy the liability
insurance requirements of this Section 15.1 under a policy of commercial general
liability insurance rather than comprehensive general liability insurance,
Tenant must obtain an endorsement which applies the aggregate limits separately
to the Premises (ISO Endorsement CG-25-05-11-85, Amendment--Aggregate Limits of
Insurance (Per Location) or an equivalent endorsement satisfactory to Landlord).
The
<PAGE>
certificate of insurance evidencing such policy must evidence that the limits of
Tenant's liability insurance required hereunder apply solely to the Demised
Premises and not to other locations.
(b) Worker's Compensation in statutory amounts and employer's liability
of at least $100,000.00.
(c) Insurance covering its contents and all Tenant Improvements, from
loss or damage from fire and casualty and, as to Tenant Improvements, such
coverage shall be all-risk special form insurance (or its equivalent) with
replacement cost and agreed amount endorsements naming Landlord as loss payee
and Mortgagee under a New York standard non-contributory Mortgagee endorsement
as their interests may appear.
(d) Such other insurance as Landlord or any mortgagee may reasonably
require from time to time.
Section 15.2 All policies will be obtained by Tenant and copies of same or,
at Landlord's option, certificates evidencing coverage will be delivered to
Landlord at or before the Commencement Date. All insurance will be written by
companies with a Best's rating of not less than A+, satisfactory to Landlord and
Mortgagee and authorized to do business in the Commonwealth of Pennsylvania. All
policies will be for periods of not less than one year and contain a provision
whereby the same cannot be canceled or materially altered unless Landlord is
given at least thirty (30) days prior written notice of such cancellation.
Tenant will procure and pay for renewals of such insurance from time to time and
promptly deliver to Landlord certificates thereof at least thirty (30) days
before the expiration thereof. All such insurance will be primary insurance not
contributing with other insurance Landlord or its contractor and/or construction
manager may carry.
Section 15.3 All policies of insurance to be obtained pursuant to this
Article 15 and all other policies which Landlord or Tenant may carry which
affect, relate or pertain to the Demised Premises, the Common Facilities or any
of Tenant's contents, the Tenant improvements, fixtures and property must
include a waiver by the insurer of all rights of subrogation. Neither Landlord,
Tenant, nor any of their respective agents, officers, employees or invitees will
be liable to the other for, and each hereby expressly releases or waives any
claim for, loss or damage caused by any risk covered by a so-called all-risk
special form insurance policy (or its equivalent) or a commercial or
comprehensive general liability policy, as applicable, without regard to whether
such coverage is in effect. Such release and waiver shall include any such risk
as to which a party elects to self -insure, in whole or in part, by virtue of
any applicable deductible provisions of any insurance coverage or otherwise.
Moreover, Tenant expressly waives and releases Landlord from any claim for any
loss or damage to its business, contents, fixtures and/or property, whether or
not such loss or damage results from the negligence of Landlord, its agents,
officers, employees and/or invitees. If the release of Landlord as set forth
in this Section contravenes any law with respect to exculpatory agreements,
the liability of Landlord will not be deemed released but will be secondary to
the other's insurer.
Section 15.4 Landlord will maintain fire and casualty insurance on the
Property (all-risk special form or its equivalent) and such other insurance as
Landlord or Mortgagee deems necessary to protect adequately the interest of
Landlord or Mortgagee.
ARTICLE 16. QUIET ENJOYMENT
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Section 16.1 Landlord covenants that so long as this Lease is in effect
and Tenant pays the rents and performs the covenants and conditions contained in
this Lease, Tenant may peacefully hold and enjoy the Demised Premises during the
Term subject, however, to the terms of this Lease.
ARTICLE 17. SECURITY DEPOSIT
- ----------------------------
Section 17.1 Simultaneously with the execution of this Lease, Tenant will
deposit with Landlord the Security Deposit (which will not bear interest to
Tenant unless required to do so by any provision of law) as security for
Tenant's faithful and timely payment and performance by Tenant of all of
Tenant's obligations, covenants, conditions and agreements under this Lease.
Within a reasonable time after the expiration of the Term, Landlord will return
the Security Deposit to Tenant, less such portion thereof as Landlord has
utilized to make good any failure by Tenant to comply with any of Tenant's
obligations, covenants, conditions or agreements hereunder.
Section 17.2 In the event of any default by
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<PAGE>
Tenant hereunder, Landlord has the right, but is not obligated, to apply all or
any portion of the Security Deposit to cure each default, in which event Tenant
will, upon demand, promptly deposit with Landlord the amount necessary to
restore the Security Deposit to its original amount.
Section 17.3 The Security Deposit will be held by Landlord and may be
commingled with its other funds. In the event of sale or transfer of Landlord's
interest in the Building, Landlord has the right to transfer the Security
Deposit to such purchaser or transferee, in which event Landlord will, upon such
transfer, be released from all liability to Tenant for the return of the
Security Deposit. Tenant will look only to the new landlord for the return of
the Security Deposit.
ARTICLE 18. DAMAGE OR DESTRUCTION
- ---------------------------------
Section 18.1 In case of any damage to or destruction of the Demised
Premises, or any part hereof, Tenant will promptly give written thereof to
Landlord.
Section 18.2 If the Demised Premises is partially or totally damaged or
destroyed by fire or other cause, then, whether or not the damage or destruction
resulted from the fault or neglect of Tenant (and if this Lease has not been
terminated as hereinafter provided in this Article 18), Landlord will repair the
damage and restore and rebuild the Demised Premises (which for purposes of this
Article 18 shall include the Tenant improvements), at its expense, with
reasonable dispatch after notice to Landlord of the damage or destruction,
provided, however, that Landlord will not be required to repair or replace any
of Tenant's property.
Section 18.3 If the Demised Premises is partially damaged or partially
destroyed by fire or other cause, the rents payable hereunder will be abated to
the extent that the Demised Premises has been rendered unusable to Tenant in the
conduct of its business and for the period from the date of such damage or
destruction to the date the damage has been repaired or restored. If the Demised
Premises or a major part thereof has been totally (which shall be deemed to
include substantially) damaged or destroyed or rendered completely unusable to
Tenant in the conduct of its business on account of fire or other cause, the
rents shall completely abate as of the date of the damage or destruction and
until Landlord repairs, restores and rebuilds the Demised Premises, provided,
however, that if Tenant reoccupies a portion of the Demised Premises for the
conduct of Tenant's business during the time that the restoration work is taking
place and prior to the date that the same are made completely tenantable, rents
allocable to such portion will be payable by Tenant from the date of such
occupancy.
Section 18.4 In case of any damage or destruction mentioned in this
Article 18, Landlord may terminate this Lease, by notice to Tenant, if the
Demised Premises and/or the portion of the Property in which the Demised
Premises are located are not reasonably capable of restoration within one
hundred eighty (180) days. Within thirty (30) days after such fire or
casualty, Landlord will advise Tenant in writing as to whether or not it can
restore the Premises within the one hundred eighty (180) day period referred
to above, and whether or not it elects to terminate this Lease as provided in
this Section 18.4. If Landlord elects not to terminate the Lease, then
Landlord will have two hundred ten (210) days from receipt of Tenant's notice
of such damage to restore the Demised Premises.
Section 18.5 Provided that Landlord diligently prosecutes such repair and
restoration, Landlord will have no liability if the time for repair or
restoration extends beyond the two hundred ten (210) day period. During any
period of restoration, Tenant will be responsible for the security of its goods,
fixtures and equipment and will be responsible at its cost and expense to remove
same from the damaged Demised Premises pending restoration if necessary, it
being understood and agreed that Landlord will have no responsibility or
liability with respect thereto if the same remain in the damaged area.
Section 18.6 Notwithstanding anything to the contrary contained herein,
Landlord's obligation to repair will not extend to the Tenant Improvements
<PAGE>
unless Tenant makes available to Landlord the funds to pay for the cost of such
repairs, and Landlord's repairs will not exceed the scope of the work required
to be done by Landlord at the outset of this Lease, if any, as set forth in
Exhibit C. Furthermore, should the damage or destruction occur during the last
year of the Term, then notwithstanding any contrary provision continued herein,
Landlord will have the option of not repairing the Demised Premises. Landlord
must give Tenant notice of its election not to repair within thirty (30) days of
receipt of Tenant's notice of the damage or destruction or such option will be
deemed terminated.
Section 18.7 No damages, compensation or claim will be payable by Landlord
for Inconvenience, loss of business or otherwise arising from any repair or
restoration of any portion of the Demised Premises or of the portion of the
Property in which the Demised Premises are located pursuant to this Article.
Landlord will use reasonable and diligent efforts to effect such repair or
restoration promptly and in such manner as not to unreasonably interfere with
Tenant's use and occupancy.
Section 18.8 Notwithstanding anything to the contrary contained herein,
Landlord's obligations to repair the damage and restore and rebuild the Demised
Premises and the portion of the Property in which the Demised Premises are
located pursuant to this Article will be contingent upon its obtaining all
necessary approvals from the applicable governmental authorities, all necessary
consents from mortgagees or ground lessors and sufficient proceeds from
insurance policies.
ARTICLE 19. CONDEMNATION
- ------------------------
Section 19.1 If, at any time during the Term of this Lease, title to the
whole or materially all of the portion of the Property in which the Demised
Premises are located and/or Demised Premises is taken by the exercise of the
right of condemnation or eminent domain (hereinafter referred to as the
"proceedings") or by agreement between Landlord and those authorized to exercise
such right, this Lease will terminate and expire on the date of such taking, all
Base Rent and Additional Rent provided to be paid by Tenant will be apportioned
and paid to the date of such taking, and the total award made in such
proceedings will be paid to Landlord. For the purpose of this Article 19,
"materially all of the portion of the Property in which the Demised Premises are
located and/or Demised Premises" will be deemed to have been taken if, as a
result of the taking, the premises remaining after such taking are not
reasonably usable for Tenant's business purposes. Any dispute as to whether the
premises are reasonably usable for Tenant's business purposes will be settled by
arbitration to be held in Philadelphia, Pennsylvania in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's determination in any court having jurisdiction and
the parties consent to the jurisdiction of the Common Pleas Court of
Pennsylvania for this purpose.
Section 19.2 If, at any time during the Term of this Lease, title to less
than materially all of the portion of the Property in which the Demised Premises
are located and/or Demised Premises is taken as aforesaid (a"Partial
Condemnation"), the entire award will be paid to Landlord, and Landlord will
have the option to (a) restore the portion of the Property in which the Demised
Premises are located and/or Demised Premises to an architecturally and/or
functionally complete unit with reasonable promptness, subject to ordinary
delays beyond Landlord's control, provided that after such restoration the
Demised Premises as restored is sufficient to meet Tenant's needs, or (b)
terminate this Lease. Landlord will exercise its option to cancel by written
notice to Tenant to be given not more than forty-five (45) days from the date of
such Partial Condemnation and this Lease will become null and void ninety (90)
days after said notice.
Section 19.3 If title to less than materially all of the portion of the
Property in which the Demised Premises are located and/or Demised Premises is
taken as aforesaid and this Lease continues, the Base Rent and any additional
Rent will be reduced to an amount equivalent to the proportionate square footage
of the Demised Premises.
Section 19.4 Tenant further agrees that if, at any time after the date
hereof, the whole or any part of the portion of the Property in which the
Demised Premises are located and/or Demised Premises is taken or condemned by
any competent authority for its temporary use or occupancy (herein a "Taking"),
this Lease will not terminate by reason thereof and Tenant will continue to pay,
in the manner and at the time herein specified, the
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<PAGE>
full amount of the Base Rent and all Additional Rent payable by Tenant
hereunder, and, except only to the extent that Tenant may be prevented from so
doing pursuant to the terms of the order of the condemning authority, to perform
and observe all of the other terms, covenants, conditions and obligations hereof
upon the part of Tenant to be performed and observed, as though such Taking had
not occurred. In the event of any such Taking, Tenant will be entitled to
receive the entire amount of any award made for such Taking applicable to the
Demised Premises, whether paid by way of damages, rent or otherwise (except that
if the award is made in a lump sum, the award will be held by Landlord and paid
out to Tenant in equal monthly installments), except that portion of the award
attributable to or for restoration, if any, which will be held by and belong to
Landlord, provided, however, if such period of temporary use or occupancy shall
extend beyond the expiration date or termination of this Lease, such award shall
be apportioned between Landlord and Tenant as of such date of expiration or
termination of the Term. If the period of temporary use or occupancy ends during
the Term of this Lease, Tenant will, at its sole cost and expense, restore the
Demised Premises as nearly as practicable to the condition of the same is
immediately prior to the Taking, and if the period of temporary use or occupancy
does not end during the Term of this Lease, Landlord will be entitled to the
portion of the award that is attributable to restoration of the Demised
Premises.
Section 19.5 Except as expressly provided in the preceding Sections of
this Article, Tenant will neither have nor make any claim whatsoever for any
award or payment for the Demised Premises or any part thereof, and in any event
Tenant shall neither have nor make any claim whatsoever for any award or payment
for the value of Tenant's leasehold under this Lease or the value of the
unexpired portion of the Term of this Lease. Nothing herein shall preclude
Tenant from the right to recover for direct loss of its personal property or
trade fixtures or for relocation expenses, if applicable.
ARTICLE 20. INDEMNIFICATION
- ---------------------------
Section 20.1 Tenant covenants and agrees, at its sole cost and expense and
in addition to any other right or remedy of Landlord hereunder, to indemnify and
save harmless Landlord and/or Mortgagee from and against any and all loss, cost,
expense and liability from claims by any third party(ies) (but excluding any
liability arising solely out of the negligence of Landlord or its agents,
employees or contractors), including, without limitation, reasonable attorneys'
fees and court costs, arising from or in connection with Tenant's occupancy and
control of the Demised Premises or Common Facilities, the conduct or management
of any work, or any act or omission whatsoever, done in or on the Demised
Premises by or under the direction or at the request of Tenant, any breach or
default on the part of Tenant in the payment of any rent or performance of any
covenant or agreement on the part of Tenant to be performed pursuant to the
terms of this Lease, or any act or negligence of Tenant or any of its agents,
contractors, servants, employees, licensees or invitees.
Section 20.2 In the event that any action or proceeding is brought against
Landlord and/or Mortgagee by reason of any claims covered by the foregoing
indemnity, Tenant will, upon notice from Landlord and/or Mortgagee, resist or
defend such action or proceeding by counsel reasonably satisfactory to Landlord
and/or Mortgagee. Landlord and/or Mortgagee will not defend such action or
proceeding so long as Tenant is diligently doing so. Landlord and/or Mortgagee
will give prompt notice to Tenant of any action or proceeding brought against
Landlord and/or Mortgagee by reason of any claims covered by the foregoing
indemnity, together with copies of any documents served on Landlord and/or
Mortgagee in connection therewith, and Landlord and/or Mortgagee will not settle
any such claim without Tenant's written consent.
ARTICLE 21. SELF-HELP
- ----------------------
Section 21.1 Tenant covenants and agrees that if it at any time fails to
take any payments or perform any act which it is obligated to make or perform
under this Lease, then Landlord may, but will not be obligated to, after
Tenant's time to make any
<PAGE>
such payment or perform any such act as provided in this Lease has expired and
any required notice has been given, and without waiving or releasing Tenant from
any of its obligations under this Lease, make any such payment or perform any
such act in such manner and to such extent as is necessary and consistent with
Tenant's obligations hereunder. In exercising any such rights, Landlord may pay
or incur costs and expenses, including, without limitation, reasonable
attorneys' fees. Notwithstanding the foregoing, Landlord may make any such
payment or perform any such act before Tenant's time to do so (as provided in
Article 8) has expired, if payment or performance of the same is necessary or
required prior to the expiration of the applicable grace period for the
preservation or protection of the Property and/or Demised Premises.
Section 21.2 All sums so paid or incurred in connection with the
performance of any such act by Landlord, together with interest thereon from the
date that Landlord made such expenditure at the rate of five (5%) percent above
the rate which CoreStates Bank, N.A. announces as its so-called prime rate or
base rate, from time to time, or the maximum rate allowed by law, whichever is
less, will be deemed Additional Rent hereunder and, except as otherwise in this
Lease expressly provided, will be payable to Landlord on demand or, at the
option of Landlord, may be added to any Rent then due or thereafter becoming due
under this Lease.
ARTICLE 22. ESTOPPEL CERTIFICATE
- --------------------------------
Section 22.1 Tenant agrees that at any time and from time to time, within
ten (10) days of the receipt of written request by Landlord, it will execute,
acknowledge and deliver a statement in writing certifying (a) that this Lease is
unmodified and in full force and effect, or if there have been modifications
that the same is in full force and effect as modified and stating the
modification, (b) the dates to which the Base Rate, Additional Rent and other
charges have been paid and the amount of same, and (c) to the best knowledge of
the certifying party whether there are any defaults or rent abatements or
offsets claimed. Notwithstanding the foregoing, it is intended that any such
statement delivered pursuant to this Article may be relied upon by any
prospective purchaser or mortgagee or assignee of any mortgage of Landlord's
interest in the Demised Premises and/or Property and the statement will contain
such other information as is requested, and be in the form required, by such
purchaser, mortgagee or assignee.
Section 22.2 The failure of Tenant to execute, acknowledge and deliver to
Landlord a written instrument in accordance with the provisions of this Article
within the ten (10) day period above provided shall constitute an
acknowledgement by Tenant, which may be relied upon by any mortgagee or
prospective purchaser or mortgagee or assignee of any mortgage of Landlord's
interest in the Demised Premises and/or Property or of any interest therein,
of the matters set forth in Section 22.1 as well as such other facts and
conditions as shall have been requested to be certified, and shall constitute,
as to any person entitled to rely as aforesaid, a waiver or any defaults which
may exist prior to the date of such request. Notwithstanding the foregoing,
Tenant's failure to furnish such written instrument within the time period
provided herein after Landlord's request therefor, shall constitute a default
under this Lease.
ARTICLE 23. SUBORDINATION AND NON-DISTURBANCE
- ---------------------------------------------
Section 23.1 This Lease is and will at all times be subject and subordinate
to the lien of any mortgage(s) now or hereafter made on or affecting the
Property or any part thereof, and all renewals, modifications, consolidations,
replacements, or extensions thereof, irrespective of the time of recording such
mortgage(s). The provisions of this subordination shall be automatic and no
further instrument of subordination will be necessary, but in confirmation of
this subordination Tenant will, at Landlord's request, execute and deliver such
further instruments as may be required by the holder(s) of said mortgage(s).
Section 23.2 If any mortgagee or any other person claiming by or through
any mortgagee, or by or through any foreclosure proceeding or sale in lien of
foreclosure, succeeds to the rights of Landlord under this Lease, Tenant will,
at the request of such successor or at Landlord's request, attorn to and
recognize such successor as the landlord of Tenant under this Lease, and Tenant
will promptly execute, acknowledge and deliver at any time any instruments
requested by such person to evidence such attornment and/or confirm Tenant's
agreement
-1-
<PAGE>
to attorn. Upon such attornment, this Lease will continue as a direct lease from
such successor landlord to Tenant, upon and subject to all of the provisions of
this Lease for the remainder of the Term, except that the successor landlord
will not be:
(a) liable for any previous act or omission of Landlord under this
Lease;
(b) subject to any offset not expressly provided for in this Lease which
has theretofore accrued to Tenant against Landlord;
(c) bound by (i) any modification of this Lease after the date of such
mortgage, or (ii) any prepayment of more than one (1) month's Base Rent or
Additional Rent, unless same has been expressly approved in writing by the
holder of such mortgage through or by reason of which the successor landlord
shall have succeeded to the rights of Landlord under this Lease;
(d) bound by any security deposit which Tenant may have paid to any
prior landlord, unless such deposit is in an escrow fund available to mortgagee,
or actually received by mortgagee;
(e) bound by any provision in the Lease which obligates Landlord to
erect or complete any building or to perform any construction work or to make
any improvements to the Demised Premises or to expand or rehabilitate any
existing improvements or to restore any improvements following any casualty or
taking;
(f) bound by any notice of termination given by Landlord to Tenant
without such mortgagee's written consent thereto; or
(g) personally liable under the Lease and any mortgagee's liability
under the Lease shall be limited to the ownership interest of mortgagee in the
Demised Premises and/or the Property.
Tenant will further agree with such mortgagee that Tenant will not
voluntarily subordinate the Lease to any lien or encumbrance without such
mortgagee's prior written consent.
ARTICLE 24. NOTICES
- --------------------
Section 24.1 Except as expressly provided in this Lease to the contrary,
all notices, demands and requests (other than invoices for Base Rent or
Additional Rent) which are required to be given by either party to the other
will be in writing and will be sent by United States first class certified mail,
return receipt requested, addressed (a) to Landlord at its address set forth in
the Agreement of Lease, "Attention: Vice President - Asset Management", (b) to
Tenant at the Demised Premises, or (c) at such other place as either party may
from time to time designate in a written notice to the other party. Until Tenant
takes occupancy of the Demised Premises, notices to Tenant shall be at
Tenant's address as set forth in the Agreement of Lease.
Section 24.2 Notice is deemed to be given upon receipt, provided, however,
that in the event a party refuses to accept delivery of said certified mail, the
notice will nevertheless be deemed to be given upon the date of refusal to
accept delivery, and further provided that if the postal service is unable to
deliver said certified mail the notice will nevertheless be deemed to be given
as of the date of the postal service's second notice of attempted delivery.
Notwithstanding the above, a notice of change of address will not be effective
until received.
Section 24.3 Either party may, at its option, substitute for service by
United States first class certified mail, service by Federal Express or similar
overnight courier, provided that such courier obtains and makes available to its
customers written evidence of delivery. Notice given via such courier is deemed
to be given upon receipt or upon refusal to accept delivery, as applicable.
Notices may be given by a party or by an agent or attorney for a party on its
behalf.
ARTICLE 25. BROKER
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Section 25.1 Landlord and Tenant represent to each other that they dealt
with no broker in connection with this Lease other than the Broker identified in
the Agreement of Lease.
Section 25.2 Tenant agrees that if any claim should be made for commissions
by any broker by reason of any act of Tenant or its representatives, Tenant will
hold Landlord free and harmless from any and all loss, liabilities and expenses
in connection
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<PAGE>
therewith. Landlord will give prompt notice to Tenant after any such claim is
made by any broker. Tenant will have the right to defend such claim and Landlord
will not pay or settle such claim as long as Tenant is defending same.
Section 25.3 Landlord agrees that if any claims should be made for
commissions by any broker by reason of any act of Landlord or its
representatives, Landlord will hold Tenant free and harmless from any and all
loss, liabilities and expenses in connection therewith. Tenant will give prompt
notice to Landlord after any such claim is made by any such broker. Landlord
will have the right to defend such claim and Tenant will not pay or settle such
claim as long as Landlord is defending same.
ARTICLE 26. SIGNS
- -----------------
Section 26.1 Tenant will comply with Landlord's criteria governing tenant
signage. Tenant will not place any signs on the land, or the exterior or
interior of the Demised Premises, or in any window whereby such sign would be
visible from the outside of the building in which the Demised Premises is
located, except as agreed to in writing by Landlord. Tenant will obtain, at its
sole cost and expense, any and all permits, licenses or approvals which may be
necessary in connection with its sign or signs.
ARTICLE 27. HOLDOVER
- --------------------
Section 27.1 If Tenant continues in occupancy of the Demised Premises
after the expiration or sooner termination of the Term, such occupancy will be
deemed to be an event of default by Tenant (without the necessity of any
notice). Tenant's occupancy will be deemed a month-to-month tenancy subject to
the terms of the Lease and Tenant will pay twice the Base Rent in effect upon
the expiration of the Term together with twice the Additional Rent herein
provided. The provisions of this Article will not be construed (a) to relieve
Tenant from liability to Landlord for damages resulting from any such holding
over, or (b) as Landlord's consent for Tenant to hold over.
ARTICLE 28. LIMITATION OF LIABILITY
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Section 28.1 Notwithstanding any contrary provision contained in this
Lease, neither Landlord, nor any of its officers, directors, principals,
partners, agents or employees, will be responsible or liable to Tenant:
(a) for any damage or injury resulting from acts or omissions of persons
occupying or using any other part of the Property or for any injury or damage
resulting from bursting, stoppage or leakage of water, sprinkler, gas, sewer or
steam pipes; or
(b) for any consequential damages or lost profits, under any
circumstances whatsoever; or
(c) with respect to any of the provisions of this Lease.
Notwithstanding the provisions of this Section, if Landlord is in
default with respect to its obligations hereunder and is thereby or otherwise
determined to be liable to Tenant (whether as a result of negligence, strict
liability, breach of warranty or any other theory or concept of liability),
Landlord will be liable for monetary damages only and as of the date such cause
of action occurs, following a final judgment establishing such default or
liability. In any such event, Tenant will look solely to the equity of Landlord
in the Property for the satisfaction of Tenant's remedies or Landlord's
liability and it is expressly understood and agreed that Landlord's liability
under the terms, covenants, warranties and obligations of this Lease or
otherwise, will in no event exceed the loss of its equity in the Property, or
extend personally to any principal, partner or officer, director, agent or
employee, as applicable, of Landlord.
ARTICLE 29. Intentionally omitted
- ----------
ARTICLE 30. RULES AND REGULATIONS
- ---------------------------------
Section 30.1 Tenant, its agents, employees, contractors, licensees and
invitees, will at all times abide by and observe the Rules and Regulations
attached hereto as Exhibit E. In addition, Tenant, its agents, employees,
contractors, licensees and invitees will abide by and observe such modified or
new rules or regulations as may be promulgated from time to time by Landlord for
the operation and maintenance of the Property, provided, however, that a copy of
same are sent to Tenant and that the same are in conformity with common practice
and usage in similar properties and are not inconsistent with the provisions of
this Lease. Nothing contained in this Lease will be construed to impose upon
Landlord any duty or obligation to enforce such rules and regulations, or the
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<PAGE>
terms, conditions or covenants contained in any other lease, as against any
other tenant, and Landlord will not be liable to Tenant for violation of the
same by any other tenant, its employees, agents, contractors, licensees or
invitees. If there is any inconsistency between this Lease and the Rules and
Regulations set forth in Exhibit D, the terms of this Lease will govern.
ARTICLE 31. REGULATION OR COMMON FACILITIES
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Section 31.1 The Common Facilities are at all times subject to the
exclusive control and management of Landlord. Landlord will have the right to
change the areas, locations and arrangements of parking areas, roads and other
Common Facilities (provided that Tenant will have reasonable access to the
Demised Premises); to enter into, modify and terminate easements and other
agreements pertaining to the use and maintenance of the parking areas and other
Common Facilities; to restrict parking by tenants, their officers, agents, and
employees to employee parking areas; to construct parking areas and facilities;
to establish and change the level of parking surfaces; to close all or any
portion of the parking areas or other Common Facilities to such extent as may,
in the opinion of Landlord, be necessary to prevent a dedication thereof or the
accrual of any rights to any person or to the public therein; to close
temporarily any or all portions of the said areas or facilities to discourage
non-tenant parking; and to do and perform such other acts in and to the Common
Facilities as, in the exercise of good business judgment, Landlord may determine
to be advisable.
Section 31.2 Landlord reserves any and all rights not expressly granted to
Tenant hereunder, including, but not limited to, the following rights which are
reserved to Landlord for its purpose in operating the Property: (a) the
exclusive right to the use of the name of the Property, except that Tenant may
use the name of the Property as its business address and for no other purpose;
(b) the right to change the name or address of the Property, without incurring
any liability to Tenant for so doing; (c) the right to install and maintain a
sign or signs on the Property or on the Common Facilities; (d) the exclusive
right to use or dispose of the use of the roof of the building in which the
Demised Premises are located; and the right to grant to anyone the right to
conduct any particular business or undertaking on the Property.
ARTICLE 32. SHORT FORM LEASE
- ----------------------------
Section 32.1 Tenant will, at the request of Landlord, execute duplicate
originals of an instrument in recordable form which will constitute a short form
of lease, setting forth a description of the Demised Premises, the Term of this
Lease and any other portions hereof, except the rent provisions, that either
party may reasonably request.
ARTICLE 33. CAPTIONS
- --------------------
Section 33.1 The captions in this Lease are for convenience and reference
only, in no way define, limit or describe the scope or intent of this Lease and
are in no way to affect the interpretation or construction of this Lease.
ARTICLE 34. APPLICABILITY TO SUCCESSORS AND ASSIGNS
- ---------------------------------------------------
Section 34.1 The provisions of this Lease will be binding upon and inure
to the benefit of Landlord and Tenant, and their respective heirs, successors,
legal representatives and assigns, but nothing herein will grant to Tenant the
right to assign this Lease other than pursuant to the provisions hereof. It is
understood that the term "Landlord" as used in this Lease means only the owner,
a mortgagee in possession, or a ground lessee of the Demised Premises, so that
in the event of any sale of the Demised Premises or the building in which the
Demised Premises is located or of any ground lease thereof, or if a mortgagee
takes possession of the Demised Premises or the building in which the Demised
Premises is located, the Landlord named herein will be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord hereunder
accruing thereafter, and it will be deemed, without further agreement, that the
purchaser, the ground lessee of the Demised Premises or the building in which
the Demised Premises is located, or the mortgagee in possession has assumed and
agreed to carry out any and all covenants and obligations of
<PAGE>
landlord hereunder accruing from and after the date of transfer, lease or
possession, as applicable.
ARTICLE 35. ENTIRE AGREEMENT; MODIFICATION
- ------------------------------------------
Section 35.1 This Lease (a) constitutes the entire and only agreement
between the parties relating to the subject matter hereof, (b) cancels and
supersedes any prior agreements or discussions between the parties or their
representatives, and (c) may not be modified except by an instrument in writing
which is signed by both parties.
ARTICLE 36. MISCELLANEOUS
- --------------------------
Section 36.1 The terms, covenants, conditions, provisions and agreements
of this Lease are deemed to be severable. If any clause or provision herein
contained is adjudged to be invalid or unenforceable by a court of competent
jurisdiction or by operation of any applicable law or regulation, it will not
affect the validity of any other clause or provision herein, but such other
clauses or provisions will remain in full force and effect. In addition,
Landlord may pursue the relief or remedy sought in any invalid clause, by
conforming such clause with the provisions of the statute or regulation as if
the particular provisions of the applicable statute or regulation were set forth
herein at length.
Section 36.2 This Lease is not to be strictly construed against either
Landlord or Tenant. No remedy or election given by any provision in this Lease
is deemed inclusive unless so indicated, but each, wherever possible, is
cumulative with all other remedies in law or at equity.
Section 36.3 All obligations of Tenant which by their nature involve
performance in any particular, or which, cannot be ascertained to have been
fully performed until after the end of the Term, will survive the expiration or
sooner termination of this Lease.
Section 36.4 Intentionally omitted.
Section 36.5 This Lease is to be interpreted, governed by and enforced in
accordance with the substantive law of the State in which the Property is
located without regard to choice of laws concepts.
ARTICLE 37. OUTSIDE STORAGE
- ---------------------------
Section 37.1 Storage of goods, equipment, vehicles or materials of any
kind outside the Demised Premises is expressly prohibited without the prior
written consent of Landlord, except for employee and visitor parking which shall
be permitted only in designated parking area. Tenant shall be permitted
unreserved parking for sixty (60) vehicles, which may be relocated by Landlord.
ARTICLE 38. RIGHT TO RELOCATE
- -----------------------------
Section 38.1 From time to time or at any time during the Term, and on not
less than thirty (30) days notice to Tenant, Landlord will have the right to
move Tenant out of the Demised Premises and into substantially similar space of
at least equal area, in the building in which the Demised Premises are located,
or a comparable building owned by Landlord, or any of its affiliates, in the
Property. In such event Landlord will remove, relocate and reinstall Tenant's
equipment, furniture and fixtures and redecorate the new space similar to the
old space, all of which shall be done at Landlord's sole cost and expense,
whereupon this Lease shall continue in full force and effect and shall apply to
the new space as though this Lease had originally been for such new space for
the balance of the Term.
Section 38.2 Provided no default exists hereunder and subject to the same
rights granted to Tenants under leases for space in the building prior to the
date hereof, at the end of the third lease year and upon written notice to
Landlord, Tenant shall have the right to move out of the Demised Premises and
into space of at least 9,000 square feet at Tinicum Industrial Park, at Tenant's
sole cost and expense, whereupon Tenant shall pay no penalty for the unamortized
portion of Tenant's improvements, and Tenant and Landlord shall enter into a new
Agreement of Lease.
ARTICLE 39. REMOVAL OF TRASH
- ----------------------------
Section 39.1 If the Agreement of Lease provides that Landlord shall remove
trash, Tenant shall place all trash in dumpsters outside the building in which
the Demised Premises are located at designated areas approved by Landlord in
writing. Landlord shall remove trash at such regular intervals as are necessary
to keep trash from overflowing the dumpsters.
Section 39.2 If the Agreement of Lease provides that Tenant shall remove
trash, Tenant shall arrange to dispose of same outside the Property in
compliance with all applicable laws and regulation and at
-1:
<PAGE>
such regular intervals as are necessary to keep trash from overflowing the
dumpsters designated for Tenant's use.
Section 39.3 If Tenant utilizes dumpsters on the Property other than the
dumpsters approved by Landlord for Tenant's use, Tenant will be deemed to have
leased same from Landlord at the then-current fair market rental value thereof
and shall pay such rental value to Landlord on demand as Additional Rent.
ARTICLE 40. RIGHT OF FIRST OFFER
- --------------------------------
Section 40.1 Provided no default exists hereunder and subject to the same
rights granted to tenants under leases for space in the Building prior to the
date hereof, Landlord shall notify Tenant in writing promptly after Landlord
becomes aware that adjacent space in the Building will become available for
lease of the date of availability of such adjacent space, together with the
location thereof and the terms and conditions on which Landlord proposes to
lease such adjacent space. Within five (5) business days after Tenant's receipt
of such notice, Tenant shall advise Landlord in writing whether it intends to
lease such adjacent space and Tenant's failure to so notify Landlord shall be
deemed a waiver of Tenant's right to lease such adjacent space at such time.
END OF GENERAL TERMS OF LEASE
2-
<PAGE>
EXHIBIT B
LEASE COMMENCEMENT DATE AGREEMENT
---------------------------------
THIS AGREEMENT made this ___________________ day of _______________ 199__ by
and between:
________________________________________________________________________
("Landlord") and ____________________________________________________
("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into an Agreement of Lease dated
________________________ ("Lease") setting forth the terms of occupancy by
Tenant of all or a portion of a building located at
_______________________________________________________________________________,
Pennsylvania; and
WHEREAS, the Lease is for an initial term of ______ year(s) and the
Commencement Date of the initial term of the Lease has been determined in
accordance with the provisions of Article 3 of the Lease.
NOW, THEREFORE, it is agreed and confirmed by the parties as follows:
1. The Commencement Date of the initial term of the Lease is
_______________________________ and the termination date of the initial term of
the Lease is ______________________________.
2. The date on which the first payment of Base Rent and Additional Rent is
due from Tenant is ____________________.
3. This agreement is executed by the parties for the purpose of providing a
record of the commencement, termination and Base Rent commencement dates of the
Lease.
IN WITNESS WHEREOF, the parties, by their duly authorized representatives,
have executed this instrument as of the day and year first above written.
Attest/Witness: Landlord
By:
- ---------------------------- ----------------------------
Tenant
By:
- ---------------------------- ----------------------------
<PAGE>
EXHIBIT C
SCOPE OF TENANT IMPROVEMENT WORK
--------------------------------
The following improvements shall be completed by Landlord at Landlord's sole
cost and expense:
1. Floor covering, colors, designs and specifications per carpet, floor tile
and paste to be as chosen by Tenant and approved by Landlord among the
samples provided by Landlord.
2. Partitions - demising partitions to be metal studs with 1/2" drywall, fire
rated where required, up to under side of suspended ceiling or structural
slab according to plan.
3. Painting and staining interior wall surfaces of gypsum board to receive one
prime coat and one finish coat of latex finish, color to be selected by
Tenant from building standard color chart.
Exposed interior ferrous metal surfaces including piping, ductwork and
mechanical equipment to receive one coat of enamel primer and one finish
coat of enamel.
Metal doors, door but, and other metal surfaces not having shop finish to
receive one prime coat and one finish coat.
All wood doors to be finished with one coat sanding sealer and one coat
clear polyurethane.
4. Doors - All interior doors to be hollow core wood veneer 3'0" by 6'8".
Emergency exit doors as required by code.
5. Finish hardware to be medium duty commercial type manufacturer models to be
approved by Landlord.
<PAGE>
All interior doors to be provided with key-access hardware,
Tenant entrance door to be provided with heavy duty combination lock set and
door closure.
6. Ceiling to be white 2' x 4' x 5/8" acoustical ceiling tiles and exposed
white grid system.
Exceptions to the ceiling height will be made to accommodate piping,
mechanical ducts and shafts, and other obstructions located above the
ceiling.
7. Perimeter window blinds to be horizontal narrow slat window blinds per
Landlord's specifications.
8. Electrical systems - Demised premises to be provided with electrical service
in accordance with applicable codes.
Demised Premises to be serviced by designated meter from which Tenant will
receive a monthly electric bill.
All duplex outlets and switches in accordance with the enclosed floor plan.
9. Lighting Fixtures - Standard fixtures to be 2' x 4' with four forth watt
fluorescent lamps in a quantity of 1 fixture per 100 square feet.
Emergency egress lighting to be provided by the use of standard fixtures by
emergency battery back-up power as required by code.
10. Communication - Tenant to be responsible for providing and installing, at
its expense, communication systems including, but not limited to, telephone,
fiber optics, computer, intercom system and audio/visual system. Wiring
installation above finished ceiling shall be approved for plenum
installation. Tenant shall provide required areas within Demised Premises
for communication systems equipment.
Access to the Demised Premises through the building's core by servicing
utilities shall be coordinated with and approved by Landlord.
11. Landlord shall turn on the existing water fountain located in Tenant's
lounge area.
One stainless steel sink shall be provided in Tenant break area (counter top
and base cabinet included).
12. HVAC - Demised Premises to be provided with a variable air volume cooling
system at a rate of one ton per 400 square feet. Tenant acknowledges that
the training area HVAC system is also sized at one ton per 400 square feet,
and three individually switch ceiling fans shall be used to recirculate the
existing air flow throughout the training center.
13. Fire Protection - The building sprinkler has been designed in accordance
with applicable building codes. Changes in the sprinkler system to
accommodate the Tenant's equipment in the training room will be completed by
Landlord prior to Tenant's occupancy at Landlord's sole cost and expense.
Any future additional requirements per sprinkler system service (adds,
relocates, deletions) made necessary by the Tenant's usage of the Demised
Premises will be at Tenant's cost.
14. Heat and smoke detection systems, chemical dry fire extinguishers, or any
other system required as a result of Tenant's specific use will be at the
Tenant's cost.
15. Identification - Tenant identification to be provided by Landlord at
Tenant's cost on main building entrance directory, street sign directory,
lobby directory, as well as entrance door to Demised Premises subject to
approval by Landlord.
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1. Tenant will not and will not permit its employees, agents, invitees or
licensees to: obstruct, in any way, the fire exits or equipment, sidewalks,
entry passages, corridors, halls, stairways or elevators of the Building, or use
the same in any way other than as a means of passage to and from the Demised
Premises; bring in, store, test or use any materials in the Building which could
cause a fire or an explosion or produce any fumes or vapor; smoke in any
elevator, stairwell or any designated "no smoking" area; throw substances of any
kind out of windows or doors, or down the stairs, halls or passages of the
Building; sit on or place anything upon the window sills; or clean the windows.
2. Waterclosets and urinals may not be used for any purpose other than those for
which they were constructed and no sweepings, rubbish, ashes, newspaper or any
other substances of any kind will be thrown into them. Waste and excessive or
unusual use of water is prohibited.
3. The windows, doors, partitions and lights which reflect or admit light into
the halls or other places of the Building will not be obstructed. NO SIGNS,
ADVERTISEMENTS OR NOTICES WILL BE INSCRIBED, PAINTED, AFFIXED OR DISPLAYED IN,
ON, UPON OR BEHIND ANY WINDOWS, except as may bs required by law or agreed upon
in writing by Landlord. Except as expressly provided in the Lease, no sign,
advertisement or notice will be inscribed, painted or affixed on any doors,
partitions or other part of the inside or outside of the Building, without the
prior written consent of Landlord.
4. No contract of any kind with any supplier of towels, water, ice, toilet
articles, waxing, rug shampooing, venetian blind washing, furniture polishing,
lamp servicing, cleaning of electrical fixtures, removal of waste paper, rubbish
or garbage, or other like service will be entered into by Tenant nor will any
vending machine of any kind be installed in the Demised Premises, without the
prior written consent of landlord.
5. When electric wiring of any kind is introduced, it will be done only by
contractors
<PAGE>
approved by Landlord and must be connected as approved by Landlord. No stringing
or cutting of wires will be allowed.
6. All freight, including furniture and equipment, brought into or removed from
the Building by Tenant and the time of moving the same in and out of the
Building, will be done under the supervision of Landlord. Landlord will not be
responsible for loss of or damage to any such equipment or freight from any
cause and any damage done to the Building by moving or maintaining any such
equipment or freight will be repaired at the expense of the Tenant. Landlord
reserves the right to inspect all freight to be brought into the Building and to
exclude from the Building all freight which violates any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
7. Landlord has the right to approve or prescribe the weight, size and position
of all safes and other bulky or heavy equipment or articles. All safes or other
heavy equipment or articles will stand on a base of such size as is designated
by Landlord. No machinery of any kind or articles of unusual size or weight will
be allowed in the Building without the prior written consent of Landlord.
Business machines and mechanical equipment will be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Landlord's judgment, to
absorb and prevent vibration, noise and annoyance to other tenants.
8. No additional or different lock or locks will be placed by Tenant on any door
without the prior written consent of Landlord, which shall not be unreasonably
withheld. For lock installed by Landlord, two keys will initially be furnished
to Tenant by Landlord and two additional keys will be supplied to Tenant by
Landlord upon request, without charge. Any additional keys by Tenant will be
paid for by Tenant. Tenant, its agents and employees, will not have any
duplicate key made. Any and all keys to doors and washrooms will be returned to
Landlord on or before the termination of the Lease. In the event of a loss of
any keys Tenant will pay Landlord the cost thereof and, if applicable, the costs
of replacing the locks related thereto.
9. Except as is expressly provided in the Lease to the contrary, Tenant will not
employ any person or persons for the purpose of cleaning the Demised Premises
without the prior written consent of Landlord. Landlord will not be responsible
to Tenant for any loss of property from the Demised Premises, or for any damage
done to the Demised Premises or the effects of Tenant, by cleaners employed by
Tenant or any of its employees, or by any other person or any other cause
however occurring.
10. No bicycles, vehicles or animals of any kind will be brought into or kept in
or about the Demised Premises other than in areas which are specifically
designated for such purpose, if any.
11. The requirements of Tenant will be attended to only upon application at the
office of Landlord. Employees of Landlord will not perform, or be requested by
Tenant to perform, any work for Tenant or do anything outside of their regular
duties, unless under special instructions from Landlord.
12. The Demised Premises will not be used for lodging or sleeping purposes and
cooking therein is prohibited. Tenant will not use the Demised Premises or
permit the Demised Premises to be used for the sale of food or beverages.
<PAGE>
13. Tenant will not: conduct, or permit any other person to conduct, any
auction upon the Demised Premises; manufacture or store goods, wares or
merchandise upon the Demised Premises, without the prior written approval of
Landlord, except the storage of usual supplies and inventory to be used by
Tenant in the conduct of its business; permit the Demised Premises to be used
for gambling; make or permit to be made any unusual noises or any musical
instrument, radio, television or recorded or wired music to be played in such a
manner as to disturb or annoy other tenants; or permit any unusual odors to be
produced upon the Demised Premises.
14. No awning or other projections will be attached to the outside walls of the
Building. No curtains, blinds, shades or screens will be attached to or hung in,
or used in connection with, any window or door of the Demised Premises, without
the prior written consent of Landlord and any such curtains, blinds and shades
must be of a quality, type, design and color, and attached in a manner, approved
by Landlord.
15. Canvassing, soliciting and peddling in the Building are prohibited, and
Tenant will cooperate to prevent the same.
16. All deliveries and loading and unloading of goods or freight will be done in
the areas and through the entrances designated for such purposes by Landlord.
Timing will be reviewed with Landlord and mutually agreed upon by Landlord and
Tenant. Neither Tenant nor others will use any hand trucks or similar moving
devices except those equipped with rubber tires and side guards. No hand trucks
or similar moving devices will be allowed in passenger elevators.
17. Tenant will have the right in common with Landlord and other tenants of the
Building and their employees and invitees to use the parking area(s) and/or
parking garage, if any, provided by Landlord for the parking of passenger
automobiles, other than parking spaces specifically identified as allocated to
others by Landlord. Landlord may issue parking permits (which Tenant will
require all of its employees to display in or on their vehicles), install a gate
system or impose any other system Landlord deems necessary for the use of the
parking area(s). Tenant and Tenant's employees will park their vehicles only in
those portions of the parking area designated for that purpose by Landlord.
TENANT AGREES THAT IT AND ITS EMPLOYEES AND INVITEES WILL NOT PARK THEIR
AUTOMOBILES IN PARKING SPACES ALLOCATED FOR VISITORS OR RESERVED TO OTHERS BY
LANDLORD AND WILL COMPLY WITH SUCH RULES AND REGULATIONS FOR USE OF THE
PARKING AREA AS LANDLORD MAY FROM TIME TO TIME PRESCRIBE. VIOLATION OF THE
REGULATION MAY RESULT IN VEHICLE(S) BEING TOWED AT THE EXPENSE OF THE
OWNER/OPERATOR OF SUCH VEHICLE(S). Landlord is not responsible for any damage
to or theft of any vehicle in the parking area(s) and will not be required to
keep parking spaces clear of unauthorized vehicles or to otherwise supervise
the use of the parking area(s). Landlord reserves the right to change any
existing or future parking areas, roads or driveways, to make any repairs or
alterations deemed necessary to any parking areas, roads and/or driveways and
to temporarily revoke or modify the parking rights granted to Tenant
hereunder.
18. Before closing and leaving the Demised Premises, Tenant will ensure that all
entrance doors have been locked.
19. Landlord has the right to prohibit any advertising by Tenant which in
Landlord's reasonable opinion tends to impair the reputation of the Building
(and/or the park in which the Building is located) or its desirability as a
building for offices, and upon written notice from Landlord, Tenant will refrain
from or discontinue such advertising.
-2-
<PAGE>
EXHIBIT E
OPERATING EXPENSES
- ------------------
1. During the Term of this Lease Tenant shall pay to Landlord Tenant's Pro
Rata Share of "Operating Expenses" and "Real Estate Taxes" as defined below.
2. (a) "Operating Expenses" are defined as any and all costs and expenses
incurred by Landlord relating or pertaining to the Property and deemed by
Landlord to be reasonable, appropriate and for the best interests of the
Property, including, but not limited to, the cost of: (i) gas, oil, electricity,
steam, water and other utilities (excluding tenants' electricity); (ii)
installing, operating, maintaining, repairing and replacing any part or parts
of, and/or providing Common Facilities, utilities, services, lighting,
mechanical and electrical equipment (including heating, ventilation and air-
conditioning equipment) and similar items which are or will be utilized to
provide services and utilities; (iii) maintenance, repair, lighting, cleaning,
painting, stripping, decorating, policing, management, superintendence and
security; (iv) insurance of any nature maintained by Landlord; (v) removal of
snow, ice and debris, regulation of traffic, inspection of machinery and
equipment and personal property taxes and other charges incurred in connection
with such machinery and equipment; (vi) replacement of paving, curbs, walkways,
planters and maintaining any lawns and/or plantings; (vii) management fee; and
(viii) any and all other expenses paid by Landlord in the operation, maintenance
and repair of the Property except as otherwise expressly excluded herein.
(b) Operating Expenses will not include: (i) any expenses for which
Landlord is reimbursed or indemnified (either by an insurer, condemnor, tenant
or otherwise); (ii) interest or amortization payments on any mortgage or
mortgages, and rental under any ground or underlying lease or leases; or (iii)
the cost of any work or services performed for or facilities furnished to a
tenant at the tenant's cost. Operating Expenses will include the cost of any
capital improvement made to the Property after the date hereof which reduces
other Operating Expenses of the Property or is required under a law or
regulation that was not applicable to the Property at the time it was
constructed, the cost thereof to be amortized over a reasonable period (not to
exceed ten (10) years) together with interest on the unamortized balance at the
rate being paid by Landlord for funds borrowed for the purposes of constructing
said capital improvements (or
<PAGE>
the rate at which Landlord then customarily borrows funds for similar
expenditures if no funds were so borrowed). Operating Expenses will also include
capital expenses necessitated by casualties to the extent not covered by
insurance, including any deductible feature of any insurance carried by Landlord
with respect thereto.
(c) "Real Estate Taxes" are defined as the annual real estate taxes,
payments "in lieu" of real estate taxes, assessments (whether general or special
and including all assessments for public improvements or benefits) or other
rents, rates and charges, excises, levies, license fees, permit fees, inspection
fees and other authorization fees and charges, in each case whether general or
special, which are levied or assessed against the Property. Real Estate Taxes
will not include income, franchise, inheritance or foreign ownership or foreign
control taxes (but Tenant will at all times be responsible for any taxes levied,
assessed or imposed upon its property), provided, however, that if at any time
after the date of this Lease the method of taxation of real estate prevailing at
the date of this lease is altered (other than a change from "in lieu" payment to
ad valorem assessment) and there is levied, assessed and imposed in addition
and/or in substitution, in whole or in part, for the present general real estate
taxes, a corporation franchise tax or any other tax, however denominated and by
whatever taxing authority (including, but not limited to, any municipal, county,
state or federal authority) which is measured by or based on whole or in part
upon the Demised Premises, or the value thereof, or the revenues or rents
derived therefrom, and which is imposed upon Landlord, then all such taxes, or
the part thereof so measured or based, will be deemed to be included within the
phrase "Real Estate Taxes" used herein but only to the extent to which such
taxes are substituted for the present general real estate taxes.
BILLING AND PAYMENT
- -------------------
The amounts required to be paid By Tenant pursuant hereto will be paid by
Tenant in monthly installments in such amounts as are estimated by Landlord from
time to time (which may be revised from time to time as Landlord may deem
necessary). Within a reasonable time after the end of Landlord's fiscal year,
Landlord shall deliver to Tenant a statement of Operating Expenses and Real
Estate Taxes for such fiscal year and the monthly installments to be paid or
payable will be adjusted between Landlord and Tenant, Tenant agreeing to pay to
Landlord within thirty (30) days of receipt of such statement, and Landlord
agreeing to credit to Tenant (or to pay to Tenant if the Term of the Lease has
ended), within thirty (30) days of receipt of such statement, as applicable,
such amount as may be necessary to effect adjustment. Failure of Landlord to
provide the statement called for hereunder within the time prescribed will not
relieve Tenant from its obligations hereunder.
APPORTIONMENT; SURVIVAL
- -----------------------
Any Operating Expenses and Real Estate Taxes, whether or not a lien
upon the Property, which accrue on an annual basis but relate in part to a
period subsequent to the Term, will be apportioned between Landlord and Tenant
as of the end of the Term based upon the final bill for the applicable year; it
being intended that Tenant will pay its pro rata share of only that portion of
the Operating Expenses and Real Estate Taxes as is allocable to the Term of this
Lease. Tenant's obligation to pay Operating Expenses and Real Estate Taxes, as
provided above, accruing during the Term, will survive the expiration or earlier
termination of this Lease.
<PAGE>
EXHIBIT F
OPTION TERM
-----------
Provided Tenant is not and has not been in Default under the terms of this
Lease, Tenant shall have the right and option, exercisable by giving Landlord
prior written notice thereof not less than six (6) months in advance of the
expiration of the Term, to extend the Term for two (2) additional periods of one
(1) year. In the event Tenant exercises such option, all other terms of the
Lease shall remain the same except that Base Rent shall increase by two (2)
percent of the preceding lease year.
<PAGE>
EXHIBIT G
RIDER TO GENERAL TERMS OF LEASE
BETWEEN
TINICUM PROPERTIES ASSOCIATES LIMITED ("LANDLORD")
AND
WORLD AIRWAYS, INC. ("TENANT")
THE FOLLOWING SECTION NUMBERS REFER TO THE SECTIONS IN THE "GENERAL TERMS OF
LEASE":
Section 3.6 Add "Notwithstanding anything to the contrary herein contained,
in the event possession of the Demised Premises is not delivered to Tenant on or
before the later of a) May 15, 1993, or b) sixty (60) days after Landlord's
execution of this Lease, for any reason other than a Tenant Delay, Tenant shall
receive a credit of one day's base rent for each day after such time that
possession of the Demised Premises is not delivered to Tenant. If Tenant takes
possession of a portion of the Demised Premises, such credit shall be prorated
based upon the ratio which the number of square feet not delivered to Tenant for
occupancy bears to the number of square feet in the Demised Premises."
Section 4.5 Change five (5) calendar days to ten (10; calendar days. Change
five (5%) percent to two (2%) percent.
Section 6.1 Paragraph (a). Change "Heat..." to "HVAC to maintain a
reasonable temperature of an office environment, hot and cold water,,.."
Section 6.2 Notwithstanding the foregoing, in the event Landlord fails to
supply any services or utilities which Landlord is obligated to supply hereunder
(not including electric and HVAC service for which Tenant is solely
responsible), Rent shall abate until such services or utilities are restored if:
a. such failure continues for ten (10) business days after Landlord's
receipt of written notice of such failure; and
b. Landlord fails to promptly take such action as is reasonable under
the circumstances to restore such services or utilities and fails to continue to
pursue same with due diligence; and
c. the lack of such services or utilities is reasonably disruptive to
Tenant's ability to perform its business.
Section 7.3 Change "five (5%) percent" to "two (2%) percent."
Section 8.1 Paragraph (a) (i). Change "five (5) days" to "ten (10) days."
Section 11.2 In the second sentence, change "sole and unreviewable" to
"reasonable."
Section 17.1 In the second sentence, change "a reasonable time" to "thirty
(30) days."
<PAGE>
Section 18.4 Change "one hundred eighty (180) days" to "one hundred twenty
(120) days." Change "two hundred ten (210) days" to "one hundred fifty (150)
days."
Section 18.5 Change "two hundred ten (210) days" to "one hundred fifty
(150) days."
Section 20.1 Delete the word "solely" from the 6th line.
Section 21.2 Change "five (5%) percent" to "two (2%) percent."
Section 22.1 Change "ten (10) days" to "twenty (20) days."
Section 22.2 Change "ten (10) days" to "twenty (20) days." Add "Tenant will
have no obligation to provide an estoppel certificate more than four (4) times
per year, but will make a reasonable effort to provide such additional
information in the event it is required more than four (4) times per year."
Exhibit E Operating Expenses shall not include operating and capital costs
which are related to rail usage, crane usage and other uses which are obviously
of an industrial nature and of which Tenant has no benefit or use due to
Tenant's office lease. Tenant shall have the right at Landlord's principal place
of business, on reasonable notice to Landlord, to inspect Landlord's books and
records with respect to any operating expense statement delivered to Tenant.
Section 23.2 Delete Paragraphs (c), (d) and (e)
<PAGE>
EXHIBIT B
LEASE COMMENCEMENT DATE AGREEMENT
---------------------------------
THIS AGREEMENT made this 30th day of June, 1993 by and between Tinicum
Properties Associates Limited Partnership ("Landlord") and World Airways, Inc.
(A Delaware Corporation) ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into an Agreement of Lease dated March
30, 1993 ("Lease") setting forth the terms of occupancy by Tenant of all or a
portion of a building located at 15,000 American Way, Tinicum Industrial Park 10
Industrial Highway, Mail Stop #19, Lester, PA 19113, and
WHEREAS, the Lease is for an initial term of four (4) years and the
Commencement Date of the initial term of the Lease has been determined in
accordance with the provisions of Article 3 of the Lease.
NOW, THEREFORE, it is agreed and confirmed by the parties as follows:
1. The Commencement Date of the initial term of the Lease is 6/1/93 and the
termination date of the initial term of the Lease is 5/31/97.
2. The date on which the first payment of Base Rent and Additional Rent is
due from Tenant is 6/1/93.
3. This agreement is executed by the parties for the purpose of providing a
record of the commencement, termination and Base Rent commencement dates of the
Lease.
IN WITNESS THEREOF, the parties, by their duly authorized representatives,
have executed this instrument as of the day and year first above written.
Landlord:
TINICUM PROPERTIES ASSOCIATES
LIMITED PARTNERSHIP, A Pennsylvania
Limited Partnership
By: Tinicum Industrial Park, Inc., General Partner
Attest: By:
----------------------------- -----------------------------
Tenant:
WORLD AIRWAYS, INC. A
DELAWARE CORPORATION)
Attest: By:
----------------------------- -----------------------------
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT, made as of the 9th day of July, 1993, by and between
TINICUM PROPERTIES ASSOCIATES LIMITED PARTNERSHIP, a Pennsylvania limited
Partnership ("Landlord"), and WORLD AIRWAYS, INC. ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease dated March 30, 1993
covering 5,866 sf located in "E" Building, 15,000 American Way, at Tinicum
Industrial Park, 10 Industrial Highway, Lester, Pennsylvania, as more fully
described in the Lease (the "Demised Premises"); and
WHEREAS, Landlord and Tenant desire to amend certain provisions of the
Lease.
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants contained herein and in the Lease, and intending to be legally
bound hereby agree that:
1. Capitalized terms used in this First Amendment shall have the meanings
ascribed to them in the Lease.
2. An additional 700 sf of space is added, as shown on Exhibit A-1, upon
substantial completion of tenant improvements at the same rent and additional
rent charges per square foot as the original space, with lease termination being
the same as the original space and annual rental adjustment per the Terms of the
Original Lease and Commencement Date Agreement executed 6/30/93.
3. Scope of tenant improvements include those listed on Exhibit "C" to this
First Amendment with installation consistent with Exhibit "C" of the original
space. (Attached)
4. Except as expressly modified herein, the terms and conditions of the
Lease shall remain unchanged and in full force and effect and Tenant agrees that
it has no charge or offset with respect to rent due or to become due under the
terms of the Lease.
5. The First Amendment to Lease shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
the day and year first above written.
LANDLORD:
TINICUM PROPERTIES ASSOCIATES
LIMITED PARTNERSHIP, a
Pennsylvania
Limited Partnership
By: Tinicum Industrial Park Inc.,
General Partner
Attest: By:
---------------------------- -----------------------------
TENANT:
WORLD AIRWAYS, INC.
Attest: By:
----------------------------- -----------------------------
<PAGE>
EXHIBIT "C"
TO FIRST AMENDMENT BETWEEN WORLD AIRWAYS, INC.
AND
TINICUM PROPERTIES ASSOCIATES LIMITED PARTNERSHIP
SCOPE OF WORK
- -------------
1. Metal stud and drywall partitions
2. One new door frame and hardware
3. Suspended ceiling repair
4. Mini blinds
5. Painting
6. Electrical
7. Carpet and vinyl base
8. Fire sprinklers to Code
Common Hall
- -----------
1. Painting
2. Electrical
A. One exit light
B. Three 1 X 4 light fixtures
HVAC
- ----
1. Split System
<PAGE>
EXHIBIT C
SCOPE OF TENANT IMPROVEMENT WORK
--------------------------------
The following improvements shall be completed by Landlord at Landlord's sole
cost and expense:
1. Floor covering, colors, designs and specifications per carpet, floor tile
and paste to be as chosen by Tenant and approved by Landlord among the
samples provided by Landlord.
2. Partitions - demising partitions to be metal studs with 1/2" drywall, fire
rated where required, up to under side of suspended ceiling or structural
slab according to plan.
3. Painting and staining interior wall surfaces of gypsum board to receive one
prime coat and one finish coat of latex finish, color to be selected by
Tenant from building standard color chart.
Exposed interior ferrous metal surfaces including piping, ductwork and
mechanical equipment to receive one coat of enamel primer and one finish
coat of enamel.
Metal doors, door but, and other metal surfaces not having shop finish to
receive one prime coat and one finish cost.
All wood doors to be finished with one coat sanding sealer and one coat
clear polyurethane.
4. Doors - All interior doors to be hollow core wood veneer 3'0" by 6'8".
Emergency exit doors as required by code.
5. Finish hardware to be medium duty commercial type manufacturer models to be
approved by Landlord.
All interior doors to be provided with key-access hardware.
<PAGE>
Tenant entrance door to be provided with heavy duty combination lock set and
door closure.
6. Ceiling to be white 2' x 4' x 5/8" acoustical ceiling tiles and exposed
white grid system.
Exceptions to the ceiling height will be made to accommodate piping,
mechanical ducts and shafts, and other obstructions located above the
ceiling.
7. Perimeter window blinds to be horizontal narrow slat window blinds per
Landlord's specifications.
8. Electrical systems - Demised Premises to be provided with electrical service
in accordance with applicable codes.
Demised Premises to be serviced by designated meter from which Tenant will
receive a monthly electric bill.
All duplex outlets and switches in accordance with the enclosed floor plan.
9. Lighting Fixtures - Standard fixtures to be 2' x 4' with four forth watt
fluorescent lamps in a quantity of 1 fixture per 100 square feet.
Emergency egress lighting to be provided by the use of standard fixtures by
emergency battery back-up power as required by code.
10. Communication - Tenant to be responsible for providing and installing, at
its expense, communication systems including, but not limited to,
telephone, fiber optics, computer, intercom system and audio/visual system.
Wiring installation above finished ceiling shall be approved for plenum
installation. Tenant shall provide required areas within Demised Premises
for communication systems equipment.
Access to the Demised Premises through the building's core by servicing
utilities shall be coordinated with and approved by Landlord.
11. Landlord shall turn on the existing water fountain located in Tenant's
lounge area.
One stainless steel sink shall be provided in Tenant break area (counter top
and base cabinet included).
12. HVAC - Demised Premises to be provided with a variable air volume cooling
system at a rate of one ton per 400 square feet. Tenant acknowledges that
the training area HVAC system is also sized at one ton per 400 square feet,
and three individually switch ceiling fans shall be used to recirculate the
existing air flow throughout the training center.
13. Fire Protection - The building sprinkler has been designed in accordance
with applicable building codes. Changes in the sprinkler system to
accommodate the Tenant's equipment is the training room will be completed by
Landlord prior to Tenant's occupancy at Landlord's sole cost and expense.
Any future additional requirements per sprinkler system service (adds,
relocates, deletions) made necessary by the Tenant's usage of the Demised
Premises will be at Tenant's cost.
14. Heat and smoke detection systems, chemical dry fire extinguishers, or any
other system required as a result of Tenant's specific use will be at the
Tenant's cost.
15. Identification - Tenant identification to be provided by Landlord at
Tenant's cost on main building entrance directory, street sign directory,
lobby directory, as well as entrance door to Demised Premises subject to
approval by Landlord.
<PAGE>
EXHIBIT B
LEASE COMMENCEMENT DATE AGREEMENT
---------------------------------
THIS AGREEMENT made this 27th day of October, 1993 by and between Tinicum
Properties Associates Limited Partnership ("Landlord") and World Airways, Inc.
(A Delaware Corporation) ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into an Agreement of Lease dated March
30, 1993 ("Lease") setting forth the terms of occupancy by Tenant of all or a
portion of a building located at 15,000 American Way, Tinicum Industrial Park,
10 Industrial Highway, Mail Stop #19, Lester, PA 19113, and modified by Lease
Amendment #1 dated July 9, 1993.
WHEREAS, the Lease is for an initial term of four (4) years and the
Commencement Date of the initial term of the Lease has been determined in
accordance with the provisions of Article 3 of the Lease.
NOW, THEREFORE, it is agreed and confirmed by the parties as follows:
1. The Commencement Date of the term of the Lease Amendment #1 is 9/1/93 and
the termination date of the term of the Lease Amendment #1 is 5/31/97.
2. The date on which the first payment of Base Rent and Additional Rent for
the additional space is due from Tenant is 9/1/93.
3. This agreement is executed by the parties for the purpose of providing a
record of the commencement, termination and Base Rent commencement dates of the
Lease Amendment #1.
IN WITNESS WHEREOF, the parties, by their duly authorized representatives,
have executed this instrument as of the day and year first above written.
Landlord:
TINICUM PROPERTIES ASSOCIATES
LIMITED PARTNERSHIP, A Pennsylvania
Limited Partnership
By: Tinicum Industrial Park, Inc., General Partner
Attest: By:
- ----------------------------------- -----------------------------
Tenant:
WORLD AIRWAYS, INC. (A DELAWARE
CORPORATION)
Attest: By:
----------------------------- -----------------------------
<PAGE>
ALDEN MANAGEMENT GROUP
OFFICE LEASE
Project: LAX BUSINESS CENTER
Building: 360 N. Sepulveda Blvd.
Landlord: SAKIOKA FARMS, a California general partnership
Tenant: WORLD FLIGHT CREW SERVICES, INC.,
a Delaware corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<C><S> <C>
1 FUNDAMENTAL LEASE PROVISIONS.................................. 1
2 PREMISES...................................................... 2
3 TERM.......................................................... 3
4 RENT AND EXPENSE PAYMENTS..................................... 3
5 OMITTED....................................................... 4
6 EXPENSES...................................................... 4
7 TAXES PAYABLE SOLELY BY TENANT................................ 8
8 LATE PAYMENTS................................................. 9
9 SECURITY DEPOSIT.............................................. 9
10 TENANT IMPROVEMENTS.......................................... 10
11 USE.......................................................... 10
12 SERVICE AND UTILITIES........................................ 11
13 ENTRY BY LANDLORD............................................ 13
14 MAINTENANCE AND REPAIR....................................... 13
15 ALTERATIONS AND ADDITIONS.................................... 15
16 INDEMNITY.................................................... 16
17 INSURANCE.................................................... 17
18 DAMAGE AND DESTRUCTION....................................... 19
19 CONDEMNATION................................................. 20
20 LIENS........................................................ 21
21 DEFAULTS BY TENANT........................................... 21
22 LANDLORD'S REMEDIES.......................................... 22
23 DEFAULTS BY LANDLORD......................................... 25
24 COSTS OF SUIT................................................ 26
25 SURRENDER OF PREMISES; HOLDING OVER.......................... 26
26 SURRENDER OF LEASE........................................... 27
27 TRANSFER OF LANDLORD'S INTEREST.............................. 27
28 ASSIGNMENT AND SUBLETTING.................................... 27
29 ATTORNMENT................................................... 33
30 SUBORDINATION................................................ 34
31 ESTOPPEL CERTIFICATE......................................... 34
32 BUILDING OCCUPANCY PLANNING.................................. 35
33 QUIET ENJOYMENT.............................................. 35
34 WAIVER OF REDEMPTION BY TENANT............................... 35
35 WAIVER OF LANDLORD: TENANT'S PROPERTY........................ 35
36 RULES AND REGULATIONS........................................ 36
37 NOTICES...................................................... 36
38 WAIVER....................................................... 37
39 MISCELLANEOUS................................................ 37
40 OMITTED...................................................... 41
41 SECURITY INTEREST............................................ 41
42 INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS................ 41
</TABLE>
Exhibits
A Description of Premises
A-1 Description of Project
B Verification of Term and Basic Rent
D Subordination of Lease
D-1 Subordination of Deed of Trust
E Estoppel Statement
F Building Rules and Regulations
P Parking License Agreement
<PAGE>
OFFICE LEASE
This Lease is made as of this 22 day of January, 1993, by and between SAKIOKA
FARMS, a California General Partnership ("Landlord") and WORLD FLIGHT CREW
------------
SERVICES, INC., a Delaware corporation ("Tenant").
----------
In consideration of the rents and covenants hereinafter set forth, Landlord
hereby leases to Tenant and Tenant hereby rents from Landlord the following
described Premises, upon the following terms and conditions:
1. FUNDAMENTAL LEASE PROVISIONS
Premises: Project: LAX Business Center
Building: 360 N. Sepulveda Blvd. Suite: 3050 Floor:3rd
City: El Segundo County: Los Angeles State: California
Area of Premises: 1,343 square feet of rentable area.
Term: Thirty-Six (36) months.
Commencement Date: January 1, 1993.
Rental: Basic Rent: One and 29/100 Dollars ($1.29) per square foot
of rentable area per month, payable in equal monthly
installments of One Thousand Seven Hundred Thirty-Two and
47/100 Dollars ($1,732.47).
Expenses: Tenant shall pay Tenant's Share of all Expenses that exceed
Landlord's Base Year 1993 together with other items of
Expense as set forth in Article 6. Tenant's Share is One
and Twenty-Six Hundredths percent (1.26%).
After-Hours After hours charges payable by Tenant are based on Landlord's
estimated costs, which, as of the Commencement Date is:
Charges: Air Conditioning $25.00 per hour per unit After-hours
charges shall remain subject to change by Landlord
throughout the term of this Lease.
Prepaid Rent: Tenant shall pay the Basic Rent for the first month of the
term upon execution of this Lease.
Security Deposit: One Thousand Seven Hundred Thirty-Two and 47/100 Dollars
($1,732.47).
Address For To Landlord: c/o ALDEN MANAGEMENT GROUP
Notices: 4 Upper Newport Plaza, Suite 101
Newport Beach, California 92660
To Tenant:
------------------------------------------
------------------------------------------
------------------------------------------
Attn: ------------------------------------------
or after commencement of the term, to the Premises.
<PAGE>
2. PREMISES
(a) The approximate location of the premises (the "Premises") leased
--------
hereunder is shown on the drawing attached hereto as Exhibit A. The Premises
---------
consist of that certain space situated in the building (the "Building")
--------
described in Section 1 hereof. The area of the Premises for all purposes
hereunder is stipulated to be 1,199 square feet of usable area and 1,343
square feet of rentable area. As used in this Lease, the following terms have
the meanings indicated:
(i) The term "gross area" or "gross square footage" means the entire
------------ ----------------------
area being measured, including vertical elevator and ventilation shafts,
maintenance, telephone, mechanical and electrical rooms and closets, and all
other public areas measured from the exterior of exterior walls, and from the
center line of interior demising walls;
(ii) The term "usable area" or "usable square footage" means the entire
------------- -----------------------
floor area of tenant space being measured, excluding vertical shafts and all
public areas, measured from the exterior walls and the exterior of interior
corridor walls, and the center line of interior demising walls; and
(iii) The term "rentable area" or "rentable square footage" means the
--------------- -------------------------
entire area measured in the same way within exterior Building walls including
all common or public areas of the Building allocated proportionately to each
floor of the Building but excluding public stairwells and such vertical shafts.
As to the area leased by Tenant, the rentable area is stipulated to be the
usable area of the Premises increased by 12%.
If the Premises are being newly constructed, then within thirty (30) days
after the Commencement Date either party may, by written notice to the other
given within such period, require that the area of the Premises be remeasured by
Landlord's space planner in accordance with the foregoing, at the expense of the
requesting party. If such remeasurement indicates a variance from the square
footage areas specified above by two percent (2%) or more, this Lease shall be
amended accordingly.
(b) The Premises are (or when constructed will be) a part of a
business/commercial complex consisting of the Building and other buildings,
landscaping, parking facilities and other improvements described as the
"Project" in Section 1 hereof. The Project is generally shown on the drawing
- ---------
attached hereto as Exhibit A-1 . Landlord may in its sole discretion change the
-----------
size, shape, location, number and extent of any or all of the improvements in
the Project without any liability to or consent of Tenant, except that no
material change in the size or location of the Premises shall be made without
Tenant's consent, Tenant does not rely on the fact nor does Landlord represent
that any specific tenant or number of tenants shall occupy any space in the
Project.
2
<PAGE>
(c) Landlord reserves the right to use the roof and exterior walls of the
Premises, and the area beneath, adjacent to and above the Premises, together
with the right to install, use, maintain and replace equipment, machinery,
pipes, conduits and wiring through the Premises, which serve other parts of the
Project, in a manner and in locations which do not unreasonably interfere with
Tenant's use of the Premises. No light, air or view easement is created by this
Lease.
(d) Tenant hereby acknowledges that the Project is being, or may be,
constructed, reconstructed or remodelled in phases, and that by reason of
construction or reconstruction activities there may be temporary incidents
thereof such as dust, dirt, barricades, detours, equipment or material in the
Building or Common Areas. Tenant hereby agrees that so long as Landlord conducts
such activities in a reasonable manner Landlord shall not be liable for any such
incidents of construction, reconstruction, or remodelling.
(e) Tenant shall lease the Premises on an "As Is" basis, except Landlord
shall shampoo the carpet and install five (5) additional telephone outlets
"Landlord's Work"). Landlord shall have no other obligation to improve,
- ------------------
remodel, alter or otherwise modify the Premises prior to Tenant's occupancy.
3. TERM. The term of this Lease shall be for the duration set forth in Section
1 hereof and shall commence on January 1, 1993 (the "Commencement Date") which
--------------------
shall be confirmed by Landlord and Tenant in the form set forth in Exhibit B
---------
attached hereto when Tenant takes possession of the Premises. Failure of Tenant
to execute such Exhibit B within ten (10) days after written request from
---------
Landlord shall be a material default hereunder. This Lease shall be a binding
contractual agreement effective upon the date of execution hereof by both
Landlord and Tenant, notwithstanding the later commencement of the term of this
Lease.
4. RENT AND EXPENSE PAYMENTS.
(a) General. The "Rent" or "Rental" hereunder is composed of ""Basic
------ --------
Rent"" as set forth in Section 1 hereof and adjustments hereto as hereinafter
provided. The term "Expenses" hereunder means all costs, expenses, fees,
----------
charges or other amounts described in Section 6. Tenant agrees to pay to
Landlord all Rent and Expenses required under this Lease, which shall be
payable monthly to Landlord (unless expressly provided otherwise), without
deduction or offset, in lawful money of the United States of America at the
office maintained by Landlord in the Project or at such other place as
Landlord may from time to time designate in writing. Notwithstanding any
contrary provisions of this Lease, all Expenses, late payment fees, interest,
"After-Hours Charges", parking fees payable under the "Parking License
Agreement" attached hereto, and all other sums of money or charges required to
be paid pursuant to this Lease shall be deemed additional Rental for the
Premises; and in any notice to pay rent or quit the Premises, Landlord may
include and designate same as rent then past due and owing, if such be the
case. Any Rental or Expense increases which are called for hereunder, the
3
<PAGE>
payment of which is delayed or prevented by reason of any wage and price control
law, rent control law, or other governmental rule, law or restriction, shall
accrue and be payable together with interest thereon at the "Agreed Rate" [as
defined in Section 39(n) hereof], at the end of the Lease term, or sooner if
allowed. No acceptance by Landlord of partial payment of any sum due from Tenant
shall be deemed a waiver by Landlord of any of its rights to the full amount
due, nor shall any endorsement or statement on any check or accompanying letter
from Tenant be deemed an accord and satisfaction. Any Rental payments or other
sums received from Tenant or any other person shall be conclusively presumed to
have been paid on Tenant's behalf, unless Landlord has been given prior written
notice to the contrary by Tenant. Tenant agrees that the acceptance by Landlord
of any such payment shall not constitute a consent by Landlord or a waiver of
any of its rights under this Lease. In no event shall the foregoing be construed
as requiring Landlord to accept any Rental or other sums from any person other
than Tenant. If the term hereof begins or ends on a day other than the last day
of a month, then the Rent and Expenses for such month shall be prorated based on
a thirty (30)-day month. All prorations of Rent or Expenses under this Lease for
fractional periods shall be based on a thirty (30)-day month and a three hundred
sixty (360)-day year.
(b) Basic Rent. Tenant shall pay the "Basic Rent" set forth in Section 1
hereof on the first day of each month in advance, beginning on the Commencement
Date. Landlord may, but shall not be obligated to, send a bill or statement for
Rent to Tenant each month, but Tenant shall be obligated to pay Rent on the
first day of each month regardless of whether or not it receives a bill or
statement.
(c) Prepaid Rent. Tenant shall pay prepaid Basic Rent concurrently with the
execution of this Lease, as set forth in Section 1 hereof.
5. OMITTED
6. EXPENSES
Tenant shall pay its share of estimated monthly "Expenses" on the first
day of each month in advance during the term hereof or otherwise as set forth
in this Section. The monthly estimate of Expenses payable by Tenant hereunder
shall be one-twelfth (1/12) the amount by which Landlord's reasonable estimate
of Tenant's Share of Expenses exceeds Landlord's Expense Stop [or
alternatively, "Base Year Costs"] (as such terms are hereinafter defined).
(a) Definitions. As used in this Lease, the following terms have the
meanings indicated:
(i) "Landlord's Base Year Costs" means the annualized dollar amount
----------------------------
which results from (1) dividing the total actual Expenses incurred by Landlord
during the Base Year by the total rentable square footage of the Building, and
(2) multiplying the resulting sum by the rentable square footage of the
Premises. Such amount constitutes the amount per year which Landlord agrees to
pay towards
4
<PAGE>
Expenses allocable to the Premises, without reimbursement from Tenant.
Landlord's Base Year Costs and subsequent year's Expenses shall be adjusted to
be equal to Landlord's reasonable estimate of Expenses assuming at least ninety-
five percent (95%) of the total rentable area of the Building was occupied for
the entire year, and assuming the Building was fully completed and fully
assessed for property tax assessment, maintenance and repair purposes.
(ii) The term "Expenses" means all expenses, costs and fees paid or
----------
incurred by Landlord during any calendar year during the term hereof in
connection with or attributable to the Building and Common Area (as described
hereinafter), including any parking facilities therein, for:
(1) Electricity, water, gas, sewer, and all other utility services to
or for the Building or Common Area, including any utility taxes, fees, charges
or other similar impositions paid or incurred by Landlord in connection
therewith; and
(2) Operation, maintenance (including reasonable reserves), security
services, replacement for normal wear and tear, repair, restripping or
resurfacing of paving, management (including costs of on-site offices and
personnel), insurance (including public liability and property damage, rent
continuation, boiler and machinery and extended coverage insurance), and
cleaning of the Building and Common Area and all furnishings, fixtures and
equipment therein, but excluding the costs of leasing and preparing space for
new tenants in the Building, or costs borne solely by Tenant under the Lease.
The term "Expenses" includes the annual amortization of costs (including
financing at the then prevailing rate, if any) of any equipment, device or
improvement required after completion of the Building by governmental authority
or incurred as a labor saving measure or to reduce operation or maintenance
expenses with respect to the Building and Common Area where such costs are
amortized over the useful life thereof and which do not inure primarily to the
benefit of any particular tenant; and
(3) All real property taxes and personal property taxes, licenses,
charges and assessments which are levied, assessed, imposed or collected by
any governmental authority or improvement or assessment district during any
calendar year with respect to the Building or Common Area and the land on
which the same is located, and any improvements, fixtures, equipment and other
property of Landlord, real or personal, located in the Project and used in
connection with the operation or maintenance of the Building or Common Area
(computed on a cash basis or as if paid in permitted installments regardless
of whether actually so paid), as well as any tax which shall be levied or
assessed in addition to or in lieu of such taxes (it being acknowledged that
because of the passage of laws which limit increases in real property taxes,
government agencies may impose fees, charges, assessments or other levies in
connection with services previously furnished without charge or at a lesser
charge and which were previously paid for in whole or in part, directly or
indirectly by real property taxes), and gross excise tax or other similar tax,
and any costs or expenses of contesting any
5
<PAGE>
such taxes, licenses, charges or assessments, but excluding any federal or state
income or gift tax or any franchise, capital stock, estate or inheritance taxes.
(iii) The term "Common Area" means that portion of the Project other than
-------------
the Building and other buildings for lease to tenants which is from time to time
designated and improved for nonexclusive, common use by more than one person.
The general location of the Common Area is shown on Exhibit A-1 attached hereto
-----------
and incorporated by reference. The Common Area includes parking facilities in
the Project.
Any cost or expense included in Expenses which is attributable to Common
Area shall be prorated by Landlord to the Building based on the proportion which
the total square footage of the Building bears to the total square footage of
all buildings in the Project from time to time or by such other fair and
reasonable method of allocation based on use or benefit as Landlord may
determine, except that, with regard to taxes, Landlord may use such allocation
of taxes among the various parcels in the Project as may have been used by the
taxing authority.
(iv) The term "Base Year" means the calendar year 1993.
-----------
(v) The term "Subsequent Year" means the first full calendar year
-----------------
following the Base Year and each calendar year, or part thereof, thereafter
occurring during the term of this Lease.
(vi) The term "Tenant's Share" means the proportion which the rentable
----------------
square footage of the Premises bears to the total rentable square footage of the
Building, which proportion is hereby agreed by Landlord and Tenant to be the
percentage set forth in Section 1 hereof.
(b) Payment of Estimated Expenses. Tenant shall pay estimated Expenses to
Landlord as follows:
(i) Landlord shall submit to Tenant on or before March 31 of the first
Subsequent Year or as soon thereafter as Landlord has sufficient data, a
reasonably detailed statement showing the Expenses for the Base Year.
(ii) For each Subsequent Year, Landlord shall submit to Tenant, prior to
January 1 of such Subsequent Year or as soon thereafter as practicable, a
reasonably detailed statement showing the estimated Expenses for such Subsequent
Year. The determination of estimated Expenses hereunder shall be made by
Landlord based upon Landlord's experience with actual costs and projections.
Tenant shall pay monthly to Landlord an amount equal to the excess of (1) the
sum of the total annual estimated Expenses multiplied by Tenant's Share, minus
(2) Landlord's Base Year Costs over, (3) Twelve (12) months. If Landlord does
not submit said statement to Tenant prior to January 1 of any such Subsequent
Year, Tenant shall continue to pay its share of estimated Expenses
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at the then existing rate until such statement is submitted, and, thereafter, at
the monthly Rent payment date next following the submittal of such statement,
shall pay its share of estimated Expenses based on the rate set forth in such
statement together with any amounts based on such rate which may have
theretofore accrued from January 1 of such Subsequent Year. Landlord may revise
such estimated Expenses at the end of the calendar quarter, and Tenant shall pay
Tenant's Share of such revised estimated Expenses after notice thereof as herein
provided.
(c) Payment of Actual Expenses. Actual Expenses shall be reconciled against
payments of estimated Expenses as follows:
(i) On or before March 31 of each Subsequent Year or as soon as
Landlord has sufficient data, Landlord shall submit to Tenant a reasonably
detailed statement showing the actual Expenses paid or incurred by Landlord
during the previous calendar year. If Tenant's Share of such actual Expenses
is less than the amount of estimated Expenses for such previous year
theretofore paid by Tenant, then Landlord shall credit the amount of such
difference against estimated and/or actual Expenses which may thereafter be
due from Tenant; provided, however, that in no event shall Tenant receive a
credit as provided herein for any amount calculated to be less than Landlord's
Expense Stop or Base Year amount. If Tenant's Share of such actual Expenses is
more than the amount of the estimated Expenses for such previous year
theretofore paid by Tenant, then Tenant shall, at the monthly Rent payment
date next following the submittal of such statement to Tenant, pay to Landlord
the full amount of such difference.
(ii) The reconciliation of the Expenses paid by Tenant for the calendar
year in which this Lease terminates shall be made upon Landlord's submittal to
Tenant of the statement of actual Expenses for such calendar year. The estimated
and actual Expenses for such calendar year shall be prorated based on the actual
number of days in such calendar year that this Lease was in effect, based on a
360 day year, and shall be compared. If pursuant to such comparison it is
determined that there has been an underpayment or an overpayment by Tenant for
such calendar year, Landlord shall refund the overpayment to Tenant, or Tenant
shall pay the amount calculated as owing to Landlord, as the case may be, within
thirty (30) days after the submittal of the statement by Landlord. This
provision shall survive the expiration or termination of the Lease. If
Landlord deems it advisable, Landlord may submit partial year statements
pursuant to this Section in order to cause an earlier reconciliation of
Expenses for the calendar year in which this Lease terminates.
(d) Other Expense Provisions.
(i) Notwithstanding any provision of this Section to the contrary, if
at any time during the term of this Lease any tenant, pursuant to an express
provision in its Lease and with Landlord's approval, contracts for certain
Building or Common Area services to be provided directly to it and at its
expense, which services would normally be furnished by Landlord (e.g.,
janitorial, maintenance,
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utilities, etc.), then Landlord may make an appropriate adjustment in
calculating Tenant's Share of Expenses to the end that the cost of the remaining
services provided by Landlord are shared proportionately by all tenants
receiving such services.
(ii) Computation of Amount of Tenant's Proportionate Share on an Annual
Basis. In determining the amount of Expenses hereunder, if less than Ninety-Five
percent (95%) of the rentable area of the Building shall have been occupied by
tenants and fully used by them, at anytime during any year of the Lease term,
Expenses shall be adjusted by extrapolation to what the Expenses would have been
if the Building were Ninety-Five percent (95%) occupied during such year.
(iii) The computation of Expenses pursuant to this Section is intended to
constitute a formula for an agreed sharing of costs by tenants, and may or may
not constitute an exact reimbursement to Landlord for costs paid by Landlord,
and for Landlord's administration.
(iv) Any delay or failure of Landlord in computing or billing for
Expenses shall not constitute a waiver of, or in any way impair, the
obligation of Tenant to pay Expenses hereunder. However, Tenant shall not be
charged interest on unpaid Expenses which have accrued during such time that
Landlord has failed to submit a statement for such Expenses.
7. TAXES PAYABLE SOLELY BY TENANT
In addition to the Rental and Expenses to be paid by Tenant, Tenant shall
pay before delinquency and without notice or demand by Landlord any and all
taxes levied or assessed on and which become payable by Tenant during the term
of this Lease (excluding, however, state and federal personal or corporate
income taxes measured by the income of Landlord from all sources, capital
stock taxes, and estate and inheritance taxes), whether or not now customary
or within the contemplation of the parties hereto, which are based upon,
measured by or otherwise calculated with respect to: (i) the gross or net Rent
payable under this Lease, including, without limitation, any gross receipts
tax or any other gross income tax or excise tax levied by any taxing authority
with respect to the receipt of the Rental hereunder; (ii) the value of
Tenant's equipment, furniture, fixtures or other personal property located in
the Premises; (iii) the possession, lease, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any portion
thereof; (iv) the value of any improvements, alterations or additions made in
or to the Premises by or on behalf of Tenant, except for those improvements
(if any) installed as part of Landlord's Work (as hereinafter defined) or (v)
this transaction or any document to which Tenant is a party creating or
transferring an interest or an estate in the Premises. Real property taxes on
improvements which are installed as part of Landlord's Work shall be deemed to
be included in the taxes described in Section 6(a)(ii)(3) above, as to which
Tenant shall pay Tenant's Share. If it is not lawful for Tenant to reimburse
Landlord for any such taxes paid or incurred by Landlord, the Rent shall be
revised so as to net Landlord the same Rental after imposition of such taxes
as would have been payable prior to the imposition of such taxes.
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8. LATE PAYMENTS
If Tenant fails to pay to Landlord when due any Rent, Expenses or other
sums owing to Landlord pursuant to the terms of this Lease, said late payment
shall bear interest at the Agreed Rate as herein provided and, in addition:
(a) For each such late payment that is not paid within ten (10) days
after the date the same was due, Tenant shall pay to Landlord a service charge
equal to ten percent (10%) of the overdue amount. Tenant acknowledges and
agrees that such late payment by Tenant will cause Landlord to incur costs and
expenses not contemplated by this Lease, the exact amounts of which will be
extremely difficult to ascertain, and that such service charge represents a
fair estimate of the costs and expenses which Landlord would incur by reason
of Tenant's late payment. Tenant further agrees that such service charge shall
neither constitute a waiver of Tenant's default with respect to such overdue
amount nor prevent Landlord from exercising any other right or remedy
available to Landlord; and
(b) Following any three consecutive late payments of Rent, Landlord
may, upon notice to Tenants,
(i) Require that, beginning with the first payment of Rent due
following the date the third late payment was due, Rent shall no longer be
paid in monthly installments but shall be payable three (3) months in advance;
and, in addition, or in the alternative at Landlord's election,
(ii) Require that Tenant increase the amount of any Security Deposit
required herein by 100%, which additional security Deposit shall be retained by
Landlord, and which may be applied by Landlord, in the manner provided herein
with respect to any Security Deposit required herein. If a Security Deposit is
not then held by Landlord, Tenant shall pay to Landlord a sum to be held as a
Security Deposit equal to 200% of the maximum amount of Rent reasonably
estimated by Landlord to be due from Tenant during the final full month of this
Lease.
<PAGE>
9. SECURITY DEPOSIT
Upon Tenant's execution of this Lease, Tenant shall deposit with Landlord a
"Security Deposit" in the amount set forth in Section 1 hereof, which shall be
held by Landlord as security for the faithful performance by Tenant of all of
the terms, covenants, and conditions of this Lease, it being expressly
understood and agreed that the deposit is neither an advance Rent deposit nor a
measure of Landlord's damages in case of Tenant's default. If at any time
during the term of this Lease or any extended term thereof Tenant's Basic Rent
is increased, the Security Deposit shall be increased in the same proportion and
tenant shall deposit cash with Landlord in an amount sufficient to increase the
Security Deposit to the appropriate amount. The Security Deposit may be
retained, used or applied by Landlord to remedy any default by Tenant, to repair
damage caused by Tenant to any part of the Project, and to clean the Premises
upon expiration or earlier termination of the Lease, as well as to reimburse
Landlord for any amount which Landlord may spend by reason of Tenant's default
or to compensate Landlord for any other loss or damage which Landlord may suffer
by reason of Tenant's default. If any portion of said deposit is so used or
applied, Tenant shall, within ten (10) days after written demand therefore,
deposit cash with Landlord in an amount sufficient to restore said deposit to
the full amount required hereunder, and Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep the
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. Tenant may not elect to use any portion of
said Security Deposit as a Rental payment although Landlord may elect to do so
in the event Tenant is in default hereunder or is insolvent. If Tenant shall
fully and faithfully perform every provision of this Lease to be performed by
it, the Security Deposit or any balance thereof shall be returned to Tenant at
Tenant's last known address (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) within thirty (30) days after the Lease term has
ended and the Premises have been vacated by Tenant in the manner required by
this Lease.
10. TENANT IMPROVEMENTS
(a) Applicability. If the Premises are being leased on an "As Is" basis
without any improvements, alterations or additions required to be made thereto
by Landlord or Tenant, the provisions of this Section shall not apply. However,
if any improvements, alterations or additions to the Premises are required to
be made by Landlord and/or Tenant, the provisions of the "Construction
Provisions" attached as Exhibit C hereto shall govern with regard to work to
---------
be completed at Landlord's expense ("Landlord's Work"), if any, and work to be
-------------------
completed at Tenant's expense ("Tenant's Work"), if any. Landlord has no
-----------------
obligation and has made no promise to alter, remodel, decorate, paint or
otherwise improve the Premises or any part thereof except as specifically set
forth in Section 2(e). To the extent Landlord is required to perform
Landlord's Work or Tenant's Work pursuant to the Construction Provisions,
Landlord shall use reasonable diligence to complete such work in a timely
manner.
11. USE
The Premises shall be used and occupied by Tenant for general office
purposes and for no other purpose without the prior written consent of
Landlord, which Landlord may withhold in its sole discretion. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the Premises, the Building, or the
Project, with respect to the suitability thereof for the conduct of Tenant's
business. Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate of or affect or cause a cancellation of any fire or other
insurance covering the Building, Common Area, or the Premises or any of its
contents, nor shall Tenant sell or permit to be kept, used or sold in or about
the Premises any article which may be prohibited by a standard form policy of
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insurance. Tenant shall promptly upon demand reimburse Landlord for any
additional premium charges for any such insurance by reason of Tenant's
failure to comply with the provisions of this Section. Tenant agrees that it
will use the Premises in such manner as not to interfere with the rights of
other tenants of the Building or Common Area. Tenant shall neither use nor
allow the Premises, Building or Common Area to be used for any unlawful or
objectionable purpose, nor cause, maintain or permit any nuisance or waste in,
on or about any portion of the Project. Tenant will not place a load upon any
floor exceeding the floor load which such floor was designed to carry, and
Landlord reserves the right to prescribe the location of any safe or other
heavy equipment in the Premises. Tenant shall not use or allow anything to be
done in or about the Premises or the Project which will in any way conflict
with any law, ordinance or governmental regulation or requirement of any board
of fire underwriters or any duly constituted public authority now in force or
hereafter enacted or promulgated affecting the use or occupancy of the
Premises, and shall promptly comply with all such laws or requirements at its
sole cost and expense. The judgment of any court of competent jurisdiction or
any admission by Tenant that Tenant has violated any such law, statute,
ordinance, rule, regulation or requirement shall be conclusive of such fact
between Landlord and Tenant.
12. SERVICE AND UTILITIES
(a) Landlord's Obligations. Provided Tenant is not in default hereunder,
Landlord shall as a part of Expenses make available to the Premises during the
Building's normal business hours as set forth in Rule 17 of the Rules and
Regulations described in Section 36 hereof, such amounts of air conditioning,
heating and ventilation as may be required in Landlord's reasonable judgment for
the comfortable use of the Premises, as well as elevator service, reasonable
amounts of electric current for normal lighting by Building Standard overhead
fixtures and for fractional horsepower office machines, and water for lavatory
and drinking purposes. "Building Standard" fixtures and equipment are as
described in Schedule A to Exhibit C attached hereto or, in absence thereof, as
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installed in the typical common corridor. Landlord shall as a part of Expenses
replace Building Standard light bulbs, tubes and ballasts which need replacing
due to normal use. Landlord shall also as a part of Expenses maintain and keep
lighted the common stairs, entries and toilet rooms in the Building and shall
provide trash removal, janitorial service and window washing customary for
similar buildings in the same geographical area. Except to the extent caused
by Landlord's negligence, Landlord shall not be in default hereunder or liable
for any damages directly or indirectly resulting from, nor shall the Rent be
abated or shall there be deemed a constructive or other eviction of Tenant by
reason of (i) the installation, use or interruption of use of any equipment in
connection with the furnishing of any of the foregoing utilities and services,
(ii) failure to furnish, or delay in furnishing, any such utilities or
services when such failure or delay is caused by acts of God, acts of
government, labor disturbances of any kind, or other conditions beyond the
reasonable control of Landlord, or by the making of repairs or improvements to
the Premises or any part of the Project, or (iii) governmental limitation,
curtailment, rationing or restriction on use of water, electricity or any
other service or utility whatsoever serving the Premises, Building or Common
Area. Landlord shall be entitled to cooperate with the energy
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conservation efforts of governmental agencies or utility suppliers. The failure
of Landlord to provide such services if consistent with the foregoing shall not
constitute a constructive or other eviction of Tenant.
(b) After-Hours Charges. During non-business hours Landlord shall as a
part of Expenses keep the public areas of the Building lighted, shall provide
electricity to the Premises and shall provide elevator service with at least
one elevator, but shall not be obligated to furnish air conditioning to the
Premises. If Tenant requires air conditioning during non-business hours Tenant
shall give Landlord at least twenty-four (24) hours prior notice of such
requirement or shall follow such other procedure for activating the building
energy management system as Landlord may advise Tenant, and Tenant shall pay
Landlord the "After-Hours Charges" for such extra service at the rate set
forth in Section 1 hereof. Such rates are subject to increase from time to
time based on increases in Landlord's costs associated with providing such
extra services. All payment required for After-Hours Charges shall be deemed
to be additional Rent and Landlord shall have the same remedies for a default
in payment thereof as for a default in payment of Rent.
(c) Tenant's Obligations. Tenant-shall pay, prior to delinquency, for all
telephone charges and all other materials and services not expressly required to
be paid by Landlord, which may be furnished to or used in, on or about the
Premises during the term of this Lease. Tenant shall also pay, as additional
Rent, all charges and fees required to be paid by Tenant by the Rules and
Regulations described in Section 36 of this Lease.
(d) Excess Utility Usage. Tenant will not without prior written consent of
Landlord use any apparatus or device in the Premises, including (without
limitation) electronic data processing machines and telephone switchgear, which
will materially increase the amount of cooling or ventilation or electricity or
water usually furnished or supplied for use of the Premises as general office
space; nor shall Tenant connect with electric current (except through existing
electrical outlets in the Premises) or water pipes, any apparatus or device for
the purpose of using electrical current or water, except as may be provided in
the Construction Provisions. If Tenant uses electricity at a rate in excess of
4 kilowatt/hours per usable square foot of the Premises per year, the cost to
Landlord of any such excess use of utility service by Tenant shall be paid by
Tenant based on Landlord's reasonable estimates and costs. If Tenant requires
or uses ventilation, cooling, water or electric current or any other resource
in excess of that usually furnished or supplied for use of the Premises as
general office space, Landlord may cause a special meter or other measuring
device to be installed in or about the Premises to measure the amount of
water, electric current or other resource consumed by Tenant. The cost of any
such meter, and of the installation, maintenance and repair thereof, shall be
paid for by Tenant, and Tenant agrees to pay Landlord promptly upon demand for
all such water, electric current or other resource consumed, as shown by said
meter, at the rates charged by the local public utility or other supplier
furnishing the same, plus any additional expense incurred by Landlord in
keeping account of the foregoing and administering same. If any lights,
machines or equipment (including but not limited
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to computers) are used by Tenant in the Premises which materially affect the
temperature otherwise maintained by the heating, ventilation or air
conditioning system, or generate substantially more heat in the Premises than
would be generated by Building Standard lights or usual fractional horsepower
office equipment, Landlord shall have the right to install any machinery and
equipment which Landlord deems necessary to restore the temperature balance in
any affected part of the Building, including but not limited to modifications
to the Building Standard air conditioning equipment, and the cost thereof
including the cost of installation and any additional cost of operation and
maintenance occasioned thereby shall be paid by Tenant to Landlord upon
demand. Any sums payable under this Section 12(d) shall be considered
additional Rent, and Landlord shall have the same remedies for a default in
payment of such sum as for a default in the payment of Rent.
13. ENTRY BY LANDLORD
Landlord and its authorized representatives shall have the right to enter
the premises at all reasonable times during normal business hours and at any
time in case of an emergency (i) to determine whether the Premises are in good
condition and whether Tenant is complying with its obligations under this
Lease, (ii) to maintain or to make any repair or restoration to the Building
that Landlord has the right or obligation to perform, (iii) to install any
meters or other equipment which Landlord may have the right to install, (iv)
to serve, post, or keep posted any notices required or allowed under the
provisions of this Lease, (v) to post "for sale" signs at any time during the
term, and to post "for rent" or "for lease" signs during the last three (3)
months of the term or during any period which Tenant is in default, (vi) to
show the Premises to prospective brokers, agents, buyers, tenants, or persons
interested in an exchange, (vii) to shore the foundations, footings, and walls
of the Building and to erect scaffolding and protective barricades around and
about the Building or the Premises, but not so as to prevent entry into the
Premises, and (viii) to do any other act or thing necessary for the safety or
preservation of the Premises or the Building. Landlord shall have the right at
all times to have and retain a key with which to unlock all doors in, upon and
about the Premises excluding Tenant's vaults and safes, and Landlord shall
have the right to use any and all means which Landlord may deem proper to gain
entry in an emergency, and any entry to the Premises obtained by Landlord in
accordance with the foregoing shall not be construed or deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises or any portion thereof. Tenant hereby
waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business and any loss of occupancy or quiet
enjoyment of the Premises by reason of Landlord's exercise of its right of
entry in accordance with this Section, and Tenant shall not be entitled to an
abatement or reduction of Rent or Expenses in connection therewith.
14. MAINTENANCE AND REPAIR
(a) Landlord's Obligations. Landlord shall as part of Expenses maintain or
cause to be maintained in good order, condition and repair the structural and
common portions of the Building and
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all Common Areas in the Project (except to the extent of damage caused by
Tenant which shall be repaired by Landlord at Tenant's expense). Landlord
shall not be liable, and neither Rent nor Expenses shall be abated, for any
failure by Landlord to maintain and repair areas which are being used in
connection with construction or reconstruction of improvements, or for any
failure to make any repairs or perform any maintenance, unless such failure
shall persist for an unreasonable time after written notice of the need
thereof is given to Landlord by Tenant. To the extent the provisions of this
Section are in conflict with any statute now or hereafter in effect which
would afford Tenant the right to make repairs at Landlord's expense or to
terminate this Lease, the provisions of this Section shall govern.
(b) Tenant's Obligations.
(i) Tenant shall, at its sole cost and expense, except for janitorial
services furnished by Landlord pursuant to Section 12 hereof, maintain the
Premises including all improvements therein in good order, condition and repair.
(ii) In connection with Tenant surrendering possession of the
Premises at the end of the Lease term, Tenant agrees to repair any damage
caused by or in connection with the removal of any article of personal
property, business or trade fixtures, machinery, equipment, cabinetwork,
furniture, movable partitions or permanent improvements or additions,
including without limitation thereto, repairing the floor and patching and
painting the walls where required by Landlord to Landlord's reasonable
satisfaction, all at Tenant's sole cost and expense. Tenant shall indemnify,
defend and hold Landlord harmless against any loss, liability, cost or expense
(including reasonable attorney's fees) resulting from delay by Tenant in so
surrendering the Premises. Tenant's obligation hereunder shall survive the
expiration or termination of this Lease,
(iii) If Tenant fails to maintain the Premises in good order,
condition and repair, Landlord may give Tenant notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant thereafter fails to
promptly commence such work and diligently prosecute it to completion, then
Landlord shall have the right to do such acts and expend such funds at the
expense of Tenant as are reasonably required to perform such work. Any amount
so expended by Landlord [together with a charge for Landlord's administration
and overhead equal to five percent (5%) thereof] shall be paid by Tenant
promptly after demand, with interest at the Agreed Rate from the date of such
work. Landlord shall have no liability to Tenant for any inconvenience or
interference with the use of the Premises by Tenant as a result of performing
any such work.
(c) Compliance with Law. Landlord and Tenant shall each do all acts
required to comply with all applicable laws, ordinances, and rules of any
public authority relating to their respective maintenance obligations as set
forth herein.
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15. ALTERATIONS AND ADDITIONS
Tenant shall make no alterations, additions or improvements to the
Premises or any part thereof having a cost in excess of $5,000 or which
affects the exterior appearance of the Premises or the Building or any common
portion of the Building or any portion of the Common Area or the electrical,
mechanical, plumbing or other systems in the Building, without obtaining the
prior written consent of Landlord in each instance. Such consent may be
granted or withheld at Landlord's sole discretion. Any such alterations,
additions or improvements consented to by Landlord may, at Landlord's option,
be made by Landlord for Tenant's account and Tenant shall reimburse Landlord
for the cost thereof [together with a charge for Landlord's administration and
management thereof equal to five percent (5%) of the cost incurred] within
thirty (30) days after an invoice therefor is submitted to Tenant. Landlord
may impose as a condition to such consent such requirements as Landlord may
deem necessary in its sole discretion, including (without limitation) the
requirement that Landlord be furnished with working drawings before work
commences and that a bond be furnished, and requirements relating to the
manner in which the work is done, the contractor by whom it is performed, and
the times during which it is accomplished, as well as the requirement that
upon written request of Landlord prior to the expiration or earlier
termination of the Lease, Tenant will remove at its expense any such
alterations, improvements or additions to the Premises. Any damage done to the
Premises in connection with any such removal shall be repaired at Tenant's
sole cost and expense. Landlord may, in connection with any such removal which
reasonably might involve damaging the Premises, require that such removal be
performed by a bonded contractor or other person for which a bond satisfactory
to Landlord has been furnished covering the cost of repairing the anticipated
damage. Unless so removed, all such alterations, additions or improvements
shall at the expiration or earlier termination of the Lease become the
property of Landlord and remain upon the Premises. All such improvements,
alterations or additions must be done in a good and workmanlike manner and
diligently prosecuted to completion so that the Premises shall at all times be
a complete unit except during the period of work. Such improvements,
alterations or additions shall only be constructed by a contractor which is
bondable and which shall use union employees only, except that such contractor
may use non-union employees only if prior to the commencement of any work
Tenant obtains Landlord's written consent which Landlord may withhold unless
it is adequately protected against any and all loss or damage that may result
from labor problems or any work stoppage or interruption arising from the use
of such non-union employees. Tenant shall deliver to Landlord upon
commencement of such work, a copy of the building permit with respect thereto.
Upon completion of such work Tenant shall file for record in the office of the
County Recorder where the Project is located a Notice of Completion, as
required or permitted by law. All such work shall be performed so as to not
obstruct the access to the premises of any tenant in the Building or Project.
Tenant agrees to carry insurance as required by Section 17 covering any
improvements, alterations or additions to the Premises made by Tenant under
the provisions of this Section, it being expressly agreed that none of such
improvements, additions or alterations shall be insured by Landlord under the
insurance Landlord may carry upon the Building, nor shall Landlord be required
under any provision for reconstruction to reinstall any such improvements,
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additions or alterations. In addition, it is expressly agreed that if any tax is
imposed, or the amount of taxes on the Building or the Project is increased, by
reason of any such improvements, alterations or additions, Tenant shall be
solely responsible therefor under Section 7.
16. INDEMNITY
(a) Indemnification by Tenant. Tenant shall indemnify, defend and hold
Landlord, its agents and employees, harmless from and against any and all
claims, liability, loss, cost or expense (including reasonable attorneys' fees)
arising out of or in connection with (i) any injury or damage to any person or
property occurring in, on or about the Premises or any part thereof or the
Building or Common Area, if such injury or damage is caused in part or in whole
by any act or omission by Tenant, its agents, contractors, employees, or
invitees or (ii) any breach or default in the performance of any obligation on
Tenant's part to be performed under this Lease. If any action or proceeding is
brought against Landlord by reason of any such claim, upon notice from Landlord,
Tenant shall defend the same at Tenant's expense by counsel reasonably
satisfactory to Landlord. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property or injury to persons in,
upon or about the Premises from any cause except Landlord's negligence or
wrongful acts, and Tenant hereby waives all claims with respect thereto against
Landlord. The foregoing provisions shall survive the termination of this Lease.
(b) Exemption of Landlord from Liability. If the Premises, the Building, or
the Common Area, or any part thereof, is damaged by fire or other cause against
which Tenant is required to carry insurance pursuant to this Lease, Landlord
shall not be liable to Tenant for any loss, cost or expense arising out of or in
connection with such damage. Tenant hereby releases Landlord, its directors,
officers, shareholders, partners, employees, agents and representatives, from
any liability, claim or action arising out of or in connection with such damage,
Furthermore, Tenant shall pursuant to Section 17 maintain insurance against
loss, injury, or damage which may be sustained by the person, goods, wares,
merchandise or property of Tenant, its agents, contractors, employees, invitees
or customers, or any other person in or about the Premises, caused by or
resulting from fire, steam, electricity, gas, water, or rain, which may leak
or flow from or into any part of the Premises or the Building, or from the
breakage, leakage, obstruction or other defects of the pipes, sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures of the
same, whether such damage or injury results from conditions arising within the
Premises or other portions of the Building, or from other sources, and
Landlord shall not be liable therefor, unless caused by Landlord's negligence
or wrongful act, and in that event only to the extent not covered by the
insurance which Tenant is required to carry pursuant to this Lease. Landlord
shall not be liable to Tenant for any damages arising out of or in connection
with any act or omission of any other tenant of the Project or for losses due
to theft or burglary or other wrongful acts of third parties.
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17. INSURANCE
(a) General. All insurance required to be carried by Tenant hereunder shall
be issued by responsible insurance companies acceptable to Landlord and the
holder of any deed of trust or mortgage secured by any portion of the Premises
(hereinafter referred to as a "Mortgagee"). All policies of insurance provided
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for herein shall be issued by insurance companies with a general
policyholder's rating of not less than A and a financial rating not less than
Class X as rated in the most current available "Best Insurance Reports." Each
policy shall name Landlord and at Landlord's request any Mortgagee as an
additional insured, as their respective interests may appear. Tenant shall
deliver certificates of such insurance to Landlord, evidencing the existence
and amounts of such insurance, at least ten (10) days prior to Tenant's
occupancy in the Premises. Failure to make such delivery shall constitute a
material default by Tenant under this Lease. All policies of insurance
delivered to Landlord must contain a provision that the company writing said
policy will give Landlord thirty (30) days prior written notice of any
modification, cancellation or lapse or reduction in the amounts of insurance.
All public liability, property damage and other casualty insurance policies
shall be written as primary policies, not contributing with, and not in excess
of coverage which Landlord may carry. Tenant shall furnish Landlord with
renewals or "binders" of any such policy at least thirty (30) days prior to
the expiration thereof. Tenant agrees that if Tenant does not procure and
maintain such insurance, Landlord may (but shall not be required to) obtain
such insurance on Tenant's behalf and charge Tenant the premiums therefor
together with a twenty-five percent (25%) handling charge, payable upon
demand. Tenant may carry such insurance under a blanket policy provided such
blanket policy expressly affords the coverage required by this Lease by a
Landlord's protective liability endorsement or otherwise and evidence thereof
is furnished to Landlord as required above.
(b) Casualty Insurance. At all time during the term hereof, Tenant shall
maintain in effect policies of casualty insurance covering (i) all improvements
in, on or to the Premises (including any Building Standard furnishings, and any
alterations, additions or improvements as may be made by Tenant), and (ii) trade
fixtures, merchandise and other personal property from time to time in, on or
upon the Premises. Such policies shall include coverage in an amount not less
than one hundred percent (100%) of the actual replacement cost thereof from time
to time during the term of this Lease. Such policies shall provide protection
against any peril included within the classification "Fire and Extended
Coverage," against vandalism and malicious mischief, theft, sprinkler leakage
and against flood damage (and including cost of demolition and debris
removal). Replacement cost for purposes hereof shall be determined by an
accredited appraiser selected by Landlord or otherwise by mutual agreement.
The proceeds of such insurance shall be used for the repair or replacement of
the property so insured. Upon termination of this Lease following a casualty
as set forth in Section 18, the proceeds under (i) above shall be paid to
Landlord, and the proceeds under (ii) above shall be paid to Tenant.
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(c) Liability Insurance. Tenant shall at all times during the term hereof
obtain and continue in force bodily injury liability and property damage
liability insurance adequate to protect Landlord against liability for injury
to or death of any person in connection with the activities of Tenant in, on
or about the Premises or with the use, operation or condition of the Premises.
Such insurance at all times shall be in an amount of not less than Two Million
Dollars ($2,000,000) for injuries to persons in one accident, not less than
One Million Dollars ($1,000,000) for injury to any one person and not less
than Five Hundred Thousand Dollars ($500,000) with respect to damage to
property. The limits of such insurance do not necessarily limit the liability
of Tenant hereunder. All public liability and property damage policies shall
contain a provision that Landlord, although named as an insured, shall
nevertheless be entitled to recovery under said policies for any loss
occasioned to it, its partners, agents and employees by reason of the
negligence of Tenant.
(d) Workers' Compensation Insurance. Tenant shall, at all times during the
term hereof, maintain in effect workers' compensation insurance as required by
applicable statutes.
(e) Adjustment. Every three (3) years during the term of this Lease, or
whenever Tenant materially improves or alters the Premises, whichever is
earlier, Landlord and Tenant shall mutually agree to increases in Tenant's
insurance policy limits for the insurance to be carried by Tenant as set forth
in this Section. If Landlord and Tenant cannot mutually agree upon the amounts
of said increases within thirty (30) days after notice from Landlord, then the
insurance policy limits set forth in this Section shall be adjusted upward by an
accredited insurance appraiser approved by Landlord to reflect increased
replacement costs and increased limits of liability then prevailing generally in
the local real estate industry for comparable property.
(f) Landlord's Insurance. Landlord shall at all times from and after
substantial completion of the Premises maintain in effect as an item of Expense
a policy or policies of insurance covering the Common Area and the buildings in
the Project in an amount up to one hundred percent (100%) of the actual
replacement cost thereof (exclusive of the cost of excavations, foundations and
footings) from time to time during the term of this Lease, providing protection
against rental loss and any peril generally included in the classification "Fire
and Extended Coverage" which may include insurance against sprinkler damage,
vandalism, malicious mischief, earthquake and third party liability, and
including such coverages in such amounts as Landlord may designate. Landlord's
obligation to carry the insurance provided for herein may be brought within
the coverage of any so-called blanket policy or policies of insurance carried
and maintained by Landlord, provided that the coverage afforded will not be
reduced or diminished by reason of the use of such blanket policy of
insurance.
(g) Waiver of Subrogation. Landlord and Tenant each hereby waives any and
all rights of recovery against the other or against the directors, officers,
shareholders, partners, employees, agents and representatives of the other, on
account of loss or damage of such waiving party or its property, or the property
of others under its control, to the extent that such loss or damage is insured
against
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under any fire and extended coverage insurance policy which either may have in
force at the time of such loss or damage. Tenant shall, upon obtaining the
policies of insurance required under this Lease, give notice to its insurance
carrier(s) that the foregoing mutual waiver of subrogation is contained in
this Lease. The waivers set forth herein shall be required to the extent that
same are available from each party's insurer without additional premium; if an
extra charge is incurred to obtain such waiver, it shall be paid by the party
in whose favor the waiver runs within fifteen (15) days after written notice
from the other party.
18. DAMAGE AND DESTRUCTION
(a) Partial Damage - Insured. If the Premises, Building or Common Area are
damaged by a risk covered under fire and extended coverage insurance protecting
Landlord, then Landlord shall restore such damage provided insurance proceeds
are available to Landlord to pay eighty percent (80%) or more of the cost of
restoration, and provided such restoration by Landlord can be completed within
six (6) months after the commencement of work, in the opinion of a registered
architect or engineer appointed by Landlord. In such event this Lease shall
continue in full force and effect so long as the Premises can be used by Tenant,
except that Tenant shall, so long as the damage is not due to the act or
omission of Tenant, be entitled to an equitable reduction of Rent and Expenses
while such restoration takes place, such reduction to be based upon the extent
to which the damage and the restoration efforts directly and materially
interfere with Tenant's use of the Premises.
(b) Partial Damage - Uninsured. If the Premises, Building or Common Area
are damaged by a risk not covered by such insurance or the insurance proceeds
available to Landlord are less than eighty percent (80%) of the cost of
restoration, or if the restoration cannot be completed within six (6) months
after the commencement of work in the opinion of the registered architect or
engineer appointed by Landlord, then Landlord shall have the option either to
(i) repair or restore such damage, this Lease continuing in full force and
effect so long as the Premises can be used by Tenant, but the Rent and Expenses
to be equitably reduced as hereinabove provided, or (ii) give notice to Tenant
at any time within ninety (90) days after such damage terminating this Lease as
of a date to be specified in such notice, which date shall be not less than
thirty (30) nor more than sixty (60) days after giving such notice. If such
notice is given, this Lease shall expire and any interest of Tenant in the
Premises shall terminate on the date specified in such notice and the Rent and
Expenses, reduced by an equitable reduction (except as hereinabove provided)
based upon the extent, if any, to which such damage directly and materially
interfered with Tenant's use of the Premises, shall be paid to the date of
such termination, and Landlord agrees to refund to Tenant any Rent or Expenses
theretofore paid in advance for any period of time subsequent to such
termination date.
(c) Total Destruction. If the Premises are totally destroyed (i.e., over
eighty percent (80%) of the Premises is destroyed or if Tenant cannot use the
Premises without major restoration) or if in Landlord's judgment the Premises
cannot be restored as set forth above, then, notwithstanding the
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availability of insurance proceeds, this Lease shall be terminated effective as
of the date of the damage,
(d) Landlord's Obligations. Landlord shall not be required to carry
insurance of any kind on Tenant's property and shall not in the absence of
Landlord's negligence or wrongful acts be required to repair any injury or
damage thereto by fire or other cause, or to make any restoration or replacement
of any paneling, decorations, partitions, ceilings, floor covering, office
fixtures or any other improvements or property installed in the Premises by or
at the direct or indirect expense of Tenant, and Tenant shall be required to
restore or replace same in the event of damage and shall have no claim against
Landlord for any loss suffered by reason of any such damage, destruction, repair
or restoration. Notwithstanding anything to the contrary contained in this
Section, Landlord shall have the option not to repair, reconstruct or restore
the Premises with respect to damage or destruction as described in this Section
occurring during the last twelve (12) months of the term of this Lease or any
extension thereof, provided, however, that if Landlord exercises such option
this Lease shall be terminated upon such exercise.
(e) Waiver by Tenant. It is expressly agreed that this Section shall govern
the rights of Landlord and Tenant in the event of damage and destruction and
supersedes the provisions of any statutes with respect to any damage or
destruction of the Premises.
19. CONDEMNATION
If all or a substantial part of the Premises, Building or Common Area is
taken or appropriated for public or quasi-public use by the right of eminent
domain or otherwise by taking in the nature of inverse condemnation, with or
without litigation, or is transferred by agreement in lieu thereof (any of the
foregoing being referred to herein as a "taking"), either party hereto may, by
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written notice given to the other within thirty (30) days of receipt of notice
of such taking, elect to terminate this Lease as of the date possession is
transferred pursuant to the taking; provided, however, that before such party
may terminate this Lease for a taking, such taking shall be of such an extent
and nature as to economically frustrate its business therein, or to
substantially handicap, impede or impair its use thereof. No award for any
partial or entire taking shall be apportioned, and Tenant hereby assigns to
Landlord any and all rights of Tenant now or hereafter arising in or to the
same or any part thereof; provided, however, that Tenant may file a separate
claim for an award and nothing contained herein shall be deemed to give
Landlord any interest in, or to require Tenant to assign to Landlord, any
award made to Tenant for the taking of personal property belonging to Tenant.
In the event of a taking which does not result in a termination of this Lease,
Rent and Expenses shall be equitably reduced to the extent Tenant's business
in or use of the Premises is economically impaired as described above. No
temporary taking of the Premises or any part of the Project shall terminate
this Lease, or give Tenant any right to any abatement of Rent and Expenses
hereunder, except that Rent and Expenses shall be equitably reduced as
described above during that portion of any temporary taking lasting more than
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thirty (30) days. To the extent the provisions of this Section conflict with
California Code of Civil Procedure Section 1265.130 allowing either party to
petition the court to terminate this Lease for a partial taking, the
provisions of this Section shall govern.
20. LIENS
Tenant shall keep the Premises, the Building and the Project free from any
liens arising out of work performed, materials furnished, or obligations
incurred by Tenant, and shall indemnify, hold harmless and defend Landlord from
any liens and encumbrances arising out of any work performed or materials
furnished by or at the direction of Tenant. Tenant shall give Landlord at least
ten (10) business days prior written notice of the expected date of commencement
of work relating to alteration, improvements, or additions to the Premises and
if requested by Landlord shall secure a completion and indemnity bond for said
work, satisfactory to Landlord, in an amount equal to one and one-half (1 1/2)
times the estimated cost of such work. Landlord shall have the right at all
times to keep posted on the Premises any notices permitted or required by law,
or which Landlord shall deem proper, for the protection of Landlord and the
Premises, and any other party having any interest therein, against mechanics'
and materialmens liens. If any claim of lien is filed against the Premises or
any part of the Project or any similar action affecting title to such property
is commenced, the party receiving notice of such lien or action shall
immediately give the other party written notice thereof. If Tenant fails, within
twenty (20) days following the imposition of any lien, to cause such lien to be
released of record by payment or posting of a proper bond, Landlord shall have,
in addition to all other remedies provided herein and by law, the right (but no
obligation) to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all costs and expenses incurred by it in connection
therewith (including reasonable attorneys' fees) shall be payable to Landlord by
Tenant on demand, with interest at the Agreed Rate from the date of expenditure.
21. DEFAULTS BY TENANT
The occurrence of any one or more of the following events shall constitute
a material default and breach of this Lease by Tenant:
(a) The abandonment of the Premises by Tenant.
(b) The failure by Tenant to make any payment of Rent or Expenses or of any
other sum required to be made by Tenant hereunder, as and when due.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Tenant, if
such failure is not cured within thirty (30) days after written notice thereof
from Landlord to Tenant; provided, however, that if the nature of Tenant's
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default is such that it cannot be cured solely by payment of money and more
than thirty (30) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant commences such cure within the thirty
(30) day period and thereafter diligently prosecutes such cure to completion;
provided, further, that repeated breaches or defaults by Tenant [more than
three (3) in any twelve (12) month period] shall entitle Landlord at its
option, to terminate this Lease unless Tenant furnished Landlord with adequate
assurances, in Landlord's sole judgment, against further defaults; and
provided, further, that violations by Tenant of the Rules and Regulations
described in Section 36 which interfere with the rights of other tenants or
which constitute a nuisance or hazard shall be cured by Tenant within forty-
eight (48) hours after written notice thereof from Landlord, failing which
Landlord may (but need not) cure same, in which event Tenant shall pay
Landlord, within ten (10) days after written notice thereof by Landlord, the
amount expended by Landlord to effect such cure together with an
administrative charge of fifteen percent (15%) of the amount thereof.
(d) The making by Tenant of any general assignment for the benefit of
creditors, the filing by or against Tenant of a petition to have Tenant adjudged
a bankrupt or of a petition for reorganization or arrangement under any law
relating to bankruptcy [unless, in the case of a petition filed against Tenant,
the same is dismissed within sixty (60) days] or the appointment of a trustee or
receiver to take possession of, or the attachment, execution or other judicial
seizure of, substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged within
thirty (30) days.
Any notice required or permitted by this Section is intended to satisfy to
the maximum extent possible any and all notice requirements imposed by law on
Landlord. Landlord may serve a statutory notice to quit, a statutory notice to
pay rent or quit, or a statutory notice of default, as the case may be, to
effect the giving of any notice required by this Section.
22. LANDLORD'S REMEDIES
In the event of any material default or breach of this Lease by Tenant,
Landlord's obligations under this Lease shall be suspended and Landlord may at
any time thereafter, without limiting Landlord in the exercise of any other
right or remedy at law or in equity which Landlord may have (all remedies
provided herein being non-exclusive and cumulative), do any one or more of the
following:
(a) Maintain this Lease in full force and effect and recover the Rent,
Expenses and other monetary charges as they become due, without terminating
Tenant's right to possession irrespective of whether Tenant shall have abandoned
the Premises. If Landlord does not elect to terminate the Lease, Landlord shall
have the right to attempt to relet the Premises at such rent and upon such
conditions, and for such a term, as Landlord deems appropriate in its sole
discretion and to do all acts necessary with regard thereto, without being
deemed to have elected to terminate the Lease, including re-entering the
Premises to make repairs or to maintain or modify the Premises, and removing all
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persons and property from the Premises; which property if removed may at
Landlord's election be abandoned or stored in a public warehouse or elsewhere
at the cost of and for the account of Tenant. Reletting may be for a period
shorter or longer than the remaining term of this Lease, and for more or less
rent, but Landlord shall have no obligation to relet at less than prevailing
market rental rates. If reletting occurs, this Lease shall terminate
automatically when the new tenant takes possession of the Premises and
commences rent payment. Notwithstanding that Landlord does not elect to
terminate the Lease initially, Landlord at any time thereafter may elect to
terminate the Lease by virtue of any uncured default by Tenant. In the event
of any such termination, Landlord shall be entitled to recover from Tenant any
and all damages incurred by Landlord by reason of Tenant's default [including,
without limitation, the damages described in Section 22(b) below], as well as
all costs of reletting, including commissions, reasonable attorneys' fees,
restoration or remodeling costs, and costs of advertising.
(b) Terminate Tenant's right to possession by any lawful means, in which
case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event Landlord shall be entitled
to recover from Tenant all damages incurred by Landlord by reason of Tenant's
default including (without limitation) the following: (1) the worth, at the time
of award, of any unpaid Rent which had been earned at the time of such
termination; plus (2) the worth, at the time of award, of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rental loss that Tenant proves could have been
reasonably avoided; plus (3) the worth, at the time of award, of the amount by
which the unpaid Rent for the balance of the term after the time of award
exceeds the amount of such Rental loss that Tenant proves could have been
reasonably avoided; plus (4) any other amount, and court costs, necessary to
compensate Landlord for all the detriment proximately caused by Tenant's default
or which in the ordinary course of things would be likely to result therefrom
(including, without limiting the generality of the foregoing, the amount of any
commissions and/or finder's fee for a replacement tenant); plus (5) at
Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law. As used in
subsections (1) and (2) of this Section 22(b), the "worth, at the time of award"
-----------------------------
is to be computed by allowing interest at the then maximum rate of interest
allowable under law which could be charged Tenant by Landlord, and, as used in
subsection (3) of this Section 22(b), the "worth, at the time of award" is to
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be computed by discounting such amount at the discount rate of the U.S.
Federal Reserve Bank of San Francisco at the time of award, plus one percent
(1%). The term "Rent," as used in the Section, shall be deemed to be and to
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mean all Rent, Expenses, parking fees and other monetary sums required to be
paid by Tenant pursuant to this Lease or as defined in Section 4(a) hereof.
For the purpose of determining the amount of "unpaid Rent which would have
been earned after termination" or the "unpaid Rent for the balance of the
term" (as referenced in subsections (2) and (3) hereof), the amount of parking
fees and Expenses shall be deemed to increase annually for the balance of the
term by an amount equal to the average annual percentage increase in parking
fees and Expenses during the three (3) calendar years preceding the year in
which the Lease was terminated, or, if such termination shall occur prior to
the
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expiration of the third calendar year occurring during the term of this Lease,
then the amount of parking fees and Expenses shall be deemed to increase
monthly for the balance of the term by an amount equal to the average monthly
percentage increase in parking fees and Expenses during all of the calendar
months preceding the month in which the Lease was terminated.
(c) Collect sublease rents (or appoint a receiver to collect such rent) and
otherwise perform Tenant's obligations at the Premises, it being agreed,
however, that neither the filing of a petition for the appointment of a receiver
for Tenant nor the appointment itself shall constitute an election by Landlord
to terminate this Lease.
(d) Proceed to cure the default at Tenant's sole cost and expense, without
waiving or releasing Tenant from any obligation hereunder. If at any time
Landlord pays any sum or incurs any expense as a result of or in connection with
curing any default of Tenant (including any administrative fees provided for
herein and reasonable attorneys' fees), the amount thereof shall be immediately
due as of the date of such expenditure and, together with interest at the Agreed
Rate from the date of such expenditures, shall be paid by Tenant to Landlord
immediately upon demand, and Tenant hereby covenants to pay any and all such
sums,
(e) If Tenant is not occupying the Premises, retain possession of all of
Tenant's fixtures, furniture, equipment, improvements, additions and other
personal property left in the Premises or, at Landlord's option, at any time, to
require Tenant to forthwith remove same, and if not so removed to deem them
abandoned and dispose of same.
(f) Additional Remedies. Upon the occurrence of any of the events specified
in Sections 21 (d) or 21 (e), if Landlord shall elect not to exercise, or by law
shall not be able to exercise, its right hereunder to terminate this Lease,
then, in addition to any other rights or remedies of Landlord under this Lease
or provided by law, (i) Landlord shall not be obligated to provide Tenant with
any of the services specified in Section 12, or otherwise specified in the Lease
unless Landlord has received compensation in advance for such services, and the
parties agree that Landlord's reasonable estimate of the compensation required
with respect to such services shall control; and (ii) neither Tenant, as debtor
in possession, nor any trustee or other person (collectively, the "Assuming
---------
Tenant") shall be entitled to assume this Lease, unless on or before the date
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of such assumption, the Assuming Tenant (A) cures, or provides adequate
assurance that such Assuming Tenant will promptly cure, any existing default
under this Lease; (B) compensates, or provides adequate assurance that the
Assuming Tenant will promptly compensate Landlord for any loss (including,
without limitation, reasonable attorneys' fees and disbursements, including on
appeal and in connection with any bankruptcy) resulting from such default; and
(C) provides adequate assurance of future performance under this Lease. Tenant
covenants and agrees that, for such purposes (i) any cure or compensation
shall be effected by the immediate payment of any monetary default or any
required compensation, or the immediate correction acceptable to Landlord of
any nonmonetary default; (ii) any "adequate assurance" of such cure or
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compensation shall be effected by the establishment of an escrow fund for the
amount at issue or by other method acceptable to Landlord; and (iii) "adequate
assurance" of future performance shall be effected by the establishment of an
escrow fund for the amount at issue or other method acceptable to Landlord.
Provided, further, upon the occurrence of any of the events specified in
Section 21(d) prior to the date fixed as the Commencement Date (whether or not
such default is cured within the time period, if any, provided in such
Section), this Lease shall ipso facto be cancelled and terminated. In such
event, (i) neither Tenant nor any person claiming through or under Tenant, or
by virtue of any statute or order of any court, shall be entitled to
possession of the Premises; and (ii) in addition to such other rights and
remedies provided in this Section 22, (A) Landlord may retain as damages any
Rent, Security Deposit (if any) or monies received from Tenant or others on
account of Tenant; and (B) the Concession Advance shall be immediately due and
payable. The foregoing is a material consideration to Landlord for the
execution of this Lease.
All covenants and agreements to be performed by Tenant under this Lease
shall be performed by Tenant at Tenant's sole cost and expense and without any
offset to or abatement of Rent or Expenses.
23. DEFAULTS BY LANDLORD
Landlord shall not be deemed to be in default in the performance of any
obligation under this Lease unless and until it has failed to perform such
obligation within thirty (30) days after receipt of written notice by Tenant to
Landlord specifying such failure; provided, however, that if the nature of
Landlord's default is such that more than thirty (30) days are required for its
cure, then Landlord shall not be deemed to be in default if it commences such
cure within the thirty (30) day period and thereafter diligently prosecutes such
cure to completion. Tenant agrees to give any Mortgagee a copy, by certified
mail, of any notice of default served upon Landlord, provided that prior to such
notice Tenant has been notified in writing (by way of Notice of Assignment of
Rents and Leases, or otherwise) of the address of such Mortgagee. Tenant further
agrees that if Landlord shall have failed to cure such default within the time
provided for in this Lease, then any such Mortgagee shall have an additional
forty-five (45) days within which to cure such default on the part of the
Landlord or if such default cannot be cured within that time, then such
additional time as may be necessary if within that forty-five (45) days the
Mortgagee has commenced and is pursuing the remedies necessary to cure such
default (including but not limited to commencement of foreclosure proceedings,
if necessary to effect such cure), in which event this Lease shall not be
terminated while such remedies are being so pursued. If Tenant recovers any
judgment against Landlord for a default by Landlord of this Lease, the
judgment shall be satisfied only out of the interest of Landlord in the
Project and neither Landlord nor any of its partners, shareholders, officers,
directors, employees or agents shall be personally liable for any such default
or for any deficiency.
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24. COSTS OF SUIT
If either party brings action for relief against the other, declaratory or
otherwise, arising out of this Lease, including any suit by Landlord for the
recovery of Rent or possession of the Premises, the losing party shall pay the
successful party its costs incurred in connection with and in preparation for
said action, including its reasonable attorneys' fees (which costs shall be
deemed to have accrued on the commencement of such action and shall be paid
whether or not such action is prosecuted to judgment, it being agreed that to be
the successful party a party need not necessarily have recovered a judgment, but
shall be the party which, in light of all the facts and circumstances of the
case, shall be deemed to be without fault or to have a lesser degree of fault
than the other party). If Landlord, without fault on Landlord's part, is made a
party to any action instituted by Tenant against a third party or by a third
party against Tenant or by or against any person holding under or using the
Premises by license of Tenant, or for the foreclosure of a lien for labor or
material furnished to or for Tenant or any such other person, or otherwise
arising out of or resulting from any act or omission of Tenant or of any such
other person, Tenant shall at its cost and at Landlord's option defend Landlord
therefrom and further, except to the extent Landlord is found separately liable
for its own negligence or wrongful acts, indemnify and hold Landlord harmless
from any judgment rendered in connection therewith and all costs and expenses
(including reasonable attorneys' fees) incurred by Landlord in connection with
such action.
25. SURRENDER OF PREMISES; HOLDING OVER
(a) Surrender. On expiration or termination of this Lease, Tenant shall
surrender to Landlord the Premises, and all Tenant's improvements thereto and
alterations thereof, broom clean and in good condition (except for ordinary wear
and tear, destruction to the Premises covered by Section 18 of this Lease, and
for alterations that Tenant has the right to remove or is obligated to remove,
so long as Tenant repairs any damage to the Premises under the provisions of
this Section or Section 15), and shall remove all of its personal property
including any signs, notices and displays. Tenant shall perform all restoration
made necessary by the removal of any such improvements or alterations or
personal property, prior to the expiration of the Lease term. If any such
removal would damage the Building structure, Tenant shall give Landlord prior
written notice thereof and Landlord may elect to make such removal at Tenant's
expense or otherwise to require Tenant to post security for such restoration.
Landlord may retain or dispose of in any manner any such improvements or
alterations or personal property that Tenant does not remove from the Premises
on expiration or termination of the term as allowed or required by this Lease
and title to any such improvements or alterations or personal property that
Landlord so elects to retain or dispose of shall vest in Landlord for
Landlord's costs of storing, removing and disposing of any such improvements,
alterations or personal property which Tenant fails to remove from the
Premises. Tenant shall indemnify, defend and hold Landlord harmless from all
damages, loss, cost and expense (including reasonable attorneys' fees) arising
out of or in connection with Tenant's failure to surrender the Premises in
accordance with this Section.
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(b) Holding Over. If Tenant holds over after the term hereof, such
tenancy shall be at sufferance only, and not a renewal hereof or an extension
for any further term, and in such case Rent shall be payable at a rental in
the amount of two hundred percent (200%) of the Rent in effect as of the last
month of the term hereof and at the time specified in this Lease, and such
tenancy shall be subject to every other term, covenant and agreement contained
herein other than any provisions for rent concessions, Landlord's Work, or
optional rights of Tenant requiring Tenant to exercise same by written notice
(such as options to extend the term of the Lease). The foregoing shall not,
however, be construed as a consent by Landlord to any holding over by Tenant
and Landlord reserves the right to require Tenant to surrender possession of
the Premises upon expiration or termination of this Lease.
26. SURRENDER OF LEASE
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work as a merger. Such surrender or cancellation
shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
of any or all such subleases or subtenancies. The delivery of keys to the
Premises to Landlord or its agents shall not, of itself, constitute a surrender
and termination of this Lease.
27. TRANSFER OF LANDLORD'S INTEREST
If Landlord sells or transfers its interest in the Premises (other than a
transfer for security purposes) Landlord shall be released from all obligations
and liabilities accruing thereafter under this Lease, if Landlord's successor
has assumed in writing Landlord's obligations under this Lease. Any Security
Deposit, prepaid Rent or other funds of Tenant in the hands of Landlord at the
time of transfer shall be delivered to such successor and Tenant agrees to
attorn to the purchaser or assignee, provided all Landlord's obligations
hereunder are assumed in writing by such successor. Notwithstanding the
foregoing, Landlord's successor shall not be liable to Tenant for any such funds
of Tenant which Landlord does not deliver to the successor.
28. ASSIGNMENT AND SUBLETTING
(a) Landlord's Consent Required. Tenant shall not sell, assign, mortgage,
pledge, hypothecate or encumber this Lease (any such act being referred to
herein as an "assignment"), and shall not sublet the Premises or any part
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thereof, without the prior written consent of Landlord in each instance, which
consent shall not be unreasonably withheld, and any attempt to do so without
such consent shall be voidable by Landlord and, at Landlord's election, shall
constitute a material default under this Lease.
(b) Tenant's Application. If Tenant desires at any time to assign this
Lease (which assignment shall in no event be for less than its entire interest
in this Lease) or to sublet the Premises or any portion thereof, Tenant shall
submit to Landlord at least sixty (60) days prior to the proposed effective
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date of the transaction ("Proposed Effective Date"), in writing, a notice of
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intent to assign or sublease, setting forth: (i) the Proposed Effective Date,
which shall be no less than sixty (60) nor more than ninety (90) days after
the sending of such notice; (ii) the name of the proposed subtenant or
assignee; (iii) the nature of the proposed subtenant's or assignee's business
to be carried on in the Premises; and (iv) a description of the terms and
provisions of the proposed sublease or assignment. Such notice shall be
accompanied by (i) such financial information as Landlord may request
concerning the proposed subtenant or assignee, including recent financial
statements and bank references; (ii) evidence satisfactory to Landlord that
the proposed subtenant or assignee will immediately occupy and thereafter use
the affected portion of the Premises for the entire term of the sublease or
assignment; (iii) a copy of the proposed sublease or assignment agreement; and
(iv) any fee required under Section 28(h). During the time that Landlord has
in which to exercise the options available to Landlord upon the giving of such
notice, as hereinafter described, Tenant shall not sublet all or any part of
the Premises nor assign all or any part of this Lease.
(c) Landlord's Option to Recapture Premises. If Tenant proposes to sublease
all or part of the Premises for the balance of the Lease term, Landlord may, at
its option upon written notice to Tenant given within thirty (30) days after its
receipt of the above-described notice from Tenant, elect to recapture such
portion of the Premises as Tenant proposes to sublease and upon such election by
Landlord, this Lease shall terminate as to the portion of the Premises
recaptured. In the event a portion only of the Premises is recaptured, the
Rental payable under this Lease, the Security Deposit, and Tenant's Share shall
be proportionately reduced based on the rentable square footage retained by
Tenant and the rentable square footage leased by Tenant hereunder immediately
prior to such recapture and termination, and Landlord and Tenant shall thereupon
execute an amendment of this Lease in accordance therewith. If Landlord
recaptures only a portion of the Premises, it shall construct and erect at its
sole cost such partitions as may be required to sever the space retained by
Tenant from the space recaptured by Landlord; provided, however, that said
partitions need only be finished in Building Standard condition. Landlord may,
at is option, lease the recaptured portion of the Premises to the proposed
subtenant without liability to Tenant. If Landlord does not elect to recapture
pursuant to this Section, Tenant may thereafter enter into a valid sublease with
respect to the Premises, provided Landlord, pursuant to this Section, consents
thereto, and provided further that (i) the sublease is executed within ninety
(90) days after notification to Landlord of such proposal, and (ii) the rental
therefor is not less than that stated in such notification. Any termination as
provided in this Section 28(c) shall be subject to the written consent of any
Mortgagee of Landlord. The effective date of any such termination shall be the
Proposed Effective Date so long as Tenant has complied with the provisions of
Section 28(b) above, and otherwise shall be as specified in Landlord's notice
of termination.
(d) Approval/Disapproval Standards. In the event that Tenant complies with
the provisions of Section 28(b), and Landlord does not exercise an option
provided to Landlord under Section 28(c), Landlord's consent to a proposed
assignment or sublease shall not be unreasonably withheld. In
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determining whether to grant or withhold consent to a proposed assignment or
sublease, Landlord may consider any reasonable factor. Without limiting what
may be construed as a reasonable factor, it is hereby agreed that any one of
the following factors will be reasonable grounds for disapproval of a proposed
assignment or sublease:
(i) Tenant has not complied with the requirements set forth in Section
28(b) above;
(ii) The proposed assignee or subtenant does not, in Landlord's
reasonable judgment, have sufficient financial worth, considering the
responsibility involved;
(iii) The proposed assignee or subtenant does not, in Landlord's
reasonable judgment, have a good reputation as a tenant of property;
(iv) Landlord has had prior negative leasing experience with the proposed
assignee or subtenant;
(v) The use of the Premises by the proposed assignee or subtenant will
not be identical to the use permitted by this Lease;
(vi) In Landlord's reasonable judgment, the proposed assignee or
subtenant is engaged in a business, and the Premises, or the relevant part
thereof, will be used in a manner that is not in keeping with the then current
standards of the Building, or that will violate any restrictive or exclusive
covenant as to use contained in any other lease of space in the Building or the
Project;
(vii) The use of the Premises by the proposed assignee or subtenant will
violate any applicable law, ordinance or regulation;
(viii) The proposed assignee or subtenant, or any person that, directly
or indirectly, controls, is controlled by, or is under common control with, the
proposed assignee or subtenant, or any person who controls the proposed assignee
or subtenant, is then an occupant of a part of the Building or the Project;
(ix) The proposed assignee or subtenant is a person with whom Landlord is
negotiating to lease space in the Building or the Project;
(x) Tenant shall have advertised or publicized the availability of the
Premises without prior notice to, and approval by, Landlord;
(xi) The proposed assignment or sublease fails to include all of the
terms and provisions required to be included therein pursuant to this Section;
or
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(xii) Tenant is then in default of any obligation of Tenant under this
Lease, or Tenant has defaulted under this Lease on three (3) or more occasions
during the twelve (12) months preceding the date that Tenant shall request
consent.
(e) Approval/Disapproval Procedure. Landlord shall approve or disapprove
the proposed assignment or sublease by written notice to Tenant. If Landlord
shall exercise any option to recapture the Premises as herein provided, or
denies a request for consent to a proposed sublease or assignment, Landlord
shall not be liable to the proposed assignee or subtenant, or to any broker or
other person claiming a commission or similar compensation in connection with
the proposed assignment or sublease. If Landlord approves the proposed
assignment or sublease, Tenant shall, prior to the Proposed Effective Date,
submit to Landlord all executed originals of the assignment or sublease
agreement for execution by Landlord on the signature pages thereof after the
words "The foregoing is hereby consented to by Landlord." Provided such
assignment or sublease agreement is in accordance with the terms approved by
Landlord, Landlord shall execute each original as described above and shall
retain two originals for its file and return the others to Tenant. No purported
assignment or sublease shall be deemed effective as against Landlord and no
proposed assignee or subtenant shall take occupancy unless such document is
delivered to Landlord in accord with the foregoing.
(f) Required Provisions. Any and all assignment or sublease agreements
shall (i) contain such terms as are described in Tenant's notice under Section
28(b) above or as otherwise agreed by Landlord, (ii) prohibit further
assignments or subleases, (iii) impose the same obligations and conditions on
the assignee or sublessee as are imposed on Tenant by this Lease except as to
Rent and term or as otherwise agreed by Landlord, (iv) be expressly subject and
subordinate to each and every provision of this Lease, (v) have a term that
expires on or before the expiration of the term of this Lease, (vi) provide that
if Landlord succeeds to sublessor's position, Landlord shall not be liable to
sublessee for advance rental payments, deposits or other payments which have not
been actually delivered to Landlord by the sublessor, and (vii) provide that
Tenant and/or the assignee or sublessee shall pay Landlord the amount of any
additional costs or expenses incurred by Landlord for repairs, maintenance or
otherwise as a result of any change in the nature of occupancy caused by the
assignment or sublease. Any and all sublease agreements shall also provide
that in the event of termination, re-entry, or dispossession by Landlord under
this Lease, Landlord may, at its option, take over all of the right, title and
interest of Tenant as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of the sublease, except that Landlord shall not: (i) be liable for
any previous act or omission of Tenant under the sublease; (ii) be subject to
any offset not expressly provided in the sublease, that theretofore accrued to
the subtenant against Tenant; or (iii) be bound by any previous modification
of such sublease or by any previous prepayment of more than one (1) month's
fixed rent or any additional rent then due.
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(g) Payment of Additional Rent Upon Assignment or Sublease. If Landlord
shall give its consent to any assignment of this Lease or to any sublease of the
Premises, Tenant shall, in consideration therefor, pay to Landlord, as
additional Rent:
(i) In the case of an assignment, an amount equal to all sums and other
consideration paid to Tenant by the assignee for, or by reason of, such
assignment (including, without limiting the generality of the foregoing, all
sums paid for the sale of Tenant's leasehold improvements); and
(ii) In the case of a sublease, any rents, additional charges, or other
consideration payable under the sublease by the subtenant to Tenant that are in
excess of the Rent and Tenant's Share of Expenses accruing during the term of
the sublease in respect of the subleased space (at the rate per square foot
payable by Tenant hereunder) pursuant to the terms hereof (including, without
limiting the generality of the foregoing, all sums paid for the sale or rental
of Tenant's leasehold improvements).
The sums payable under subsection (i) above shall be paid to Landlord upon
the effective date of the assignment. The sums payable under subsection (ii)
above shall be paid to Landlord as and when payable by the sublessee to Tenant.
Within fifteen (15) days after written request therefor by Landlord, Tenant
shall at any time and from time to time furnish evidence to Landlord of the
amount of all such sums or other consideration received or expected to be
received.
(h) Fees for Review. Simultaneously with the giving of the notice described
in Section 28(b) above, Tenant shall pay to Landlord or Landlord's designee a
non-refundable fee in the amount of Three Hundred Dollars ($300.00) as
reimbursement for expenses incurred by Landlord in connection with reviewing
each such transaction. In addition to such reimbursement, if Landlord retains
the services of an attorney to review the transaction, Tenant shall pay to
Landlord the reasonable attorneys' fees incurred by Landlord in connection
therewith. Tenant shall pay such attorneys' fees to Landlord within fifteen (15)
days after written request therefor.
(i) No Release of Tenant. No consent by Landlord to any assignment or
subletting by Tenant shall relieve Tenant of any obligation to be performed by
Tenant under this Lease, whether occurring before or after such consent,
assignment or subletting, including Tenant's obligation to obtain Landlord's
express prior written consent to any other assignment or subletting. In no event
shall any permitted subtenant assign its sublease, further sublet all or any
portion of is sublet space, or otherwise suffer or permit the sublet space, or
any part thereof, to be used or occupied by others, except upon compliance with,
and subject to the provisions of this Section. The acceptance by Landlord of
payment from any person other than Tenant shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be a consent to any subsequent
assignment or sublease, or to be a release of Tenant from any obligation under
this Lease.
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(i) Assumption of Obligations. Each assignee of Tenant shall assume the
obligations of Tenant under this Lease and shall be and remain liable jointly
and severally with Tenant for the payment of the Rent and the performance of
all the terms, covenants, conditions and agreements herein contained on
Tenant's part to be performed for the term of this Lease. No assignment shall
be binding on Landlord unless the assignee or Tenant delivers to Landlord a
counterpart of this instrument of assignment in recordable form which contains
a covenant of assumption by the assignee satisfactory in substance and form to
Landlord, and consistent with the requirements of this Section. The failure or
refusal of the assignee to execute such instrument of assumption shall not
release or discharge the assignee from its liability to Landlord hereunder.
Landlord shall have no obligation whatsoever to perform any duty to or respond
to any request from any sublessee, it being the obligation of Tenant to
administer the terms of its subleases.
(k) Corporate or Partnership Transfers. If the Tenant is a privately held
corporation, or is an unincorporated association or partnership, the cumulative
or aggregate transfer, assignment or hypothecation of fifty percent (50%) or
more of the total stock or interest in such corporation, association or
partnership shall be deemed an assignment or sublease within the meaning and
provisions of this Section. This Section shall, however, not apply to
assignments or subleases to a corporation (i) into or with which Tenant is
merged or consolidated, (ii) to which substantially all of Tenant's assets are
transferred, or (iii) that controls, is controlled by, or is under common
control with Tenant, provided that, in any of such events:
(i) The successor of Tenant has a net worth, computed in accordance
with generally accepted accounting principles, at least equal to the greater
of (a) the net worth of Tenant immediately prior to such merger, consolidation
or transfer, or (b) the net worth of Tenant herein named on the date of this
Lease;
(ii) Proof satisfactory to Landlord of such net worth shall have been
delivered to Landlord at least ten (10) days prior to the effective date of such
transaction;
(iii) Any such assignment or sublease shall be subject to all of the
terms and provisions of this Lease, and such assignee or sublessee shall
assume, in a written document reasonably satisfactory to Landlord and
delivered to Landlord promptly upon the assignment or sublease, all the
obligations of Tenant under this Lease;
(iv) Tenant shall remain fully liable for all obligations to be
performed by Tenant under this Lease; and
(v) Tenant shall reimburse Landlord, promptly on demand, for Landlord's
reasonable attorneys' fees incurred in conjunction with the processing and
documentation of any such transaction.
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(l) Involuntary Assignment. No interest of Tenant in this Lease shall be
assignable by operation of law (including without limitation, the transfer of
this Lease by testacy or intestacy, or in any bankruptcy or insolvency
proceeding). Each of the following acts shall be considered an involuntary
assignment: (i) If Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or institutes a proceeding under any
bankruptcy law in which Tenant is the bankrupt; or, if Tenant is a partnership
or consists of more than one person or entity, if any partner of the
partnership or other such person or entity is or becomes bankrupt or
insolvent, or makes an assignment for the benefit of creditors; (ii) If a writ
of attachment or execution is levied on this Lease; (iii) If, in any
proceeding or action to which Tenant is a party, a receiver is appointed with
authority to take possession of the Premises; or (iv) there is any assumption,
assignment, sublease or other transfer under or pursuant to the Bankruptcy
Code, 11 U.S.C. 101 et seq. (hereinafter referred to as the "Bankruptcy
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Code"). An involuntary assignment shall constitute a default by Tenant and
- ------
Landlord shall have the right to elect to terminate this Lease, in which case
this Lease shall not be treated as an asset of Tenant. If Landlord shall elect
not to exercise its right hereunder to terminate this Lease in the event of an
involuntary assignment, then in addition to any other rights or remedies of
Landlord under this Lease or provided by law, the provisions of Sections
28(c), (f), (g), (h), (i), (j) and (m) shall apply to any such involuntary
assignment. Such sums, if any, payable pursuant to the referenced Sections
shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Such sums which are not paid or delivered to Landlord
shall be held in trust for the benefit of Landlord, and shall be promptly paid
or turned over to Landlord upon demand. Any person or entity to which this
Lease is assigned pursuant to the provisions of said Code shall be deemed
without further act or deed to have assumed all of the obligations of Tenant
arising under this Lease on and after the date of such assignment. Any such
assignee shall upon demand execute and deliver such instruments and documents
reasonably requested by Landlord confirming such assumption.
(m) Assignment of Sublease Rents. Tenant immediately and irrevocably
assigns to Landlord, as security for Tenant's obligations under this Lease, all
rent from any subletting of all or any part of the Premises, and Landlord, as
assignee and as attorney-in-fact for Tenant for purposes hereof, or a receiver
for Tenant appointed on Landlord's application, may collect such rents and
apply same toward Tenant's obligations under this Lease; except that, until
the occurrence of an act of default by Tenant, Tenant shall have the right and
license to collect such rents.
29. ATTORNMENT
If any proceeding is brought for default under any ground or underlying
lease to which this Lease is subject, or in the event of foreclosure or the
exercise of the power of sale under any mortgage or deed of trust made by
Landlord covering the Premises, Tenant shall attorn to the successor upon any
such foreclosure or sale and shall recognize that successor as Landlord under
this Lease, provided such successor expressly agrees in writing to be bound to
all future obligations by the
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terms of this Lease, and, if so requested, Tenant shall enter into a new lease
with that successor on the same terms and conditions as are contained in this
Lease, for the unexpired term of this Lease then remaining,
30. SUBORDINATION
Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, this Lease shall be subject and
subordinate at all times to: (i) all ground or underlying leases which may now
exist or hereafter be executed affecting the Premises, and (ii) the lien of any
first mortgage or first deed of trust which may now exist or hereafter be
executed in any amount for which the Premises, such ground or underlying leases,
or Landlord's interest or estate in any of them, is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground or underlying leases or any such liens
to this Lease. If any ground or underlying lease terminates for any reason,
Tenant shall, notwithstanding any subordination, attorn to and become Tenant of
the successor in interest to Landlord at the option of such successor in
interest, Tenant covenants and agrees to execute and deliver, upon demand by
Landlord and in the form requested by Landlord, any documents evidencing the
priority or subordination of this Lease with respect to any such ground or
underlying leases or the lien of any such first mortgage or first deed of trust,
and specifically to execute, acknowledge, and deliver to Landlord from time to
time within ten (10) days after written request to do so a subordination of
lease, or a subordination of deed of trust, in substantially the form set forth
in Exhibit D or D-1 respectively, attached hereto, or such other form as may be
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customarily required by any Mortgagee of Landlord, and failure of Tenant to do
so shall be a material default hereunder. Tenant hereby irrevocably appoints
Landlord as its attorney-in-fact to execute, deliver, and record any such
documents in the name and on behalf of Tenant if Tenant fails to comply with the
foregoing,
31. ESTOPPEL CERTIFICATE
Tenant shall from time to time within ten (10) days after prior written
notice from Landlord execute, acknowledge and deliver to Landlord a statement in
writing in the form set forth in Exhibit E attached hereto, or such other form
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as may be customarily required by Landlord's Mortgagee, (i) certifying that
this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this Lease, as so
modified, is in full force and effect) and the date to which the Rent and
other charges are paid in advance, if any, (ii) acknowledging that there are
not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, (or specifying such defaults if they are claimed), and (iii)
containing such other matters as are set forth in such form. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises. Tenant's failure to deliver such statement
within such time shall be conclusive upon Tenant that this Lease is in full
force and effect, without modification except as may be represented by
Landlord, that there are no uncured defaults in Landlord's performance, and
that not more than one
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month's Rent has been paid in advance. Failure of Tenant to so deliver such
statement shall be a material default hereunder. Tenant hereby irrevocably
appoints Landlord as its attorney-in-fact to execute and deliver such
statement to any third party in the name and on behalf of Tenant if Tenant
fails to comply with the foregoing.
32. BUILDING OCCUPANCY PLANNING
Notwithstanding any contrary provision of this Lease, if Landlord requires
the Premises for use in conjunction with another suite or for other reasons
related to Landlord's occupancy plans for the Building, then upon at least
thirty (30) days' prior written notice to Tenant, Landlord shall have the right
to move Tenant to other space in the Building, and thereupon such other space
shall be deemed to be the Premises covered by this Lease. The expense of moving
Tenant, its property and equipment to the substituted space and of improving
same to a condition similar to the then current condition of the Premises shall
be born by Landlord. If the substituted space is smaller or larger than the
Premises the Basic Rent, Security Deposit and Tenant's Share specified in this
Lease shall be adjusted proportionately, and Landlord and Tenant shall execute
an amendment to this Lease in accordance therewith. However, if the substituted
space does not meet with Tenant's approval, Tenant may cancel this Lease upon
thirty (30) days' prior written notice to Landlord, given within ten (10) days
after Tenant's receipt of Landlord's notice referred to above.
33. QUIET ENJOYMENT
So long as Tenant pays all Rent and other sums due under this Lease,
performs its covenants and obligations under this Lease and recognizes any
successor to Landlord in accordance with the terms of this Lease, Tenant shall
lawfully and quietly have, hold and enjoy the Premises without hindrance or
molestation by Landlord or anyone claiming by, through or under Landlord,
subject, however, to all the provisions of this Lease.
34. WAIVER OF REDEMPTION BY TENANT
Tenant hereby waives for Tenant and for all those claiming under Tenant all
right now or hereafter existing to redeem by order or judgment of any court or
by any legal process or writ, Tenant's right of occupancy of the Premises after
any termination of this Lease.
35. WAIVER OF LANDLORD: TENANT'S PROPERTY
Landlord shall, within thirty (30) days after written request from Tenant,
execute and deliver to Tenant any statement in form acceptable to Landlord as
may be required by any supplier, lessor, installment seller or chattel mortgagee
in connection with the installation in the Premises of any personal property or
trade fixtures of Tenant, pursuant to which Landlord shall agree to waive any
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rights it may have or may acquire with respect to any such property, provided
in all cases that such supplier, lessor, installment seller or chattel
mortgagee expressly agrees in writing that: (i) It will remove at its sole
cost and expense all such property from the Premises before the expiration or
termination of the Lease and if it fails to do so within ten (10) days after
written request from Landlord it shall be deemed to have waived any and all
rights it may have had to such property; (ii) Prior to making any such removal
it will advise Landlord in writing of the date and time of such removal and
will, at the time of such removal, allow a representative of Landlord to be
present; (iii) It will promptly and diligently and at its sole cost and
expense repair any and all damage to the Premises attributable to such removal
and shall restore the Premises to substantially the same condition it was in
prior to such removal; (iv) It will allow Landlord to select the person or
persons which will effect such removal, repair and restoration, and will bear
the costs and expenses thereof; (v) It will, if Landlord chooses to exercise
its rights under (iv) above, cause a performance and completion bond,
satisfactory to Landlord, to be furnished to Landlord with regard to the work
of such removal, repair and restoration; (vi) It will promptly pay Landlord
any costs and expenses incurred by Landlord in connection with the enforcement
of Landlord's rights hereunder, including attorneys' fees, and will indemnify
and hold Landlord harmless against any and all claims, loss, cost or expense
arising out of or in connection with such removal, repair and restoration;
(vii) It will pay Landlord interest on any outstanding amounts payable by it
to Landlord at the "Agreed Rate" (as hereinafter defined); (viii) It will not
record such statement without Landlord's prior written consent which Landlord
may withhold in its sole discretion; and (ix) It will not assign its rights or
delegate its duties under such statement without Landlord's prior written
consent.
36. RULES AND REGULATIONS
The Rules and Regulations attached hereto as Exhibit F are expressly made a
---------
part hereof. Tenant agrees to comply with such Rules and Regulations and any
reasonable amendments, modifications or additions thereto as may hereafter be
adopted and published by notice to tenants in the Building, and to cause its
agents, contractors and employees to comply therewith, and agrees that the
violation of any of them shall constitute a default by Tenant under this Lease.
If there is a conflict between the Rules and Regulations and any of the
provisions of this Lease, the Provisions of this Lease shall prevail. Landlord
shall not be responsible to Tenant for the non-performance by any other tenant
or occupant of the Building or of the Project of any of the Rules and
Regulations.
37. NOTICES
Any notice, demand or communication required or permitted to be given
hereunder to Landlord by Tenant shall be personally served or deposited in the
United States mails, duly registered or certified with postage fully prepaid
thereon, addressed to Landlord at Landlord's address as set forth in Section 1
hereof, or to such other address to which Tenant last forwarded Rent, or to such
other parties as Landlord may from time to time designate. Any notice, demand or
communication required or
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permitted to be given hereunder to Tenant by Landlord may be mailed as above
stated to Tenant's address as set forth in Section 1 hereof or delivered
personally to Tenant at the address of the Premises. Either party may by
written notice similarly given designate a different address for notice
purposes, except that Landlord may in any event use the Premises as Tenant's
address for notice purposes. Notice shall be effective when mailed or
delivered as above specified.
38. WAIVER
No delay or omission in the exercise of any right or remedy of Landlord for
any default by Tenant shall impair such right or remedy or be construed as a
waiver. The receipt and acceptance by Landlord of delinquent payments shall not
constitute a waiver of any other default, and shall not constitute a waiver of
timely payment of the particular payment involved. No act or conduct of
Landlord, including, without limitation, the acceptance of keys to the Premises,
shall constitute an acceptance of the surrender of the Premises by Tenant before
the expiration of the term. Only an express notice to such effect from Landlord
to Tenant shall constitute acceptance of the surrender of the Premises
sufficient to terminate this Lease. Landlord's consent to or approval of any act
by Tenant requiring Landlord's consent or approval shall not constitute a
consent or approval of any subsequent act by Tenant. Any waiver by Landlord of
any default must be in writing and shall not be a waiver of any default
concerning the same or any other provision of this Lease.
39. MISCELLANEOUS
(a) Execution by Landlord. The submission of this document for examination
and negotiation does not constitute an offer to lease, or a reservation of, or
an option for, the Premises, This document becomes effective and binding only
upon execution by Tenant and by Landlord. No act or omission of any employee or
agent of Landlord or of Landlord's broker shall alter, change or modify any of
the provisions hereof.
(b) Landlord and Tenant. As used in this Lease, the words "Landlord" and
----------
"Tenant" include the plural as well as the singular. Words used in the neuter
- --------
gender include the masculine and feminine and words in the masculine or feminine
gender include the neuter. If there is more than one person or entity
constituting Landlord or Tenant, the obligations imposed hereunder upon
Landlord or Tenant are joint and several. If Tenant consists of a husband and
wife, the obligations of Tenant hereunder extend individually to the sole and
separate property of each of them as well as to their community property. The
obligations contained in this Lease to be performed by Landlord shall be
binding on Landlord's successors and assigns only during their respective
periods of ownership of the Premises.
(c) Brokers. Tenant shall hold Landlord harmless from all damages
(including reasonable attorneys' fees and costs) resulting from any claims that
may be asserted against Landlord by any
37
<PAGE>
broker, finder, or other person with whom Tenant has or purportedly has dealt,
except The Seeley Company.
(d) Signs. Tenant shall not place or permit to be placed in or upon the
Premises, where visible from outside the Premises, or outside the Premises on
any part of the Building or Project, any signs, notices, drapes, shutters,
blinds, or displays of any type, without the prior written consent of Landlord.
Landlord reserves the right in its sole discretion to place and locate on the
roof or exterior of the Building, and in any area of the Project not leased to
Tenant, any signs, notices, displays and similar items as Landlord deems
appropriate.
(e) Name of Building. Tenant shall not use the name of the Building or the
Project for any purpose other than the address of the business to be conducted
by Tenant in the Premises. Tenant shall not use any picture of the Building or
the Project in its advertising, stationery or in any manner so as to imply that
the entire Building is leased by Tenant. Landlord expressly reserves the right
at any time to change the name of the Building or Project without in any manner
being liable to Tenant therefor,
(f) Parking. During the term of this Lease, Tenant shall only be entitled
to such use of parking spaces in the parking areas located in the Project as
shall be confirmed in writing by the parties, and absent any written agreement
to the contrary, parking for Tenant and its employees, agents, customers,
invitees and licensees shall be on a first-come, first-served basis, at rates
and upon other terms and conditions as may be established from time to time by
Landlord or Landlord's operator of the parking areas. Parking rates may be
hourly, weekly or monthly, or such other rate system as Landlord deems
advisable, and Tenant acknowledges that its employees shall not be entitled to
park in such parking areas located in and about the Building which may from time
to time be designated for visitors of the Building, Landlord may also designate
areas for assigned, reserved or employee parking either within the parking areas
located in and about the Building, or in other areas reasonably close thereto.
Landlord shall have the right to change any such designated parking areas from
time to time. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty as to the suitability of the
parking areas for the conduct of Tenant's business.
(g) Guarantee. If this Lease shall have been guaranteed, any such guarantee
shall be deemed a material part of the consideration for Landlord's execution of
this Lease. If the guarantor under any such guarantee is or becomes bankrupt or
insolvent, makes an assignment for the benefit of creditors, or institutes or is
the subject of any proceeding under the Bankruptcy Code or other similar law for
the protection of creditors (or, if the guarantor is a partnership or consists
of more than one person or entity, if any partner of the partnership or such
other person or entity is or becomes bankrupt or insolvent, institutes any such
proceeding, or makes an assignment for the benefit of creditors), then Landlord
shall have the option to terminate this Lease upon thirty (30) days written
notice unless Tenant, within such thirty (30) day period, provides Landlord with
either (i) a substitute or additional
38
<PAGE>
guarantor satisfactory to Landlord and any Mortgagee of Landlord, or (ii)
adequate assurance of the performance of each and every obligation of Tenant
hereunder, satisfactory to Landlord and such Mortgagee; provided, however,
that no such termination of this Lease shall become effective without the
prior written consent of such Mortgagee.
(h) Approval of Landlord's Mortgagee. Tenant acknowledges that this Lease
is subject to the approval of Landlord's Mortgagee, and Tenant agrees to make
such reasonable modifications to this Lease as may be ordinarily and customarily
requested by Landlord's Mortgagee, so long as such modifications shall not
affect the Rent payable hereunder, increase Tenant's obligations hereunder, or
otherwise adversely affect Tenant in any material way.
(i) Landlord's Financing. In connection with Landlord's financing of the
Premises or any other part of the Project, if Landlord's Mortgagee requires
Tenant to execute, acknowledge and deliver to Landlord or Landlord's Mortgagee
certain documents as may be ordinarily and customarily required by such lender
in connection with financing, including without limitation those documents as
may be required under Sections 30 and 31 of this Lease, Tenant shall be liable
for any and all loss, cost, damage, or expense (including without limitation
reasonable attorneys' fees) which Landlord may sustain or incur as a result of
or in connection with Tenant's unreasonable failure or delay in executing,
acknowledging and delivering such documents, or Tenant's breach of any other
covenant or agreement embodied in this Lease that results in the delay,
impairment or cancellation of Landlord's financing.
(j) Nonrecordability of Lease. Tenant agrees that in no event shall this
Lease or a memorandum hereof be recorded without Landlord's express prior
written consent.
(k) Matters of Record. This Lease and Tenant's rights hereunder are subject
and subordinate in all respects to matters affecting Landlord's title recorded
in the official records of the county recorder's office for the county in which
the Project is located prior or subsequent to the date of execution of this
Lease, and is expressly subject and subordinate to the Declaration of Covenants,
Conditions and Restrictions dated November 9, 1971, and recorded on December 8,
1971, as Document No. 3663 in Book M-3918, Page 76 of the Official Records of
Los Angeles County, State of California. Tenant agrees that as to its
leasehold estate it, and all persons in possession or holding under it, will
conform with and not violate any such covenants, conditions and restrictions,
or other matters, of record.
(l) Severability. If any provision of this Lease shall, to any extent, be
determined by a court of competent jurisdiction to be invalid or unenforceable,
the remainder of this Lease shall not be affected thereby, and every other term
and provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
39
<PAGE>
(m) Construction. All provisions hereof, whether covenants or conditions,
shall be deemed to be both covenants and conditions. The definitions contained
in this Lease shall be used to interpret this Lease.
(n) Interest. Except as expressly provided otherwise in this Lease, any
amount due to Landlord which is not paid when due shall bear interest from the
date due at the prime commercial rate of interest charged from time to time by
CitiBank N.A. plus two percent (2%) per annum, but not to exceed the maximum
rate of interest allowed by law (the "Agreed Rate"). Payment of such interest
--------------
shall not excuse or cure any default by Tenant under this Lease.
(o) Binding Effect; Choice of Law. Except as expressly provided otherwise
in this Lease, all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California.
(p) Waiver of Trial by Jury. Landlord and Tenant each hereby waive trial by
jury in any action, proceeding or counterclaim brought by either against the
other on any matter whatsoever arising out of or in any way connected with this
Lease or Tenant's use or occupancy of the Premises, including any claim of
injury or damage, and any emergency and other statutory remedy with respect
thereto. Landlord and Tenant also agree that the venue of any such action,
proceeding or counterclaim shall be in the City and County of Los Angeles, State
of California.
(q) Time; Rights Cumulative. Time is of the essence of this Lease and each
and every provision hereof, except as may be expressly provided otherwise. All
rights and remedies of the parties shall be cumulative and non-exclusive of any
other remedy at law or in equity.
(r) Inability to Perform. This Lease and the obligations of Tenant
hereunder shall not be affected or impaired because Landlord is unable to
fulfill any of its obligations hereunder or is delayed in doing so, if such
inability or delay is caused by reason of force majeure, strike, labor troubles,
acts of God, acts of government, unavailability of materials or labor, or any
other cause beyond the reasonable control of Landlord.
(s) Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of Tenant represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of Tenant, and that
Tenant is qualified to do business in the State of California, and shall deliver
appropriate certification to that effect if requested.
(t) Partnership Authority. If Tenant is a partnership, joint venture, or
other unincorporated association, each individual executing this Lease on behalf
of Tenant represents that this Lease is binding on Tenant. Furthermore, Tenant
agrees that the execution of any written consent hereunder,
40
<PAGE>
or of any written modification or termination of this Lease, by any general
partner of Tenant or any other authorized agent of Tenant, shall be binding on
Tenant.
(u) Submittal of Financial Statement. At any time and from time to time
during the term of this Lease, within fifteen (15) days after request therefor
by Landlord, Tenant shall supply to Landlord and/or any Mortgagee a current
financial statement or such other financial information as may be required by
Landlord.
(v) Riders. Clauses, plats, addenda, and riders, if any, that are signed by
Landlord and Tenant and affixed to this Lease, are a part hereof,
40. OMITTED
41. SECURITY INTEREST
In consideration of the covenants and agreements contained herein, and as a
material consideration to Landlord for entering into this Lease, Tenant hereby
unconditionally grants to Landlord a continuing security interest in and to all
money and property of any kind or description, including, without limitation,
the Security Deposit, if any, and any advance Rental payment or other deposit,
now in or hereafter delivered to or coming into the possession, custody or
control of Landlord, by or for the account of Tenant, in any manner and for any
purpose, together with any increase in profits or proceeds from such property.
The security interest granted to Landlord hereunder secures payment and
performance of all obligations of Tenant under this Lease now or hereafter
arising or existing, whether direct or indirect, absolute or contingent, or due
or to become due. In the event of a default under this Lease which is not cured
within the applicable grace period, if any, Landlord is and shall be entitled to
all the rights, powers and remedies granted a secured party under the California
Uniform Commercial Code and otherwise available at law or in equity, including,
but not limited to, the right to retain as damages the Security Deposit and
other funds held by Landlord, without additional notice or demand regarding this
security interest. Tenant agrees that it will execute such other documents or
instruments as may be reasonably necessary to carry out and effectuate the
purpose and terms of this Section, or as otherwise reasonably requested by
Landlord, including without limitation, execution of a UCC-1 financing
statement. Landlord's rights and remedies under this Section are in addition
to, and not in lieu of, the provisions of Section 9.
42. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreement, negotiations, brochures, arrangements, or understanding pertaining to
any such matter shall be effective for any purpose unless expressed
41
<PAGE>
herein. No provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the last
date indicated below.
LANDLORD: TENANT:
SAKIOKA FARMS, WORLD FLIGHT CREW SERVICES, INC.,
a California General Partnership a Delaware Corporation
By: By:
------------------------------ ----------------------------------------
General Partner Title: President
--------------------------------------
By: By:
------------------------------ ----------------------------------------
General Partner Title:
--------------------------------------
Dated: , 1992 Dated: January 25 , 1993
--------------------- --------------------------------
42
<PAGE>
EXHIBIT B
VERIFICATION OF TERM AND INITIAL RENT
RE: Lease dated ______________________________ between SAKIOKA FARMS, a
California general partnership ("Landlord") and
______________________________________________("Tenant"), for premises in
__________________________________________________. Tenant hereby verifies
that the information stated below is correct and further acknowledges and
accepts possession of the Premises.
Area: (rentable/usable/gross) sq. ft.
-------------------------
Commencement Date:
-------------------------
Termination Date:
-------------------------
Options:
-------------------------
Initial Rent:
-------------------------
Address for Notices:
-------------------------
-------------------------
-------------------------
-------------------------
Billing Address:
-------------------------
-------------------------
-------------------------
ATTN:
-------------------------
Telephone Number: ( )
-------------------------
Federal Tax I.D. No:
-------------------------
By:
-------------------------
Title:
-------------------------
Date:
-------------------------
<PAGE>
EXHIBIT D
SUBORDINATION OF LEASE
Recording Requested By And
When Recorded Return To:
Attention:
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN THE LEASEHOLD ESTATE IN THE
PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER
OR LATER SECURITY DOCUMENT.
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
I
THIS AGREEMENT made as of the day of , 19
------------ -------------------
among (hereinafter referred to as "Mortgagee"),
------------------------------- ------------
(hereinafter referred to as "Landlord"), and
- -------------------------------- ----------
- -------------------------------------------------------------------------------
(hereinafter referred to as "Tenant").
- ----------------------------------------- ---------
WITNESSETH
WHEREAS, Mortgagee has become the owner and holder of a beneficial interest
under a deed of trust recorded , as
-------------------------------------------
Instrument No. , Official Records, County of
-----------------
- ----------------------------------------, California (hereinafter referred to as
the "Mortgage") covering certain premises described in Exhibit A attached hereto
----------- ---------
(hereinafter referred to as the "Mortgaged Premises") and of the note, bond or
---------------------
other obligation secured thereby (hereinafter referred to as the "Note");
-------
WHEREAS, Tenant is the holder of a leasehold estate in a portion of the
Mortgaged Premises (hereinafter referred to as the "Demised Premises") under and
-------------------
pursuant to the provisions of a certain lease dated
, 19 by and between Tenant and Landlord
- ---------------------------------- ---
(hereinafter referred to as the "Lease");
--------
WHEREAS, Landlord's interest in the Lease has been assigned to Mortgagee as
additional security for the Mortgage; and
<PAGE>
WHEREAS, Tenant has agreed to subordinate the Lease to the Mortgage and
to the lien thereof and Mortgagee has agreed to grant non-disturbance to
Tenant under the Lease on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements herein contained, and other good and valuable
consideration, the receipt of which is hereby acknowledged, Mortgagee and
Tenant hereby covenant and agree as follows:
1. So long as Tenant is not in default in the payment of rent or
additional rent or in the performance of any of the other terms, covenants or
conditions of the Lease on Tenant's part to be performed, Tenant's possession
of the Demised Premises under the Lease, or any extensions or renewals thereof
which may be effected in accordance with any option therefor in the Lease,
shall not be diminished or interfered with by Mortgagee and Mortgagee shall
not join Tenant as a party defendant in any action or proceeding for the
purpose of terminating Tenant's interest and estate under the Lease because of
any default under the Mortgage.
2. If Mortgagee shall become the owner of the Mortgaged Premises or the
Mortgaged Premises shall be sold by reason of foreclosure, trustee's sale or
other proceedings brought to enforce the Mortgage, or if the Mortgaged Premises
shall be transferred by deed in lieu of foreclosure, the Lease shall continue in
full force and effect as a direct Lease between the then owner of the Mortgaged
Premises (including Mortgagee or the grantee under a deed in lieu of
foreclosure) and Tenant, upon and subject to all of the terms, covenants and
conditions of the Lease for the balance of the term thereof remaining and any
extensions or renewals thereof which may be effected in accordance with any
option therefor in the Lease, and Tenant does hereby attorn to Mortgagee or any
other such owner as its Landlord, said attornment to be effective and self-
operative without the execution of any further instruments, except that Tenant
shall neither make, nor be entitled to make, any claim against Mortgagee or
other such owner with respect to any takeover and/or subleased space, and Tenant
shall, from and after Mortgagee's or other such owner's succession to the
interest of Landlord under the Lease, have the same remedies for the breach of
covenant contained in the Lease that Tenant might have had under the Lease
against Landlord; provided further, however, that Mortgagee or other such
owner shall not be:
(a) liable for any act or omission of any prior landlord (including
Landlord); or
(b) subject to any offsets or defenses which Tenant might have against
any prior landlord; or
(c) bound by any prepayment of rent or additional rent which Tenant
might have paid for more than the current month to any prior landlord; or
<PAGE>
(d) bound by any amendment or modification of the Lease or by any
waiver or forbearance on the part of any prior landlord made or given without
the written consent of Mortgagee or any subsequent holder of the Mortgage.
3. The Lease is hereby made, and shall at all times be subject and
subordinate in each and every respect, to the Mortgage and to any and all
renewals, modifications, extensions, substitutions, replacements and/or
consolidations of the Mortgage, but any and all such renewals, modifications,
extensions, substitutions, replacements and/or consolidations, shall
nevertheless be subject to and entitled to the benefit of the terms of this
Agreement.
4. To the extent that the Lease shall entitle the Tenant to notice of any
Mortgage, this Agreement shall constitute such notice to the Tenant with respect
to the Mortgage and to any and all renewals, modifications, extensions,
substitutions, replacements and/or consolidations of the Mortgage.
5. This Agreement may not be modified orally or in any manner other
than by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and acknowledged as of the day and year first above written.
Mortgagee: Tenant:
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
By: By:
----------------------------------- ------------------------------------
Title: Title:
--------------------------------- ----------------------------------
Landlord
- ---------------------------------------
- ---------------------------------------
By:
------------------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT D-1
SUBORDINATION OF DEED OF TRUST
(hereinafter called "Lender")
- ------------------------------------------------- ---------
as owner and holder of a certain promissory note dated
in the principal sum of Dollars ($ )
----------------------------- ------------
and a Deed of Trust dated of even date therewith securing said Note, now a
first lien upon the premises more particularly demised and described in those
certain leases by and between
------------------------------------------------,
as Landlord, and the persons named (whose agreement hereto is evidenced by
unrecorded agreements in the possession of Landlord and Lender) in
Exhibit A attached hereto and made apart hereof, as Tenant, and upon other
- ---------
property, in consideration of such leasing and of the sum of One Dollar ($1.00)
and other good and valuable consideration, receipt of which is hereby
acknowledged,
DO hereby covenant and agree that the said Deed of Trust shall be, and the
same is hereby made, SUBJECT AND SUBORDINATE to said leases with the same force
and effect as if the said leases had been executed, delivered and recorded prior
to the execution, delivery and recording of said Deed of Trust, without regard
to the date on which said leases had been executed, delivered and recorded in
relation to the date on which said Deed of Trust has become an effective lien by
the terms therein demised;
EXCEPT, HOWEVER, that this Subordination shall not affect or be
applicable to and does hereby expressly exclude:
(a) The prior right, claim and lien of the said Deed of Trust in, to and
upon any award or other compensation heretofore or hereafter to be
made for any taking by eminent domain of any part of said premises,
and to the right of disposition thereof in accordance with the
provisions of said Deed of Trust,
(b) The prior right, claim and lien of the said Deed of Trust in, to and
upon any proceeds payable under all policies of fire and rent
insurance upon the said premises and as to the right of disposition
thereof in accordance with the terms of said Deed of Trust, and
(c) Any lien, right, power or interest, if any which may have arisen or
intervened in the period between the recording of the said Deed of
Trust and the execution of the said lease, or any lien or judgment
which may arise at any time under the terms of such leases.
The subordination shall inure to the benefit of and shall be binding upon
the undersigned, its successors and assigns.
<PAGE>
IN WITNESS WHEREOF, this Subordination has been duly signed and delivered
by the undersigned this day of , 19 .
-------------------- -------------------- --
"Lender"
--------------------------------
--------------------------------
By:
------------------------------
By:
------------------------------
<PAGE>
EXHIBIT E
ESTOPPEL STATEMENT
Re: Lease dated (hereinafter the
-------------------------------------
"Lease"), between ,
-------- ------------------------------------------------
(hereinafter the "Lessor") and (hereinafter the
--------- --------------------------
"Lessee"), (and amended on ), concerning the
--------- ----------------------------
premises described in Exhibit A attached hereto (the "Premises").
--------- -----------
As Lessee under the above referenced Lease, the undersigned hereby
acknowledges for the benefit of
--------------------------------------------
("Lender"), which has or is about to make a loan to said Lessor, part of the
security for which will be a mortgage or deed of trust covering the Premises
leased to the undersigned and an assignment of Lessor's interest in the Lease,
the truth and accuracy of the following statements pertaining to said Lease.
1. Lessee has accepted, is satisfied with (except for only nonsubstantial
defects, notice of which has previously been given to Lessor), and is in full
possession of said Premises, including all improvements, additions and
alterations thereto required to be made by Lessor under the said Lease, and
Lessee is not aware of any patent or latent defects in construction of said
improvements (except for only nonsubstantial defects, notice of which has
previously been given to Lessor) which would constitute a default by Lessor
pursuant to the Lease.
2. Lessee is paying the full rent stipulated in said Lease to be paid by
Lessee as of the date hereof with no offsets, defenses or claims.
3. Lessor is not presently in default under any of the terms, covenants or
provisions of said Lease.
4. Lessor has satisfactorily complied with all of the requirements and
conditions precedent to the commencement of the term of said Lease as specified
in said Lease.
5. The current fixed base monthly rent under said Lease is $
-----------
and no moneys have been paid to Lessor in advance of the due date set forth in
the Lease described above, except as follows:
---------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6. The Lease is for a term of years and Lessee has been in
---------
occupancy since and paying
-----------------------------------------------------
rent since .
---------------------------------------------
7. The Lease commenced on .
---------------------------------------
<PAGE>
8. Lessee acknowledges that Lender assumes no liability for its security
deposits, if any, or for sums escrowed with the Lessor for taxes or insurance or
other expenses in the event that Lender acquires the Premises through
foreclosure or through a transfer of title in lieu of foreclosure.
9. Lessee hereby acknowledges (a) that there have been no modifications or
amendments to said Lease other than herein specifically stated, (b) that it has
no notice of a prior assignment, hypothecation or pledge of rents or of the
Lease, (c) that the Lease is in full force and effect and Lessee has no
defenses, setoffs or counterclaims against Lessor arising out of the Lease or in
any way relating thereto, or arising out of any other transaction between Lessee
and Lessor, (d) that the Lease represents the entire agreement between the
parties thereto as to the leased premises, and Lessee neither has nor claims any
right or interest in or under any contract, option or agreement involving the
sale or transfer of the leased premises except as specifically provided in the
Lease, (e) that no prepayment or reduction of rent, and no modification,
termination or acceptance of surrender of the Lease will be valid as to Lender
without the consent of Lender, and (f) that notice of the proposed assignment of
Lessor's interest in said Lease may be given Lessee by Certified or Registered
Mail, Return Receipt Requested, at the Premises, or as otherwise directed
herein.
Dated: , 19
----------------------------------------- ----
LESSEE:
-----------------------------------------
BY:
---------------------------------------------
ITS:
--------------------------------------------
(Address to which notices are to be sent
if other than Premises)
- --------------------------------------------
- --------------------------------------------
<PAGE>
EXHIBIT F
BUILDING RULES AND REGULATIONS
The following rules and regulations shall be applicable to the Building:
(1) No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, or printed or affixed on or to any part of the Building or
Premises if visible from outside the Premises, without the prior written consent
of Landlord. Tenant's identification signs and lettering shall be in accordance
with Landlord's standard requirements for the Building unless otherwise approved
in writing by Landlord, and shall be printed, painted, affixed, or inscribed at
the expense of Tenant by a person approved by Landlord.
(2) Tenant shall not place or maintain any window covering, blinds or
drapes on any window without Landlord's prior written approval. A breach of
this rule will directly and adversely affect the exterior appearance of the
Building. Upon request by Landlord, Tenant shall remove any window covering,
or other item visible from outside the Premises, if installed or placed
without Landlord's written approval.
(3) A directory of the Building will be provided for the display of the
name and location of tenants. Landlord will install at Tenant's expense
directory strips for Tenant's name and a reasonable number of the principal
employees thereof, and Landlord reserves the right to exclude any other names
therefrom,
(4) The sidewalks, halls, passages, exits, entrances, elevators,
escalators, and stairways shall not be obstructed by Tenant or used by it for
any purpose other than for ingress to and egress from the Premises. The halls,
passages, exits, entrances, elevators, escalators, stairways, balconies and
roof are not for the use of the general public and Landlord shall in all cases
retain the right to control and prevent access thereto by all persons whose
presence in the judgment of the Landlord might be prejudicial to the safety,
character, reputation and interests of the Building and its tenants, provided
that nothing herein contained shall be construed so as to prevent such access
to persons with whom Tenant normally deals in the ordinary course of Tenant's
business unless such persons are engaged in illegal activities or are creating
a nuisance. No employee, invitee, contractor or agent of Tenant shall go upon
the roof of the Building.
(5) Tenant shall be responsible for assuring that doors to the Premises are
locked during non-business hours. Such doors shall not be left open during
business hours, except while moving furniture or other items in or out of the
Premises, unless Landlord consents otherwise.
(6) The toilet rooms and urinals, wash bowls and other apparatus therein
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be placed
therein; the expense of breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees,
invitees, contractors or agents, shall have caused it.
<PAGE>
(7) Except as to normal pictures and furnishings, Tenant shall not mark,
drive nails, screw or drill into partitions, woodwork or plaster or in any way
deface the Premises or any part thereof. No boring, cutting or stringing of
wires shall be permitted except with the prior written consent of Landlord and
as Landlord may direct. Tenant shall not lay linoleum, tile, carpet or other
similar floor covering so that the same shall be affixed to the floor of the
Premises in any manner except as approved by Landlord. The expense of
repairing any damage resulting from a violation of this rule or removal of any
floor covering shall be borne by Tenant.
(8) Tenant shall not overload any floor of the Premises or the Building. No
furniture, freight or equipment of any kind shall be brought into the Building
by Tenant or its contractors or agents without prior consent of Landlord and all
moving of the same into or out of the Building shall be done at such time and in
such manner as Landlord shall designate. Landlord shall have the right to
prescribe the weight, size and position of all safes and other heavy objects
brought into the Building and also the time and manner of moving the same in and
out of the Building. Safes and other heavy objects shall, if considered
necessary by Landlord, stand on wood strips of such thickness as is necessary to
properly distribute weight. Landlord will not be responsible for loss or damage
to any property from any such cause, and all damage done to the Building by
moving or maintaining any such safe or other property shall be repaired at the
expense of Tenant. There shall not be used in any part of the Building any hand
truck unless it is equipped with rubber tires and side guards.
(9) Tenant shall not employ any person or persons other than the janitor of
Landlord for the purpose of cleaning the Premises unless otherwise agreed to in
writing by Landlord. Except with the prior written consent of Landlord, no
person or persons other than those approved by Landlord shall be permitted to
enter the Building for the purpose of cleaning same. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness. Landlord shall in no way be
responsible to Tenant for any loss of property on the Premises, however
occurring, or for any damage done to the effects of Tenant or any of its
employees or other persons by the janitor of Landlord. Janitor service shall
include ordinary dusting and cleaning by the janitor assigned to such work and
shall not include cleaning of carpets or rugs, except normal vacuuming, or
moving of furniture and other special services. Janitor service will not be
furnished to rooms which are occupied after 9:30 p.m. Window cleaning shall be
done only by Landlord at reasonable intervals and as Landlord deems necessary.
(10) Tenant shall not use, keep or permit to be used or kept any noxious gas
or substance in the Premises, or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants of
the Building by reason of noise, odors and/or vibrations, or interfere in any
way with other tenants or those having business therein. No tenant shall make or
permit to be made any loud or disturbing noises or disturb or interfere with
occupants of the Building or those having business with them whether by the use
of any musical instrument, radio, phonograph, shouting or in any other manner.
Tenant shall not throw anything out of the doors or down the passageways.
(11) The Premises shall not be used for the storage of merchandise except as
such storage may be incidental to the use of the Premises authorized by the
Lease. No cooking shall be done or permitted in the Premises without Landlord's
consent, except that use by Tenant of Underwriter's
<PAGE>
Laboratory approved microwave ovens or equipment for brewing coffee or similar
beverage shall be permitted. Tenant shall not advertise for day laborers giving
an address at the Premises. The Premises shall not be used for lodging or for
any illegal purposes. Tenant shall not keep or maintain pets or animals of any
type and shall not store or keep bicycles, mopeds or motorcycles in the Premises
or the Building.
(12) Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or flammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied or permitted by
Landlord.
(13) Landlord will direct electricians as to where and how electrical,
telephone and telegraph wires are to be introduced to the Premises. No boring or
cutting for wires will be allowed without the prior consent of Landlord. The
location of telephone switching equipment, call boxes and other similar
equipment in the Premises shall be subject to the approval of Landlord.
(14) Landlord will furnish Tenant free of charge two (2) keys for each
locking door in the Premises. Any additional or replacement keys will be
furnished at a reasonable charge. All keys to offices, rooms and toilet rooms
shall be obtained from Landlord and Tenant shall not duplicate or obtain such
keys from any other source. Upon termination of the Lease, Tenant shall
deliver to Landlord the keys to the offices, rooms and toilet rooms which were
previously furnished to Tenant, failing which Tenant shall pay Landlord the
cost of replacing same or of changing the lock or locks opened by any
unreturned key if Landlord deems it necessary to make such changes. Landlord
shall have the right periodically to change all locks and furnish Tenant with
new keys therefor. Tenant shall not alter any lock or install any new or
additional locks or any bolts on any door of the Premises without the prior
written consent of Landlord (except as to safes, vaults and other secured
areas of Tenant approved by Landlord).
(15) No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except
between such hours and in such elevators as shall be designated by Landlord.
(16) Landlord reserves the right to close and keep locked all entrances and
exit doors of the Building on Saturdays, Sundays, legal holidays and on other
days during non-business hours, as Landlord may deem advisable for the adequate
protection of the Building and the property of its tenants (such hours are
referred to as "After-Hours"). However, during such After-Hours, Tenant and/or
--------------
authorized employees of Tenant, shall be allowed access to the Building upon
presenting proper identification. Landlord shall in no case be liable for
damages for any error with regard to the admission to or exclusion from the
Building of any person. In case of invasion, mob, riot, public excitement, or
other commotion, Landlord reserves the right to prevent access to the Building
during the continuance of same.
(17) The "normal business hours" for the Building are from 7:00 a.m. to 6:00
p.m., Monday through Friday, excluding nationally recognized standard holidays,
All other hours are deemed "After-Hours."
F- 3
<PAGE>
(18) Tenant shall not canvass or solicit other tenants in the Building and
Tenant shall cooperate to prevent any such canvassing and/or solicitation.
Canvassing and peddling in the Building is prohibited. Tenant shall not obtain
for use in the Premises food, beverage, shoe-shine or other services except as
expressly permitted by Landlord.
(19) Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, who has no legitimate purpose to be in the Building, or who
is violating the rules and regulations of the Building.
(20) The requirements of Tenant will be attended to only upon application to
Landlord's designated property manager. Tenant acknowledges that employees of
Landlord shall have no obligation to perform work for Tenant or do anything
outside their regular duties for Tenant unless under special instructions from
Landlord, and that no employee will have any obligation to admit any person
(Tenant or otherwise) to any office of Landlord without specific instructions
from Landlord.
(21) No vending machines of any description shall be installed, maintained,
or operated by Tenant upon the Premises or in the Building, without the prior
consent of Landlord.
(22) Tenant agrees that it shall comply with all fire and security
regulations that may be issued from time to time by Landlord, and Tenant shall
also provide Landlord with the name of a designated responsible employee to
represent Tenant in all matters pertaining to such fire or security
regulations.
(23) Tenant shall not install any radio or television antenna, loudspeaker
or other device on the roof or exterior walls of the Building. Tenant shall
not interfere with broadcasting or reception from or in the Building or
elsewhere.
(24) Tenant shall store its trash and garbage within the Premises or in
other facilities designated by Landlord, Tenant shall not place in any trash
receptacle any material which cannot be disposed of in the ordinary practice
of trash disposal, All trash and garbage disposal shall be made pursuant to
directions issued from time to time by Landlord,
(25) Landlord may waive any one or more of the rules and regulations as to
any tenant without being construed as having waived same as to any other
tenant.
(26) Tenant shall be responsible for the observance of the rules and
regulations by Tenant's employees, agents, customers, invitees and guests,
(27) Landlord reserves the right upon written notice to Tenant, to rescind,
alter or waive any rule or regulation at any time prescribed for the Building,
or to establish additional rules and regulations when, in Landlord's sole
judgment, it is necessary, desirable or proper for the best interest of the
Building and its tenants.
(28) The rules and regulations shall be administered fairly by Landlord and
Landlord shall not enforce them in a discriminatory manner as between tenants of
the Building.
F-4
<PAGE>
PARKING LICENSE AGREEMENT
SAKIOKA FARMS, a California General Partnership ("Licensor") hereby grants
to WORLD FLIGHT CREW SERVICES, INC., a Delaware corporation ("Licensee")
the right and license to use parking spaces in LAX BUSINESS CENTER (the
"Project") as described below and subject to the following conditions:
1. Type and Number of Parking Spaces: Licensee shall have the right to
use up to five (5) unassigned automobile parking spaces. If the area of
Licensee's Premises in the Project is reduced, Licensee's allotment of parking
spaces will be adjusted proportionately. If the area of Licensee's Premises is
increased, Licensee may, at its option, increase the number of its allotted
parking spaces proportionately. Notwithstanding the preceding, Licensee shall
have no right to use any number of parking spaces in excess of the number of
employees of Licensee actually employed at the Premises.
2. Monthly Fee: Licensee shall pay for the right and license granted hereby
the prevailing rates charged for such spaces by Licensor from time to time
("market rate"). Such sums shall be payable in advance on the first day of each
- ---------------
calendar month. Licensor shall have no obligation to accept any such payment
from anyone other than Licensee (e.g. Licensee's employees, subtenants, etc.) If
Licensee fails to make any such payment when due, Licensor, at its option and
after five (5) days' notice to Licensee, may forthwith terminate this license
and all rights of Licensee hereunder. Any late payment of the monthly fee will
result in additional administrative and processing costs being incurred by
Licensor, the exact amount of which would be extremely difficult to determine,
and it is agreed that with respect thereto a late fee of Ten Dollars ($10.00)
per space is a reasonable estimate thereof and will be payable by Licensee with
regard to any monthly fee not paid when due.
3. Term: Licensee shall been entitled to the foregoing parking rights for a
period equivalent to the term of that certain "Lease" of Premises in the Project
entered into by Licensor and Licensee. Licensee's rights to any and all parking
spaces shall automatically be revoked and shall terminate upon any material
default hereunder, or any expiration or termination of said Lease, as well as
upon any assignment of such Lease or sublease of such Premises, in violation
of the terms of such Lease. Licensee must exercise its rights under this
Agreement by delivering all required security deposits and the initial monthly
fee for the parking spaces described above within thirty (30) days after the
"Commencement Date" of the aforementioned Lease unless otherwise agreed by
Licensor. Failure of Licensee to so exercise its rights will entitle Licensor
without notice to transfer to others Licensee's rights to park in any and all
parking spaces as to which Licensee has not so exercised its rights hereunder,
and Licensee will be deemed to have waived its rights hereunder with regard
thereto.
4. Location of Parking Spaces: Licensor shall have the right in its sole
discretion to designate the particular location of said parking space(s),
which designation is subject to change from time to time.
5. Rights Non-Transferrable: The foregoing parking rights are personal to
Licensee and Licensee shall not assign, convey, or otherwise transfer said
rights in any manner whatsoever without Licensor's prior written consent. Any
attempt by Licensee to do so shall be null and void and, at Licensor's election,
shall constitute a material default hereunder, If the Premises or any portion
thereof
P-1
<PAGE>
is assigned or sublet pursuant to the terms of the Lease, the number or parking
spaces allotted to Licensee under paragraph 1 hereof shall automatically be
adjusted accordingly and Licensor and Licensee shall immediately execute an
amendment to this Agreement setting forth (i) the number of spaces retained by
Licensee, (ii) the number of spaces allotted to Licensee's assignee or subtenant
(which number shall not exceed the amount stated in paragraph 1 above), (iii)
the then current "market rate" to be charged Licensee for the spaces allotted to
its assignee or subtenant, and (iv) the security deposit to be paid by Licensee
for its assignee's or subtenant's parking cards.
6. Licensee Indemnification: Use of said parking spaces and of the parking
areas in the Project shall be at the sole risk of Licensee. Unless caused by the
negligence or wrongful acts of Licensor, its agents or employees, Licensee
hereby agrees to defend, indemnify and hold Licensor harmless against any
liability, loss, cost or expense (including reasonable attorneys' fees) for any
damage to or loss or theft of any vehicle or property within any vehicle or any
other property (including property of Licensee), or injury to or death of any
person (including Licensee and Licensee's family, agents, employees, visitors or
customers), arising directly or indirectly out of or in connection with the use
by Licensee or such other persons of the parking areas or any part thereof.
7. Interruption of Use: Licensor shall not be liable to Licensee for any
Interruption or Licensee's use of the rights granted hereunder due to repairs,
improvements or alterations of the parking areas or the Project, or due to any
labor controversy, or resulting from any cause beyond the reasonable control of
Licensor. However, Licensee shall be entitled to an abatement of the monthly fee
with regard to any assigned parking space to the extent it is prevented from
using such space and no reasonably similar alterative space is made available to
it by Licensor.
8. Rules and Regulations: Licensor's parking rules and regulations are
attached hereto. Licensor may adopt such other rules and regulations relating to
the use of the parking areas as in Licensor's opinion are necessary or desirable
for the proper, orderly and safe use of the parking areas. If Licensee fails to
comply with the rules and regulations and modifications thereto after receiving
notice thereof, Licensor may at its option forthwith terminate this license
and all rights of Licensee hereunder, and may also, whether or not such license
is so terminated, take such action as shall be required to remedy such failure,
and Licensee agrees to pay Licensor on demand the reasonable cost to Licensor of
such actions including attorneys' fees. Licensee shall at all time be required
to park in a lawful manner, and no vehicle shall at any time be parked in more
than one marked space at a time. Licensor shall be entitled to tow away any
vehicle which is improperly parked, at the vehicle owner's sole cost and
expense. In the event of such tow away, neither Licensor nor any Mortgagee of
Licensor shall have any liability therefor to Licensee or to such vehicle owner.
9. Licensor's Property Rights: Licensor shall have the right to decrease
the size of any of the parking areas in the Project, to alter or rearrange
parking spaces and improvements in the parking areas, to take all or any
portion of the parking areas for purposes of maintaining, repairing or
restoring same, or for purposes of construction and operating structures
thereon or adjacent thereto, to have ingress and egress in connection with the
exercise of any such rights, and to do and perform such other acts with
respect to the parking areas as Licensor shall in its discretion deem
appropriate. Licensor may at any time and from time to time in its discretion
designate any portion of the parking areas in the Project for use as assigned
parking, visitor parking or employee parking. If Licensor
P-2
<PAGE>
establishes an "employee parking" area or other assigned parking area for
Licensee's employees to park in, Licensee shall furnish Licensor, within five
(5) days after written request to do so, with a list of the vehicle license
numbers of Licensee's employees parking in the project. Licensor may charge
Licensee Ten Dollars ($10.00) per day for each day or partial day for each
vehicle parked by Licensee or any of its employees in a parking space or area
other than the space or parking area assigned or designated for such vehicle.
Licensor may tow away any such improperly parked vehicles and may also attach
violation notices or stickers to improperly parked vehicles. In the event of
such tow away, neither Licensor nor any Mortgagee of Licensor shall have any
liability therefor to Licensee or to such vehicle owner.
10. Security Deposit: If parking is in a controlled lot, a monthly parking
card or decal may be issued to Licensee for each parking space to be used by
Licensee hereunder. Licensee will pay a security deposit for each parking card
at the time of issuance of the card. Licensor shall have no obligation to accept
any such security deposit from anyone other than Licensee. The security deposit
shall be held by Licensor to secure Licensee's due performance of its
obligations with regard to parking hereunder and the return to Licensor of such
parking card(s) in good condition, normal wear and tear excepted, upon
termination of Licensee's rights hereunder. Licensee shall be obligated to take
reasonable steps to protect such cards from warping or mutilation. Without
limitation as to the generality of the foregoing, Licensor may apply such
security deposit to remedy any default by Licensee hereunder and further, if
such card(s) are lost or mutilated, Licensor may apply any or all of said
deposit toward Licensor's cost of such card(s). If at any time Licensor applies
any or all of such security deposit as provided herein, Licensee shall be
obligated to deposit with Licensor the amount so applied by Licensor within ten
(10) days after written request therefor is given. Upon termination of
Licensee's rights hereunder and the return to Licensor of the aforementioned
card(s) (or cards issued in substitution thereof) the security deposit or
balance thereof shall be returned to Licensee provided Licensee is not then in
default hereunder. Licensor need not hold said security deposit in a separate
account.
11. Replacement Cards: If for any reason (other than a malfunction for which
Licensee is not responsible hereunder any card issued to Licensee is requested
by Licensee to be replaced, Licensee shall pay Licensor the then current non-
refundable charge for said replacement card.
12. Miscellaneous: No waiver by Licensor or any breach of this agreement by
Licensee shall constitute a waiver of any other breach. Any amount due to
Licensor that is not paid when due shall bear interest at the maximum rate
allowable under law. In the event of any legal action taken or proceeding
brought to enforce the provisions hereof, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and costs incurred in connection
therewith.
DATED this __________________ day of ______________________________, 1992.
LICENSOR: LICENSEE:
SAKIOKA FARMS, a California WORLD FLIGHT CREW SERVICES, INC.,
General partnership a Delaware corporation
By: By:
----------------------------- ---------------------------------
TITLE: TITLE: President
-------------------------- ------------------------------
<PAGE>
PARKING RULES AND REGULATIONS
1. All claimed damage or loss must be reported and itemized in writing
delivered to the parking facility office or property manager's office within
ten business days after any claimed damage or loss occurs. Any claim not so
made is waived. Licensor has the option to make repairs at its expense of any
claimed damage within ten business days after filing a claim. In all court
actions the burden of proof to establish a claim remains with Licensee. Court
actions by Licensee for any claim must be filed within ninety days from date
of parking, in a court of jurisdiction where the claimed loss occurred.
Licensor is not responsible for damage by water, fire, or defective brakes, or
parts, or for the acts or omissions of others, or for loss of articles left in
vehicles. The total liability is limited to $250.00 for all damages or loss of
articles left in vehicles. The total liability is limited to $250.00 for all
damages or loss to any vehicle. Licensor is not responsible for loss of use.
2. Licensee shall not park or permit the parking of any vehicle under its
control in any parking area designated by Licensor as areas for parking by
visitors. Licensee shall not leave vehicles in the parking lot overnight nor
park any vehicles in the parking areas other than automobiles, motorcycles,
motor driven or non-motor driven bicycles or four-wheeled trucks.
3. Parking stickers or any other device or form of identification supplied by
licensor as a condition of use of the parking facilities shall remain the
property of Licensor. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
4. No extended term storage of vehicles shall be permitted.
5. Vehicles must be parked entirely within the painted stall lines of a single
parking stall.
6. All directional signs and arrows must be observed.
<PAGE>
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in driveways;
(c) where "no parking" signs are posted;
(d) in cross hatched areas; and
(e) in such other areas as may be designated by Licensor or its parking
operator.
9. Every parker is required to park and lock his own vehicle unless Licensor
furnishes valet service. Valet parking attendants may refuse to drive any
vehicle reasonably believed to be unsafe.
10. Loss or theft of parking identification devices from vehicles must be
reported to the parking operator immediately, and a lost or stolen report must
be filed at that time. Licensor has the right to exclude any vehicle from the
parking facilities that does not have an identification code.
11. Any parking identification devices reported lost or stolen found on any
unauthorized vehicle will be confiscated and the illegal holder will be subject
to prosecution.
12. Lost or stolen identification devices found by the Licensee should be
reported to the parking facility office or property manager immediately to avoid
confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
14. Licensee shall acquaint all persons to whom Licensee assigns parking space
of these Rules and Regulations. Parking facility managers or attendants are not
authorized to make or allow any exceptions to these Rules and Regulations.
15. Licensor reserves the right to refuse the sale of monthly parking stickers
or other parking identification devices to any person and/or his agents or
representatives who willfully refuses to comply with these Rules and
Regulations.
<PAGE>
EXHIBIT 10.62
CONSIGNMENT AGREEMENT
THIS AGREEMENT, dated this 30th day of September, 1993 is made by and
between World Airways (hereinafter referred to as "Consignor") and the Memphis
Group Inc. (hereinafter referred to as "Consignee").
Consignee is engaged in the business of buying and selling surplus
aircraft material, and Consignor desires hereby to supply Consignee with an
inventory of related aircraft material under a consignment arrangement, the
terms and conditions of which are set forth below:
1. AGREEMENT. Consignor hereby consigns to Consignee the Consigned
---------
Goods identified in Exhibit "A", attached hereto (the "Consigned Goods").
Subject to the terms and conditions herein, Consignee agrees to use its best
efforts to market and to sell any and all of the Consigned Goods.
2. TERM. This agreement shall, subject to the terms and conditions
----
contained herein, remain in effect for a period of three (3) years.
3. CONDITIONS OF SALES BY CONSIGNEE. All sales shall be subject to the
---------- -- ----- -- ---------
following terms and conditions:
(a) Consignee agrees to use its best efforts to sell the Consigned
Goods at the highest current market value possible;
(b) Sales of any Consigned Goods shall be reported to Consignor
monthly, within 10 days of the end of month during which the sales were
invoiced,
<PAGE>
with purchase orders for sales being forwarded from Consignee to
Consignor for the amount due, less applicable commission and charges for any
repairs.
(c) Consignee shall pay Consignor for consigned goods sold within
thirty (30) days of end of month during which the sales were invoiced.
(d) Consignee agrees that upon notification from Consignor, it will
pay all or any specified amounts of payments due under this agreement to
International Lease Finance Corporation or such other company as Consignor may
designate. Such designations to be irrevocable by Consignor unless consented
to by payee.
(e) Consignor agrees to provide to Consignee at its cost during this
Agreement, all illustrated parts catalogues or service bulletins, if
applicable, that may be necessary to satisfy sales of consigned material.
4. EXCLUSIVE RIGHT TO SELL; COMMISSION. Consignee shall have exclusive
-----------------------------------
right to sell the Consigned Goods during the term of the Agreement. Consignee
shall be paid a commission as stated in Exhibit "B".
5. EXCHANGE OR RENTAL TRANSACTIONS. It may be determined by Consignee
-------------------------------
that certain components would be more likely exchange or rental items as
opposed to outright sale. In the event that Consignee has the opportunity to
exchange
<PAGE>
or rent certain consigned items under this Agreement, Consignee shall be paid
a commission of 23 percent of the gross exchange or rental price. It should
be pointed out that under this program the Consignor does not lose title to
the exchanged or rented component or a like equivalent.
6. REPAIRS OF CONSIGNEE GOODS. It may be determined by Consignee to
--------------------------
enhance, repair or overhaul a particular consigned good by utilizing the
services of an FAA approved facility in order to improve its value or
likelihood of sale. In the event any of the consigned goods are so enhanced,
repaired or overhauled, consignee shall advance the cost of same and shall
maintain adequate accounting records of such costs and shall deduct such
costs, as supported by receipts and invoices, from Consignor's proceeds from
sales of consigned inventory monthly.
7. INSURANCE. Consignor will maintain all risk insurance coverage on
---------
all consigned inventory covered by this Agreement.
8. SHIPMENT OF CONSIGNED GOODS.
---------------------------
(a) Consignee shall take delivery of all Consigned Goods F.O.B.
Memphis, TN. Consignor shall bear all risk and expense of
transporting Consigned Goods to Consignee's facility. In the
event that any Consigned Goods are to be returned to Consignor
from Consignee's facility to Consignor's place of business or
any other place of delivery designated by Consignor, the
<PAGE>
Consignor shall bear all risk and expense of transportation.
(b) Transportation of Consigned Goods to any purchaser shall be the
responsibility of Consignee.
9. PARTIAL RETURN OF CONSIGNED GOODS. In the event Consignor has a need
---------------------------------
of certain consigned items from time to time for the Consignors own
consumption, Consignee shall return such items to Consignor in a timely
manner at a charge of $25.00 per line item during normal business hours and
$50.00 per line item after hours and on weekends, plus normal transportation
expenses to the designated location.
10. INVENTORY REPORTS. Consignee agrees to provide the Consignor, on a
-----------------
monthly basis, inventory status reports. Consignee further agrees to permit
Consignor or its designated accounting agency full audit rights in support of
Consignor's physical inventory.
11. TERMINATION OF AGREEMENT. This agreement may be cancelled by either
------------------------
party upon ninety (90) days written notice as provided in paragraph 12.
12. NOTICES. All notices, receipts or demands of any kind, under the
-------
terms of this agreement, if to Consignor, shall be made by mailing such notice
to WorldCorp, 13873 Park Center Road, Suite 490, Herndon, VA 22071, Attn: Seth
Potack, Treasury Manager and if to Consignee, by mailing such notice to 3900
Willow Lake Blvd. Memphis, TN 38118, Attn: Chief Financial Officer.
<PAGE>
13. WARRANTIES: INDEMNIFICATION.
---------------------------
(a) Consignor will assign, deliver and convey to Consignee any and
all manufacturer's warranties applicable to the Consigned
Goods.
14. SALE BY CONSIGNEE. The Consignee shall conduct the business of
-----------------
selling and distributing the Consigned Goods in its own name, in accordance
with its own terms and conditions of sale. Collection of credit extended for
the purchase and sale of any Consigned Goods will be the sole responsibility
of Consignee.
15. DISPOSITION OF CONSIGNED GOODS AFTER TERMINATION.
------------------------------------------------
In case this agreement shall be terminated by the Consignor, the
Consignee, at the request of the Consignor, shall permit all Consigned Goods
at the effective date of such termination to remain in storage at the
Consignee's warehouse for such period, not exceeding ninety (90) days
thereafter; as the Consignor shall require to dispose of the same; the
consignee shall, upon request of the Consignor, at any time or from time to
time during such ninety (90) day period, load or cause the same to be loaded
and shipped from the Consignee's warehouse in accordance with the Consignor's
instructions without any cost or charge to the Consignee therefore. During
such ninety (90) day period, the Consignor's representatives shall have the
right to enter the Consignee's warehouse during all usual business hours for
the purpose of dealing with the disposition of the Consignor's consigned
stock. The Consignor will remove or
<PAGE>
give instructions for the shipment of all property in consigned stock within
the ninety (90) day period. In the event of termination, initiated by
Consignor, the Consignee will be allowed to recover from the Consignor, all
labor and related overhead costs associated with the removal of the inventory
from the Consignee's facility and additionally any cost of repairs that have
not been recovered by the Consignee.
16. DISPOSITION OF CONSIGNED STOCK FOR SCRAP. In the case whereby the
----------------------------------------
Consignor requests or the Consignee recommends certain material for scrap, the
Consignee will respond in accordance with the Consignor's instruction for
disposition.
(a) In the event the Consignor requests material to be returned to
the Consignor's facility, transportation of consigned goods
shall be the responsibility of the Consignor.
(b) In the event the Consignor requests material to be scrapped by
the Consignee in accordance with the Consignor's instructions,
the Consignee shall be paid a commission from the scrap
proceeds of 50 percent of the residual scrap value.
17. ADVERTISING: SALES
------------------
(a) Consignee may, but shall not be required to advertise the
Consigned Goods in such publications as, in the sole discretion
of Consignee, facilitate the sale of Consigned
<PAGE>
Goods. Any cost incurred for advertising shall be paid by
Consignee.
(b) Consignee will, in addition to any advertising, utilize its
sales force, at its cost, to market and sell Consigned Goods.
18. ASSIGNMENT. This Agreement shall insure to the benefit of and be
----------
binding upon the successors and assigns of the parties hereto, but it may not
be voluntarily assigned, wholly or in part, by either party hereto without the
prior written consent of the other party.
19. GOVERNING LAW. This Agreement shall be interpreted in accordance with
-------------
the plain English meaning of its terms, and the construction thereof shall be
governed by the laws of the State of Tennessee, United States of America.
IN WITNESS WHEREOF, the parties hereto have entered into the Agreement on
the date first written above.
CONSIGNOR World Airways, Inc. CONSIGNEE The Memphis Group, Inc.
------------------------- -------------------------------
BY: /S/ BY: /S/
------------------------------- -------------------------------------
TITLE: C.F.O. TITLE: Chief Financial Officer
---------------------------- ----------------------------------
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A1
N114 & N115
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
- --------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 3.83-887 MEM GROUP
- --------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 5.79-380 MEM GROUP
- --------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 10.91-189 MEM GROUP
- --------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 3.83-896 MEM GROUP
- --------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 3.83-904 MEM GROUP
- -------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 5.79-406 MEM GROUP
- -------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 7.79-410 MEM GROUP
- --------------------------------------------------------------------------------
1010099-6 WATER BOILER 1 5.79-388 MEM GROUP
- --------------------------------------------------------------------------------
102100-122 ANNUNCIATOR-OH PNL 1 154 MEM GROUP
- --------------------------------------------------------------------------------
102300-8 CONTROLLER ASSY 1 0601 MEM GROUP
- --------------------------------------------------------------------------------
102300-8 CONTROLLER ASSY 1 0516 MEM GROUP
- --------------------------------------------------------------------------------
102300-8 CONTROLLER ASSY 1 389 MEM GROUP
- --------------------------------------------------------------------------------
103000-8 WARNING SYSTEM 1 333 MEM GROUP
- --------------------------------------------------------------------------------
103000-14 WARNING SYSTEM 1 326 MEM GROUP
- --------------------------------------------------------------------------------
1164410-120 MAIN MULTIPLEXER 1 0970008 MEM GROUP
- --------------------------------------------------------------------------------
1164420-120 SUB MULTIPLEXER 1 107000048 MEM GROUP
- --------------------------------------------------------------------------------
1164440-120 TIMER SECTION-DECODER 1 078000184 MEM GROUP
- --------------------------------------------------------------------------------
1164440-120 TIMER SECTION-DECODER 1 097000045 MEM GROUP
- --------------------------------------------------------------------------------
1164440-120 TIMER SECTION-DECODER 1 098000214 MEM GROUP
- --------------------------------------------------------------------------------
1164440-120 TIMER SECTION-DECODER 1 107000054 MEM GROUP
- --------------------------------------------------------------------------------
1164440-120 TIMER SECTION-DECODER 1 068000138 MEM GROUP
- --------------------------------------------------------------------------------
1164440-120 TIMER SECTION-DECODER 1 098000224 MEM GROUP
- --------------------------------------------------------------------------------
130334-1 SELECTOR-CABIN PRESS 1 11-279 MEM GROUP
- --------------------------------------------------------------------------------
16720-1 APU START PUMP 1 284 MEM GROUP
- --------------------------------------------------------------------------------
16720-1 APU START PUMP 1 719 MEM GROUP
- --------------------------------------------------------------------------------
1964106-6 YAW RATE GYRO 1 79070912 MEM GROUP
- --------------------------------------------------------------------------------
1964106-6 YAW RATE GYRO 1 79080927 MEM GROUP
- --------------------------------------------------------------------------------
1964192-7 M.A.L.U. 1 74010286 MEM GROUP
- -------------------------------------------------------------------------------
Page 1 of 7
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A1
N114 & N115
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
- --------------------------------------------------------------------------------
1964192-7 M.A.L.U. 1 74040307 MEM GROUP
- --------------------------------------------------------------------------------
1964193-6 LINEAR ACCELEROMETER 1 79120868 MEM GROUP
- --------------------------------------------------------------------------------
1990548-7 PITCH COMPUTER 1 74030075 MEM GROUP
- --------------------------------------------------------------------------------
1990548-7 PITCH COMPUTER 1 79040206 MEM GROUP
- --------------------------------------------------------------------------------
1990548-7 PITCH COMPUTER 1 75100150 MEM GROUP
- --------------------------------------------------------------------------------
1990549-7 ROLL COMPUTER 1 74060098 MEM GROUP
- --------------------------------------------------------------------------------
1990549-7 ROLL COMPUTER 1 80010222 MEM GROUP
- --------------------------------------------------------------------------------
1990549-8 ROLL COMPUTER 1 88120272 MEM GROUP
- --------------------------------------------------------------------------------
1990553-4 PANEL DIR CNTL 1 74040340 MEM GROUP
- --------------------------------------------------------------------------------
1990554-4 PANEL VHL NAV CNTL 1 72090003 MEM GROUP
- --------------------------------------------------------------------------------
1990554-4 PANEL VHL NAV CNTL 1 74050077 MEM GROUP
- --------------------------------------------------------------------------------
1990554-4 PANEL VHL NAV CNTL 1 79060175 MEM GROUP
- --------------------------------------------------------------------------------
2070409-0101 ANTENNA WX RADAR 1 2570 MEM GROUP
- --------------------------------------------------------------------------------
2070409-0101 ANTENNA WX RADAR 1 2940 MEM GROUP
- --------------------------------------------------------------------------------
2222601-6 FLT DATA ACQUSITION 1 1338 MEM GROUP
- --------------------------------------------------------------------------------
2223574 PANEL-DATA ENTRY 1 503 MEM GROUP
- --------------------------------------------------------------------------------
2593342-932 AT/SC COMPUTER 1 79121135 MEM GROUP
- --------------------------------------------------------------------------------
2594466-905 IND MACH A/S 1 87052753 MEM GROUP
- --------------------------------------------------------------------------------
32-3110-005 VALVE A/I 1 11741849 MEM GROUP
- --------------------------------------------------------------------------------
32-3110-005 VALVE A/I 1 1760132 MEM GROUP
- --------------------------------------------------------------------------------
350880-6 PUMP HYDRAULIC 1 MX328834 MEM GROUP
- --------------------------------------------------------------------------------
623272 PUMP HYDRAULIC 1 01537 MEM GROUP
- --------------------------------------------------------------------------------
3757082-7 YAW COMPUTER 1 79110550 MEM GROUP
- --------------------------------------------------------------------------------
3757082-7 YAW COMPUTER 1 79120558 MEM GROUP
- --------------------------------------------------------------------------------
3759028-6 PANEL PITCH CONTROL 1 78030110 MEM GROUP
- --------------------------------------------------------------------------------
3759028-6 PANEL PITCH CONTROL 1 79030123 MEM GROUP
- --------------------------------------------------------------------------------
3759028-6 PANEL PITCH CONTROL 1 77030098 MEM GROUP
- --------------------------------------------------------------------------------
3759029-6 PANEL PITCH CONTROL 1 76080145 MEM GROUP
- --------------------------------------------------------------------------------
Page 2 of 7
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A1
N114 & N115
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3759029-6 PANEL PITCH CONTROL 1 71105105 MEM GROUP
- ------------------------------------------------------------------------
3759029-6 PANEL PITCH CONTROL 1 79110177 MEM GROUP
- ------------------------------------------------------------------------
384022-5-1 STARTER 1 AEX02878 MEM GROUP
- ------------------------------------------------------------------------
384022-5-1 STARTER 1 AEX01772 MEM GROUP
- ------------------------------------------------------------------------
396372-2 VALVE-FLOW CNTL 1 P1486C MEM GROUP
- ------------------------------------------------------------------------
396372-2 VALVE-FLOW CNTL 1 P1700C MEM GROUP
- ------------------------------------------------------------------------
396372-2 VALVE-FLOW CNTL 1 SC-508 MEM GROUP
- ------------------------------------------------------------------------
4003733-903 IND HORIZ SIT 1 4080357 MEM GROUP
- ------------------------------------------------------------------------
4003733-903 IND HORIZ SIT 1 80100778 MEM GROUP
- ------------------------------------------------------------------------
4003733-903 IND HORIZ SIT 1 5060457 MEM GROUP
- ------------------------------------------------------------------------
4003733-903 IND HORIZ SIT 1 4060350 MEM GROUP
- ------------------------------------------------------------------------
4003734-901 IND-RADIO MAGNETIC 1 4050204 MEM GROUP
- ------------------------------------------------------------------------
4004670-740 THRUST RATE COMP 1 77090541 MEM GROUP
- ------------------------------------------------------------------------
4004670-742 THRUST RATE COMP 1 4110444 MEM GROUP
- ------------------------------------------------------------------------
4005123-901 ALTIMETER 1 79011054 MEM GROUP
- ------------------------------------------------------------------------
4005123-901 ALTIMETER 1 79081084 MEM GROUP
- ------------------------------------------------------------------------
4006584-901 IND ATTITUDE DIR 1 4090285 MEM GROUP
- ------------------------------------------------------------------------
4006584-901 IND ATTITUDE DIR 1 3050154 MEM GROUP
- ------------------------------------------------------------------------
4006584-901 IND ATTITUDE DIR 1 3050156 MEM GROUP
- ------------------------------------------------------------------------
4006584-901 IND ATTITUDE DIR 1 3070186 MEM GROUP
- ------------------------------------------------------------------------
4010-07 PANEL-F/E FAULT ISOL 1 201 MEM GROUP
- ------------------------------------------------------------------------
414470 PUMP AUX ELEC HYD 1 MX321525 MEM GROUP
- ------------------------------------------------------------------------
414470 PUMP AUX ELEC HYD 1 MX342366 MEM GROUP
- ------------------------------------------------------------------------
452080-05-28 I.N.U. LITTON-72 1 0789 MEM GROUP
- ------------------------------------------------------------------------
452080-05-28 I.N.U. LITTON-72 1 0784 MEM GROUP
- ------------------------------------------------------------------------
452090-02 C.D.U. LITTON-72 1 01674 MEM GROUP
- ------------------------------------------------------------------------
452090-02 C.D.U. LITTON-72 1 0196 MEM GROUP
- ------------------------------------------------------------------------
452090-02 C.D.U. LITTON-72 1 0575 MEM GROUP
- ------------------------------------------------------------------------
</TABLE>
PAGE 3 of 7
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A1
N114 & N115
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
452090-02 C.D.U. LITTON-72 1 0638 MEM GROUP
- --------------------------------------------------------------------------------
452090-02 C.D.U. LITTON-72 1 0785 MEM GROUP
- -------------------------------------------------------------------------------
452100-02 M.S.U. LITTON-72 1 0344 MEM GROUP
- -------------------------------------------------------------------------------
452100-02 M.S.U. LITTON-72 1 01723 MEM GROUP
- -------------------------------------------------------------------------------
5000757-4 MAIN WHEEL ASSY 1 JAN74-276 MEM GROUP
- -------------------------------------------------------------------------------
5000757-5 MAIN WHEEL ASSY 1 DEC77-126 MEM GROUP
- -------------------------------------------------------------------------------
5000757-5 MAIN WHEEL ASSY 1 MAR77-1504 MEM GROUP
- -------------------------------------------------------------------------------
5000757-5 MAIN WHEEL ASSY 1 OCT76-137 MEM GROUP
- -------------------------------------------------------------------------------
5000757-5 MAIN WHEEL ASSY 1 DEC77-122 MEM GROUP
- -------------------------------------------------------------------------------
5000757-6 MAIN WHEEL ASSY 1 MAR79-722 MEM GROUP
- -------------------------------------------------------------------------------
5000757-6 MAIN WHEEL ASSY 1 AUG78-406 MEM GROUP
- -------------------------------------------------------------------------------
5000757-6 MAIN WHEEL ASSY 1 JUN80-1289 MEM GROUP
- -------------------------------------------------------------------------------
5000757-6 MAIN WHEEL ASSY 1 DEC79-1159 MEM GROUP
- -------------------------------------------------------------------------------
5000757-6 MAIN WHEEL ASSY 1 FEB79-649 MEM GROUP
- -------------------------------------------------------------------------------
5000757-8 MAIN WHEEL ASSY 1 DEC87-3015 MEM GROUP
- -------------------------------------------------------------------------------
5000757-8 MAIN WHEEL ASSY 1 NOV86-2537 MEM GROUP
- -------------------------------------------------------------------------------
5000758-6R BRAKE ASSY 1 OCT78-194 MEM GROUP
- -------------------------------------------------------------------------------
5000758-6R BRAKE ASSY 1 APR77-113 MEM GROUP
- -------------------------------------------------------------------------------
5000758-10R BRAKE ASSY 1 SEP76-83 MEM GROUP
- -------------------------------------------------------------------------------
50047 OVEN 1 305 MEM GROUP
- -------------------------------------------------------------------------------
50047 OVEN 1 261 MEM GROUP
- -------------------------------------------------------------------------------
50047 OVEN 1 250 MEM GROUP
- -------------------------------------------------------------------------------
50562 IND-WATER QTY 1 80E0171 MEM GROUP
- -------------------------------------------------------------------------------
521141 IND-APU EGT 1 04800122 MEM GROUP
- -------------------------------------------------------------------------------
521142 IND-N1 APU 1 06800130 MEM GROUP
- -------------------------------------------------------------------------------
521143 IND-N2 APU 1 04800121 MEM GROUP
- -------------------------------------------------------------------------------
521199 IND-FUEL TANK TEMP 1 01750101 MEM GROUP
- -------------------------------------------------------------------------------
522-3698-014 RADIO ALT R/T 1 11090 MEM GROUP
- -------------------------------------------------------------------------------
</TABLE>
Page 4 of 7
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A1
N114 & N115
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
627652-1 PNEU SYS CONTROLLER 1 069C-360 MEM GROUP
- --------------------------------------------------------------------------------
700-1117-001 PROJECTOR-VIDEO 1 6161 MEM GROUP
- --------------------------------------------------------------------------------
743-0217-001 UNIT-SYSTEM CONTROL 1 0202 MEM GROUP
- --------------------------------------------------------------------------------
743-0238-001 PLAYER-VIDEO CASSETTE 1 101207 MEM GROUP
- --------------------------------------------------------------------------------
707304E C.S.D. 1 1658 MEM GROUP
- --------------------------------------------------------------------------------
8-061-25 IND GEAR POS PROX 1 288 MEM GROUP
- --------------------------------------------------------------------------------
8-061-25 IND GEAR POS PROX 1 293 MEM GROUP
- --------------------------------------------------------------------------------
8-061-25 IND GEAR POS PROX 1 382 MEM GROUP
- --------------------------------------------------------------------------------
9070M55P42 MAIN ENG CONTROL 1 WYG22098 MEM GROUP
- --------------------------------------------------------------------------------
9070M55P39 MAIN ENG CONTROL 1 WYG20157 MEM GROUP
- --------------------------------------------------------------------------------
8062-819 MAIN ENG CONTROL 1 WYG24032 MEM GROUP
- --------------------------------------------------------------------------------
898626-3 VALVE PRESS REG 1 P-992 MEM GROUP
- --------------------------------------------------------------------------------
898626-3 VALVE PRESS REG 1 P-920 MEM GROUP
- --------------------------------------------------------------------------------
8DJ175LXP2 IND EGT 1 N0119 MEM GROUP
- --------------------------------------------------------------------------------
8DJ175LXP2 IND EGT 1 N0044 MEM GROUP
- --------------------------------------------------------------------------------
8DJ175LXP2 IND EGT 1 P0083 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAP2 IND N1 TACH 1 R0099 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAP2 IND N1 TACH 1 R0711 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAP2 IND N1 TACH 1 S0454 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAP2 IND N1 TACH 1 R0676 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAR2 IND N2 TACH 1 S0182 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAR2 IND N2 TACH 1 R0412 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAR2 IND N2 TACH 1 H0443 MEM GROUP
- --------------------------------------------------------------------------------
8DJ176WAR2 IND N2 TACH 1 R0083 MEM GROUP
- --------------------------------------------------------------------------------
8DJ225WAB1 IND FLAP 1 J0145 MEM GROUP
- --------------------------------------------------------------------------------
8DJ225WAB1 IND FLAP 1 J0049 MEM GROUP
- --------------------------------------------------------------------------------
8DJ225WAB1 IND FLAP 1 K0072 MEM GROUP
- --------------------------------------------------------------------------------
8DJ225WAB1 IND FLAP 1 L0013 MEM GROUP
- --------------------------------------------------------------------------------
Page 5 of 7
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A1
N114 & N115
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8DJ225WAD2 IND FLAP/SLAP POS 1 R0024 MEM GROUP
- --------------------------------------------------------------------------------
8DJ225WAD2 IND FLAP/SLAP POS 1 P0037 MEM GROUP
- --------------------------------------------------------------------------------
9257-04 PUMP ENGINE FUEL 1 10583 MEM GROUP
- --------------------------------------------------------------------------------
9257-08 PUMP ENGINE FUEL 1 CGW10229 MEM GROUP
- --------------------------------------------------------------------------------
976J863-10 B.C.U. 1 MA1351 MEM GROUP
- --------------------------------------------------------------------------------
976J863-10 B.C.U. 1 PZ1303 MEM GROUP
- --------------------------------------------------------------------------------
978690-4 VALVE H.P. BLEED 1 P-682 MEM GROUP
- --------------------------------------------------------------------------------
978690-4 VALVE H.P. BLEED 1 P-832 MEM GROUP
- --------------------------------------------------------------------------------
979186-1 VALVE BUTTERFLY 1 AEX10798C MEM GROUP
- --------------------------------------------------------------------------------
979186-1 VALVE BUTTERFLY 1 AEX10344C MEM GROUP
- --------------------------------------------------------------------------------
979186-1 VALVE BUTTERFLY 1 AEX10166C MEM GROUP
- --------------------------------------------------------------------------------
979186-1 VALVE BUTTERFLY 1 AEX40171 MEM GROUP
- --------------------------------------------------------------------------------
B4361710001 ALT PNEU STANDBY 1 811 MEM GROUP
- --------------------------------------------------------------------------------
B4361710001 ALT PNEU STANDBY 1 401 MEM GROUP
- --------------------------------------------------------------------------------
B4361710001 ALT PNEU STANDBY 1 666 MEM GROUP
- --------------------------------------------------------------------------------
BG1039AA05 PAFAM COMPUTER 1 289 MEM GROUP
- --------------------------------------------------------------------------------
G2933 PANEL-VHF COMM CNTL 1 142 MEM GROUP
- --------------------------------------------------------------------------------
G2933 PANEL-VHF COMM CNTL 1 74 MEM GROUP
- --------------------------------------------------------------------------------
G2933 PANEL-VHF COMM CNTL 1 79 MEM GROUP
- --------------------------------------------------------------------------------
G3816 PANEL-ATC CNTL 1 725 MEM GROUP
- --------------------------------------------------------------------------------
G3847 PANEL-SELCAL CNTL 1 4 MEM GROUP
- --------------------------------------------------------------------------------
G5518 PANEL-F/E JACK BOX CNTL 1 35 MEM GROUP
- --------------------------------------------------------------------------------
HG280D5 C.A.D.C. 1 819 MEM GROUP
- --------------------------------------------------------------------------------
HG280D5 C.A.D.C. 1 789 MEM GROUP
- --------------------------------------------------------------------------------
HG280D5 C.A.D.C. 1 877 MEM GROUP
- --------------------------------------------------------------------------------
HG280D5 C.A.D.C. 1 596 MEM GROUP
- --------------------------------------------------------------------------------
M2977-A1 OVEN 1 0082 MEM GROUP
- --------------------------------------------------------------------------------
M2977-A1 OVEN 1 0033 MEM GROUP
- --------------------------------------------------------------------------------
</TABLE>
Page 6 of 7
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A1
N114 & N115
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
M2977-A1 OVEN 1 0068 MEM GROUP
- --------------------------------------------------------------------
M2977-A1 OVEN 1 0065 MEM GROUP
- --------------------------------------------------------------------
M2977-A1 OVEN 1 0060 MEM GROUP
- --------------------------------------------------------------------
P134-395-7 FILL DRAIN VALVE 1 3012114 MEM GROUP
- --------------------------------------------------------------------
RDAX7002-29 TAPE REPRODUCER 1 100021 MEM GROUP
- --------------------------------------------------------------------
ITEM TOTAL: 173
-----
Page 7 of 7
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A2
DC10-10 SURPLUS MATERIAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
003-001-003 PROBE FAULT ISOLATION 1 193 MEM GRP
- --------------------------------------------------------------------------------
102300-9 CNTL MASTER WARNING 1 388 MEM GRP
- --------------------------------------------------------------------------------
1400 WATER BOILER 1 1010 MEM GRP
- --------------------------------------------------------------------------------
1400 WATER BOILER 1 1026 MEM GRP
- --------------------------------------------------------------------------------
155750-1 ACTUATOR 1 101 MEM GRP
- --------------------------------------------------------------------------------
1964570-5 PANEL PITCH CNTL 1 7206100 MEM GRP
- --------------------------------------------------------------------------------
1964570-5 PANEL PITCH CNTL 1 7204101 MEM GRP
- --------------------------------------------------------------------------------
1964570-5 PANEL PITCH CNTL 1 7202101 MEM GRP
- --------------------------------------------------------------------------------
1978172-4 PANEL DIR CNTL 1 7112100 MEM GRP
- --------------------------------------------------------------------------------
2067635-0703 IND RADIO ALT 1 7610 MEM GRP
- --------------------------------------------------------------------------------
217-003-011M IND MASTER 1 1067 MEM GRP
- --------------------------------------------------------------------------------
217-003-011M IND MASTER 1 198 MEM GRP
- --------------------------------------------------------------------------------
217-003-016M IND MASTER 1 123 MEM GRP
- --------------------------------------------------------------------------------
217-003-016M IND MASTER 1 1013 MEM GRP
- --------------------------------------------------------------------------------
2594549-901 IND THRUST 1 2060232 MEM GRP
- --------------------------------------------------------------------------------
2594549-901 IND THRUST 1 2110267 MEM GRP
- --------------------------------------------------------------------------------
2594628-901 IND HORIZ SIT 1 2050253 MEM GRP
- --------------------------------------------------------------------------------
2594628-901 IND HORIZ SIT 1 2060265 MEM GRP
- --------------------------------------------------------------------------------
2594628-901 IND HORIZ SIT 1 3110422 MEM GRP
- --------------------------------------------------------------------------------
2594628-901 IND HORIZ SIT 1 78070556 MEM GRP
- --------------------------------------------------------------------------------
2594628-903 IND HORIZ SIT 1 81020636 MEM GRP
- --------------------------------------------------------------------------------
2594860-901 GYRO DIRECTIONAL 1 2060305 MEM GRP
- --------------------------------------------------------------------------------
2594861-902 GYRO VERITICAL 1 3010483 MEM GRP
- --------------------------------------------------------------------------------
308-002-001 IND LGR WEIGHT 1 1013 MEM GRP
- --------------------------------------------------------------------------------
3757088-9 PITCH COMPUTER 1 72048009 MEM GRP
- --------------------------------------------------------------------------------
3757088-9 PITCH COMPUTER 1 72058013 MEM GRP
- --------------------------------------------------------------------------------
3757088-9 PITCH COMPUTER 1 78085053 MEM GRP
- --------------------------------------------------------------------------------
Page 1 of 6
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A2
DC10-10 SURPLUS MATERIAL
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
3757089-9 ROLL COMPUTER 1 72065163 MEM GRP
- -------------------------------------------------------------------------------
3757091-9 YAW COMPUTER 1 72068217 MEM GRP
- -------------------------------------------------------------------------------
3757091-9 YAW COMPUTER 1 77080119 MEM GRP
- -------------------------------------------------------------------------------
3757091-9 YAW COMPUTER 1 79020138 MEM GRP
- -------------------------------------------------------------------------------
3757091-9 YAW COMPUTER 1 72068211 MEM GRP
- -------------------------------------------------------------------------------
3757121-9 PITCH COMPUTER 1 72028125 MEM GRP
- -------------------------------------------------------------------------------
4004670-912 THRUST RATE COMP 1 2060194 MEM GRP
- -------------------------------------------------------------------------------
416-0001-21 COFFEE MAKER 1 134 MEM GRP
- -------------------------------------------------------------------------------
416-0001-7 COFFEE MAKER 1 0014 MEM GRP
- -------------------------------------------------------------------------------
416-0001-7 COFFEE MAKER 1 0028 MEM GRP
- -------------------------------------------------------------------------------
416-0001-7 COFFEE MAKER 1 0042 MEM GRP
- -------------------------------------------------------------------------------
416-0001-7 COFFEE MAKER 1 2025 MEM GRP
- -------------------------------------------------------------------------------
452080-04-02-28 I.N.U.-LITTON 72 1 0055 MEM GRP
- -------------------------------------------------------------------------------
452080-04-02-28 I.N.U.-LITTON 72 1 0064 MEM GRP
- -------------------------------------------------------------------------------
452080-04-28 I.N.U.-LITTON 72 1 0379 MEM GRP
- -------------------------------------------------------------------------------
452080-04-28 I.N.U.-LITTON 72 1 0407 MEM GRP
- -------------------------------------------------------------------------------
452100-02 M.S.U.-LITTON 72 1 01569 MEM GRP
- -------------------------------------------------------------------------------
452100-02 M.S.U.-LITTON 72 1 02421 MEM GRP
- -------------------------------------------------------------------------------
452100-02 M.S.U.-LITTON 72 1 0905 MEM GRP
- -------------------------------------------------------------------------------
452100-02 M.S.U.-LITTON 72 1 4683 MEM GRP
- -------------------------------------------------------------------------------
458100-02-02 C.D.U.-OMEGA 1 0889 MEM GRP
- -------------------------------------------------------------------------------
482653-0001 VIDEO DIST AMP 1 5424 MEM GRP
- -------------------------------------------------------------------------------
487425-0015 SYS CNTL UNIT 1 6412 MEM GRP
- -------------------------------------------------------------------------------
487425-0015 SYS CNTL UNIT 1 6490 MEM GRP
- -------------------------------------------------------------------------------
487720-0002-M VIDEO PROJECTOR 1 6115 MEM GRP
- -------------------------------------------------------------------------------
487720-0001-M VIDEO PROJECTOR 1 3572 MEM GRP
- -------------------------------------------------------------------------------
488484-0001-L TUNER 1 6409 MEM GRP
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A2
DC10-10 SURPLUS MATERIAL
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLTURE QTY NUMBER LOCATION
[S] [C] [C] [C] [C]
- --------------------------------------------------------------------------------
489907-0001-C VIDEO PROJECTOR 1 6436 MEM GRP
- --------------------------------------------------------------------------------
490331-0001 COMPACT HPU 1 0145 MEM GRP
- --------------------------------------------------------------------------------
490331-0001 COMPACT HPU 1 0193 MEM GRP
- --------------------------------------------------------------------------------
490331-0001 COMPACT HPU 1 124 MEM GRP
- --------------------------------------------------------------------------------
490331-0001 COMPACT HPU 1 3508 MEM GRP
- --------------------------------------------------------------------------------
490331-0001 COMPACT HPU 1 3510 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 APR81-1607 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 NOV81-1896 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 JUN79-84 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 JUN84-2319 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 AUG79-255 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 DEC80-1259 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 JAN79-17 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 OCT79-378 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 MAR80-665 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 DEC80-1232 MEM GRP
- --------------------------------------------------------------------------------
5000306-4 MAIN WHEEL ASSY 1 DEC86-2548 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 AUG73-484 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 DEC80-985 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 DEC90-0216 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 OCT79-864 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 JUL82-1167 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 MAY73-440 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 JAN73-390 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 JUN81-1062 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 SEP80-952 MEM GRP
- --------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 OCT72-361 MEM GRP
- --------------------------------------------------------------------------------
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A2
DC10-10 SURPLUS MATERIAL
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 MAY73-415 MEM GRP
- -------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 JAN83-1206 MEM GRP
- -------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 MAY79-816 MEM GRP
- -------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 DEC77-760 MEM GRP
- -------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 JUN71-99 MEM GRP
- -------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 JUN81-1044 MEM GRP
- -------------------------------------------------------------------------------
5000307 NOSE WHEEL ASSY 1 MAR74-533 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 OCT88-0081 MEM GRP
- -------------------------------------------------------------------------------
5000709-3 BRAKE ASSY 1 AUG88-0217 MEM GRP
- -------------------------------------------------------------------------------
5000709-3 BRAKE ASSY 1 JAN73-812 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 OCT71-425 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 AUG74-1043 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 JUN72-902 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 MAY78-10 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 SEP81-133 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 OCT81-153 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 OCT88-0075 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 DEC87-0013 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 OCT81-149 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 JUN71-307 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 DEC87-0009 MEM GRP
- -------------------------------------------------------------------------------
5000709-7 BRAKE ASSY 1 AUG79-56 MEM GRP
- -------------------------------------------------------------------------------
6000892-3 ANTI-SKID CNTL BOX 1 AUG72-186 MEM GRP
- -------------------------------------------------------------------------------
6001045-2 CIRCUIT BOARD 1 SEP71-507 MEM GRP
- -------------------------------------------------------------------------------
72-21-02-23 OVEN CONTROLLER 1 305/8/73 MEM GRP
- -------------------------------------------------------------------------------
787-6892-002 IND ATTITUDE DIR 1 22 MEM GRP
- -------------------------------------------------------------------------------
787-6892-002 IND ATTITUDE DIR 1 113 MEM GRP
- -------------------------------------------------------------------------------
</TABLE>
Page 4 of 6
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A2
DC10-10 SURPLUS MATERIAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMENCLATURE QTY NUMBER LOCATION
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
787-6892-002 IND ATTITUDE DIR 1 147 MEM GRP
- --------------------------------------------------------------------------------
787-6892-002 IND ATTITUDE DIR 1 7C138 MEM GRP
- --------------------------------------------------------------------------------
8062-121 MAIN ENG CNTL 1 WYC14045 MEM GRP
- --------------------------------------------------------------------------------
8062-127 MAIN ENG CNTL 1 WYG11746 MEM GRP
- --------------------------------------------------------------------------------
8901-118 SENSOR 1 WYG11577 MEM GRP
- --------------------------------------------------------------------------------
8901-170 SENSOR 1 WYG16281 MEM GRP
- --------------------------------------------------------------------------------
898584-8 VALVE PRESS REG 1 NB2207 MEM GRP
- --------------------------------------------------------------------------------
8DJ175LWS2 IND EGT 1 M0026 MEM GRP
- --------------------------------------------------------------------------------
8DJ175LWT2 IND EGT 1 G0005 MEM GRP
- --------------------------------------------------------------------------------
8DJ175LWT2 IND EGT 1 J0036 MEM GRP
- --------------------------------------------------------------------------------
8DJ175LWT2 IND EGT 1 J0117 MEM GRP
- --------------------------------------------------------------------------------
8DJ175LWT2 IND EGT 1 K0415 MEM GRP
- --------------------------------------------------------------------------------
8DJ175LWT2 IND EGT 1 N0085 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZD2 IND N1 TACH 1 H0397 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZD2 IND N1 TACH 1 R0139 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZD2 IND N1 TACH 1 H0390 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZD2 IND N1 TACH 1 J0814 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZD2 IND N1 TACH 1 G0510 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZF2 IND RPM 1 J0192 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZF2 IND RPM 1 E0481 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZF2 IND RPM 1 J0044 MEM GRP
- --------------------------------------------------------------------------------
8DJ176LZF2 IND RPM 1 J0875 MEM GRP
- --------------------------------------------------------------------------------
9-114-02 F/F TRANSMITTER 1 449A MEM GRP
- --------------------------------------------------------------------------------
9-114-02 F/F TRANSMITTER 1 553AB MEM GRP
- --------------------------------------------------------------------------------
9-114-02 F/F TRANSMITTER 1 496A MEM GRP
- --------------------------------------------------------------------------------
9-114-02 F/F TRANSMITTER 1 95A MEM GRP
- --------------------------------------------------------------------------------
9-114-02 F/F TRANSMITTER 1 454A MEM GRP
- --------------------------------------------------------------------------------
</TABLE>
Page 5 of 6
<PAGE>
WORLD AIRWAYS, INC.
ROTABLE SPARES SURPLUS INVENTORY
EXHIBIT A2
DC10-10 SURPLUS MATERIAL
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SERIAL BASE
PART NUMBER NOMEMCLATURE QTY NUMBER LOCATION
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
9-115-10 ELECTRONIC UNIT 1 34 MEM GRP
- -------------------------------------------------------------------
9-118-03 IND FUEL FLOW 1 310 MEM GRP
- -------------------------------------------------------------------
9-118-03 IND FUEL FLOW 1 393 MEM GRP
- -------------------------------------------------------------------
978620-6 VALVE FAN AIR 1 P-380C MEM GRP
- -------------------------------------------------------------------
ACG7439-5505 CYL NOSE STEERING 1 CCE044 MEM GRP
- -------------------------------------------------------------------
G3004 PANEL AUDIO CNTL 1 710 MEM GRP
- -------------------------------------------------------------------
G3004A PANEL AUDIO CNTL 1 532 MEM GRP
- -------------------------------------------------------------------
G3004A PANEL AUDIO CNTL 1 679 MEM GRP
- -------------------------------------------------------------------
G3004A PANEL AUDIO CNTL 1 745 MEM GRP
- -------------------------------------------------------------------
G3006 PANEL VHF COMM CNTL 1 194 MEM GRP
- -------------------------------------------------------------------
G3006 PANEL VHF COMM CNTL 1 212 MEM GRP
- -------------------------------------------------------------------
G3016 PANEL HF CNTL 1 54 MEM GRP
- -------------------------------------------------------------------
G3630 PANEL VOR/DME 1 15 MEM GRP
- -------------------------------------------------------------------
G3630 PANEL VOR/DME 1 17 MEM GRP
- -------------------------------------------------------------------
G3630 PANEL VOR/DME 1 8 MEM GRP
- -------------------------------------------------------------------
G3948A PANEL AUDIO CNTL 1 6 MEM GRP
- -------------------------------------------------------------------
G3948A PANEL AUDIO CNTL 1 17 MEM GRP
- -------------------------------------------------------------------
G3948A PANEL AUDIO CNTL 1 1 MEM GRP
- -------------------------------------------------------------------
487720-0001 VIDEO PROJECTOR 1 5508 MEM GRP
- -------------------------------------------------------------------
487720-0001 VIDEO PROJECTOR 1 5512 MEM GRP
- -------------------------------------------------------------------
ITEM TOTAL: 155
-------
</TABLE>
Page 6 of 6
<PAGE>
EXHIBIT "B"
-----------
<TABLE>
<CAPTION>
Level Gross Value of Sales Commission
- ----- -------------------- ----------
<S> <C> <C>
1 $1 - $837,525 18%
2 $837,526 - $1,675,050 20% plus $8,375.00 Bonus
3 $1,675,050 - $2,512,575 22% plus $16,750.50 Bonus
4 $2,512,576 & Up 23% plus $12,562.88 Bonus
</TABLE>
If TMG reaches Level 2 within nine months, additional compensation of
$8,375.00 will be paid.
If TMG reaches Level 3 within 18 months, additional compensation of $16,750.50
will be paid.
If TMG reaches Level 4 within 30 months, additional compensation of $12,562.88
will be paid.
The parties agree that the above numbers may be revised from time to time by
mutual agreement if market conditions substantially change.
<PAGE>
EXHIBIT 10.63
ASSIGNMENT AND ASSUMPTION
AND CONSENT AND RELEASE
This Agreement is made and entered into as of the 20th day of July, 1993,
by and among World Airways, Inc. ("World"), WorldCorp Inc. ("WorldCorp"),
McDonnell Douglas Corporation ("MDC") and McDonnell Douglas Finance
Corporation ("MDFC").
Recitals
--------
A. World is presently leasing from MDFC one DC-10-30 aircraft bearing FAA
registration number N115WA (the "Aircraft") pursuant to a Lease Agreement,
dated as of February 12, 1992 and a Lease Supplement, dated as of April 28,
1992, recorded by the FAA under Conveyance Number KK16651 on April 28, 1992
(together, the "Lease").
B. The Lease is guaranteed by WorldCorp pursuant to a Guaranty dated as of
February 12, 1992 (the "WorldCorp Guaranty"), and by MDC pursuant to a
Guaranty dated as of February 28, 1992 (the "MDC Guaranty"). In addition,
World and MDFC are parties to a Tax Indemnity Agreement dated as of February
12, 1992 (the "TIA"), which also is guaranteed by MDC pursuant to a Guaranty
dated as of February 28, 1992 (the "TIA Guaranty"). MDC, MDFC and World are
parties to a further agreement, dated as of February 12, 1992, entitled
"Agreement", pertaining to a possible conversion of the Aircraft to a
freighter (the "Freighter Agreement").
C. The parties hereto, together with International Lease Finance Corporation,
are also parties to an agreement dated as of July 9, 1993, entitled
"Agreement", providing for, among other things, the assignment to and
assumption by MDC of the rights and obligations of World under the Lease (the
"Return Agreement").
Agreement
---------
1. The parties agree that the Effective Date with the respect to the Aircraft
shall be extended from July 17, 1993 to the date hereof.
2. World does hereby assign, transfer, sell and convey to MDC all of World's
right, title and interest in, to and under the Lease and the TIA, including,
but not limited to, all of World's rights in and to the Aircraft, except to
the extent of rights relating to obligations of World under the Lease or TIA
from which World has not been released hereby.
3. MDC does hereby assume and agree to perform all of the obligations of
World as lessee under the Lease and the TIA.
4. MDFC does hereby consent to the assignment to and assumption
<PAGE>
by MDC of the Lease and the assumption by MDC of the TIA.
5. MDFC does hereby release World from the obligations of World arising under
the Lease and the TIA on and after the date hereof (the "Assumed
Obligations"), and MDFC does hereby release WorldCorp from the obligations of
WorldCorp, as guarantor, arising under the WorldCorp Guaranty on account of the
Assumed Obligations (but the WorldCorp Guaranty shall continue in full force
and effect with respect to the obligations of World arising under the Lease or
the TIA through the date hereof).
6. MDFC does hereby release MDC from the obligations of MDC, as guarantor,
arising under the MDC Guaranty or the TIA Guaranty on account of the Assumed
Obligations (but MDC's guaranties shall continue in full force and effect with
respect to the obligations of World arising under the Lease or the TIA through
the date hereof).
7. The Freighter Agreement is hereby terminated and shall be of no further
force or effect.
8. MDC and MDFC certify that the conditions of their obligations under the
Return Agreement in the case of the Aircraft, contained in Section 3 thereof,
have been satisfied, except for satisfaction of the return conditions set
forth in the Return Agreement relating to the Aircraft and/or payment of the
Deposit (as such term is defined in the Return Agreement). World's obligations
with respect to the return of the Aircraft are as set forth in Exhibit "A" to
the Return Agreement and not as set forth in the Lease.
<PAGE>
This Agreement is made and entered into as of the date and year first
above written.
WORLD AIRWAYS, INC.
By: /s/
------------------------------
Title: Chief Financial Officer
---------------------------
WORLDCORP INC.
By: /s/
------------------------------
Title: Chief Financial Officer
---------------------------
MCDONNELL DOUGLAS CORPORATION
By:
------------------------------
Title:
---------------------------
MCDONNELL DOUGLAS FINANCE CORPORATION
By:
------------------------------
Title:
---------------------------
<PAGE>
This Agreement is made and entered into as of the date and year first
above written.
WORLD AIRWAYS, INC.
By:
------------------------------
Title:
---------------------------
WORLDCORP INC.
By:
------------------------------
Title:
---------------------------
MCDONNELL DOUGLAS CORPORATION
By: /s/
------------------------------
Title: Vice Pres. - Contracts
---------------------------
MCDONNELL DOUGLAS FINANCE CORPORATION
By:
------------------------------
Title:
---------------------------
<PAGE>
This Agreement is made and entered into as of the date and year first
above written.
WORLD AIRWAYS, INC.
By:
------------------------------
Title:
---------------------------
WORLDCORP INC.
By:
------------------------------
Title:
---------------------------
MCDONNELL DOUGLAS CORPORATION
By:
------------------------------
Title:
---------------------------
MCDONNELL DOUGLAS FINANCE CORPORATION
By: /s/
------------------------------
Title: President
---------------------------
<PAGE>
give instructions for the shipment of all property in consigned stock within
the ninety (90) day period. In the event of termination, initiated by
Consignor, the Consignee will be allowed to recover from the Consignor, all
labor and related overhead costs associated with the removal of the inventory
from the Consignee's facility and additionally any cost of repairs that have
not been recovered by the Consignee.
16. DISPOSITION OF CONSIGNED STOCK FOR SCRAP. In the case whereby the
----------------------------------------
Consignor requests or the Consignee recommends certain material for scrap, the
Consignee will respond in accordance with The Consignor's instruction for
disposition.
(a) In the event the Consignor requests material to be returned to the
Consignor's facility, transportation of consigned goods shall be the
responsibility of the Consignor.
(b) In the event the Consignor requests material to be scrapped by the
Consignee in accordance with the Consignor's instructions, the
Consignee shall be paid a commission from the scrap proceeds of 50
percent of the residual scrap value.
17. ADVERTISING: SALES.
-------------------
(a) Consignee may, but shall not be required to advertise the
Consigned Goods in such publications as, in the sole discretion
of Consignee, facilitate the sale of Consigned
<PAGE>
EXHIBIT 10.64
ASSIGNMENT AND ASSUMPTION
AND CONSENT AND RELEASE
This Agreement is made and entered into as of the 9th day of July, 1993,
by and among World Airways, Inc. ("World"), WorldCorp Inc. ("WorldCorp"),
McDonnell Douglas Corporation ("MDC") and McDonnell Douglas Finance Corporation
("MDFC").
Recitals
--------
A. World is presently leasing from MDFC one DC-10-30 aircraft bearing FAA
registration number N114WA (the "Aircraft") pursuant to a Lease Agreement,
dated as of February 12, 1992 and a Lease Supplement, dated as of April
16, 1992, recorded by the FAA under Conveyance Number H78925 on April 17,
1992 (together, the "Lease").
B. The Lease is guarantied by WorldCorp pursuant to a Guaranty dated as of
February 12, 1992 (the "WorldCorp Guaranty"), and by MDC pursuant to a
Guaranty dated as of February 28, 1992 (the "MDC Guaranty"). In addition,
World and MDFC are parties to a Tax Indemnity Agreement dated as of
February 12, 1992 (the "TIA"), which also is guaranteed by MDC pursuant to
a Guaranty dated as of February 28, 1992 (the "TIA Guaranty"). MDC, MDFC
and World are parties to a further agreement, dated as of February 12,
1992, entitled "Agreement", pertaining to a possible conversion of the
Aircraft to a freighter (the "Freighter Agreement").
C. The parties hereto, together with International Lease Finance Corporation,
are also parties to an agreement dated as of July 9, 1993, entitled
"Agreement", providing for, among other things, the assignment to and
assumption by MDC of the rights and obligations of World under the Lease
(the "Return Agreement").
Agreement
---------
1.
2. MDC does hereby assume and agree to perform all of the obligations of World
as lessee under the Lease and the TIA.
3. MDFC does hereby consent to the assignment to and assumption by MDC of the
Lease and the assumption by MDC of the TIA.
4. MDFC does hereby release World from the obligations of World arising under
the Lease and the TIA on and after the date hereon
<PAGE>
(the "Assumed Obligations"), and MDFC does hereby release WorldCorp from the
obligations of WorldCorp, as guarantor, arising under the WorldCorp Guaranty
on account of the Assumed Obligations (but the WorldCorp Guaranty shall
continue in full force and effect with respect to the obligations of World
arising under the Lease or the TIA through the date hereof).
5. MDFC does hereby release MDC from the obligations of MDC, as guarantor,
arising under the MDC Guaranty or the TIA Guaranty on account of the Assumed
Obligations (but MDC's guaranties shall continue in full force and effect with
respect to the obligations of world arising under the Lease or the TIA through
the date hereof).
6. The freighter Agreement is hereby terminated and shall be of no further
force or effect.
7. MDC and MDFC certify that the conditions of their obligations under the
return agreement in the case of the Aircraft, contained in Section 3 thereof,
have been satisfied, except for satisfaction of the return conditions set
forth in the Return Agreement relating to the Aircraft and/or payment of the
Deposit (as such term is defined in the Return Agreement). World's obligation
with respect to the return of the Aircraft are as set forth in Exhibit "A" to
the Return Agreement and not as set forth in the Lease.
WORLD AIRWAYS, INC.
By: /S/
--------------------------
Title: C.F.O.
-----------------------
WORLDCORP INC.
By: /S/
--------------------------
Title: C.F.O.
MCDONNELL DOUGLAS CORPORATION
By:
--------------------------
Title:
-----------------------
MCDONNELL DOUGLAS FINANCE CORPORATION
By:
--------------------------
Title:
-----------------------
<PAGE>
(the "Assumed Obligations"), and MDFC does hereby release WorldCorp from the
obligations of WorldCorp, as guarantor, arising under the WorldCorp Guaranty
on account of the Assumed Obligations (but the WorldCorp Guaranty shall
continue in full force and effect with respect to the obligations of World
arising under the Lease or the TIA through the date hereof).
5. MDFC does hereby release MDC from the obligations of MDC, as guarantor,
arising under the MDC Guaranty or the TIA Guaranty on account of the Assumed
Obligations (but MDC's guaranties shall continue in full force and effect with
respect to the obligations of World arising under the Lease or the TIA through
the date hereof).
6. The Freighter Agreement is hereby terminated and shall be of no further
force or effect.
7. MDC and MDFC certify that the conditions of their obligations under the
Return Agreement in the case of the Aircraft, contained in Section 3 thereof,
have been satisfied, except for satisfaction of the return conditions set
forth in the Return Agreement relating to the Aircraft and/or payment of the
Deposit (as such term is defined in the Return Agreement). World's
obligations with respect to the return of the Aircraft are as set forth in
Exhibit "A" to the Return Agreement and not as set forth in the Lease.
WORLD AIRWAYS, INC.
By:
------------------------------
Title:
---------------------------
WORLDCORP INC.
By:
------------------------------
Title:
---------------------------
MCDONNELL DOUGLAS CORPORATION
By: /s/
------------------------------
Title: VP - Contracts
---------------------------
MCDONNELL DOUGLAS FINANCE CORPORATION
By:
------------------------------
Title:
---------------------------
<PAGE>
(the "Assumed Obligations"), and MDFC does hereby release WorldCorp from the
obligations of WorldCorp, as guarantor, arising under the WorldCorp Guaranty
on account of the Assumed Obligations (but the WorldCorp Guaranty shall
continue in full force and effect with respect to the obligations of World
arising under the Lease or the TIA through the date hereof).
5. MDFC does hereby release MDC from the obligations of MDC, as guarantor,
arising under the MDC Guaranty or the TIA Guaranty on account of the Assumed
Obligations (but MDC's guaranties shall continue in full force and effect with
respect to the obligations of World arising under the Lease or the TIA through
the date hereof).
6. The Freighter Agreement is hereby terminated and shall be of no further
force or effect.
7. MDC and MDFC certify that the conditions of their obligations under the
Return Agreement in the case of the Aircraft, contained in Section 3 thereof,
have been satisfied, except for satisfaction of the return conditions set forth
in the Return Agreement relating to the Aircraft and/or payment of the Deposit
(as such term is defined in the Return Agreement). World's obligations with
respect to the return of the Aircraft are as set forth in Exhibit "A" to the
Return Agreement and not as set forth in the Lease.
WORLD AIRWAYS, INC.
By:_____________________________
Title:__________________________
WORLDCORP INC.
By:_____________________________
Title:__________________________
MCDONNELL DOUGLAS CORPORATION
By:_____________________________
Title:__________________________
MCDONNELL DOUGLAS FINANCE CORPORATION
By:_____________________________
Title: PRESIDENT
__________________________
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
AIRCRAFT LEASE AGREEMENT
Dated as of January 15, 1993
BETWEEN
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner Trustee
under that certain Trust Agreement dated as of December 28, 1990,
as Lessor,
AND
WORLD AIRWAYS, INC.,
as Lessee.
Concerning:
One MD-11 Aircraft
Three Pratt & Whitney PW4462 Turbofan Engines.
Serial No. 48458
Registration: N489GX
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
Section 1 Definitions.................................................. 1
-----------
Section 2 Delivery and Acceptance...................................... 7
-----------------------
2.1. Time and place............................................... 7
--------------
2.2. A Letting Only............................................... 7
--------------
2.3. Lessor's Conditions to Delivery.............................. 7
-------------------------------
2.4. Lessee's Conditions to Delivery.............................. 8
-------------------------------
Section 3 Term......................................................... 9
----
Section 4 Rent......................................................... 9
----
4.1. Basic Rent................................................... 9
----------
4.2. Supplemental Rent............................................ 9
-----------------
4.3. Prohibition Against Setoff, Counterclaim, Etc................ 9
---------------------------------------------
4.4. Security Deposit............................................. 10
----------------
4.5. Manner and Place of Payment.................................. 10
---------------------------
Section 5 Representations and Warranties; Covenants of the Parties..... 10
--------------------------------------------------------
5.1. Lessor's Representations, Covenants, Warranties and
---------------------------------------------------
Disclaimer................................................... 10
----------
5.2. Lessee's Representations and Warranties...................... 12
---------------------------------------
5.3. Covenants of Lessee.......................................... 14
-------------------
5.4. Covenants of Lessor.......................................... 16
-------------------
Section 6 Possession; Use; Lawful Insured Operations; Maintenance;
-------------------------------------------------------
Registration and Insignia.................................... 17
-------------------------
6.1. Possession................................................... 17
----------
6.2. Assignment; Sublease......................................... 18
--------------------
6.3. Use; Net Lease............................................... 18
--------------
6.4. Lawful Insured Operations.................................... 18
-------------------------
6.5. Registration................................................. 19
------------
6.6. Maintenance.................................................. 19
-----------
6.7. Insignia and Notices......................................... 20
--------------------
6.8. Maintenance Reserves......................................... 20
--------------------
6.9. CRAF......................................................... 22
----
6.10. Engines...................................................... 22
-------
Section 7 Inspection................................................... 22
----------
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-----------------
(Continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
Section 8 Early Termination and Extension.............................. 23
-------------------------------
8.1. Early Termination............................................ 23
-----------------
8.2. Extension.................................................... 23
---------
Section 9 Replacement and Pooling of Parts; Alterations, Modifications,
------------------------------------------------------------
Etc.......................................................... 23
---
9.1. Replacement of Parts......................................... 23
--------------------
9.2. Title to Replaced and Replacement Parts...................... 23
---------------------------------------
9.3. Pooling...................................................... 24
-------
9.4. Alterations, Modifications and Additions..................... 24
----------------------------------------
9.5. Title to Parts............................................... 24
--------------
9.6. Engine Interchange........................................... 25
------------------
Section 10 Taxes........................................................ 25
-----
10.1. General...................................................... 25
-------
10.2. Withholding Taxes............................................ 26
-----------------
10.3. Amount of Indemnity.......................................... 26
-------------------
10.4. Contest...................................................... 27
-------
10.5. Tax Returns.................................................. 28
-----------
10.6. Mutual Assistance............................................ 28
-----------------
Section 11 Events of Loss............................................... 29
--------------
11.1. With Respect to the Aircraft................................. 29
----------------------------
11.2. With Respect to an Engine.................................... 29
-------------------------
11.3. Application of Payments from Governmental Authorities........ 30
-----------------------------------------------------
Section 12 Insurance.................................................... 30
---------
12.1. Public Liability, Bodily Injury and Property Damage Liability
-------------------------------------------------------------
Insurance.................................................... 30
---------
12.2. Insurance Against Loss or Damage to the Aircraft............. 31
------------------------------------------------
12.3. Reinsurance.................................................. 32
-----------
12.4. Replacement Insurance........................................ 33
---------------------
12.5. Application of Proceeds in an Event of Loss.................. 33
-------------------------------------------
12.6. Application of Proceeds in the Absence of an Event of Loss... 33
----------------------------------------------------------
12.7. Reports, etc................................................. 34
------------
12.8. Lessor's Additional Insurance................................ 34
-----------------------------
12.9. Lessor Not Liable For Premiums............................... 34
------------------------------
12.10. Government Indemnity......................................... 34
--------------------
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
-----------------
(Continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
Section 13 General Indemnification...................................... 35
-----------------------
13.1. Scope........................................................ 35
-----
13.2. Lessee's Release............................................. 36
----------------
13.3 Contest...................................................... 36
-------
13.4. Repayment.................................................... 37
---------
13.5. Payment...................................................... 37
-------
Section 14 Liens........................................................ 37
-----
Section 15 Return of Aircraft and Records............................... 37
------------------------------
15.1. Location; Storage............................................ 37
-----------------
15.2. Replacement Items............................................ 38
-----------------
15.3. Evaluation of Aircraft....................................... 38
----------------------
15.4. Certificate of Airworthiness................................. 38
----------------------------
15.5. Demonstration Flight......................................... 38
--------------------
15.6. Maintenance.................................................. 39
-----------
15.7. Final Inspection and Specific Return Conditions.............. 39
-----------------------------------------------
15.8. Aircraft Manuals and Documentation........................... 41
----------------------------------
15.9. Corrections and Subsequent Corrections....................... 41
--------------------------------------
Section 16 Events of Default............................................ 42
-----------------
16.1. Lessee's Defaults............................................ 42
-----------------
Section 17 Rights and Remedies.......................................... 44
-------------------
17.1. Remedies..................................................... 44
--------
17.2. Further Rights............................................... 45
--------------
17.3. Remedies Cumulative.......................................... 45
-------------------
Section 18 Miscellaneous................................................ 46
-------------
18.1. Severability, Amendment, Construction and Applicable Law..... 46
--------------------------------------------------------
18.2. Notices...................................................... 46
-------
18.3. Lessor's Right to Perform.................................... 47
-------------------------
18.4. Counterparts................................................. 47
------------
18.5. Assignment by Lessor......................................... 47
--------------------
18.6. Service of Process; Waiver of Immunities..................... 48
----------------------------------------
18.7. Language..................................................... 48
--------
18.8 Costs and Expenses........................................... 48
------------------
18.9. Survival..................................................... 49
--------
18.10. Further Assurances........................................... 49
------------------
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
-----------------
(Continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
18.11. Entire Agreement............................................. 49
----------------
18.12. Successors and Assigns....................................... 49
----------------------
18.13. Concerning Lessor............................................ 49
-----------------
</TABLE>
Exhibits
- --------
Exhibit A Lease Supplement
Exhibit B Permitted Sublessees
Exhibit C Opinion Letter of Lessee's Counsel
Exhibit D Lessor's Certificate of Representations & Warranties
Exhibit E Aircraft Condition & Configuration
Exhibit F Quiet Enjoyment Letter
Exhibit G Cooperation Agreement
Exhibit H Interior Drawings
iv
<PAGE>
AIRCRAFT
LEASE AGREEMENT
---------------
THIS AIRCRAFT LEASE AGREEMENT, dated as of January 15, 1993 ("Lease"),
between WILMINGTON TRUST COMPANY (in its individual capacity herein referred to
as "WTC"), a Delaware banking corporation not in its individual capacity (except
as expressly provided herein) but solely as Owner Trustee under that certain
Trust Agreement, dated as of December 28, 1990, with GATX Capital Corporation
(the "Trust Agreement"), as Lessor (in such trust capacity herein referred to as
"Lessor"), and WORLD AIRWAYS, INC., a Delaware corporation, as Lessee
("Lessee").
RECITAL
Lessor desires to lease the Aircraft (as defined below) to Lessee and
Lessee desires to lease the Aircraft from Lessor on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
Lessor and Lessee agree as follows:
Section 1
Definitions
-----------
Unless the context requires otherwise, the following terms shall have the
following meanings for all purposes of this Lease and such meanings shall be
equally applicable to both the singular and the plural forms of the terms
defined:
"AD" or "Airworthiness Directive" means any airworthiness directive issued
---- -------------------------
by the FAA and applicable to MD-11 aircraft and to engines of the same type as
the Aircraft and the Engines.
"Aircraft" shall mean the Airframe, together with the Engines, whether or
----------
not installed thereon, the Fly Away Kit and all Parts.
"Aircraft Records" shall mean the documents listed on Appendix A to the
------------------
Lease Supplement.
"Airframe" shall mean the McDonnell Douglas MD-11 airframe described in
----------
the Lease Supplement (except for any engines or Engines installed thereon), and
(except as otherwise provided in Sections 9.3 and 9.4 hereof) any and all Parts
incorporated or installed therein or attached thereto or, so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section 9
hereof, removed therefrom.
"Authorized Maintenance Provider" is defined in Section 6.6 below.
---------------------------------
<PAGE>
"Basic Rent" is defined in Section 4.1 hereof.
------------
"Basic Rent Payment Date" shall mean each date on which Basic Rent is
-------------------------
payable pursuant to Section 4.1 hereof and Section 8 of the Lease Supplement.
"Beneficiary" shall mean GATX Capital Corporation.
-------------
"Beneficiary Liens" shall mean any Lien with respect to any Item which
-------------------
results from (a) nonpayment by Beneficiary of any Tax or Loss imposed on it
(except a Tax or Loss as to which Lessee is obliged hereunder to indemnify
Lessor or Beneficiary), (b) claims against Beneficiary not related to the
transactions described in this Lease or to the ownership of the Items of
Equipment, or (c) an affirmative act of Beneficiary not related to the
transactions described in this Lease.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
--------------
which commercial banking institutions in the cities of Wilmington, Delaware,
Chicago, Illinois, or Washington, D.C., are authorized by law to be closed.
"Cycle" shall mean, in the case of the Airframe, one take-off and landing
-------
of the Airframe and, with respect to an Engine or other engine or the auxiliary
power unit or landing gear of the Aircraft, means one take-off and landing of
the Airframe or other airframe on which such Engine or other engine or the
auxiliary power unit or landing gear of the Aircraft is installed.
"Debt" shall mean any obligation for the payment of borrowed money or
------
deferred purchase price.
"Default" shall mean any event or condition which, with the lapse of time
---------
or the giving of notice or both, would constitute an Event of Default.
"Delivery Date" shall mean the date on which the Aircraft is delivered to
---------------
and accepted by Lessee pursuant to the provisions of Section 2 hereof. The
Lease Supplement shall be dated the Delivery Date.
"Dollars or $" (whether capitalized or not) shall mean United States
-------- --
dollars.
"Engine" shall mean: (a) each of the three Pratt & Whitney PW4462 turbofan
--------
engines described in the Lease Supplement whether or not from time to time
thereafter installed on the Airframe; (b) any engine which may from time to time
be substituted or be a replacement for any such engine pursuant to Section 11
hereof; and (c) except as otherwise provided in Sections 9.3 and 9.4 hereof,
any and all Parts incorporated or installed in or attached thereto or removed
therefrom, so long as title thereto shall remain vested in Lessor in accordance
with the terms of Section 9 hereof; provided, however, that the term
2
<PAGE>
"Engine" shall not include any engine with respect to which this Lease shall
have been terminated.
"Event of Default" shall have the meaning specified in Section 16.
-----------------
"Event of Loss" means, with respect to any Item of Equipment, any of the
---------------
following: (a) loss of such Item or the use thereof due to theft, disappearance
for a period of 30 consecutive days or more, destruction damage beyond repair or
rendition of such Item permanently unfit for normal use for any reason
whatsoever; (b) any damage to such Item which results in an insurance settlement
with respect to such Item on the basis of a total loss; (c) the condemnation
confiscation, requisition or other loss of title to such Item; (d) the
confiscation or seizure of, or requisition of use of, such Item for a period in
excess of 60 consecutive days; (e) any divestiture of title to an Engine treated
as an Event of Loss pursuant to Section 6.1 or other provision hereof; or (f)
the operation or location of the aircraft, while under requisition for use by
the Government, in any area excluded from coverage by any insurance policy or
indemnity provided by the Government in effect with respect to the Aircraft
required by Section 12. An Event of Loss with respect to the Aircraft shall be
deemed to have occurred if an Event of Loss occurs with respect to the Airframe.
"FAA" shall mean, as context requires, the United States Federal Aviation
-----
Administration and/or the Administrator of the United States Federal Aviation
Administration, or any person, governmental department, bureau, commission or
agency succeeding to the functions of either of the foregoing.
"FAR" or "Federal Aviation Regulation" shall mean one or more of the
----- -----------------------------
Federal Aviation Regulations issued by the FAA.
"Federal Aviation Act" shall mean the United States Federal Aviation Act
----------------------
of 1958, as amended, as in effect on the date of this Lease, or any successor or
substituted legislation at the time in effect and applicable.
"Final Inspection" shall have the meaning specified in Section 15.7.
------------------
"Flight Hour" shall mean, with respect to an aircraft, each hour or
-------------
portion thereof during each period commencing when the aircraft lifts off the
runway and concluding when such aircraft touches down upon landing. With respect
to an Engine, "Flight Hour" shall mean each Flight Hour of the aircraft on which
such Engine is installed.
"Fly Away Kit" or "FAK" shall mean those items specified on Appendix D to
-------------- -----
the Lease Supplement, and any additions to or replacements for such items.
3
<PAGE>
"Government" shall mean the government of the United States of America or
------------
any instrumentality or agency thereof (provided the credit of such
instrumentality or agency is backed by the full faith and credit of the United
States of America).
"Hereby", "herein", "hereof", "hereunder", and other like words shall
-------- --------- --------- -----------
refer to this Lease as originally executed or as amended, modified or
supplemented pursuant to the applicable provisions hereof, including, without
limitation, as supplemented by the Lease Supplement.
"Incentive Rate" shall mean a per annum rate of interest equal to the
----------------
Prime Rate in effect from time to time, plus 3%, but in no event greater than
the maximum rate permitted by applicable law.
"Insured Value" with respect to the Aircraft shall mean $112,500,000.
---------------
"Item of Equipment" or "Item" shall mean the Airframe, any Engine, any
------------------- ------
Part or the Fly Away Kit (or any item contained therein).
"Lease" shall mean this Aircraft Lease Agreement and, when executed, the
-------
Lease Supplement.
"Lease Supplement" shall mean the Lease Supplement, substantially in the
------------------
form of Exhibit A hereto, to be entered into by Lessor and Lessee on the
Delivery Date for the purpose of leasing the Items of Equipment pursuant to the
terms of this Lease. The Lease Supplement shall be deemed to incorporate by
reference all of the provisions of this Lease to the same extent as if such
provisions were fully set forth therein.
"Lessor Lien" shall mean any Lien with respect to any Item which results
-------------
from (a) nonpayment by WTC or Lessor of any Tax or Loss imposed on it (except a
Tax or Loss as to which Lessee is obliged hereunder to indemnify WTC or Lessor),
(b) claims against WTC or Lessor not related to the transactions described in
this Lease or to the ownership of the Items of Equipment, or (c) an affirmative
act of WTC or Lessor not related to the transactions described in this Lease.
"Lien" shall mean any mortgage, pledge, lien, charge,
------
encumbrance, lease, exercise of rights, security interest or claim.
"Loss" is defined in Section 13.1 below.
------
"Maintenance Program" shall have the meaning set forth in Section 6.6(a)
---------------------
below.
4
<PAGE>
"Manufacturer" shall mean (a) as to the Engines, United Technologies
--------------
Corporation Pratt & Whitney Division ("UTC"), and (b) as to the Airframe,
McDonnell Douglas Corporation ("Douglas").
"Mortgage" shall mean, collectively, the Senior Mortgage and the
----------
Subordinated Mortgage.
"Mortgagee" shall mean GATX Capital Corporation, as Security Agent.
----------
"Parts" shall mean any and all appliances, parts, instruments,
-------
accessories, furnishings, seats and other equipment of whatever nature (other
than the Engines or engines), which (a) are from time to time incorporated or
installed in or attached to the Airframe or an Engine, or (b) having been so
installed or attached, are later removed therefrom, so long as title thereto
remains vested in Lessor in accordance with Section 9 hereof.
"Permitted Liens" shall mean (a) the respective rights of the parties
-----------------
hereunder and of others as permitted under Sections 6 and 9, below; (b) Liens
for taxes, assessments or other governmental charges either not yet due or being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings so long as such proceedings do not
involve any material danger of the sale, forfeiture, loss or loss of use of the
Aircraft, the Airframe or any Engine or any interest therein; (c) materialmens,
mechanics, workers, repairers, employees, or other like Liens arising in the
ordinary course of business for amounts the payment of which is either not yet
due or is being contested in good faith (and for the payment of which adequate
reserves have been provided) by appropriate Proceedings so long as such
Proceedings do not involve any material danger of the sale, forfeiture or loss
of use of the Aircraft, the Airframe or any Engine or any interest therein; (d)
Liens arising out of any judgment or award unless the judgment secured shall
not, within 60 days after entry thereof, have been discharged, vacated or
reversed or Lessee has commenced an appeal or proceeding for review which is
being prosecuted in good faith by Lessee and with respect to which there shall
have been secured a stay of execution pending such appeal or proceeding for
review; (e) any other Liens with respect to which Lessee shall have provided
security in form and amount acceptable to Lessor; (f) Lessor Liens and
Beneficiary Liens; (g) Liens existing prior to the Delivery Date, unless caused
by Lessee; and (h) the Mortgage.
"Permitted Sublessee" shall mean any of the air carriers identified on
---------------------
Exhibit B hereto provided that such carrier is authorized to operate MD-11
aircraft. Every six months the list of Permitted Sublessees constituting
Exhibit B hereto shall be revised and Lessor may add or remove any carriers
which Lessor in its reasonable judgment believes should be added or removed
based on changes in the carriers' financial condition or the political
condition in the host country. Lessee may at any time request that the name of
a
5
<PAGE>
carrier be added to the list of Permitted Sublessees and Lessor shall promptly
agree or refuse (on a reasonable basis) such request.
"Prime Rate" shall mean that rate publicly announced by Citibank, N.A.,
------------
New York, New York, or its successor, as such bank's "prime" or best rate for 90
day loans to commercial borrowers of the highest credit standing.
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
------
"Security Deposit" shall mean the sum of $200,000 to be paid by Lessee to
------------------
Lessor and held as security by Lessor pursuant to Section 4.4.
"Senior Mortgage" shall mean that certain Second Amended and Restated
-----------------
Senior Aircraft Chattel Mortgage, dated as of September 24, 1992 between
Lessor, as mortgagor ("Mortgagor"), and GATX Capital Corporation, a Delaware
corporation, in its capacity as Security Agent ("Mortgagee") for GATX Capital
Corporation and Credit Lyonnais, a French banking corporation, acting through
its Paris, France office.
"Subordinated Mortgage" shall mean that certain Amended and Restated
-----------------------
Subordinated Aircraft Chattel Mortgage, dated as of September 24, 1992 between
Lessor, as mortgagor ("Mortgagor"), and GATX Capital Corporation, a Delaware
corporation, in its capacity as Security Agent ("Mortgagee") for GATX Capital
Corporation and Credit Lyonnais, a French banking corporation, acting through
its Paris, France office.
"Supplemental Rent" shall mean all amounts, liabilities and obligations
-------------------
(other than Basic Rent) which Lessee assumes, agrees or is obligated to pay
hereunder.
"Supplier" shall mean the manufacturer, vendor or supplier of any Item of
----------
Equipment other than a Manufacturer.
"Tax" and "Taxes" shall have the meanings specified in Section 10.
----- -------
"Term" shall mean the period for which the Items of Equipment are leased
------
hereunder pursuant to Section 3. If such period is extended pursuant to Section
8, the word "Term" shall be deemed to refer to such period as so extended, and
all provisions of this Lease shall apply until the expiration date of such
period, except as may be otherwise specifically provided herein.
6
<PAGE>
Section 2
Delivery and Acceptance
-----------------------
2.1. Time and Place. Subject to the satisfaction of the conditions set
--------------
forth in Section 2.3, on the Delivery Date Lessor shall deliver the Aircraft,
together with all necessary manuals, log books, records and other documents
relating thereto to Lessee, at the location specified in the Lease Supplement or
at such other location as may be mutually agreed. The parties anticipate that
the Delivery Date shall be on or about March 25, 1993. Lessor shall not be
liable for any delay in delivery which is beyond Lessor's reasonable control.
Lessee shall accept the Aircraft by executing and delivering the Lease
Supplement and delivering the same to Lessor and upon Lessor's countersignature
on the Lease Supplement the Aircraft shall be subject to this Lease.
2.2. A Letting Only. Except as expressly provided in Sections 9 and 11.2,
--------------
at all times during the Term, full legal title to the Items of Equipment shall
remain vested in Lessor to the exclusion of Lessee, notwithstanding the delivery
of the Items of Equipment to, and the possession and use thereof by, Lessee.
2.3. Lessor's Conditions to Delivery. Lessor's obligation to deliver and
-------------------------------
lease the Items of Equipment to Lessee hereunder shall be subject to
satisfaction of the following conditions:
(a) Simultaneously with the execution of this Lease, Lessor shall
have received:
(i) The full Security Deposit as specified in Section 4.4;
(ii) Written evidence of appropriate corporate action,
certified by the Secretary or an Assistant Secretary of Lessee, duly authorizing
or ratifying the lease of the Items of Equipment hereunder and the execution,
delivery and performance of this Lease, together with an incumbency certificate
as to the person or entity or persons authorized to execute and deliver said
certification and said documents on behalf of Lessee.
(b) On or before the Delivery Date, Lessor shall have received:
(i) The Lease Supplement, duly executed by Lessee, dated the
Delivery Date;
7
<PAGE>
(ii) Certificates executed by independent aircraft insurance
brokers evidencing Lessee's compliance with the insurance provisions of
Section 12 hereof;
(iii) An opinion of Lessee's counsel dated the Delivery Date,
substantially in the form of the attached Exhibit C;
(iv) A certificate signed by a duly authorized officer of
Lessee, dated the Delivery Date, to the effect that:
(A) the representations and warranties contained in
Section 5.2 hereof are true and correct on and as of such date as though
made on and as of such date, and all authorizations and approvals of,
givings of notice to, and filings and recordings with, all regulatory
bodies and authorities which may be conditions to the validity or
enforceability of this Lease or Lessee's performance of the terms hereof
have been duly accomplished; and
(B) no Default or Event of Default has occurred and is
continuing, or would result from the lease of the Items of Equipment
hereunder;
(v) Evidence satisfactory to Lessor confirming that this
Lease and the Lease Supplement have been duly filed with the FAA and any other
appropriate governmental authorities;
(vi) The first payment of Basic Rent;
(vii) An executed counterpart of an agreement with UTC
guaranteeing maintenance costs on the Engines for 10 years in form and
substance the same or better than that between Lessee and UTC;
(viii) Such other documents as Lessor may reasonably request,
in form and substance satisfactory to Lessor.
2.4. Lessee's Conditions to Delivery. Lessee's obligation to accept and
-------------------------------
lease the Items of Equipment from Lessor hereunder shall be subject to the
satisfaction of the following conditions on or before the Delivery Date:
(a) Written evidence of appropriate corporate action by Lessor and
Beneficiary, certified by the Secretary or an Assistant Secretary of Lessor or
Beneficiary, as appropriate, duly authorizing or ratifying the lease of the
Items of Equipment hereunder and the execution delivery and performance of this
Lease, together with an incumbency certificate as to the person or entity or
persons authorized to execute and deliver said certification and said documents
on behalf of Lessor and Beneficiary;
8
<PAGE>
(b) (i) A certificate substantially in the form of Exhibit D
hereto signed by a duly authorized officer of Lessor, dated the Delivery Date,
to the effect that (A) the representations and warranties contained in Section
5.1 hereof are true and correct on and as of such date as though made on and as
of such date, and (B) Lessor has not breached any of its covenants in this Lease
and (ii) A similar certificate signed by a duly authorized officer of
Beneficiary to the effect that the representations and warranties contained in
the GATX Agreement are true and correct on and as of such date;
(c) The Aircraft shall be in the condition and configuration
specified in Exhibit E hereto;
(d) Lessee shall have received a quiet enjoyment letter from the
Mortgagee in the form of Exhibit F hereto.
Section 3
Term
----
The Term shall commence on the Delivery Date and shall expire on October
1, l995, unless earlier terminated pursuant to Section 17 or extended pursuant
to Section 8 or Sections 15.7(a) or 15.9.
Section 4
Rent
----
4.1. Basic Rent. Commencing on the Delivery Date and the first Business
----------
Day of each month thereafter (each a "Basic Rent Payment Date"), Lessee shall
pay Lessor rent for the Aircraft throughout the Term each such payment in the
amount specified in Section 8 of the Lease Supplement ("Basic Rent").
4.2. Supplemental Rent. Lessee shall also pay to Lessor or Lessor's
-----------------
designee any and all Supplemental Rent promptly as the same shall become due and
payable. Lessee shall pay to Lessor, as Supplemental Rent, interest at the
Incentive Rate on any portion of any payment of Rent not paid on the due date
thereof. All computations of interest under this Lease to be made on the basis
of a 365-day year and actual days elapsed.
4.3. Prohibition Against Setoff, Counterclaim, Etc. Lessee's obligation
---------------------------------------------
to pay Rent hereunder shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor. Except as provided in Section 10.2 in respect of withholding
Taxes, each payment of Rent shall be absolutely final and net to Lessor, so that
this Lease will yield to Lessor the full amount of Rent throughout the Term
without deduction. Nothing in this Section 4.3 shall be construed to prevent
Lessee, after
9
<PAGE>
complying with this Section 4.3, from pursuing any claim it may have against
Lessor or any other person in such court of law or otherwise as Lessee may
deem appropriate.
4.4. Security Deposit. Lessee agrees, simultaneously with the execution
----------------
of this Lease, to pay the Security Deposit which shall be held by Lessor as
security for Lessee's performance of its obligations hereunder. Upon return of
the Aircraft to Lessor in full compliance with Section 15, including the return
conditions specified therein, and provided that all unpaid Rent has been paid,
Lessor shall refund the Security Deposit to Lessee. Lessee may substitute a
Letter of Credit from a bank acceptable to Lessor and in form and substance
acceptable to Lessor in lieu of the Security Deposit.
4.5. Manner and Place of Payment. All amounts to be paid by Lessee
---------------------------
hereunder shall be paid by wire transfer of immediately available funds,
consisting of lawful currency of the United States of America, to the following
account:
The First National Bank of Chicago
ABA No. 071000013
Chicago, Illinois 60670
Credit: GATX Capital Corporation
Account No. 52 47209
or to such other party or account in the contiguous continental United States of
America as Lessor shall designate in writing. If any such amount is due to be
paid on a day other than a Business Day, such amount shall be payable on the
next succeeding Business Day.
Section 5
Representations and Warranties: Covenants of the Parties
--------------------------------------------------------
5.1. Lessor's Representations, Covenants, Warranties and Disclaimer.
---------------------------------------------------------------
WTC and Lessor represent and warrant (except with respect to Section c below
which is given solely by Lessor) that:
(a) Title: Condition. On the Delivery Date Lessor shall be the owner
----------------
of the Aircraft and shall have the right to lease the Aircraft to Lessee under
the terms of this Lease.
EXCEPT FOR THE FOREGOING REPRESENTATION AND THE OTHER
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 5.1, LESSOR DOES NOT
MAKE AND SHALL NOT BE DEEMED TO HAVE MADE OR TO MAKE ANY WARRANTIES,
REPRESENTATIONS OR GUARANTEES OF ANY KIND, INCLUDING AS TO THE AIRWORTHINESS,
VALUE, CONDITION, DESIGN OR OPERATION OF, OR QUALITY OF THE
10
<PAGE>
MATERIAL OR WORKMANSHIP IN, OR ANY DEFECT IN, THE AIRCRAFT, THE AIRFRAME, ANY
ENGINE, ANY PART, ANY DATA OR ANY OTHER THING DELIVERED, LEASED, OR
TRANSFERRED HEREUNDER, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR USE OR FOR A PARTICULAR PURPOSE, AGAINST INFRINGEMENT OR THE LIKE, OR
ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, ANY
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT WITH RESPECT TO THE
AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA OR ANY OTHER THING
DELIVERED, LEASED, OR TRANSFERRED HEREUNDER, WHETHER OR NOT IN STRICT OR
ABSOLUTE LIABILITY OR ARISING FROM THE ACTUAL OR IMPUTED NEGLIGENCE OF LESSOR,
BENEFICIARY, THE MORTGAGEE, OR ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY FOR LOSS OF, OR DAMAGE TO, ANY AIRCRAFT, ANY AIRFRAME, ANY ENGINE, ANY
PART, ANY DATA OR ANY OTHER THING, FOR ANY LOSS OF USE, REVENUE OR PROFIT, OR
ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, EXCEPT TO THE EXTENT
ARISING SOLELY AS A RESULT OF LESSOR'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
LESSEE ACCEPTS THE AIRCRAFT "AS-IS," "WHERE-IS". Lessor hereby assigns (but
only for such time as no Event of Default shall have occurred and be
continuing) to Lessee such rights as Lessor may from time to time have under
any warranty made by any Manufacturer or Supplier with respect to any Item of
Equipment, and, so long as no Event of Default exists and is continuing,
Lessee shall have the exclusive right to enforce such warranties and to use
such proceeds in accordance with the terms of this Lease to repair or modify
the Items of Equipment.
(b) Corporate Existence and Qualification. Lessor is a corporation
-------------------------------------
duly incorporated and validly existing under the laws of the jurisdiction of its
incorporation and has the power and authority to enter into and perform its
obligations hereunder and under the Lease Supplement.
(c) Authority and Binding Obligations. This Lease has been duly
---------------------------------
authorized, executed and delivered by Lessor, and the Lease is, and the Lease
Supplement will be, upon due execution and delivery, the legal, valid and
binding obligations of Lessor, enforceable in accordance with their respective
terms and do not require any approval from stockholder, trustee or any holders
of debt or other obligations of Lessor, except such as has been duly obtained.
(d) No Violation. The execution and delivery by Lessor of this
------------
Lease is not, and the execution and delivery of the Lease Supplement will not
be, and the performance by Lessor of its obligations under each of the
foregoing documents will not be, inconsistent with the terms of its charter or
bylaws, do not and will not contravene any law,
11
<PAGE>
governmental rule or regulation, of the State of Delaware or the United States
of America governing the banking or trust powers of Lessor or any judgment or
order applicable to it, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract or other
instrument to which Lessor is a party or by which it is bound or require the
consent or approval of, the giving of notice to, the registration with or the
taking of any action in respect of or by, any governmental authority or agency
of the State of Delaware or the United States of America governing the banking
or trust powers of Lessor, or other person, except such as have been obtained,
given or accomplished.
(e) Litigation. There are no pending suits or proceedings against
----------
or affecting Lessor in any court or before any governmental authority or
arbitration board or tribunal that relate to this Lease or the Aircraft or
that, if adversely determined, might materially adversely affect Lessor's
ability to enter into or perform under this Lease.
5.2. Lessee's Representations and Warranties. Lessee covenants,
---------------------------------------
represents and warrants that:
(a) Corporate Existence and Qualification. Lessee is a corporation
-------------------------------------
duly incorporated and validly existing under the laws of the state or country of
its incorporation and is an air carrier of persons and property in air
transportation, registered, licensed or otherwise certificated or duly
authorized by the FAA and any other appropriate aeronautics authority to engage
in such air transportation and is duly qualified or otherwise authorized to do
business as an air carrier in all jurisdictions in which it has air routes,
except for jurisdictions where failure to so qualify or obtain authorization
would not have a material adverse effect on the business of Lessee and would not
involve any material danger of the sale, forfeiture or loss of any Item of
Equipment or the impairment of the value thereof.
(b) Authority. Lessee has full corporate power and authority to
---------
enter into and perform this Lease and the Lease Supplement; and the execution,
delivery and performance of this Lease and the Lease Supplement have been duly
authorized by all necessary corporate action on the part of Lessee, do not
require any stockholder approval or approval or consent of any trustee or
holders of any Debt or other obligations of Lessee except such as have been duly
obtained and do not contravene any provision of any law, governmental rule,
regulation or order binding on Lessee, or any applicable interpretation or
administration of any such law, governmental rule, regulation or order, or
contravene the certificate of incorporation by-laws or other organic documents
of Lessee or any indenture, mortgage, contract or other agreement or instrument
to which Lessee is a party or by which it or any of its assets may be bound or
affected.
(c) Governmental Approvals. Except for the filing of this Lease
----------------------
and the Lease Supplement with the FAA, neither the making nor performance by
Lessee of this Lease or the Lease Supplement, nor the consummation of any of the
transactions by Lessee contemplated hereby or thereby, nor the acquisition,
ownership or leasing by Lessor of the
12
<PAGE>
Aircraft under such documents, requires the consent or approval of, the giving
of notice to, the registration or filing for recordation with, or the taking
of any other action in respect of, the Government or any political agency,
subdivision or instrumentality thereof, except such as have been obtained,
made or taken.
(d) Binding Obligations. This Lease constitutes the valid and
-------------------
legally binding obligation of Lessee enforceable against Lessee in accordance
with the terms hereof.
(e) Litigation. Except as otherwise disclosed in the Lessee's most
----------
recent Form 10Q and Form 10K, there are no suits or proceedings pending or, to
the knowledge of Lessee, threatened in any court or before any regulatory
commission, board or other administrative or governmental agency against or
affecting Lessee which relate to the transactions contemplated hereby or which,
if adversely determined, would have a material adverse affect on the ability
of Lessor to perform its obligations hereunder.
(f) Financial Condition. The audited balance sheet of Lessee as of
-------------------
December 31, 1991 (the "1991 Balance Sheet"), and the audited statements of
profit and loss of Lessee for 1991, each certified by KPMG Peat Marwick,
together with the unaudited financial statements of Lessee for the period ending
September 30, 1992, fairly present the financial condition of Lessee and have
been prepared in accordance with generally accepted accounting principles.
Lessee has no contingent obligations, liabilities for taxes or unusual forward
or long-term commitments which could have a material adverse effect on its
financial condition, except as disclosed in the 1991 Balance Sheet. Since
September 30, 1992, there has been no material adverse change in Lessee's
operations or financial condition from that reflected in such financial
statements other than changes in the ordinary course of business the effect of
which has not been materially adverse to the ability of Lessee to fulfill its
obligations hereunder, other than the sale of Key Airlines.
(g) Use of Aircraft. The Aircraft will be used exclusively for the
----------------
transport of persons and property as permitted under the laws of the United
States and any other jurisdictions in which Lessee conducts its operations.
(h) Pari Passu Ranking. The obligations of Lessee to pay Rent
------------------
hereunder will be direct and unconditional general obligations of Lessee, and
will rank in right of payment at least pari passu with all unsecured obligations
of Lessee.
(i) No Conflicting Agreements. Lessee is not a party to any
-------------------------
agreement or instrument or subject to any charter or other corporate
restriction which individually or in the aggregate is, in the reasonable
judgment of Lessee, likely to materially adversely affect its ability to
perform its obligations under this Lease or the Lease Supplement.
(j) No Default. No Default or Event of Default has occurred and is
----------
continuing.
13
<PAGE>
(k) Protective Filings. Other than the filing for recordation of
------------------
this Lease and the Lease Supplement with the FAA, no other filing or recording
of any document and no other action is necessary or advisable in the United
States of America, in order to establish and perfect Lessor's title to and
interest in the Aircraft as against Lessee and any third parties claiming
against or through Lessee, including trustees, custodians and other
representatives or similar officials, under any bankruptcy or liquidation law
or regulations, or other regulations, or otherwise.
(1) Registration. Lessee is a "certificated air carrier" under the
------------
Federal Aviation Act.
5.3. Covenants of Lessee. Until payment in full of all Rent and
-------------------
performance by Lessee of all its other obligations hereunder, Lessee agrees
that:
(a) Financial Statements, Reports. etc. Lessee shall furnish to
----------------------------------
Lessor:
(i) As soon as available and in any event within 60 days after
the close of each of the first three quarters of each fiscal year of
Lessee, the balance sheet of Lessee as at the end of such quarterly
period and the related statement of earnings for such quarterly period,
setting forth in each case in comparative form the corresponding figures
for the end of the corresponding period of the preceding fiscal year,
certified by the principal financial officer of Lessee;
(ii) As soon as available and in any event within 120 days
after the close of each fiscal year of Lessee, the balance sheet of
Lessee as at the end of such fiscal year and the related statement of
earnings for such fiscal year, prepared in accordance with generally
accepted accounting principles and on a basis consistent with that used
in the preparation of the financial statements referred to in Section
5.2(f), except as noted in such balance sheet and statements, certified
by Lessee's independent public accountants and including the
accompanying footnotes and such accountants' opinion thereon;
(iii) Promptly after Lessee shall have obtained knowledge of the
occurrence of any Default or Event of Default hereunder, a written notice
specifying the nature and period of existence thereof and what action
Lessee has taken or is taking or proposes to take with respect thereto;
(iv) Promptly notify Lessor of any damage to the Aircraft if the
estimated cost of repair exceeds $200,000;
14
<PAGE>
(v) Within 30 days after receiving service of process or
equivalent notice of any litigation, including arbitrations, involving
any claim against Lessee in excess of $5,000,000 and of any proceeding
by or before any governmental agency, which litigation or proceeding, if
adversely determined, could materially adversely affect the properties,
business, prospects or financial condition of Lessee and its
subsidiaries on a consolidated basis;
(vi) Promptly after entering into or becoming bound or
affected by any pooling or interchange agreement or arrangement by which
any Engine may be affected and promptly after each amendment or
modification of any such agreement or arrangement, a copy of such
agreement, arrangement, amendment or modification, duly certified by an
officer of Lessee as being a complete and correct copy;
(vii) every three months a copy of all invoices received from
Eurocontrol and other airport and overflight authorities and appropriate
evidence of payment by Lessee thereof; and
(viii) Subject to applicable legal restrictions and Lessee's
reasonable confidentiality requirements, from time to time such other
information as Lessor may reasonably request, which relates to maintenance
of the Aircraft and the Engines (including total Flight Hours and Cycles
and time between overhauls) and the financial condition and general
business operations of Lessee. Lessee agrees to provide GATX Capital
Corporation prior to the Delivery Date with one complete copy of the
Maintenance Program, entitled Part D "Operation Specifications" and all
documents referenced therein and during the Term all periodic updates and
revisions thereto, all of which shall be treated as strictly proprietary
and confidential and returned at the end of the Term.
(b) Authorizations. Lessee will obtain from time to time any and all
--------------
such consents, approvals, licenses and authorizations and make any and all such
filings and registrations as shall now or hereafter be required under applicable
law and regulations (including foreign exchange laws) for the making and
performance by Lessee of this Lease and to the extent such documents are
material and non-routine will promptly furnish copies thereof to Lessor.
(c) Recording. Subject to the requirements of Section 5.4(a), Lessee
---------
shall be responsible for and bear the expenses of recording and rerecording,
registering and reregistering and filing and refiling this Lease, each and every
Lease Supplement, and such other instruments as are necessary or reasonably
requested by Lessor to protect the right, title and interest of Lessor hereunder
and as owner of the Aircraft.
15
<PAGE>
(d) Certificated Carrier. Lessee shall do or cause to be done all
--------------------
things necessary to preserve and keep in full force and effect its status as a
duly certificated air carrier pursuant to (or, in the event such law or
regulation is superseded, its authorization under) the Federal Aviation Act and
pursuant to the laws of the United States of America to be an air carrier
engaged in the carriage of persons and property for compensation or hire.
(e) Corporate Existence. Lessee will at all times maintain its
-------------------
corporate existence. Without prior written notice to Lessor, Lessee will not
consolidate with or merge into any other entity, or sell, lease, exchange,
transfer or otherwise dispose (whether in one transaction or in a series of
related transactions) of all or substantially all its property, assets or
revenues, whether now owned or hereafter acquired.
(f) Place of Business. Lessee's principal place of business and
-----------------
executive office are located at 13873 Park Center Road, Suite 490, Herndon,
VA 22071.
5.4. Covenants of Lessor:
-------------------
(a) Registration. Lessor will take such action as may be reasonably
------------
requested by Lessee, at the expense of Lessee, in order to execute and deliver
for filing or recordation the Lease and the Lease Supplement with the FAA.
Lessor agrees to deliver to Lessee and to any other person or entity specified
by Lessee such notifications, certifications, reports or other documents as may
be required by law as a precondition to exemption or other relief from (or
reduction of) any Taxes which otherwise would be imposed with respect to any
amount payable by Lessee under this Lease.
(b) Quiet Enjoyment. So long as no Event of Default shall have
---------------
occurred and be continuing, Lessor agrees that, except as specifically permitted
by the terms of this Lease, it will not, through its own actions or through the
actions of others claiming through or under Lessor, interfere with Lessee's
peaceful and quiet use, operation and possession of the Aircraft.
(c) U.S. Citizen. WTC will remain a "citizen of the United States"
--------
as defined in Section 101(16) of the Federal Aviation Act. Upon WTC's actual
knowledge that it has ceased to be a "citizen of the United States" the Lessor
shall at its expense convey the Aircraft and its rights and obligations
hereunder to a "citizen of the United States".
(d) Lessor Liens. WTC agrees to keep the Aircraft free and clear of
------------
Lessor Liens attributable to WTC and unrelated to this Agreement and to
indemnify Lessee for any loss, cost, damage or expense suffered by Lessee by
reason of the existence of any such Lessor Liens.
16
<PAGE>
Section 6
Possession; Use: Lawful Insured Operations; Maintenance; Registration and
-------------------------------------------------------------------------
Insignia
--------
6.1. Possession. Except as expressly provided in this Lease, the Aircraft
----------
and the operations performed therewith, subject to applicable law and the rules
and regulations of the FAA shall be under the exclusive control of Lessee until
the same are returned pursuant to Section 15 or 17 hereof. Neither Lessee nor
any Permitted Sublessee shall without Lessor's prior written consent deliver,
relinquish or transfer possession of any Item or Items of Equipment, except for
the transfer of possession and replacement of Parts as provided in Sections 6.2,
9.1 and 9.3; provided, however, that, so long as no Event of Default shall have
occurred and be continuing, Lessee may, subject to Section 6.6, (a) deliver
possession of an Item of Equipment to an FAA-certificated maintenance facility
for service, repair, maintenance or overhaul work required by the terms
hereof, or for modifications, alterations or additions permitted by the
provisions of this Lease; (b) install an Engine on an airframe owned or leased
by Lessee, or purchased by Lessee subject to a conditional sale, provided that
either (x) such airframe is free and clear of all Liens except Permitted Liens
and the right of the parties to the lease or conditional sale or other
security agreement covering such airframe or (y) the owner or secured party of
such airframe has entered into a Cooperation Agreement in the form of Exhibit
G hereto; (c) Lessee may transfer temporary possession of the Aircraft to the
United States of America or any instrumentality or agency thereof pursuant to
Executive Order No. 10999, as amended, or any substitute or similar programs;
provided, however, no agreement or arrangement described in (a), (b) or (C)
above shall contemplate or require the transfer of title to any Engine; and
provided further, that the rights of any transferee who receives possession by
reason of a transfer permitted by Sections 6.l(a) and (b) shall be expressly
subject and subordinate to all the terms of this Lease, including, without
limitation the restrictions on the use of the Aircraft contained in Section
6.3 and Lessor's right to terminate this Lease upon the occurrence of an Event
of Default and to obtain possession of the Engine regard to any such
agreement, lease or sublease, and Lessee shall remain primarily liable
hereunder for the performance of all of the terms hereof to the same extent as
if such transfer had not occurred. Any transfer of an Engine pursuant to this
Section 6. 1 which results in a transfer of title to such Engine shall be
treated as an Event of Loss with respect to such Engine. Lessor agrees to
enter into the Cooperation Agreement in the form of Exhibit G hereto.
If applicable law requires that the Aircraft be registered in a
jurisdiction other than the United States during the term of any permitted
sublease the Aircraft may be registered in such other jurisdiction provided
that notwithstanding such reregistration, all of the other terms and
conditions of this Lease are complied with and such sublessee provides Lessor
with evidence, reasonably satisfactory to Lessor and Mortgagee, including
opinions of counsel reasonably acceptable to Lessor, that Lessor and Mortgagee
will retain substantially all of the same rights and protections under this
Lease and the Mortgage, respectively and with respect to the Aircraft as if
the Aircraft had not been so reregistered. Lessor shall
17
<PAGE>
have the right to require Lessee to carry "political risk" insurance of the
Aircraft is registered in a jurisdiction outside the United States. Promptly
after the end of such sublease, the Aircraft, the Lease and the Mortgage shall
be reregistered and refiled with the FAA at the Lessee's expense.
6.2. Assignment: Sublease. Lessee may enter into a wet lease of the
--------------------
Airframe or Aircraft with any third party, provided that the operation of the
Airframe or Aircraft remains in the exclusive control of Lessee's employees
possessing all current certificates and licenses necessary for operation
thereof. Lessee may also sublease the Aircraft to any Permitted Sublessee.
Lessee shall notify Lessor of any contemplated wet lease or sublease as many
days prior to the commencement thereof as may be practical and shall provide
Lessor with a certified copy of the related lease documentation as promptly as
possible after the execution thereof, but prior to the commencement thereof.
Lessee may remove the rental figures therefrom and Lessor shall maintain the
confidentiality thereof. No wet lease or sublease of this Aircraft shall
extend for more than eight months, including renewals, unless the agreement
permits substitution of aircraft. Any wet lease or sublease shall be expressly
subordinate to this Lease. No sublease or wet lease shall permit a further
wet lease or sublease. Except as provided in this Section 6.2 and in Section
6.1, Lessee will not sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine, or assign
any of its rights or obligations hereunder and any such purported assignment
shall be void ab initio.
-- ------
63. Use; Net Lease. Lessee shall use the Aircraft solely in commercial
--------------
operations for which Lessee is duly authorized. Lessee shall not use, or permit
the use of, any Item or Items of Equipment for any purpose for which it is not
designed. Lessee shall comply with all regulations of the FAA with respect to
the Aircraft. Lessee shall pay for and provide all electric power, oil, fuel and
lubricant consumed by and required for the operation of the Aircraft. Lessee
shall promptly pay all navigation charges (including landing fees, departure
fees and airport taxes) the nonpayment of which could result in a Lien upon the
Aircraft.
6.4. Lawful Insured Operations. Lessee will not cause or permit any Item
-------------------------
of Equipment to be maintained, used or operated in violation of any law, treaty,
statute, rule, regulation or order of any government or governmental authority
having jurisdiction or, in the case of the Aircraft and the Engines, in
violation of any airworthiness certificate or registration relating thereto,
except to the extent any of the foregoing is being contested by Lessee in good
faith and by appropriate proceedings. Lessee agrees not to operate the Aircraft,
or suffer the same to be operated, (a) unless the Aircraft is covered by
insurance or governmental indemnity as required by the provisions of Section 12
hereof, or (b) contrary to the terms of the insurance required by the provisions
of Section 12 hereof. If the Aircraft is brought into any location or country in
which the insurance or indemnity required by Section 12 is not in full force and
effect, Lessee, in addition to its liability under
18
<PAGE>
Sections 17 and 18, shall be liable to Lessor for loss or damage to the Aircraft
up to the Insured Value.
6.5. Registration. Lessee will maintain the registration of the Aircraft
------------
with the FAA in the name of Lessor as owner throughout the Term.
6.6. Maintenance. Lessee, at its own cost and expense, shall:
-----------
(a) Service, repair, maintain, overhaul replace (but only in
accordance with Section 9 hereof) and test, or cause the same to be done to,
each Item leased hereunder (i) so as to keep such Item in good operating
condition, (ii) so as to keep the Aircraft in the condition necessary to
enable the airworthiness certification of such Aircraft to be maintained in
good standing at all times under all applicable laws and regulations, and
(iii) in compliance with Lessee's FAA-approved MD-11 maintenance program (the
"Maintenance Program");
(b) Maintain all records, logs and other materials required by the
FAA in respect of the Aircraft and all records required by the FAA to establish
traceability of all life-limited parts of the Airframe, the FAK, all Parts and
the Engines. All principal records, logs and other materials shall be maintained
by Lessee in the English language;
(c) Promptly furnish to Lessor such information as is known by
Lessee to be required, or as Lessor may request to enable Lessor to file any
reports required to be filed by Lessor with any governmental authority
concerning the Aircraft;
(d) Incorporate into the Aircraft all alert Service Bulletins issued
by any Manufacturer or Supplier and all other Service Bulletins that relate to
safety and reliability of the Aircraft which are incorporated into any other
MD-11 aircraft owned or operated by Lessee. It is the agreement of the parties
that Lessee shall not discriminate against this Aircraft with respect to any
maintenance matter;
(e) Carry out on the Aircraft all Airworthiness Directives ("AD")
imposed by the FAA which are applicable to the Aircraft and which are due during
the Term. The cost of performing the terminating action required by an AD shall
be shared between Lessor and Lessee as follows: Lessee shall pay the first
$75,000 of such terminating action and an additional amount equal to the cost of
such terminating action multiplied by a fraction the numerator of which is the
number of months from the commencement of the terminating action to the end of
the Term (assuming neither party exercises any rights under Section 8 below) and
the denominator of which is 120. Lessor shall pay any cost of the AD terminating
action in excess of the amounts paid by Lessee under the preceding sentence; and
19
<PAGE>
(f) Cause all modifications, repairs, maintenance and overhauls of
the Airframe, the Engines and all Parts, whether scheduled or unscheduled, to
be accomplished at FAA licensed repair stations or by an FAA-certified
mechanic. All scheduled maintenance and overhauls of the Airframe, Engines and
Parts throughout the Term shall be performed at FAA-certificated repair
stations specified in the Maintenance Program (the "Authorized Maintenance
Performer").
6.7. Insignia and Notices. Lessee shall affix and maintain in the cockpit
--------------------
of the Aircraft adjacent to and not less prominent than the airworthiness
certificate therein and on each Engine a nameplate satisfactory to Lessor
bearing the inscription "This *[Aircraft]* *[Engine]* is owned by Wilmington
Trust Company, as Owner Trustee, subject to a Mortgage in favor of GATX
Capital Corporation as Security Agent, and leased to World Airways, Inc.," or
such other inscription as Lessor from time to time may reasonably request in
order to show its interest in the Aircraft or to show the interests of third
parties holding a mortgage or security interest in the Aircraft. Except as
otherwise provided, Lessee will not allow the name of any person or entity to
be placed on the Airframe or any Engine as a designation that might be
interpreted as a claim of ownership except that Lessee or a Permitted
Sublessee may place its customary colors and insignia on the Airframe and any
Engine.
6.8. Maintenance Reserves. On or before the tenth (lOth) day of each
--------------------
calendar month during the Term, Lessee shall (a) report to Lessor the number of
Flight Hours accumulated during the preceding month on the Airframe and each
Engine, and (b) pay Lessor as Supplemental Rent an amount equal to the sum of
(i) Two Hundred Dollars ($200) for each flight Hour accumulated on the Airframe
(the "Airframe Reserve") plus (ii) Seventy-Three Dollars ($73) (the "Engine Base
Rate") for each Flight Hour Accumulated on each Engine (the "Engine Reserves,"
and, together with the Airframe Reserve, the "Maintenance Reserves"). The amount
of the Airframe Reserve payment shall be increased every six months by the
increase in the Consumer Price Index (CPI) for urban areas over the preceding
six months. The Engine Base Rate shall be escalated and adjusted in accordance
with the engine maintenance cost guaranties of UTC.
The Airframe Reserve shall be allocated to separate accounts as follows:
"C" Checks, Significant Structural Items ("SSI") and Zonal Inspections, $100 per
flight Hour (the "C Check Reserve"); APU, $40 per Flight Hour (the "APU
Reserve"); Landing Gear, $20 per flight Hour (the "Landing Gear Reserve");
Thrust Reversers, $40 per flight Hour (the "Thrust Reverser Reserve"). The
Reserves for the three Engines shall be pooled in a single account.
The Maintenance Reserves shall remain under the sole control and direction
of Lessor and shall be used to reimburse Lessee, within 10 days following
receipt of an invoice and proper documentation from Lessee for the actual cost
of:
20
<PAGE>
(i) Scheduled "C" Checks (including lesser checks performed in
conjunction with the "C" Checks), Zonal Inspections and Significant
Structural Items, up to the amount in the "C" Check Reserve, and APU heavy
maintenance, Landing Gear overhaul replacement and overhaul and
replacement of Thrust Reversers, up to the amount then remaining in each
of such respective Reserves. The parties acknowledge and agree that no
portion of the Airframe Reserve shall be used to reimburse Lessee for any
other causes, including, without limitation, repairs covered and
reimbursed by the Manufacturer's or other warranty, or repairs as a
result of any accident, neglect or misuse, or required as a result of
any Airworthiness Directives, Service Bulletins or any faulty
maintenance or installation; and
(ii) Engine shop visits (heavy maintenance visits) requiring teardown
or disassembly of an Engine, up to the amount then remaining in the Engine
Reserve. The parties acknowledge and agree that the Engine Reserves shall
not be used to reimburse Lessee for any other engine shop visits for, or
work performed on, an Engine, including without, limitation repairs
required as a result of faulty maintenance or installation, misuse,
neglect, foreign object damage, or other accidental cause (other than
ingestion of Parts) or as a result of any Airworthiness Directives. The
Engine Reserve shall not be used to reimburse Lessee or any other party
for work covered and reimbursed by the Manufacturer's warranty or service
life policy.
If at any time the balance of the funds held in any of the specified
Airframe Reserves are insufficient to meet a claim for reimbursement from such
specified Reserve, Lessor shall provide an aggregate credit of up to $223,000
for the Airframe Reserves (less the cost of the 1/2 "C" Check performed prior to
the Delivery Date). If at any time the amount in a particular Reserve plus the
amount of the credit, if any, available from Lessor is insufficient to meet a
claim for reimbursement then the shortfall shall be the sole responsibility of
Lessee and shall not be carried forward or made the subject of any further claim
for reimbursement. All invoices subject to reimbursement from the Maintenance
Reserves shall be reduced by the actual amounts of any applicable warranty,
guaranty or concession of any Manufacturer or Supplier. Each invoice shall be
accompanied by substantiating data from the party performing the work or if such
work was performed by Lessee, a certified statement of completion together with
completed work cards or other documents reasonably requested by Lessor and a
statement from Lessee that the amount of the invoice is appropriate. Any
overhaul work performed by Lessee shall be billed at Lessee's actual cost,
without provision for overhead or profit.
21
<PAGE>
Lessor shall maintain the Maintenance Reserves paid by Lessee in an
interest-bearing account at a bank selected by Lessor and any interest earned in
such account on such funds shall be credited pro rata to the Airframe and Engine
Reserves. Lessor shall consult with Lessee regarding investment decisions for
such account but the control of such account shall remain with Lessor. Lessor
shall have no duty to determine whether any Item requires overhaul or
maintenance, or to observe or inspect the overhaul or maintenance of any Item,
and Lessor shall not incur any liability or obligation by reason of the failure
of the Aircraft to be properly overhauled or maintained or by reason of Lessor's
election to observe or inspect or not to observe or inspect any overhaul or
maintenance. Prior to the start of a repair of an Engine (after disassembly)
Lessee shall send Lessor an estimate of total repair costs including test cell
run and consumable liquids.
At the end of the Term irrespective of the reason for the termination of
the Lease, including the destruction of the Aircraft, the balance, if any, of
the Maintenance Reserves shall be retained by Lessor. If Lessee receives a
credit from UTC (the "UTC Credit") at the end of any annual adjustment period
under World's UTC engine maintenance cost guarantee plan (the "UTC Guarantee")
during which the Lease was in effect then within 15 days Lessee shall pay Lessor
in cash an amount equal to the UTC Credit multiplied by 1.333 multiplied by a
fraction the numerator of which is the total Flight Hours accumulated on the
Engines during such annual period during the Lease Term and the denominator of
which is the total Flight Hours on all Lessee's engines (including the Engines)
during such annual period. Lessee shall supply Lessor with all documentation
relating to the UTC Credit applicable during the Term.
6.9. CRAF. Notwithstanding anything in this Lease to the contrary, any
----
compliance by Lessee with the requirements of the Civil Reserve Airfleet
Program, or any substitute or similar program shall not, in and of itself,
result in a Default or Event of Default, provided that promptly after any such
requirement terminates Lessee complies with all of its obligations under this
Lease.
6.10. Engines. Lessee will be entitled to temporarily remove any of the
-------
Engines from the Aircraft and install another engine or engines on the Aircraft,
provided that the replacement engine is a Pratt and Whitney 4000 series engine
suitable for use on the Airframe and any other applicable requirements of this
Lease are satisfied.
Section 7
Inspection
----------
Lessee shall furnish to Lessor such information concerning the location,
condition, use and operation of the Engines, the Aircraft or any Part thereof as
Lessor may reasonably request. Lessee shall permit any person or entity
designated in writing by Lessor to visit and inspect (at any reasonable time
upon reasonable notice) the Engines, the Aircraft or any part thereof, their
condition and the records maintained in connection therewith, including the
Maintenance Program, which shall not be copied and shall be maintained as
confidential. Lessor shall have no duty to make any such inspection and shall
not incur any liability or obligation by reason of not making any such
inspection. Lessor agrees that such requests will be coordinated with Lessee so
as to cause no disturbance to Lessee's operation
22
<PAGE>
and no material disturbance to its personnel and so as not to increase the
down time of the Aircraft. Lessor agrees that no more than 3 inspectors will
be inspecting the Aircraft at any one time and no more than 3 inspectors will
be at Lessee's premises inspecting the Aircraft documentation at any one time.
Section 8
Early Termination and Extension
-------------------------------
8.1. Early Termination. On not less than eight months prior written
-----------------
notice, Lessor may terminate this Lease as of any Basic Rent Payment Date and
Lessee shall redeliver the Aircraft and Aircraft Records to Lessor in compliance
with Section 15 hereof.
8.2. Extension. Unless Lessor notifies Lessee that the Aircraft is to be
---------
returned, Lessee may on as many occasions as Lessee may elect, eight months
prior to the then-scheduled expiration of the Term, elect to extend the Term for
an additional month. All terms and conditions of this Lease shall continue
during such extension(s).
Section 9
Replacement and Pooling of Parts; Alterations, Modifications, Etc.
-----------------------------------------------------------------
9.1. Replacement of Parts. Lessee, at its own cost and expense, shall
--------------------
promptly replace all Parts which 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, in the ordinary
course of maintenance, service, repair, overhaul, modification or testing,
Lessee may remove any Part, whether or not worn out, lost, stolen destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use; provided that Lessee shall promptly replace such Part. All replacement
Parts shall be free and clear of all Liens, other than Permitted Liens, and
shall be in as good operating condition as, 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.
9.2. Title to Replaced and Replacement Parts. All Parts removed from the
---------------------------------------
Airframe and the Engines shall remain the property of Lessor and subject to this
Lease, no matter where located, until such time as such Parts shall be replaced
by Parts which have been incorporated or installed in or attached to the
Airframe or an Engine and which meet the requirements for replacement Parts
specified above. Immediately upon any replacement Part becoming incorporated,
installed or attached as above provided, without further act, (a) title to the
replaced Part shall thereupon vest in Lessee, free and clear of all rights of
Lessor and its assigns; (b) such replaced Part shall no longer be deemed a
Part hereunder; (c) title to the replacement Part shall thereupon vest in
Lessor; and (d) such replacement
23
<PAGE>
Part shall become subject to this Lease and be deemed to be a Part hereunder
to the same extent as the Parts originally incorporated or installed in or
attached to the Airframe and the Engines.
9.3. Pooling. Any Part removed from the Airframe or any Engine as provided
-------
in Section 9.1 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 another air carrier; provided that a part replacing such
removed Part shall be incorporated or installed in or attached to such Airframe
or Engine in accordance with Section 9.1 as promptly as possible after the
removal of such removed Part.
Any replacement Part when incorporated or installed in or attached to the
Airframe or an Engine in accordance with Section 9.1 hereof may be owned by
another air carrier, subject to a normal pooling arrangement; provided that
Lessee, at its expense, as promptly thereafter as possible either (a) causes
title to such replacement Part to vest in Lessor in accordance with Section 9.2
by Lessee acquiring title thereto for the benefit of Lessor, free and clear of
all Liens, other than Permitted Liens, or (b) replaces such replacement Part by
incorporating or installing in or attaching to the Airframe or an Engine a
further replacement Part owned by Lessee free and clear of all Liens, other than
Permitted Liens.
9.4. Alterations, Modifications and Additions. Except as provided in this
----------------------------------------
Section 9 and in Section 6.6 hereof, Lessee shall not make any alteration,
modification or addition to the Airframe or any of the Engines. Lessee, at its
own expense, provided no Event of Default is continuing, may from time to time
make such alterations and modifications in and additions to each Item of
Equipment as Lessee may deem desirable in the proper conduct of its business,
provided that no such alteration, modification or addition adversely alters the
structure of the Aircraft or in any way diminishes the value, utility or useful
life of such Item of Equipment or impairs the condition of airworthiness thereof
below the value, utility, useful life, condition and airworthiness thereof below
the value, utility, useful life, condition nd airworthiness thereof immediately
prior to such alteration, modification or addition, assuming such Item of
Equipment was then of the value, utility and useful life and in the condition
and airworthiness required to be maintained by the terms of this Lease.
9.5. Title to Parts. Subject to the provisions hereof, title to all Parts
--------------
incorporated or installed in or attached or added to each Item as the result
of any alteration, modification or addition shall, without further act, vest
in the Lessor and become subject to this Lease; provided, however, that so
-----------------
long as no Event of Default shall have occurred and be continuing, at any time
during the Term, the Lessee may remove any Part from an Item of Equipment,
provided that (a) such Part is in addition to, and not in replacement of or in
substitution for, any Part originally incorporated or installed in or attached
to such Item at the time of delivery thereof hereunder or any Part in
replacement of, or substitution for, any such original Part; (b) such Part is
not required to be incorporated or installed in or attached or added to such
Item pursuant to the terms hereof; and (c) such Part can be
24
<PAGE>
removed from such Item without diminishing or impairing the value, utility or
airworthiness which such Item would have had at such time had such alteration,
modification or addition not occurred. Upon the removal by Lessee of any such
Part as above provided, title thereto shall, without further act, vest in
Lessee and such Part shall no longer be deemed a Part hereunder. Any Part not
removed by Lessee as above provided prior to the return of the respective Item
to Lessor hereunder shall remain the property of Lessor and subject to this
Lease.
9.6. Engine Interchange. Provided no Event of Default exists and is
------------------
continuing, Lessee may subject the Engines to normal interchange agreements
(copies of which shall have been provided to Lessor) with any Permitted
Sublessee or may subject any Engine to normal pooling or similar arrangements,
in each case customary in the airline industry and entered into by Lessee in the
ordinary course of its business; provided, however, that no such agreement or
arrangement shall contemplate or require the transfer of title to any Engine.
Section 10
Taxes
-----
10.1. General. Lessee shall pay, assume liability for and indemnify,
-------
protect, defend, save and hold Lessor, WTC, Beneficiary, any permitted
successor, assignee or transferee of Lessor and any affiliate of any of the
foregoing with which such entity files a consolidated or combined return (each
a "Tax Indemnitee"), harmless from and against all taxes (including value-
added taxes), fees (including license and registration fees), levies, imposts,
duties, charges or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon (all the foregoing being collectively
called "Taxes") which are imposed by any government (or any political
subdivision or fiscal or taxing authority thereof) and are imposed on or with
respect to, or are measured by, (a) this Lease, (b) the Aircraft or any part
thereof, (c) the purchase, acceptance, rejection, ownership, delivery,
possession, use, presence, storage, registration, deregistration,
modification, maintenance, operation, sale, return, leasing or other
disposition thereof, or, (d) the receipts, earnings or other amounts arising
from the Aircraft, any Part or this Lease; provided, however, the foregoing
indemnity shall not apply to (i) Taxes imposed on or measured by the net
income, capital adequacy, capital stock or capital gains of a Tax Indemnitee
or that are minimum or alternative minimum Taxes or doing business Taxes
imposed on or against a Tax Indemnitee, unless such Tax resulted solely from
the operation by Lessee of the Aircraft in such jurisdiction; (ii) Taxes
imposed with respect to the period prior to the Delivery Date or after full
and final compliance by Lessee with all terms of this Lease, (iii) Taxes
imposed as a result of a sale, transfer of title, mortgaging, pledging,
financing or transfer or other disposition by any Tax Indemnitee of the
Aircraft or part thereof or interest therein or any interest in or obligation
under this Lease or in any Tax Indemnitee unless such disposition occurs by
reason of the exercise of the Lessor's remedies under this Lease upon an Event
25
<PAGE>
of Default, or (iv) Taxes which any Tax Indemnitee is subject to as a result
of business or transactions unrelated to the transactions contemplated by this
Lease or that result from the Tax Indemnitee or any affiliate being
incorporated or maintaining an office or place of business in the jurisdiction
imposing the Tax (except to the extent such Tax is increased by reason of
Lessee's activities in such jurisdiction); (v) Taxes that are a result of (a)
the gross negligence or willful misconduct of any Tax Indemnitee or the breach
of any of the covenants of or the inaccuracy at the time made of any of the
representations or warranties of any Tax Indemnitee in this Lease or any
related document, (b) the failure of any Tax Indemnitee to file any return
properly and timely or to comply with any certification, information,
documentation, reporting or other similar requirement or (c) any Lessor Lien,
(vi) Taxes imposed under (A) Section 4975 of the Internal Revenue Code of 1986
as amended (the "Code") or under Part 4 or Part 5 of Subtitle B of the
Employment Retirement Income Security Act of 1974 as amended or (B) Sections
59A, 3406 or 4701 of the Code or (C) any analogous provisions of any successor
legislation.
10.2. Withholding Taxes. Except in the case of a Tax described in Section
-----------------
10.1 (i) through (vi), if Lessee is required by law to make any withholding
from Rent any other amount payable by Lessee to Lessor (or any other Tax
Indemnitee) under this Lease, Lessee shall pay to such Tax Indemnitee such
additional amount as may be necessary to enable such Tax Indemnitee to receive
(after such withholding) an amount equal to the full amount then payable to
such Tax Indemnitee absent such withholding. As soon as practicable after
Lessee makes any withholding from any amount payable to a Tax Indemnitee under
this Lease, Lessee shall deliver to such Tax Indemnitee a receipt or other
document, reasonably satisfactory to such Tax Indemnitee and reasonably
obtainable by Lessee, evidencing such withholding and the payment of the
amount withheld to the relevant governmental authority, for the purpose of
enabling such Tax Indemnitee to substantiate a claim for credit or deduction
for income tax purposes of the amounts so withheld. Notwithstanding anything
to the contrary in this Lease, Lessee shall have no obligation to indemnify
for any Taxes (including withholding Taxes) imposed on or with respect to or
attributable to (i) the Senior Mortgage and/or the Subordinated Mortgage (or
any payments with respect to such Mortgages) or (ii) any Lessor Lien or Debt
incurred by a Tax Indemnitee that is secured by the Aircraft or any Part
thereof.
10.3. Amount of Indemnity. Each indemnity provided for in this Section 10
-------------------
shall be in an amount which, after taking into account all taxes, fees or other
charges imposed with respect thereto or as a result of the receipt thereof by
any jurisdiction (whether or not excepted above), and after taking into account
any deductions or tax savings (whether by credit, deduction or otherwise)
actually realized by such Tax Indemnitee as a result of the payment of such
amount or the event or circumstance which gave rise to the payment shall be
equal to the amount of such indemnity otherwise payable hereunder. Any payment
required to be made by Lessee under this Section 10 shall be due and payable
within 30 days following Lessee's receipt of a Tax Indemnitee's written demand
therefore
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(accompanied by a written statement of such Tax Indemnitee describing in
reasonable detail the Taxes for which such Tax Indemnitee is demanding an
indemnity and the computation of the amount of the indemnity being demanded),
subject to the provisions of Section 10.4. If any Tax Indemnitee or any of its
affiliates actually realizes a net tax benefit, savings, deduction or credit
as a result of any payment by Lessee pursuant to this Section 10, not
Previously taken into account in computing such payment, the applicable Tax
Indemnitee shall promptly pay to Lessee an amount equal to the sum of (i) the
actual net reduction in Taxes, if any, realized by such Tax Indemnitee and its
affiliates which is attributable to such net tax benefit, savings, deductions
or credits and (ii) the actual net reduction in any Taxes realized by Tax
Indemnitee and its affiliates as the result of any payment made by such Tax
Indemnitee pursuant to this sentence.
10.4. Contest. If a claim is made against a Tax Indemnitee for any Tax
-------
that is subject to indemnification under this Section 10, such Tax Indemnitee
will promptly, and in any event within 30 days after such Tax Indemnitee is
aware of such claim, give Lessee written notice of such claim. If Lessee so
requests in writing within 30 days after receipt of such notice, (x) such Tax
Indemnitee shall permit Lessee to contest the claim in the name of such Tax
Indemnity or in the name of Lessee, to the extent permitted by law, or (y) if
such claim together with other claims which could be made with respect to
other transactions to which such Tax Indemnitee is then a party would (if
sustained) have a material adverse effect on such Tax Indemnitee's business or
financial affairs (a "Special Claim"), or (z) if Lessee shall not be permitted
by law to contest such claim on behalf of such Tax Indemnitee, such Tax
Indemnitee shall contest such claim in good faith, provided in each case only
if: (a) such Tax Indemnitee shall have received an indemnity reasonably
satisfactory to it for all expenses reasonably expected to be paid in
contesting the claim (including attorneys' and accountants' fees and
disbursements); (b) the action to be taken will not involve any material risk
of the sale, forfeiture or loss of, or the creation of any Lien on (except a
Permitted Lien or a Lien which Lessee shall have bonded in an amount and
manner reasonably satisfactory to such Tax Indemnitee), the Aircraft or any
Part thereof or any interest therein; (c) if such contest shall be conducted
in a manner requiring the payment of the claim, Lessee shall have advanced the
amount required on an after-tax basis; (d) no Event of Default shall have
occurred and be continuing and Lessor, or such other Tax Indemnity as may be
appropriate, shall be receiving all amounts of Rent when payable, without
reduction by reason of such Tax; and (e) if such claim is a Special Claim,
such Tax Indemnitee shall have received a legal opinion (at the expense of
Lessee) from counsel reasonably satisfactory to such Tax Indemnity indicating
that a reasonable basis for such contest exists. Such Tax Indemnity and Lessee
shall in good faith consider the other party's views regarding the conduct of
the contest. Such Tax Indemnitee and Lessee shall provide to each other, upon
request, such reasonably obtainable information and such other reasonable
assistance as may be necessary or advisable for the effective evaluation or
conduct of such contest. Notwithstanding the foregoing provisions of this
Section 10.4, if at any time Lessor waives its right of indemnification under
this Section 10 in respect of a claim, or if, after having received payment of
indemnification from Lessee hereunder in
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<PAGE>
respect to such claim, Lessor tenders such payment to Lessee, then Lessee
shall not be entitled to contest, or to continue to contest, any such claim.
If any Tax Indemnitee or any of its affiliates shall receive a refund of, or
receive a credit for (or would have received such a refund or credit but for a
counterclaim or other claim not indemnified by Lessee hereunder (a "deemed
refund or credit")) all or any part of any Taxes paid, reimbursed or advanced
by or on behalf of Lessee pursuant to this Lease (including Sections 10.1,
10.2 or this 10.4), the applicable Tax Indemnitee shall pay to Lessee within
10 days of such receipt (or, in the case of a deemed refund or credit, within
10 days of the resolution of such contest), an amount equal to such refund or
credit or deemed refund or credit (along with interest on such amounts
actually received from the applicable taxing authority fairly attributable to
such amounts).
10.5. Tax Returns. Lessee will provide such information as may be
-----------
reasonably requested by Lessor and reasonably obtainable by Lessee to enable
Lessor to fulfill its tax filing requirements with respect to the transactions
contemplated hereby. In the event that any return, statement or report is
required to be made or filed with respect to any Tax indemnified against by
Lessee under this Section 10, Lessee shall notify Lessor of such requirement and
(a) to the extent permitted by law and requested by Lessor or required by law,
make and file in its own name such return, statement or report in such manner as
will show the ownership of the Aircraft in Lessor and furnish Lessor with a copy
of such return, statement or report or (b) where such return, statement or
report is required to be in the name of or filed by Lessor, prepare and furnish
such return, statement or report for filing by Lessor in such manner as shall be
satisfactory to Lessor and send the same to Lessor for filing no later than 30
days prior to the due date. Where Lessor is required to make or file a return
statement or report reflecting items other than or in addition to Taxes
indemnified against by Lessee under this Section 10, Lessee shall, upon
Lessor's request, provide Lessor with information within a reasonable time,
sufficient to permit such return, statement or report to be properly made and
timely filed.
10.6. Mutual Assistance. Lessor, each Tax Indemnitee and Lessee agree to
-----------------
consider in good faith any reasonable modifications of the transaction
described in this Lease that would reduce or eliminate any Tax imposed on
either party as a result of such transaction and each such person shall
cooperate in good faith in providing information on forms or otherwise so as
to reduce or eliminate any Taxes subject to indemnification under this Lease.
Without limiting the foregoing, Lessor and Lessee shall cooperate (without any
expense to Lessor) as to the location of the Aircraft at the commencement of
this Lease in order to minimize or eliminate any sales or use Tax that might
otherwise be payable in respect of the transactions contemplated hereby.
28
<PAGE>
Section 11
Events of Loss
--------------
11.1. With Respect to the Aircraft. Upon the occurrence of an Event of
----------------------------
Loss with respect to the Aircraft, Lessee shall forthwith (and in any event
within 10 days after such occurrence) give Lessor written notice of such Event
of Loss, and Lessor and Lessee shall proceed diligently and cooperate fully with
each other in the recovery of any and all proceeds of insurance applicable
thereto. Rent shall continue to accrue and be paid hereunder until such time
as Lessor has received the full amount due under this Section 11. On the
earlier of the receipt of payment from the insurers or 90 days following the
date of occurrence of such Event of Loss, Lessee shall pay to Lessor, in
immediately available funds, the Insured Value for the Aircraft.
At such time as Lessor has received the entire amount set forth above,
together with all accrued and unpaid Rent and any other amounts due Lessor
hereunder, Lessor shall transfer to Lessee all of Lessor's right, title, and
interest, "as-is", "where-is," without recourse or warranty, express or implied,
in and to (a) the Aircraft, (b) all claims for damage to the Aircraft, if any,
against third persons arising from the Event of Loss (unless any insurance
carrier requires that such claims be assigned to it), and (c) all rights to any
insurance claims and proceeds under all insurance, except liability insurance,
maintained by Lessee hereunder, all without representation, recourse or warranty
of any kind whatsoever, except that Lessor shall warrant that it has title to
the Aircraft free and clear of Lessor Liens and Liens existing prior to the
Delivery Date. Lessee shall be entitled to receive all insurance proceeds
applicable to the Aircraft over and above the amount due Lessor under the
Preceding sentence, if any, as compensation for the loss of Lessee's leasehold
interest in the Aircraft.
11.2. With Respect to an Engine. Upon the occurrence of an Event of Loss
-------------------------
with respect to an Engine under circumstances in which there has not occurred
an Event of Loss with respect to the Aircraft, Lessee shall forthwith (and in
any event within 10 days after such occurrence) give Lessor written notice
thereof and Lessee shall replace such Engine as soon as reasonably possible
(and, in any event, within 120 days following such Event of Loss) by duly
conveying to Lessor, free and clear of all Liens, except Permitted Lines,
title to another engine of the same or an improved model and suitable for
installation and use on the Airframe, which engine shall have a value and
utility at least equal to, and be in as good operating condition as, the
Engine with respect to which such Event of Loss shall have occurred, assuming
such Engine was of the value and utility and in the condition and repair as
required by the terms hereof immediately prior to the occurrence of such Event
of Loss. Such replacement engine shall be deemed an "Engine" as defined herein
for all purposes hereunder. Lessee agrees to promptly notify Lessor of any
such substitution provide Lessor with an officer's certificate demonstrating
full compliance with this Section 11.2 and Lessee agrees to take such action
and execute such documents, including a warranty bill of sale, as Lessor may
reasonably request in order that any such replacement Engine shall be duly and
29
<PAGE>
properly titled in the name of Lessor and leased hereunder to the same extent
as any Engine replaced thereby. Lessor shall take such action and shall
execute such documents as are reasonably necessary to convey the Engine
replaced pursuant to the preceding sentence to Lessee or its designee on an as-
is, where-is basis, without recourse to or warranty by Lessor except that
Lessor shall warrant that it has title free and clear of Lessor Liens and
Liens existing prior to the Delivery Date.
11.3. Application of Payments from Governmental Authorities. Payments
------------------------------------------------------
received by Lessor or Lessee from any governmental authority or entity with
respect to an Event of Loss resulting from the condemnation, confiscation or
seizure of, or requisition of title to an Aircraft, an Airframe or any of the
Engines, shall be retained by Lessor, if received by Lessor, or promptly paid
over to Lessor, if received by Lessee, up to the Insured Value (plus any amounts
of Rent then due and owing). At such time as Lessor has received such amounts in
full, Lessor shall promptly remit the excess, if any, of such payments to
Lessee. Payments received by Lessor or Lessee from any governmental authority or
entity with respect to a requisition of use during the Term of an Aircraft, an
Airframe or any of the Engines shall be retained by or paid to Lessee, and
Lessee's obligation to make all payments of Rent shall continue undiminished.
Payments received by Lessor or Lessee with respect to periods after the end of
the Term shall be paid to (or retained by) Lessor unless an Event of Loss has
occurred and Lessor has received the amounts due under Section 11.1.
Section 12
Insurance
---------
12.1. Public Liability, Bodily Injury and Property Damage Liability
-------------------------------------------------------------
Insurance. Lessee, at its own expense, shall maintain in effect third
- ---------
party aircraft liability insurance (which includes coverage with respect to
liabilities arising while the Items of Equipment are not in operation),
passenger legal liability insurance and property damage liability insurance,
including contractual liability and products liability insurance and war risk
liability insurance in accordance with AV52 or its equivalent, including the
buyback of all war risk perils (except nuclear) during the Term in an amount
not less than the greatest of (a) $700,000,000, (b) that amount normally
carried by national and international carriers engaged in similar business and
similarly situated to Lessee or (c) the amount normally carried by Lessee on
its other owned or leased MD-11 aircraft, for any one accident, or series of
accidents arising out of any one event, with respect to the Items of
Equipment. Any such liability insurance policy may be subject to a deductible
in an amount not to exceed $1,250 each claim in respect of passenger's
baggage, or such other amount as is standard market deductible for baggage,
and $5,000 each claim in respect of freight. All such policies shall be
maintained in effect with insurers and (subject to Section 12.3 below)
reinsurers of recognized reputation and responsibility, reasonably
satisfactory to Lessor. Any policies of insurance and reinsurance carried in
accordance with this Section 12.1 and any policies taken out in substitution
or replacement for any of such policies shall: (i) name, as
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<PAGE>
additional insureds, Lessor, WTC, GATX Capital Corporation and Credit Lyonnais
and their respective successors and assigns (notice of which assignment or
successor and the address of the new party and the fax and the telex numbers
of all parties having been supplied to Lessee's insurance broker)
(collectively, the "Additional Insureds"); (ii) provide that in respect of the
interests of the Additional Insureds such policies of insurance shall insure
the Additional Insureds regardless of any breach or violation of any warranty,
declarations or conditions contained in such policies by Lessee; and (iii)
provide that if such insurance is cancelled for any reason whatever, or the
same is allowed to lapse for nonpayment of premium, or if there is any adverse
change in policy terms and conditions, such cancellation, lapse or change
shall not be effective until 30 days (and with respect to war risk insurance,
such shorter period as shall be customary in the worldwide aviation insurance
market for such insurance in such area of the world) after receipt by the
Additional Insureds of written notice from such insurers of such cancellation,
lapse or change. Each liability policy shall (A) be primary without right of
contribution from any other insurance which is carried by the Additional
Insureds, (B) expressly provide that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured, but this shall not operate in respect
of loss of or damage to the Airframe or Engines insured under the Hull All
Risks, Hull War Risks or Spares Policies issued to Lessee, (C) provide that
the insurers agree to waive any right of subrogation against any Additional
Insured but only to the extent that the Lessee has waived its right of
recovery against the Additional Insured; and (D) provide for world wide
coverage in full force and effect throughout any geographical areas (except as
are excluded from War Risk coverage) traversed by the Aircraft or Engines.
Without increasing the scope of coverage under the airline liability policies,
the insurers thereunder shall acknowledge the existence of the indemnification
provisions of this Lease.
12.2. Insurance Against Loss or Damage to the Aircraft. Lessee, at its own
------------------------------------------------
expense, shall maintain in effect with insurers and (subject to Section 12.3
below) reinsurers of recognized reputation and financial responsibility: (a)
all-risk ground and flight aircraft hull insurance covering the Aircraft; (b)
all-risk spares coverage with respect to any Engines or Parts while removed
from the Aircraft and replaced; and (c) war risk, hijacking (air piracy),
confiscation, nationalization, expropriation, and related perils coverages.
All such insurance shall be in full force and effect throughout any
geographical areas (except as are excluded from War Risk coverage) traversed
at any time by the Aircraft, shall be payable in Dollars in the United States
and shall be in an amount of not less than the Insured Value. Any Hull War
Aggregate applicable to the Aircraft shall be not less than $300,000,000 (to
be increased upon policy renewal to at least $3 15,000,000) and, if losses
erode the Aggregate during the policy period, Lessee shall use its best
efforts to provide that the Aggregate shall be reinstated for the remainder of
the policy period. Any hull insurance carried in accordance with this Section
12.2 shall not contain a provision for deductible or self-insured amounts in
excess of $1,000,000. Each Engine, after removal pursuant to Section 6.1, if
another engine has been installed on the Airframe in lieu of such Engine,
shall be insured for not less than $7,500,000 under an aircraft spares policy
reasonably acceptable to Lessor. Any policies carried in accordance with this
Section 12.2 shall (i)
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<PAGE>
name the Lessor, Lessee and the Mortgagee as loss payees; (ii) be made payable
as provided in Sections 12.5 and 12.6 below; (iii) provide that if such
insurance is cancelled for any reason whatever, or the same is allowed to
lapse for nonpayment of premium, or if there is any adverse change in policy
terms and conditions, such cancellation, lapse or change shall not be
effective until 30 days (and with respect to war risk insurance, such shorter
period as shall be customary in the worldwide aviation insurance market for
such insurance in such area of the world) after receipt by the Additional
Insureds of written notice from such insurers of such cancellation, lapse or
change ; (iv) provide that in respect of the interests of the Additional
Insureds in such policies the insurance shall insure the Additional Insureds
regardless of any breach or violation of any warranties, declarations or
conditions contained in such policies by Lessee; (v) include waivers by the
insurers of any rights of subrogation or set-off, counterclaim or other
deduction whether by attachment or otherwise, in respect of any liability of
any Additional Insured but only to the extent that the Lessee has waived its
right of recovery against the Additional Insured; (vi) be primary without
right of contribution from any other insurance which is carried by any
Additional Insured as respects contingent hull/spares or hull total loss only
coverage; and (vii) provide that the Hull Risks Policy and the Hull War and
Allied Risks Policy shall each be endorsed to include a "50/50" clause in
accordance with clause AVS 103 or its equivalent.
Lessee may obtain additional hull and liability insurance on the Aircraft,
over and above the amounts required hereunder.
12.3. Reinsurance. The risks required to be insured against pursuant to
-----------
Sections 12. 1 and 12.2 shall be either directly placed in the worldwide
aviation insurance market or shall be fully reinsured in the London, French,
American and/or Nordic markets (or any other market acceptable to Lessor) with
reinsurance companies or underwriters reasonably acceptable to Lessor (the
"Foreign Reinsurers"). All such reinsurance shall comply with all the terms and
conditions for insurance required by this Section 12. With respect to
reinsurance for the risks required to be insured against pursuant to Section
12.2 above, the Foreign Reinsurers shall be directly liable to the Additional
Insureds for all claims arising under such reinsurance in accordance with "cut-
through" endorsements in which the Foreign Reinsurers agree to make payment of
reinsurance proceeds directly to the Additional Insureds in accordance with
Sections 12.5 and 12.6. Payment directly to the Additional Insureds shall be
considered a complete discharge of the Foreign Reinsurers' liability to Lessee's
primary insurers (the "Local Insurers"). The Local Insurers shall agree that
upon knowledge of any loss or losses which may give rise to a claim under any
reinsurance policy, they shall promptly advise the Foreign Reinsurers thereof
and shall promptly furnish the Foreign Reinsurers with all information available
from time to time respecting any loss or losses which may be insured under such
reinsurance policies, but any failure to give such notice or furnish such
information shall not affect any Foreign Reinsurer's liability to the Additional
Insureds under any reinsurance policy provided that such Foreign Reinsurer has
received notice of such loss or losses from some other source. The Local
Insurers shall agree that the Foreign Reinsurers, at their option, shall also
have the right to appoint
32
<PAGE>
adjusters, assessors and/or surveyors and to control any loss or losses
insured under such reinsurance policies, but failure by the Local Insurers to
abide by the foregoing agreement shall not affect any Foreign Reinsurer's
liability to the Additional Insureds under the reinsurance policy.
12.4. Replacement Insurance. If Lessee shall fail to maintain any or all
---------------------
of the insurance as provided in this Section 12, Lessor may at its option
provide such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor, as Supplemental Rent, for the cost thereof plus interest at
the Incentive Rate. Provided that Lessor has received not less than three
Business Days notice of Lessee's failure to maintain the required insurance,
Lessor shall give Lessee not less than one Business Day's notice prior to the
placement of substitute insurance by Lessor.
12.5. Application of Proceeds in an Event of Loss. All payments under
-------------------------------------------
hulls and spares insurance policies required to be maintained hereunder as the
result of the occurrence of an Event of Loss shall be applied as follows:
(a) If such payments are received with respect to the Airframe (or
the Airframe and the Engines or engines installed thereon), Lessor and Lessee
shall proceed diligently and cooperate fully with each other in the recovery
of any and all proceeds of insurance applicable thereto, and so much of such
insurance proceeds as shall not exceed the sums due under Section 11.I above
shall be paid to Mortgagee. Any proceeds of insurance maintained by Lessee in
excess of the sums due under Section 11. 1 or received after full payment of
the sums due under Section 11. 1 shall be payable to Lessee.
(b) If such payments are received with respect to an Engine under
the circumstances contemplated by Section 11.2 hereof, provided that no Event
of Default exists and is continuing, such payments shall be paid over to, or
retained by, Lessee, provided that Lessee shall have fully performed the terms
of Section 11.2 hereof with respect to the Event of Loss for which such
payments are made.
In any event Lessor shall be entitled to receive all insurance
proceeds derived from insurance coverage paid for by Lessor.
12.6. Application of Proceeds in the Absence of an Event of Loss. As
----------------------------------------------------------
between Lessor and Lessee, the insurance payments of any property damage loss to
the Aircraft or any Engine not constituting an Event of Loss with respect
thereto will be applied as follows:
(a) in respect of a claim for damage not exceeding $1,000,000 any
payment from the insurers and/or reinsurers shall be released directly to
Lessee, or where the work has been contracted out, to the repairers; and
33
<PAGE>
(b) in respect of a claim where damage exceeds $1,000,000 any payment
from the insurers and/or reinsurers shall be payable to Lessor or its
assignee(s) up to and including the amount of the Insured Value, but will be
paid over to Lessee in reimbursement for completed repairs or, where the
approved work has been contracted out, will be paid over to the repairer.
Any amount referred to in this Section 12.6 which is payable to Lessee
shall not be paid to Lessee if at the time of such payment an Event of Default
shall have occurred and be continuing, but shall be held by Lessor as security
for the obligations of Lessee under this Lease and such amount shall be paid
to Lessee at such time as there no longer exists any Default or Event of
Default.
12.7. Reports, etc. Lessee and Lessee's independent insurance broker shall
------------
advise Lessor in writing promptly of any default in the payment of any premium
and of any other act or omission on the part of Lessee which might invalidate or
render unenforceable, in whole or in part, any insurance or reinsurance on the
Aircraft. No notice from broker shall be required unless such broker has
knowledge of such act or omission. On the Delivery Date and at least 10 days
prior to the expiration or termination date of any insurance policy maintained
with respect to the Aircraft pursuant to this Section 12, Lessee shall provide
Lessor with a new certificate of insurance executed by an independent aircraft
insurance broker and the written opinion of such broker as to Lessee's continued
compliance with the provisions of this Section 12.
12.8. Lessor's Additional Insurance. Lessor, at its option and at its sole
-----------------------------
expense, may obtain insurance with respect to the Aircraft; provided, that no
such insurance shall have the effect of making more expensive, suspending,
impairing, defeating, invalidating or rendering unenforceable or reducing, in
whole or in part, the coverage of or the proceeds payable under any insurance
required to be provided and maintained by Lessee pursuant to this Section 12.
12.9. Lessor Not Liable For Premiums. All policies of insurance and
------------------------------
reinsurance carried hereunder shall clearly state that none of the Additional
Insureds or any assignee thereof, shall have any liability for or obligation
with respect to premiums, commissions, assessments or calls.
12.10. Government Indemnity. Notwithstanding any other provision of this
--------------------
Lease requiring Lessee to maintain insurance, Lessor agrees to accept, in lieu
of insurance against any risk with respect to the Aircraft indemnification from
the United States Government or any agency or instrumentality thereof or Title
XIII Insurance issued by the FAA or any agency or department of the United
States Government, or any substantially similar successor or replacement program
of the United States Government, against such risk in an amount which, when
added to the amount of insurance against such risk maintained by Lessee
(including permitted self-insurance as set forth herein) with respect to the
Aircraft,
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shall be at least equal to the amount of insurance against such risk otherwise
required by this Section 12.
Section 13
General Indemnification
-----------------------
13.1. Scope. Lessee shall hold Lessor, Beneficiary, WTC and their
-----
successors, assigns, officers, directors, employees and agents (each an
"Indemnitee") harmless from any and all claims, demands, suits, causes of action
and all legal proceedings, whether civil or criminal, damages, losses,
liabilities (including, but not limited to, strict liability in tort),
obligations, penalties, judgments or fines and other sanctions, and any costs
and expenses in connection therewith, including reasonable legal fees and
expenses of whatever kind and nature ("Loss") which may result from or arise out
of (a) the condition, use or operation during the Term of any Item of Equipment
either in the air or on the ground, or (b) any maintenance, service, repair,
overhaul or testing of any Item during the Term, whether or not such Item is at
the time in the possession of Lessee; provided, however, that Lessee shall not
be required to indemnify any Indemnitee, (i) to the extent that a Loss is caused
by acts or events which occur prior to the Delivery Date or after full and final
compliance by Lessee with all terms of the Lease, (ii) for any Tax or a loss of
tax benefit (it being understood that Section 10 provides for Lessee's sole
liability with respect to Taxes), (iii) for a Loss which results solely from the
gross negligence or willful misconduct of any Indemnitee, (iv) to the extent an
Indemnitee suffers a Loss as a result of (A) the voluntary transfer of the
Aircraft or other voluntary disposition of the Aircraft by any Indemnitee other
than pursuant to Sections 11 or 17 of this Lease, (B) a transfer or disposition
of the Aircraft by any Indemnitee from bankruptcy or other proceedings for the
relief of debtors in which any Indemnitee is the debtor, whether voluntary or
involuntary, or (C) the breach by an Indemnitee of its covenants,
representations or warranties contained herein or in any other agreement
delivered in connection herewith.
Nothing herein shall be deemed to constitute a guaranty of any useful life
or present or future residual value of the Aircraft.
If an Indemnitee has actual knowledge of any claim or liability
indemnified against under this Section 13, it shall give prompt written notice
thereof to the Lessee. In case any action, suit or proceeding shall be brought
against any Indemnitee for which indemnity may be sought under this Section 13,
such Indemnitee shall notify Lessee of the commencement thereof, and Lessee may,
at its expense, participate in and, to the extent that it shall wish assume the
defense thereof, with counsel reasonably satisfactory to such Indemnity;
provided, that no Event of Default shall have occurred and be continuing
- --------
pursuant to which the Lessor is exercising its remedies under Section 17 of this
Lease. If Lessee assumes the defense of such action, suit or proceeding, such
Indemnitee may participate in such defense at such Indemnitee's expense;
provided, however, that if in the written opinion of counsel
35
<PAGE>
to such Indemnitee an actual or potential material conflict of interest exists
where it is advisable for such Indemnitee to be represented by separate
counsel, the reasonable fees and expenses of such separate counsel shall be
borne by the Lessee. With respect to any amount which the Lessee is requested
by an Indemnitee to pay by reason of this Section 13, the Indemnitee shall, if
requested by the Lessee and prior to any payment, submit such additional
information to the Lessee the Lessee may reasonably request properly to
substantiate the requested payment. Notwithstanding the foregoing, the failure
of any Indemnitee entitled to indemnity hereunder to notify the Lessee as
provided in this Section 13 shall not relieve the Lessee from any liability it
may have to any Indemnitee entitled to indemnify under this Section 13 except
to the extent delay in receiving notice increased the amount due from Lessee
under this Section 13.
If Lessee has indemnified an Indemnitee for any Loss, the Lessee shall be
subrogated to any right of the Indemnitee in respect of the matter against which
such indemnity has been paid.
13.2. Lessee's Release. Lessee hereby waives and releases any claim now or
----------------
hereafter existing against any Indemnitee on account of any and all claims,
demands, suits, causes of action and all legal proceedings, whether civil or
criminal, damages, losses, liabilities (including, but not limited to, strict
liability in tort), obligations, penalties, judgments or fines and other
sanctions, and any costs and expenses in connection therewith, including
reasonable legal fees and expenses of whatever kind and nature, which may result
from or arise out of injury to or death of personnel of Lessee or loss or damage
to property of Lessee or the loss of use of any property which may result from
or arise out of (a) the condition, use or operation during the Term of any Item
of Equipment, either in the air or on the ground, or (b) any maintenance,
service, repair, overhaul or testing of any Item during the Term, whether or not
such Item is at the time in the possession of Lessee, unless resulting solely
from the gross negligence or willful misconduct of such Indemnitee.
13.3. Contest. If Lessee is not permitted to contest in its own name and
-------
if an Indemnitee is unable to assign to Lessee whatever right such Indemnitee
may have to bring such an action, then if requested by Lessee in writing,
Lessor shall upon receipt of an opinion of Lessee's counsel stating that
reasonable grounds exist to take the action requested, in good faith contest
the validity, applicability or amount of any liability or loss which Lessor
may incur as a result of its contesting an indemnified amount (an "Indemnified
Amount") by (a) resisting payment thereof, (b) not paying the same except
under protest if protest is necessary and proper, or (c) if payment is made,
using reasonable efforts to obtain a refund in appropriate administrative or
judicial proceedings; provided, however, that Lessor need not contest the
applicability of any such Indemnified Amount, if the matter in question is of
a continuing nature and has previously been resolved pursuant to the
provisions of this Section 13.3.
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13.4. Repayment. If an Indemnitee shall obtain a repayment of any
---------
Indemnified Amount paid by Lessee, such Indemnitee shall promptly pay to Lessee
the amount of such repayment, together with the amount of any interest received
by such Indemnitee on account of such repayment.
13.5. Payment. Subject to the provisions of Section 13.3 hereof, Lessee
-------
shall pay directly to each party indemnified hereunder all amounts due under
this Section 13 within 30 days of the receipt of notice that such payment is
due.
Section 14
Liens
-----
Lessee shall not, directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to any Item of Equipment or any interest
therein, except Permitted Liens. Lessee shall promptly, at its own expense, take
such action as may be necessary to duly discharge any such Lien not excepted
above if the same shall arise at any time with respect to any Item of Equipment.
Section 15
Return of Aircraft and Records
------------------------------
This Section 15 shall not limit any rights or remedies of Lessor under
Section 17.
15.1. Location: Storage. At the end of the Term (whether at the last day
-----------------
of the Term or the earlier termination of the Lease), unless an Event of Loss
with respect to the Aircraft has occurred, Lessee shall return the Aircraft to
any airport in the continental United States designated by Lessor, or at any
other mutually agreeable location. Inspection and technical acceptance of the
Aircraft and the maintenance work documents shall take place at the maintenance
location of the Authorized Maintenance Performer or another mutually acceptable
location, but the obligations of Lessee hereunder shall continue until return of
the Aircraft to Lessor at the designated return location. Aircraft Records shall
be inspected and accepted at Lessee's headquarters except that Lessee shall pay
for shipment of such records to Lessor. The flight to the return location and
the fuel, insurance and crew required, shall be for Lessee's account.
The Aircraft shall be returned in the same working order, condition and
appearance as when received pursuant to this Lease (reasonable wear from
normal passenger flight operations excepted), with all pilot discrepancies and
deferred maintenance items cleared (including those which are observed during
the return flight), clean by international commercial airline standards and
ready for flight with all of the Aircraft equipment, components and systems
operating within limits approved by the FAA and functioning in
37
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accordance with their intended use. The Aircraft shall be free and clear of
all Liens or other encumbrances of any kind, other than Lessor Liens and Liens
existing prior to the Delivery Date. If Lessor so requests, the Aircraft shall
be returned with the same interior as specified on drawings listed on Exhibit
I hereto, certified for commercial passenger service under FAR Part 121, fully
serviceable and in good operating condition.
Following completion of the Final Inspection (as described in Section
15.7) and any repairs or maintenance required by this Section 15, Lessor and
Lessee shall execute (a) a Certificate of Technical Acceptance, similar in form
to the Lease Supplement, evidencing the return of the Aircraft and records to
Lessor and the condition thereof and (b) a Lease Termination Instrument, for the
purpose of removing this Lease from the FAA records.
15.2. Replacement Items. Lessee will return the Aircraft with the Engines
-----------------
installed thereon (except as permitted by Section 15.9 below) to Lessor with the
same equipment as at the commencement of this Lease, subject only to those
replacements, additions and modifications which may have been made and properly
documented pursuant to this Lease or as otherwise specifically approved in
writing by Lessor. Lessee shall, at least 30 days prior to the last day of the
Term, furnish Lessor with a listing of all such replacements, additions or
modifications then part of the Aircraft which were made during the Term and
shall deliver to Lessor a detailed technical report regarding the Flight Hours
and Cycles on the Airframe and each Engine and the maintenance status of each.
15.3. Evaluation of Aircraft. Lessor may, from time to time prior to the
----------------------
return of the Aircraft, wish to make the Aircraft and its records available for
inspection to designated representatives or technical teams of no more than four
persons evaluating the Aircraft for use after the end of the Term. Lessor agrees
to give Lessee not less than five days advance notice of such inspection and
Lessee agrees to cooperate fully with Lessor's requests in making the Aircraft
and records available to such authorized technical teams and Lessor agrees that
such requests will be reasonable and will be coordinated with Lessee so as to
cause no disturbance to Lessee's operations and minimal disturbance to its
personnel and no increase in the down time of the Aircraft.
15.4. Certificate of Airworthiness. Lessee agrees to return the Aircraft
----------------------------
with a valid, current Certificate of Airworthiness for commercial passenger
service issued by the FAA under FAR part 121.
15.5. Demonstration Flight. Prior to the return of the Aircraft and as
--------------------
part of the Final Inspection referred to below, Lessee shall carry out for
Lessor or Lessor's representative a functional demonstration flight in the
Aircraft for a duration not to exceed three hours. Flight crews and fuel shall
be furnished by and at the expense of Lessee. After such functional
demonstration flight and immediately prior to the return of the Aircraft,
38
<PAGE>
Lessee will correct any deficiencies noted by Lessor which are necessary for
the return of the Aircraft pursuant to this Section 15.
15.6. Maintenance. Lessee agrees to furnish due evidence that all service,
-----------
maintenance, repairs, overhauls and modifications required under this Lease have
been performed and are acceptable to the FAA. A complete set of the documents
specified on Appendix A to the Lease Supplement shall be returned with the
Aircraft.
15.7. Final Inspection and Specific Return Conditions. Immediately prior
-----------------------------------------------
to the return of the Aircraft to Lessor, at Lessee's own expense:
(a) Lessee shall make the Aircraft available to Lessor during the "C"
Check referred to below, for the purpose of conducting a detailed inspection in
order to verify that the condition of the Aircraft complies with the
requirements set forth in this Section 15 (such inspection being referred to
herein as the "Final Inspection"). Such Final Inspection shall take place at the
location of the Approved Maintenance Performer or other mutually acceptable
maintenance facility and Lessee shall give Lessor not less than 30 days prior
written notice of the location and commencement date of such Final Inspection.
To the extent that any portion of a Final Inspection extends beyond the last day
of the Term because of work required by this Section 15, the Term of this Lease
with respect to the Aircraft undergoing the Final Inspection shall be deemed to
have been automatically extended, and the obligation to pay Basic Rent hereunder
continued on a pro-rated daily basis until the Final Inspection and all
necessary work on the Aircraft shall have been concluded;
(b) Lessee shall perform a full and complete "C" Check (including the
corresponding subordinate checks, SSI, and Zonal Inspections) or its equivalent
check sufficient to clear the Aircraft until the next "C" Check in accordance
with Lessee's approved Maintenance Program and shall correct any deficiencies
revealed during such inspection in accordance with the Maintenance Program. It
is the intent that the Aircraft will be redelivered with zero time since "C"
Check, excluding flight testing and the delivery flight. Lessee agrees to
perform, or cause to be performed, during such "C" Check, any other work
reasonably required by Lessor to enable the Aircraft to be placed on another
maintenance schedule and Lessor shall reimburse Lessee for the cost of such
other work required by Lessor at a rate based upon Lessee's direct out-of-pocket
cost for labor and materials without overhead, mark-up or profit factor;
provided, however, such work requested by Lessor shall not extend the Term of
this Lease;
(c) All exterior markings and colors of Lessee shall be removed and
the exterior of the Aircraft will be painted white in accordance with Lessee's
standard practices and utilizing standard materials. The wings and flaps, if
painted, will be touched up as necessary to present a clean and smooth surface
and appearance;
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(d) The cockpit shall be in good appearance and its paint shall be
touched-up or repainted as necessary and placards will be replaced if necessary.
Those Items which are reasonably found by Lessor to be defective in the
Aircraft's cockpit will be replaced or repaired;
(e) Lessee shall permanently repair impact damage to the Aircraft
(regardless of cause) that exceeds the limits specified in the Manufacturer's
Maintenance Manual in accordance with Manufacturer's Structural Repair Manual;
(f) The Aircraft shall have been inspected for corrosion in accordance
with Manufacturer's recommendation then in effect; all mild and moderate
corrosion shall be cleaned and treated and all severe or exfoliated corrosion
shall be repaired in accordance with the Manufacturer's Structural Repair Manual
or Lessee's approved Maintenance Program;
(g) Lessee shall have accomplished a maximum power run in accordance
with the limits shown in the Manufacturer's manuals;
(h) A borescope inspection (and, in a case where an Engine does not
meet the on-wing operating criteria as required by the Manufacturer and if
requested by Lessor, a test cell performance run) shall be performed at Lessee's
expense with Lessor's representative entitled to be present and Lessee shall
provide evidence satisfactory to Lessor reflecting the correction of any
discrepancies from the guidelines set out by the Engine Manufacturer which may
be discovered during such inspection. All repairs required as a result of such
inspection shall be certified by the party performing such work. All repairs
shall be made in accordance with the Engine Manufacturer's manuals;
(i) If the Engine historical and maintenance records and/or trend
monitoring data, including exhaust gas temperature ("EGT") margin, indicate a
rate of acceleration in performance deterioration of any Engine or APU which
indicates, based on Lessee's experience, that the Engine or APU will exceed
the limits specified in the Manufacturer's Maintenance Manual, Lessee shall,
prior to return, correct or cause to be corrected such conditions which are
determined to have exceeded the Engine or APU Manufacturer's maintenance
manual tolerances or are otherwise determined to be causing such performance
deterioration;
(j) Lessee shall carry out on the Aircraft the final completion of al
deferred maintenance items, pilot log book reports and service bulletins as
required in Section 6 hereof and shall complete, on a terminating action or
repetitive inspection basis, as appropriate, all Airworthiness Directives
issued by the FAA which become effective on or before the date of return of
the Aircraft. Unless approved in writing by Lessor, Lessee shall not request a
waiver or delay in AD compliance with respect to this Aircraft;
40
<PAGE>
(k) All installed life-limited components on the Aircraft will have
sufficient calendar time, Flight Hours or Cycles (whichever is applicable)
remaining to operate until the next "C" Check but in no event less than 4,000
Flight Hours or 15 months (whichever is applicable);
(1) The Aircraft's fuel tanks in the aggregate shall contain at least
the same amount of fuel as on the Delivery Date and each oil tank shall be full;
and
(m) All time-controlled components of the Fly Away Kit shall be
returned in zero time condition, and all components of the Fly Away Kit shall be
in fully serviceable condition.
15.8. Aircraft Manuals and Documentation. Following the Final Inspection
----------------------------------
and immediately prior to the return of the Aircraft to Lessor, Lessee shall:
(a) Deliver to Lessor the Aircraft Records, in current, up to date
status and all logs, data, inspection, modification and overhaul records
required to be maintained with respect to the Aircraft under any applicable
rules and regulations of the FAA; and
(b) Deliver to Lessor or Lessor's designee one complete copy of all
Aircraft manuals and documentation.
Notwithstanding the foregoing, in order to enable Lessor to prepare for
attendance at the Final Inspection of the Aircraft pursuant to Section 15.7,
Lessee shall make available to Lessor at a time reasonably in advance of the
Final Inspection, all necessary Aircraft records and such other documents
relating to the use, maintenance and operation of the Aircraft as Lessor shall
reasonably request.
15.9. Corrections and Subsequent Corrections. To the extent that the
--------------------------------------
Aircraft or any Engine fails to conform to any requirement imposed by this
Section 15, which failure does not interfere with the use of the Aircraft,
Lessor may, at its option, (i) continue the Lease in effect in the manner
provided for in Section 15.7 until such time as the Aircraft or Engine is
brought into compliance or, (ii) accept the return of the Aircraft or Engine
and thereafter have any such nonconformance corrected as soon as Lessor may
reasonably arrange, at commercial rates then charged by the person selected by
Lessor to perform such correction. Any expense incurred by Lessor for such
correction shall become Supplemental Rent payable by Lessee within 30 days
following the submission of a written statement by Lessor to Lessee,
identifying the items corrected and setting forth the expense of such
correction. Lessee's obligation to pay such Supplemental Rent shall survive
the last day of the Term or other termination of this Lease. Notwithstanding
the foregoing, if an engine other than an Engine is installed on the Airframe
on the date of redelivery, Lessor shall elect as provided in clause (ii) above
and Lessee, at its sole expense, shall as soon as
41
<PAGE>
possible cause such engine to be replaced by an Engine in the condition
required by this Section 15.
Section 16
Events of Default
-----------------
16.1. Lessee's Defaults. The following events shall constitute Events of
-----------------
Default:
(a) Lessee shall fail to make any payment of Basic Rent within three
days of the date such payment is due hereunder or shall fail to make any payment
of Supplemental Rent within five days after the due date thereof provided that
Lessor has invoiced Lessee for such Supplemental Rent; or
(b) Lessee shall fail to procure and maintain all insurance required
by Section 12 hereof or Lessee shall operate the Aircraft at any time or in any
geographic area when the insurance required by Section 12 shall not be in effect
or shall operate the Aircraft in any area excluded from the War Risk coverage
(unless a Governmental indemnity shall then be in effect); or
(c) Lessee shall fail to perform or observe in any material respect
any other of the covenants, conditions, or agreements to be performed or
observed by it hereunder and such failure shall continue for a period in excess
of 15 days from the date written notice is received from Lessor requiring the
same to be remedied, or if such failure can not be remedied within this time
period, failure to have taken all reasonable measures, so that it could be
remedied promptly thereafter; or
(d) Any representation or warranty made by Lessee herein or in any
document or certificate furnished to Lessor in connection herewith or pursuant
hereto shall prove to have been incorrect in any material respect when made and,
if curable, has not been cured within 30 days of notice thereof from Lessor; or
(e) Lessee shall consent to the appointment of a receiver, trustee
or liquidator of itself or of a substantial part of its property, or Lessee
admits in writing its inability to pay its debts generally as they become due,
or makes a general assignment for the benefit of creditors, or Lessee files a
voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization in a proceeding under any bankruptcy law (as now or hereafter
in effect) or an answer admitting the material allegations of a petition filed
against Lessee in any such proceeding, or Lessee by voluntary petition, answer
or consent seeks relief under the provisions of any other now existing or
future bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
42
<PAGE>
(f) Lessee disposes or threatens to dispose of all or a substantial
part of its assets in a manner which would have a material adverse effect on the
business or financial condition of Lessee; or
(g) An obligation of Lessee in excess of $5,000,000 for payment of
any indebtedness for which it is liable (contingently or otherwise), or for
payment of the deferred purchase price of any property or for payment of any
obligation under any lease of aircraft or aircraft-related equipment, which
obligation shall be accelerated and declared entirely due and owing prior to
its stated maturity unless being contested by Lessee in good faith by
appropriate proceedings; or
(h) An order, judgment or decree is entered in any proceedings by
any court of competent jurisdiction appointing, with or without the consent of
Lessee, a receiver, trustee or liquidator of Lessee or of any substantial part
of its property, or any substantial part of the property of Lessee is
sequestered, and any such order, judgment or decree of appointment or
sequestration remains in force undismissed, unstayed or unvacated for a period
of 90 days after the date of entry thereof; or
(i) A petition against Lessee in a proceeding under any bankruptcy
or other insolvency law (as now or hereafter in effect) is filed, and any
decree or order adjudging Lessee a bankrupt or insolvent in such proceeding
remains in force undismissed or unstayed and not withdrawn for a period of 90
days after such adjudication or, in case the approval of such petition by a
court of competent jurisdiction is required, the petition as filed or amended
shall be approved by such a court as properly filed and such approval shall
not be withdrawn or the proceeding dismissed within 90 days thereafter, or if,
under the provisions of any law providing for reorganization or winding-up of
corporations which may apply to Lessee, any court of competent jurisdiction
shall assume jurisdiction, custody or control of Lessee or of any substantial
part of its property and such jurisdiction, custody or control remains in
force unrelinquished, unstayed or unterminated for a period of 90 days; or
(j) Unless permitted by the provisions of this Lease, the Aircraft
or any Part thereof shall no longer be in the possession and unencumbered
control of Lessee without the prior written consent of Lessor; or
(k) Substantially all the franchises, concessions, permits and
rights required for the conduct of the business and operations of Lessee are
voluntarily suspended or revoked, cancelled or otherwise terminated; or
(l) Judgment for the payment of money in excess of $5,000,000 is
rendered against Lessee by a court of competent jurisdiction and enforceable
against Lessee's assets and the same shall remain undischarged and unstayed
for a period of 30 days; or
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<PAGE>
(m) Any governmental authority shall have condemned, seized or
appropriated all or substantially all of the property of Lessee; or
(n) Any material adverse change occurs in the financial condition of
Lessee such that in Lessor's reasonable opinion a bankruptcy filing (whether
voluntary or involuntary) may be imminent; or
(o) An Event of Default shall exist and be continuing under that
certain Loan and Security Agreement, dated as of February 16, 1993, between
Lessor, as Secured Party, and Lessee, as Debtor, or any other lease or financing
of aircraft or aircraft-related equipment between Lessor (or Beneficiary) and
Lessee; or
(p) Lessee shall fail to accept the Aircraft pursuant to Section
2.1 hereof upon proper tender by Lessor following five Business Days written
notice to Lessee; or
(q) Lessee shall fail to pay amounts due Eurocontrol and other
airport and overflight authorities within 15 days after notice from Lessor.
Section 17
Rights and Remedies
-------------------
17.1. Remedies. Upon the occurrence of any Event of Default and at any
--------
time thereafter so long as the same shall be continuing, Lessor may, at its
option, declare this Lease to be in default and at any time thereafter, so long
as Lessee shall not have remedied all outstanding Events of Default, Lessor may
exercise one or more of the following remedies with respect to any or all of the
Items of Equipment as Lessor, in its sole discretion, shall elect, to the extent
available and permitted by, and subject to compliance with any mandatory
requirements of, applicable law then in effect:
(a) Pursuant to Section 4.4, apply all or any portion of the
Security Deposit to Lessor's damages attributable to such Event of Default or
to the costs of curing such Event of Default; provided, however, the Event of
Default shall continue until the Security Deposit is restored to its original
amount.
(b) Proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by Lessee of the applicable covenants of this
Lease and to recover damages for the breach thereof.
(c) Terminate this Lease and demand that Lessee, and Lessee shall
upon written demand of Lessor and at Lessee's expense, forthwith return the
Aircraft to Lessor in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Section 15 hereof as if the Aircraft
were being returned at the end of the Term; or Lessor may enter upon the
premises where the Aircraft is located and take
44
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immediate possession of and remove the same by summary proceedings or
otherwise, all without liability for or by reason of such entry or taking of
possession whether for the restoration of damage to property caused by such
taking or otherwise.
(d) In addition to all other legal and equitable rights of Lessor,
upon notice to Lessee, Lessor may, following an Event of Default:
(i) lease the repossessed Aircraft or any part thereof to any
third party upon such terms and conditions as Lessor may determine;
(ii) sell the Aircraft, or any part thereof, to the highest
bidder at public auction or private sale.
The total proceeds of any such leases and/or sales, less expenses of Lessor
(including attorneys' fees), to the extent actually received and retained by
Lessor, shall be applied to the total amount due to Lessor as provided herein
and Lessee shall immediately pay to Lessor any deficiency.
(e) On the date on which Lessor shall become entitled to
repossession of the Aircraft, Lessor, in addition to all other remedies herein
provided, may by notice to Lessee, demand that Lessee pay, and Lessee shall
pay, on the first Basic Rent Payment Date following said notice, (i) any due
and unpaid Basic Rent and Supplemental Rent, together with interest at the
Incentive Rate from the due date to the date the same are paid, and (ii) as
liquidated damages for loss of a bargain and not as a penalty, an amount equal
to the difference between (a) the sum of all remaining payments of Basic Rent
falling due hereunder after the date of said notice, discounted to the date of
said notice at a rate of interest equal to the Prime Rate on a monthly basis,
and (b) the fair market rental (as determined by an independent aviation
appraiser of recognized standing, selected by Lessor) of the Aircraft for the
remaining Term, discounted at the same rate and frequency specified in (i)
above; provided, however, if Lessor has already leased the Aircraft as
permitted by Section 17.l(d)(i) above, the rental specified in such lease (if
it is on substantially the same terms and conditions as this Lease) shall be
conclusive as to the "fair market rental".
17.2. Further Rights. Lessee shall be liable for any and all unpaid Rent
--------------
and for all reasonable legal fees and other costs and expenses incurred by
reason of the occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto, including all costs and expenses incurred in
connection with the return of any Item in accordance with the terms of Section
15 hereof or in placing such Item in the condition and with airworthiness
certificates as required by Section 15.
17.3. Remedies Cumulative. Except as otherwise expressly provided in
-------------------
Section 18.1 hereof, no remedy referred to in this Section 17 is intended to
be exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise
45
<PAGE>
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 of such other remedies.
No express or implied waiver by Lessor of any Event of Default shall in any
way be, or be construed to be, a waiver of any future or further Event of
Default.
Section 18
Miscellaneous
-------------
18.1. Severability, Amendment, Construction and Applicable Law. Any
--------------------------------------------------------
provision of this Lease which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. No
term or provision of this Lease may be changed, waived, discharged or terminated
orally, but only by a written instrument signed by the party against which the
enforcement of the change, waiver, discharge or termination is sought. The
captions in this Lease are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. THIS LEASE SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
18.2. Notices. All notices provided for herein shall be in writing and
-------
shall be deemed to have been given when delivered personally or when telexed or
telefaxed and receipt confirmed in a commercially reasonable manner or 10 days
after deposit in the United States mail, registered first class postage prepaid,
addressed as follows:
If to Lessee: World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, VA 22071
Attn: President
Telefax: (703) 834-9412
If to Lessor: Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attn: Corporate Trust Administration
Telefax: (302) 651-8882
46
<PAGE>
with a copy to: GATX Capital Corporation
Four Embarcadero Center, Suite 2200
San Francisco, California 94111
Attn: Contract Administration
Telefax: (415) 955-3416 or (415) 955-3444
or to such other address as any party may designate for itself by written notice
to the other party.
18.3. Lessor's Right to Perform. If Lessee fails to perform any of its
-------------------------
obligations hereunder, Lessor may, following five days (or one Business Day in
the case of insurance) notice to Lessee, discharge such obligation, and the
amount of the expenses of Lessor incurred in connection with such discharge,
together with interest thereon at the Incentive Rate, shall be deemed
Supplemental Rent, payable by Lessee upon Lessor's demand.
18.4. Counterparts. At least three counterparts of this Lease have been
------------
executed by the parties hereto, each of which shall be deemed to be an original
but all of which taken together shall constitute a single agreement. One
counterpart has been prominently marked "Lessor's Copy"; one counterpart has
been prominently marked "Lessee's Copy"; and one counterpart has been
prominently marked "FAA Copy" and shall be filed for recordation with the FAA.
18.5. Assignment by Lessor. Lessor shall have the absolute right to
--------------------
transfer or assign to any person, firm, corporation or other entity any or all
of Lessor's rights, obligations, benefits and interests under this Lease,
including, without limitation, the right to receive Rent or any other payment
due under this Lease, the right to transfer or assign title to any Item of
Equipment or to transfer or assign the right to purchase any Item and the right
to make all waivers and agreements, to give all notices, consents and releases,
to take all action upon the occurrence of an Event of Default, or to do any and
all other things which Lessor is or may become entitled to do under this Lease.
Lessee acknowledges that, if Lessor should sell or transfer to a third party all
of Lessor's interest under this Lease and in the Aircraft, Lessor shall
thereupon be relieved of all of its obligations hereunder and Lessor's
transferee shall succeed to all of Lessor's rights, interests and obligations
under this Lease as though Lessor's transferee had been the initial lessor
hereunder; provided, however, that in the event of a transfer or assignment of a
security interest in any Item, Lessor shall remain liable hereunder. In the
event of a transfer of Lessor's entire interest in the Aircraft and the Lease,
except following an Event of Default, Lessor agrees that such transferee (a)
will be a "citizen of the United States" within the meaning of Section 101(16)
of the Federal Aviation Act, and (b) will have a net worth of at least
$50,000,000, or, if less the obligations of which under the Lease will be
fully guaranteed by an entity with such a net worth.
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18.6. Service of Process; Waiver of Immunities. Lessee (a) irrevocably
----------------------------------------
submits itself to the nonexclusive jurisdiction of the Supreme Court of the
State of New York, New York County, or the United States District Court for the
Southern District of New York, for the purpose of any suit, action or other
proceeding arising out of this Lease, or the subject matter hereof or any of the
transactions contemplated hereby or thereby, brought by Lessor or its successor,
subrogees or assigns, (b) irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State or
United States Federal court and (c) to the extent that Lessee has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process, waives such immunity, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such suit, action or proceeding the defense of
sovereign immunity, any claim that it is not personally subject to the
jurisdiction of the above-named New York State or United States Federal courts
by reason of sovereign immunity or otherwise, that it is immune 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, or attachment either prior to judgment or on any day of
execution, by reason of sovereign immunity, that the suit, action or proceeding
is brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper, or that this Lease or the subject matter hereof may not
be enforced in or by such courts.
The obligations of Lessee payable under this Lease in one currency (the
"first currency") may be discharged by an amount paid by Lessee pursuant to any
order or judgment of any court or other tribunal in another currency (a "second
currency"), but only to the extent that the amount so paid in a second currency
on prompt conversion to the first currency under normal banking procedures
yields the amount of the first currency due hereunder, and Lessee shall
indemnify Lessor and any other person entitled to payments hereunder against any
such shortfall. In the event that any payment in a second currency by Lessee to
any such person or entity, whether pursuant to a judgment or otherwise, upon
conversion and transfer to the designated place of payment therefore does not
result in payment of such amount of the first currency, such person or entity
shall have a separate cause of action against Lessee for the additional amount
necessary to yield the amount due and owing to such person.
18.7. Language. The English language version of this Lease will be the
--------
official, controlling version and any dispute over the interpretation of the
Lease, whether directly between the parties or involving the courts of the
United States or elsewhere, shall be resolved based upon the Lease as written
in the English language, any interpretation thereof into another language
being merely for convenience of understanding. All notices, reports and other
communications given under this Lease shall be in the English language.
18.8. Costs and Expenses. Each party shall be responsible for its costs
------------------
and expenses, including attorneys' fees, of negotiation and documentation of
this transaction. In the event of any litigation between the parties over this
Lease or the subject matter
48
<PAGE>
hereof, the prevailing party shall, in addition to whatever other damages,
costs and expenses are recovered, be entitled to recover its costs and
expenses of such litigation, including attorneys' fees and expenses. Lessee
shall be responsible for the cost, including attorneys' fees and expenses, of
registering this Lease in any foreign jurisdiction.
18.9. Survival. The indemnities of Lessee set forth in this Lease shall
--------
survive the expiration or other termination of this Lease to the extent required
for full performance and satisfaction thereof.
18.10. Further Assurances. Each party hereto shall, at its respective
------------------
expense, promptly and duly execute and deliver to the other party such further
documents and promptly take such further action not inconsistent with the terms
hereof as the other party may from time to time reasonably request in order to
more effectively carry out the intent and purpose of this Lease or to perfect
and protect the rights and, with respect to Lessor, remedies created or intended
to be created hereunder.
18.11. Entire Agreement. This Lease and the Lease Supplement executed
----------------
pursuant hereto constitute the entire agreement between Lessor and Lessee
regarding the Aircraft and there are no other prior or contemporaneous written
or oral understandings with regard to the subject matter hereof.
18.12. Successors and Assigns. This Lease shall be binding on and shall
----------------------
inure to the benefit of Lessee, Lessor and their respective successors and
permitted assigns.
18.13. Concerning Lessor. WTC is entering into this Lease solely in its
-----------------
capacity as Owner Trustee under the Trust Agreement and not in its individual
capacity (except as expressly stated herein) and in no case shall WTC (or any
entity acting as successor Owner Trustee under the Trust Agreement) be
personally liable for or on account for any statement, representations,
warranties, covenants or obligations stated to be those of Lessor hereunder;
provided, however, that WTC (or any successor Owner Trustee) shall be personally
- -----------------
liable hereunder for its own willful misconduct and gross negligence and for
its covenants and representations in Sections 5.1, 5.4 and 10 (to the extent
such representation, warranty or covenant is given in its individual
capacity).
49
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed by their authorized officers as of the date first above written.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
under the Trust Agreement dated as of
December 28, 1990
ATTEST:
____________________________ By: ___________________________
___________________Secretary Its: ___________________________
ATTEST: WORLD AIRWAYS, INC.
____________________________ By: _____________________________
___________________Secretary Its:_____________________________
50
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed by their authorized officers as of the date first above written.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
under the Trust Agreement dated as of
December 28, 1990
ATTEST:
____________________________ By: ___________________________
___________________Secretary Its: ___________________________
ATTEST: WORLD AIRWAYS, INC.
____________________________ By: _____________________________
___________________Secretary Its:_____________________________
51
<PAGE>
APPENDIX A
to
LEASE SUPPLEMENT
AIRCRAFT RECORDS
see attached _____ pages
<PAGE>
APPENDIX B
to
LEASE SUPPLEMENT
LIST OF LOOSE EQUIPMENT
see attached _____ pages
<PAGE>
APPENDIX C
to
LEASE SUPPLEMENT
OPEN ITEMS
see attached _____ pages
<PAGE>
WORLD AIRWAYS MD-11
GATX FAK Appendix D
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY COST COST
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
55543 COWL PUMP 1 $1,935 $1,935
- -----------------------------------------------------------------------------------------------------------------
10-621630-1 EXCITER 2 $1,849 $3,698
- -----------------------------------------------------------------------------------------------------------------
154ED PROBE 1 $9,925 $9,925
- -----------------------------------------------------------------------------------------------------------------
2118700-5 AUXILARY POWER UNIT ELECTRICAL CONTROL UNIT 1 $49,364 $49,364
- -----------------------------------------------------------------------------------------------------------------
2119704-1 CABIN PRESSURE SELECTOR 1 $12,567 $12,567
- -----------------------------------------------------------------------------------------------------------------
218387 AUXILARY POWER UNIT START PUMP 1 $6,081 $6,081
- -----------------------------------------------------------------------------------------------------------------
2313M-481-1 MOTOR 1 $13,395 $13,395
- -----------------------------------------------------------------------------------------------------------------
2313M-481-2 MOTOR 1 $13,395 $13,395
- -----------------------------------------------------------------------------------------------------------------
240705-2 VALVE ASSEMBLY, BYPASS 1 $7,011 $7,011
- -----------------------------------------------------------------------------------------------------------------
2609471-2 MAIN/CENTER WHEEL ASSEMBLY 2 $14,100 $28,200
- -----------------------------------------------------------------------------------------------------------------
2609472-2 MAIN/CENTER BRAKE ASSEMBLY 1 $49,258 $49,258
- -----------------------------------------------------------------------------------------------------------------
2610-11-1 CHRONOMETER, ELECTRONIC 1 $10,782 $10,782
- -----------------------------------------------------------------------------------------------------------------
29680 CENTER ACCESSORY COMPARTMENT COOLING FAN 1 $4,095 $4,095
- -----------------------------------------------------------------------------------------------------------------
2LA003988-40 RED LIGHT STROBE 1 $2,674 $2,674
- -----------------------------------------------------------------------------------------------------------------
3202176-2 LOW PRESSURE BLEED VALVE 1 $2,850 $2,850
- -----------------------------------------------------------------------------------------------------------------
3273888-3 ANTI-ICE VALVE 1 $5,900 $5,900
- -----------------------------------------------------------------------------------------------------------------
3290272-3 CONTROL VALVE 1 $21,763 $21,763
- -----------------------------------------------------------------------------------------------------------------
3290278-1 SHUT OFF VALVE 1 $7,198 $7,198
- -----------------------------------------------------------------------------------------------------------------
3290280-3 PNEUMATIC PRESSURE REGULATOR VALVE 1 $26,985 $26,985
- -----------------------------------------------------------------------------------------------------------------
399046-1 PILOT BLEED VALVE 1 $10,110 $10,110
- -----------------------------------------------------------------------------------------------------------------
60-112-004 DATA UNIT CONTROL 1 $142,100 $142,100
- -----------------------------------------------------------------------------------------------------------------
603756-2 SENSOR ASSEMBLY 1 $4,655 $4,655
- -----------------------------------------------------------------------------------------------------------------
67-040-081 MODULE 1 $227,850 $227,850
- -----------------------------------------------------------------------------------------------------------------
059001-903 AUTO FLIGHT CONTROL COMPRESSOR 1 $188,502 $188,502
- -----------------------------------------------------------------------------------------------------------------
059002-902 GLARESHIELD CONTROL PANEL 1 $63,779 $63,779
- -----------------------------------------------------------------------------------------------------------------
059003-901 SENSOR 1 $22,395 $22,395
- -----------------------------------------------------------------------------------------------------------------
059010-901 DISPLAY UNIT (ELECTRONIC INSTRUMENT SYSTEM) 1 $60,958 $60,958
- -----------------------------------------------------------------------------------------------------------------
059011-905 DISPLAY UNIT (ELECTRONIC INSTRUMENT SYSTEM) 1 $130,106 $130,106
- -----------------------------------------------------------------------------------------------------------------
059021-902 HYDRAULIC SYSTEM CONTROLLER 1 $115,755 $115,755
- -----------------------------------------------------------------------------------------------------------------
059023-903 ENVIRONMENTAL SYSTEM CONTROLLER 1 $153,596 $153,596
- -----------------------------------------------------------------------------------------------------------------
059024-904 FUEL CONTROL PANEL 1 $32,552 $32,552
- -----------------------------------------------------------------------------------------------------------------
059025-904 FUEL SYSTEM CONTROLLER 1 $124,379 $124,379
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 1 of 4
<PAGE>
WORLD AIRWAYS MD-11
GATX FAK
<TABLE>
<CAPTION>
UNIT TOTAL
PART NUMBER NOMENCLATURE QTY COST COST
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
4059026-902 FUEL SYSTEM CONTROL PANEL 1 $52,174 $52,174
- -----------------------------------------------------------------------------------------------------------------
4059027-902 MISCELLANEOUS SYSTEMS CONTROLER 1 $116,661 $116,661
- -----------------------------------------------------------------------------------------------------------------
4059031-901 ELECTRONIC SYSTEMS CONTROL PANEL 1 $17,007 $17,007
- -----------------------------------------------------------------------------------------------------------------
4059050-907 FLIGHT MANAGEMENT COMPUTER 1 $187,889 $187,889
- -----------------------------------------------------------------------------------------------------------------
4059051-902 MULTIFUNCTION CONTROL DISPLAY 1 $55,820 $55,820
- -----------------------------------------------------------------------------------------------------------------
4059060-901 DIGITAL AIR DATA COMPUTER 1 $34,294 $38,294
- -----------------------------------------------------------------------------------------------------------------
418-05124 TRANSMITTER 1 $2,670 $2,670
- -----------------------------------------------------------------------------------------------------------------
500919-2 NOSE LANDING GEAR WHEEL ASSEMBLY 2 $5,661 $11,323
- -----------------------------------------------------------------------------------------------------------------
501-1568-01 STANDBY ATTITUDE INDICATOR. 1 $7,874 $7,874
- -----------------------------------------------------------------------------------------------------------------
50P046 PROBE 2 $2,826 $6,652
- -----------------------------------------------------------------------------------------------------------------
50P109 THERMOCOUPLER 1 $975 $975
- -----------------------------------------------------------------------------------------------------------------
51A020 TRANSDUCER 1 $6,801 $6,801
- -----------------------------------------------------------------------------------------------------------------
53361-6PWS OIL SERVICE UNIT, 2 GAL 1 $961 $961
- -----------------------------------------------------------------------------------------------------------------
5D0124-1 EMERGENCY POWER RELAY 1 $128 $128
- -----------------------------------------------------------------------------------------------------------------
50-411-3 EMERGENCY POWER BATTERY 1 $5,187 $5,187
- -----------------------------------------------------------------------------------------------------------------
50-304-1 CONTROL BOX 1 $136,401 $136,401
- -----------------------------------------------------------------------------------------------------------------
005305 WHEEL SPEED TRANSDUCER 1 $2,507 $2,507
- -----------------------------------------------------------------------------------------------------------------
026D0001-01 LATCH ACTUATOR 1 $18,420 $18,420
- -----------------------------------------------------------------------------------------------------------------
30500-07 ACTUATOR ASSEMBLY 1 $15,376 $15,376
- -----------------------------------------------------------------------------------------------------------------
305J0001-01 CENTER CARGO DOOR ACTUATOR 1 $15,539 $16,539
- -----------------------------------------------------------------------------------------------------------------
5066-06 PUMP 1 $8,550 $8,550
- -----------------------------------------------------------------------------------------------------------------
50864B CONTROL UNIT 1 $84,323 $84,323
- -----------------------------------------------------------------------------------------------------------------
2-130001-012 LAVATORY SMOKE DETECTOR 1 $1,418 $1,418
- -----------------------------------------------------------------------------------------------------------------
50866B CONTROL UNIT 1 $104,249 $104,249
- -----------------------------------------------------------------------------------------------------------------
22100 PUMP 1 $45,635 $45,635
- -----------------------------------------------------------------------------------------------------------------
50875 INTEGRATED DRIVE GENERATOR 1 $257,223 $257,223
- -----------------------------------------------------------------------------------------------------------------
74860A3 STARTER 1 $21,518 $21,518
- -----------------------------------------------------------------------------------------------------------------
81100-6-075 ELECTRONIC ENGINE CONTROL 1 $121,629 $121,629
- -----------------------------------------------------------------------------------------------------------------
82-6140-001 HIGH FREQUENCY ANTENNA COUPLER 1 $17,480 $17,480
- -----------------------------------------------------------------------------------------------------------------
593-03 ELECTRONIC PROXIMITY UNIT 2 $64,875 $129,750
- -----------------------------------------------------------------------------------------------------------------
614-01 SENSOR-SLAT POSITION 1 $478 $478
- -----------------------------------------------------------------------------------------------------------------
621-01 SENSOR-SLAT POSITION 1 $462 $462
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 2 of 4
<PAGE>
WORLD AIRWAYS MD-11
GATX FAK
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
UNIT TOTAL
PART NUMBER NOMENCLATURE QTY COST COST
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
801000-2 FUEL MANAGEMENT UNIT 1 $67,138 $67,138
- -----------------------------------------------------------------------------------------------------------------
861555 PUMP 1 $19,572 $19,572
- -----------------------------------------------------------------------------------------------------------------
8038-02-02 ENGINE FIRE DETECTION CONTROL UNIT 1 $4,086 $4,086
- -----------------------------------------------------------------------------------------------------------------
895564-1 FIRECONTAINER 2 $4,100 $8,200
- -----------------------------------------------------------------------------------------------------------------
8E8003761-00 STROBE LIGHT ENERGY BOX 1 $9,477 $9,477
- -----------------------------------------------------------------------------------------------------------------
9-217-30 FUEL FLOW TRANSMITTER 1 $7,663 $7,663
- -----------------------------------------------------------------------------------------------------------------
9500-001-05 CALL LIGHT CIRCUIT BREAKER 1 $90 $90
- -----------------------------------------------------------------------------------------------------------------
9601-02-11 FLAP POSITION TRANSMITTER 1 $6,522 $6,522
- -----------------------------------------------------------------------------------------------------------------
9601-02-13 OUTBOARD FLAP POSITION TRANSMITTER 1 $6,406 $6,406
- -----------------------------------------------------------------------------------------------------------------
965-0676-020 GROUND PROXIMITY WARNING UNIT 1 $32,625 $32,625
- -----------------------------------------------------------------------------------------------------------------
969690-2 IGNITION UNIT 1 $1,200 $1,200
- -----------------------------------------------------------------------------------------------------------------
AA134S1 IGNITER 2 $59 $117
- -----------------------------------------------------------------------------------------------------------------
ACG7219-503 AXLE NUT, NOSE LANDING GEAR 1 $2,291 $2,291
- -----------------------------------------------------------------------------------------------------------------
ACG7220-1 SPACER ASSEMBLY, NOSE LANDING GEAR 1 $175 $175
- -----------------------------------------------------------------------------------------------------------------
AG1013AA02 HIGH INTENSITY LIGHT ASSEMBLY 1 $1,300 $1,300
- -----------------------------------------------------------------------------------------------------------------
7000-501 GEAR PINS 5 $235 $1,175
- -----------------------------------------------------------------------------------------------------------------
AXG7012-501 LOCK ASSEMBLY, MAIN LANDING GEAR DOOR 2 $235 $470
- -----------------------------------------------------------------------------------------------------------------
AYG7440-501 AXLE WASHER, CENTER LANDING GEAR 2 $197 $394
- -----------------------------------------------------------------------------------------------------------------
429C AIRCRAFT POWER CONTRACTOR 1 $3,133 $3,133
- -----------------------------------------------------------------------------------------------------------------
6107B PASSENGER ADDRESS PRE-AMPLIFIER 1 $850 $850
- -----------------------------------------------------------------------------------------------------------------
6980-01 AUDIO MANAGEMENT UNIT 1 $38,921 $38,921
- -----------------------------------------------------------------------------------------------------------------
6981-02 AUDIO CONTROL PANEL 1 $12,697 $12,697
- -----------------------------------------------------------------------------------------------------------------
6982-01 JACK PANEL 1 $1,757 $1,757
- -----------------------------------------------------------------------------------------------------------------
6984-01 RADIO COMMUNICATIONS PANEL 1 $11,968 $11,968
- -----------------------------------------------------------------------------------------------------------------
6990-09 PANEL 1 $5,511 $5,511
- -----------------------------------------------------------------------------------------------------------------
05A0035-52 CONTROL AURAL WARNING UNIT 1 $40,000 $40,000
- -----------------------------------------------------------------------------------------------------------------
05A0040-1 ANNUNCIATOR CONTROL UNIT 1 $45,730 $45,730
- -----------------------------------------------------------------------------------------------------------------
510A TRANSMITTER 1 $1,735 $1,735
- -----------------------------------------------------------------------------------------------------------------
C10-32-101 MASK 1 $4,389 $4,389
- -----------------------------------------------------------------------------------------------------------------
DAX4352-10 ELECTRONIC SEAT BOX 4 $967 $3,869
- -----------------------------------------------------------------------------------------------------------------
DAX5362 OVERHEAD DECODER UNIT 4 $325 $1,299
- -----------------------------------------------------------------------------------------------------------------
M600BA40N24 DC FEED CIRCUIT BRAKER 1 $825 $826
- -----------------------------------------------------------------------------------------------------------------
0BA5N22 CIRCUIT BREAKER 1 $919 $919
- -----------------------------------------------------------------------------------------------------------------
0BA60A23 REMOTE CONTROL CIRCUIT BREAKER-DT2A 1 $1,209 $1,209
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 4
<PAGE>
WORLD AIRWAYS MD-11
GATX FAK
<TABLE>
<CAPTION>
UNIT TOTAL
PART NUMBER NOMENCLATURE QTY COST COST
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
M600BA60N22 REMOTE CONTROL CIRCUIT BREAKER - 1-PH-60 GEN 1 1 $857 $657
- -----------------------------------------------------------------------------------------------------------------
M601BA10A22 CIRCUIT BREAKER 1 $2,040 $2,040
- -----------------------------------------------------------------------------------------------------------------
M601BA20A22 PHASE 35 CIRCUIT BREAKER 1 $1,808 $1,808
- -----------------------------------------------------------------------------------------------------------------
M601BA60A22 PHASE 35 CIRCUIT BREAKER 1 $1,921 $1,921
- -----------------------------------------------------------------------------------------------------------------
YLZ61767 WNDSHLD ANTI-ICE CONTROLLER 1 $21,500 $21,500
- -----------------------------------------------------------------------------------------------------------------
L101AMS5 ANTIMETER/AIR SPEED INDICATOR 1 $22,485 $22,485
- -----------------------------------------------------------------------------------------------------------------
TOTAL: $3,438,288
</TABLE>
PAGE 4 of 4
<PAGE>
PERMITTED SUBLESSEES
INITIAL LIST OF APPROVED SUBLESSEES
ELIGIBLE LIST MD - 11 SUBLESSEES
AER LINGUS AEROMEXICO MALEV
AIR 2000 ALM VIRGIN ATLANTIC
BWIA TURKISH
AIR FRANCE LAN CHILE AEROLINEAS ARGENTINAS
MEXICANA AVENSA
AIR U.K. VARIG AVIANCA
ALITALIA VIASA LADECO
AUSTRIAN
BALAIR AIR JAMAICA
BRITANNIA AIR AFRIQUE
BRITISH AIR AIR INDIA
CALENDONIAN AIR CANADA AIR INTER
CARGOLUX ALASKA (ALL CHINESE CARRIERS
THAT WERE GOVERNED BY
THE CAAC IMMEDIATELY
PRIOR TO ITS
RESTRUCTURING)
CONDOR AMERICAN
FINNAIR A.T.A.
GERMAN AIR CARGO CANADIAN
HAPAG-LLOYD DELTA
IBERIA FEDERAL EXPRESS
ICELANDAIR SOUTHWEST
KLM UNITED
LAUDA U.P.S.
LTU (GROUP) LUFTHANSA
LUXAIR
MAERSK AIR CHINA
MARTINAIR AIR NEW ZEALAND
MONARCH ALL NIPPON
SABENA AIR PACIFIC
SAS ANSETT
SCANAIR ASIANA
STERLING AUSTRALIAN
SWISSAIR CATHAY PACIFIC
TAP CHINA AIRLINES
TRANSAVIA EVA AIRWAYS
UTA GARUDA
JAPAN AIRLINES
JAPAN AIR SYSTEM
KOREAN AIR
AIR MAURITIUS MALAYSIA
AIR SEYCHELLES QUANTAS
EL AL ROYAL BRUNEI
EMIRATES SINGAPORE
GULFAIR THAI INTERNATIONAL
KUWAIT SAUDIA
SOUTH AFRICAN
Effective through September 1, 1993
EXHIBIT B
---------------------------
to Aircraft Lease Agreement
<PAGE>
LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT is dated March ____, 1993 (this "Lease Supplement")
between WILMINGTON TRUST COMPANY, a banking corporation organized under the laws
of the State of Delaware, not in its individual capacity but solely in its
capacity as Owner Trustee ("Lessor") under that certain Trust Agreement, dated
as of December 28, 1990, for the benefit of GATX Capital Corporation, a
corporation organized under the laws of the State of Delaware, and WORLD
AIRWAYS, INC., a corporation organized under the laws of the State of Delaware
("Lessee").
RECITALS
Lessor and Lessee have heretofore entered into a certain Aircraft Lease
Agreement, dated as of January 15, 1993 (the "Lease"), which provides for the
execution and delivery of a Lease Supplement in substantially the form hereof
for the purpose of leasing the Items of Equipment in accordance with the terms
thereof.
NOW, THEREFORE, in consideration of the premises, and pursuant to Article
2 of the Lease, Lessor and Lessee hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
-----------
used herein shall have the respective meanings given them in the Lease.
2. Delivery and Acceptance. Lessor hereby delivers and leases to Lessee,
-----------------------
and Lessee hereby accepts and leases from Lessor under the Lease, as hereby
supplemented, the Items of Equipment as follows:
Aircraft: One McDonnell Douglas MD-11 aircraft consisting of
the following:
(i) Airframe: Registration Number N489GX;
Manufacturer's Serial No. 48458.
Total Time:_______ Total Cycles:_______
(ii) Engines: Three PW4462 turbofan engines (each of which Engines
has 750 or more rated takeoff horsepower or the equivalent thereof),
installed on said Airframe, bearing, respectively, Manufacturer's Serial
Nos.:
<TABLE>
<CAPTION>
===================================================================================================
Engine Manufacturer's Total Total Time Since Cycles
Number Serial Number Time Cycles Overhaul Since
Since New Since New Overhaul
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. P723811
- ---------------------------------------------------------------------------------------------------
2. P723802
- ---------------------------------------------------------------------------------------------------
3. P724032
===================================================================================================
</TABLE>
Exhibit A
-------------------
to Aircraft Lease Agreement
<PAGE>
(iii) Auxiliary Power Unit:
<TABLE>
<CAPTION>
===================================================================================================================
Make Manufacturer's Total Total Time Cycles Time to
and Serial Number Time Cycles Since Since Scheduled
Model Since New Since New Overhaul Overhaul Removal
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================
</TABLE>
Lessee confirms that the Items of Equipment have been examined by its duly
appointed and authorized representatives and the records conform to the
information set forth above.
3. Aircraft Records. Lessor hereby delivers and Lessee hereby accepts the
----------------
manuals, log books, records and other documents relating to the Aircraft
described in Appendix A attached hereto.
4. Loose Equipment. Lessor hereby delivers and Lessee hereby accepts and
---------------
agrees to return the additional items of equipment, identified in Appendix B
attached hereto, which Lessor is providing in connection with the Aircraft.
5. Open Items. Lessor and Lessee hereby agree that all log book items that
----------
are not completed as of the date hereof, and which are identified on the
attached Appendix C, shall be completed by Lessee and Lessor shall compensate
Lessee for Lessee's direct costs (without administrative overhead or other mark-
up) of such completion.
6. Fuel. As measured by the dip sticks, the Aircraft had ____ gallons of
----
fuel on board at the time of its delivery and acceptance under the Lease.
7. Delivery Date. The Delivery Date of the Items of Equipment is the date
-------------
of this Lease Supplement, and the Items of Equipment are hereby delivered and
accepted on such date at ________ hours at ______.
8. Basic Rent. Each payment of Basic Rent shall be in the amount of
----------
$575,000.00 commencing on the Delivery Date and on the first day of each month
thereafter, including any renewal of the Term pursuant to Section 8. If the
Delivery Date is not the first day of the month, the amount of Basic Rent
payable on the Delivery Date shall be $575,000 multiplied by a fraction the
numerator of which is the number of days from and including the Delivery Date to
and including the last day of the month in which the Delivery Date occurs and
the denominator of which is the number of days in such calendar month.
2
<PAGE>
9. Fly Away Kit. Lessor hereby delivers and Lessee hereby accepts the Fly
------------
Away Kit described on Appendix D hereto, which shall remain aboard the Aircraft
at all times.
10. Governing Law. This Lease Supplement shall in all respects be governed
-------------
by, and construed in accordance with, the laws of the State of New York.
11. Counterparts. This Lease Supplement may be executed in any number of
------------
counterparts, each of which shall be an original and all of which taken together
shall constitute a single instrument.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers on the date first
above written.
LESSOR: WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee under the
Trust Agreement dated as of December 28, 1990
By: ______________________________
Its: _____________________________
LESSEE: WORLD AIRWAYS, INC.
By:_______________________________
Its: _____________________________
<PAGE>
[MLB LETTERHEAD]
[Date]
GATX Capital Corporation
Four Embarcadero Center
San Francisco, CA 94111
Ladies and Gentlemen:
We have acted as special counsel to World Airways, Inc., a Delaware
corporation (the "Lesee"), in connection with the execution and delivery of the
Aircraft Lease Agreement, dated as of January 15, 1993 (the "Lease"), between
Wilmington Trust Company, as Owner Trustee, and the Lessee. Capitalized terms
used in this opinion and not otherwise defined herein shall have the meanings
assigned to them in the Lease.
In connection with this opinion, we have examined executed copies of the
Lease and such other documents as we have deemed necessary or appropriate for
the purpose of this opinion. In rendering our opinion, we have assumed the due
authorization, execution and delivery of the Lease by the parties thereto, that
the Lease constitutes the legal, valid, binding and enforceable obligation of
the Lessor, the authenticity of all documents submitted to us as originals and
the conformity to authentic original documents of all documents submitted to us
as certified, conformed or photostatic copies. In rendering this opinion we have
relied, insofar as certain factual matters are concerned, on the representations
and warranties made in or pursuant to the Lease or in certificates required to
be delivered pursuant thereto.
Based on the foregoing, and subject to the limitations stated herein, we
are of the opinion that:
1. The Lease is a legal, valid and binding obligation of the Lessee,
enforceable against the Lessee in accordance with its terms, except as
enforceability may be limited to bankruptcy, insolvency, reorganization or other
laws of general application affecting the enforcement of creditors' rights and
by general equitable principles. Such enforceability may be limited, in the case
of indemnities, by considerations of public policy and, in the case of remedial
provisions, by applicable laws and judicial decisions, provided that in our
opinion such laws and judicial
Exhibit C
---------
to Aircraft Lease Agreement
<PAGE>
decisions will not prevent the practical realization of the
benefits intended to be provided by the Agreement as a whole.
2. The execution and delivery of the Lease and the consummation by the
Lessee of the transactions therein contemplated do not contravene any New York
law applicable to the Lessee.
We express this opinion as members of the Bar of the State of New York and
do not purport to be experts in, or express any opinion concerning, the laws of
any jurisdiction other than the laws of the State of New York and the Federal
laws of the United States, provided that no opinion is rendered as to any laws,
rules or regulations of any jurisdiction relating to aircraft or aviation.
This opinion is being delivered to you pursuant to Section 2.3(b)(iii) of
the Lease and is not to be relied upon by any other person without our prior
written consent.
Very truly yours,
- 2 -
<PAGE>
_______________________, 1993
GATX Capital Corporation
Four Embarcadero Center
San Francisco, CA 94111
Ladies and Gentlemen:
I am the General Counsel of World Airways, Inc., a Delaware corporation
(the "Lessee"), and am delivering this opinion in connection with the execution
and delivery of the Aircraft Lease Agreement dated as of January 15, 1993 (the
"Agreement"), between you and the Lessee. Capitalized terms used in this opinion
and not otherwise defined herein shall have the meanings assigned to them in the
Agreement.
In connection with this opinion, I have examined executed copies of Lease
and such other documents as I have deemed necessary or appropriate for the
purpose of this opinion. In rendering my opinion, I have assumed the due
authorization, execution and delivery of the Agreement by you, that the
Agreement constitutes the legal, valid, binding and enforceable obligation of
the parties thereto, the authenticity of all documents submitted to me as
originals and the conformity to authentic original documents of all documents
submitted to me as certified, conformed or photostatic copies. In rendering this
opinion I have relied, insofar as certain factual matters are concerned, on the
representations and warranties made in or pursuant to the Agreement.
I have not considered the Federal Aviation Act of 1958, as amended (the
"Act"), or the status of title to the Aircraft.
Based on the foregoing, and subject to the limitations stated herein, I am
of the opinion that:
1. Lessee is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware. It has the corporate power and authority to
carry on its business as presently conducted and to perform its obligations
under the Agreement.
2. To my knowledge, without having made any special investigation
concerning any law other than the laws specifically referred to in this opinion,
no authorization, approval, consent, license or order of, or registration with,
or the giving of notice to any regulatory body or authority is required for the
valid authorization, execution, delivery and performance by the Lessee of the
Agreement. I express no opinion, however, as to any such consent, approval,
action or filing (i) which may be required as a result of Lessor's legal or
regulatory status or because of any
Exhibit C-1
-----------
to Aircraft Lease Agreement
<PAGE>
other facts specifically pertaining to Lessor, (ii) the absence of which will
not have a material adverse effect on Lessor and does not deprive Lessor of any
material rights under the Agreement, or (iii) which can be readily obtained
without significant delay or expense to Lessor, without loss to Lessor or any
material adverse effect on Lessor during the period such consent, approval,
action or filing was not obtained or effected.
3. The Agreement has been duly authorized, executed and delivered by
lessee.
4. The execution and delivery of the Agreement, the consummation by the
Lessee of the transactions therein contemplated and compliance by the Lessee
with the terms and provisions thereof do not and will not contravene any
Virginia or United States federal law or the General Corporation Law of
Delaware, applicable to Lessee, or result in any material breach of or
constitute any material default under (i) the Certificate of Incorporation or
Bylaws of Lessee, or (ii) to the best of my knowledge, under any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan
or credit agreement, or other agreement or instrument to which Lessee is a party
or by which Lessee or its properties or assets may be bound or affected, or
result in the creation of any lien, charge or encumbrance upon any property of
Lessee.
I express this opinion as a member of the Bar of the State of Virginia and
do not purport to be expert in, or express any opinion concerning, the laws of
any jurisdiction other than the laws of the State of Virginia, the General
Corporation Law of Delaware and the Federal laws of the United States to the
extent specifically referred to in this opinion.
I assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion. This opinion has been prepared
solely for your use in connection with the Agreement and should not be quoted in
whole or in part or otherwise be referred to, nor be filed with or furnished to
any governmental agency or other person or entity without my prior written
consent.
Very truly yours,
Andrew M. Paalborg
Vice President
Legal and Human Resources
-2-
<PAGE>
COLLATERAL SUPPLEMENT
Date of Advance: _____________________
Amount of Advance: $____________________
The following equipment is hereby pledged as "Collateral" under that
certain Loan and Security Agreement, dated as of February 16, 1993 (the
"Security Agreement"), between World Airways, Inc., as Debtor, and Wilmington
Trust Company, not in its individual capacity but solely as Owner Trustee, as
Secured Party:
[insert description and location of Collateral]
Debtor certifies that the cost of the foregoing Collateral is $ _________.
WORLD AIRWAYS, INC.
By: _____________________
Its: ____________________
WILMINGTON TRUST COMPANY not in its individual
capacity but solely as Owner Trustee, under that
certain Trust Agreement dated as of December 28,
1990
By: _____________________
Its: ____________________
Exhibit C
----------------------
to Loan and Security Agreement
<PAGE>
GATX CAPITAL CORPORATION
OFFICER'S CERTIFICATE
---------------------
I, , of WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity (except as
expressly provided herein) but solely as Owner Trustee under that certain Trust
Agreement, dated as of December 28, 1990, with GATX Capital Corporation
("Lessor") do hereby certify that the representations and warranties of Lessor
contained in Section 5.1 of Aircraft Lease Agreement dated as of January 15,
1993, between Lessor and World Airways, Inc., are true and correct as of the
date of this Certificate.
IN WITNESS WHEREOF, I have executed this Certificate as of ____________,
1993.
____________________________
EXHIBIT D
---------
to Aircraft Lease Agreement
<PAGE>
AIRCRAFT DELIVERY CONDITION AND CONFIGURATION
Location: Inspection, technical acceptance of the Aircraft, its records
--------
and documents as well as delivery shall take place at Mojave, California, or
another mutually acceptable location.
Certificates of Airworthiness: The Aircraft shall have a current
-----------------------------
Certificate of Airworthiness for commercial passenger service and shall be
appropriately certified by the FAA under FAR Part 121.
Condition: The Aircraft shall be in good working order, condition and
---------
appearance, with all pilot discrepancies and deferred maintenance items cleared,
including those revealed during the Functional Demonstration Flight. Following
the completion of the Final Inspection by Lessee, a Certificate of Technical
Acceptance evidencing the condition of the Aircraft and records shall be
completed and signed by Lessor's and Lessee's representatives.
Aircraft Status: Lessor shall provide twenty (20) days prior to delivery a
---------------
comprehensive and complete summary of the Aircraft, engine and components time
and cycles, the heavy maintenance status ("C" checks, SSI and Zonal Inspections)
as well as the AD (Airworthiness Directive), Service Bulletin and modification
status. All maintenance and repair records and documents shall be provided to
the Lessee for review at that time.
Functional Demonstration Flight: As part of the delivery inspections,
-------------------------------
Lessor will permit Lessee to conduct an Engine power assurance run and a
Functional Demonstration Flight of the aircraft for a duration not to exceed
three (3) hours. Flight crews will be furnished by Lessee with all other
expenses for Lessors account.
Aircraft Manuals and Documents: The Lessor shall provide to Lessee one
------------------------------
complete set of the Aircraft Manuals and documentation as well as the aircraft
log book and any records not previously provided to the Lessee at the delivery
of the Aircraft.
Maintenance and Modification Workscope: Lessor agrees to bring the
--------------------------------------
Aircraft into alignment with the World Airways configuration by performing or
causing to be performed the following:
1. Accomplish World Airways "A" Check and 1/2 "C" Check and maintenance
integration (cards noted on Attachment Y).
2. Accomplish MDC service bulletin SB27-007R1 - terminating action for
CMR on slat cables, if not previously accomplished (confirmation
required).
Exhibit E
---------
to Aircraft Lease Agreement
<PAGE>
3. Accomplish terminating action specified in MDC Alert Service
Bulletin ASB54-31. AD 92-23-03, Amendment 39-8403, on pylon thrust
link bolt if not previously accomplished (confirmation required).
4. Accomplish required actions to increase Maximum Gross Take-off
Weight to 625,500 lbs., maximum zero fuel weight to 430,000 lbs. and
maximum landing weight to 458,000 lbs.
*5. Install emergency equipment per Aerodesign instructions and World
Airways quantity and location diagrams.
6. Accomplish modifications required to approve use of JP4.
7. Accomplish SB2l-51 cargo heat upgrade.
8. Confirm CPIP Drag Reduction mods completed.
9. Accomplish required service bulletin to upgrade engines and airframe
to PW4462 engine configuration.
*10. Accomplish intent of SCN D3181DO46 - Program Option Voice Call Outs.
11. Install third observer seats SCN D3044C002. (if possible)
*12. Delete SCN D2212C001 - VOR and LOC modes.
*13. Install flyaway kit racks per JetAire drawings.
14. Perform Engine and APU borescope inspections.
*15. Deactivate ACARS System:
a. Remove components necessary to revert Aircraft from configuration
resulting from accomplishment of SCN D2324C013 to the
configuration detailed in SCN D2324S001. Package removed parts
and components for long term storage.
*16. Deactivate ADAS System:
a. Remove components necessary to revert Aircraft from
configuration resulting from accomplishment of SCN D3131E003C and
SCN D3131E053 to configuration noted in SCN D3131E053. Package
removed parts and components for long term storage.
2
<PAGE>
17. Scuff and paint fuselage per World Airways Specifications.
18. Provide Bendix avionics spares in Flyaway Kit per attached list.
19. Provide EEL (Emergency moor Lighting) in Flyaway Kit per attached
list.
20. Provide two spare Vickers Hydraulic Pumps for Flyaway Kit.
21. Reconfigure interior based on World's Customer Specification for
seating, draperies and seat covers only.
22. Provide spare components for the entertainment system.
23. Reimburse Lessee for one spare shipset of galley carts with a maximum
cost not to exceed $14,000.
24. Weigh Aircraft (if necessary).
In the event that there are any SCNs incorporated in the Aircraft which
are not listed on Schedule X hereto or which are on Schedule X but are not
incorporated in the Aircraft or if there has been any modification to the
Aircraft not listed on Schedule X hereto, Lessor will at Lessee's request,
remove from the Aircraft any such additional modifications or SCNs and/or
incorporate any missing SCNs in the Aircraft.
____________________________
* The modifications marked with an asterisk will be reversed at the time of
redelivery of the Aircraft if requested by Lessor. SCNs or engineering data
necessary to accomplish the modification reversal at redelivery will be provided
by Lessor, without out of pocket cost to Lessor. Lessor will assist Lessee in
obtaining such information from MDC as is necessary for this process.
71
<PAGE>
Schedule X to Exhibit E
-----------------------
to Aircraft Lease Agreement
GATX CAPITAL CORPORATION
MD-11 MSN 449 SCN'S
-------------------
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
DO2OOSOO1 02/23/90 Editorial revisions to various design speeds at specific
altitudes and to specify the lowest operating altitudes
as 1,870 feet below sea level in lieu of sea level .
DO215SOO1 12/16/88 Increases the aircraft maximum operating altitude to
43,200 feet from 43,000 feet.
D0219S017 07/02/92 Editorial revision to delete specification requirement
regarding dispatch capability with the engine fail light
inoperative.
D0320C004A 06/07/90 Increased maximum takeoff gross weight from 602,500
lbs. to 605,500 lbs.
DO32OCO11 10/05/90 Increased maximum takeoff gross weight from 610,000
lbs. to 618,000 lbs.
D0320C012 11/20/90 Increased Maximum takeoff gross weight from 605,000
lbs. to 610,000 Ibs.
D131OSOO3 03/13/90 Weight adjustment to DS 11OOC and DS 111OC.
D1311S005 04/30/90 Weight adjustment to accommodate increase in Pratt
& Whitney engine and nacelle weight.
D2127C002 11/02/87 Installation of third avionics compartment cooling fan
and a third center accessory compartment cooling fan.
D2172C001 03/23/87 Installation of three ozone catalytic
converters in the prematic air distribution system.
D2212C001 10/06/87 Addition of VOR and LOC modes to the
flight control system for approach.
D2312S002 09/23/91 Editorial Revision to clarify the
location of the VHF-1 antenna.
D2314E003A 12/13/88 Installation of partial provisions for
an in-flight telephone system.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D2322E006 12/12/90 Installation of a buyer-furnished Motorola selcal
decoder part number NA138-714B, in lieu of part
number NA138-714A.
D2322S002 11/18/88 Specifies flashing selcal interrogation light in lieu of a
steady light.
D2324C013 02/09/90 Installation of ARINC communications addressing and
reporting systems (ACARS) utilizing existing partial
provisions.
D2324S009 08/21/89 Addition of partial provisions for ACARS control from
the FMS MCDU-1.
D2326E002C 01/09/90 Installation of partial provisions for a dual high gain
satellite communications systems (SATCOM).
D2330S001 03/03/89 Editorial revisions to update passengers entertainment
and service multiplexing systems.
D2331S006 08/1O/88 Specifies that P/A announcements from the flight
compartrnent shall be by the handset, oxygen mask or
boom sets (if installed).
D2332C001A 06/27/88 Installation of buyer-furnished Matsushita
prerecorded announcement system.
D2332E013 05/06/91 Installation of a buyer-furnished Matsushita
prerecorded announcement system with boarding
music in lieu of the specified prerecorded
announcement system.
D2333E010 11/03/88 Installation of a buyer-furnished Matsushita part
number RD-AX7002-01 passenger entertainment tape
reproducer.
D2333E014 05/15/89 Relocation of the attendant passenger service panel
from galley G6 to galley G8.
D2335S011 07/24/89 Deletion of the complete provisions for video projection
screens in the passenger compartment.
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D2335E024B 08/01/91 Installation of partial provisions for in-seat passenger
video system.
D2335E049A 11/19/91 Installation of a buyer-furnished Matsushita video
entertainment/information system using existing
provisions (293-passenger delivery configuration).
D2335E054A 11/19/91 Installation of additional partial provisions for an in-seat
passenger video system.
D2335E054B 01/24/92 Installation of additional partial provision for an in-seat
video passenger entertainment system.
D2337E023 05/06/91 Installation of partial provisions for an ASINC airshow
passenger video information system.
D2341E003 09/23/87 Installation of a service interphone jack outlet in the
APU compartment.
D2341E013 09/11/91 Revision to the flight compartment crew rest
call/interphone system.
D2341S007 11/23/88 Clarification of service interphone calls to attendant
stations.
D2452S001 11/01/89 Installation of a separate circuit breaker for battery
direct bus in lieu of a common circuit breaker (with
LEDC bus).
D2454E006A 10/05/89 Increased galley power availability to 120 KVA for
standard lease aircraft.
D2454E014 10/05/89 Limitation of galley power on the ground with the APU
or the galley external power receptacle providing power.
D2455C002 08/24/87 Installation of partial provisions for three phase
passenger compartment electrical outlets.
D2500E012F 05/31/91 Interior revision for 293 passengers in a three-class
arrangement with complete provisions and a
conversion kit for 330-passenger and 409-passenger
alternate arrangements.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D2500E096 12/06/91 Identification of vendors and part numbers for the
interior buyer-furnished equipment items.
D2511COO3A 02/24/88 Installation of a left observer seat in
the flight compartment.
D2511C005 08/21/87 Deletion of fire blocking from captain and first officer
seats.
D2512COO1 06/01/87 Installation of sunshades in the flight compartment.
D2512S005 05/09/89 Editorial revision to specify the increased briefcase size
that the pilots' briefcase racks will accommodate.
D2519E005B 02/08/90 Installation of a flight compartment crew rest for two in
lieu of galley G1 utilizing existing provisions.
D2520E003 01/31/92 Installation of buyer-furnished equipment passenger
compartment carpet and curtains in lieu of the
specified SFE carpet and curtains (provides SFE carpet
and curtains as delivery load - uninstalled equipment).
D2521E025 04/30/92 Installation of two additional cabin attendant seats,
one adjacent to each existing seat located on galleys
G6 and G7, and corresponding revision to portable
oxygen cylinder quantities.
D2521S009 06/30/89 Specifies that passenger seats shall conform to
Douglas specification AXV7549.
D2529E012 02/26/92 Installation of bassinet fittings.
D2561S003 08/24/89 Installation of two nylon escape lines in the flight
compartment in lieu of cotton escape lines.
D2612SOO1 08/O1/89 Installation of an APU fire warning horn test switch in the flight compartment.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D2623S010 06/21/89 Installation of Halon 1211 portable fire extinguishers in
lieu of water portable fire extinguishers.
D281OSOO1 1O/29/91 Revision to the fuel system to recover approximately
1,855 lbs. of actual versus specified useable fuel
capacity.
D2822S001 02/28/92 Installation of electrically actuated fuel-fire shutoff valves
for the no. 1 and no. 3 engines, in lieu of the
mechanical type.
D2830S002 08/07/89 Installation of a fuel dump emergency stop switch.
D2911COO2 07/27/88 Installation of Vickers engine driven hydraulic pumps in
lieu of those specified.
D2911E008 11/15/91 Installs Abex engine-driven hydraulic pumps in lieu of
those specified.
D2913C003 09/22/89 Installation of a hydraulic fluid sampling valve for each
hydraulic system.
D3O11S001 04/02/91 Editorial revision to delete specification of wing and
horizontal stabilizer anti-icing system momentary
operation for check out when aircraft is on the ground.
D3043E001 06/11/87 Installation of an intermittent setting for windshield
wipers.
D3081COO1 02/19/87 Installation of a dual primary ice detection system.
D3117S002 06/1O/88 Revision of the cabin attendant station at the left
forward passenger door.
D3131EOO3C 09/06/90 Installation of a data management unit, a quick access
recorder, event marker switches, engine supplemental
control units, and addition of ADAS parameters (Pratt
& Whitney Engines).
D3131S006 09/14/88 Installation of complete provisions for a Penny and
Giles 4MCU quick access recorder in lieu of that
specified.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D3131S008 06/06/88 Editorial revisions to specify digital flight data
acquisition unit signal sources.
D3131S013 01/31/89 Installation of data bus wiring to provide FADEC
Channel-A parameters to DFDAU.
D3132C005 02/09/90 Installation of a multifunction printer.
D3151EO1OA 09/20/91 Editorial change to combine landing gear voice warning
with landing gear warning inhibit above 1200 feet radio
altitude.
D3151S009 09/25/90 Editorial revision for additional level three alert
annunciations.
D3161S004 09/23/88 Revision of the airspeed display to display large
airspeed numbers up.
D3231S002 06/26/89 Specifies that centerline gear switch/light assembly is
located on the center main instrument panel in lieu of
the pedestal.
D3262S002A 02/21/91 Landing gear warning inhibit above 1200 feet radio altitude.
D3300S002 04/04/90 Editorial revisions to flight compartment lighting control
and nose landing light systems.
D3327S006 O1/08/90 Clarification of lavatory occupied sign requirements.
D3350E003A 10/05/88 Installation of a luminescent emergency floor lighting
system which utilizes existing floor lighting.
D3353E005 02/26/92 Installation of buyer-furnished non-rechargeable
flashlights with holders, one at each cabin attendant
station.
D3411S002 05/08/89 Specifies the static port test connection hole diameter.
D3433C001B 11/01/88 Installation of complete provisions for a dual microwave
landing system (MLS).
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D3441S001 02/05/88 Addition of Honeywell weather radar equipment to the
buyer-furnished equipment selection list.
D3442E003 03/18/91 Installation of seller-furnished Collins radio altimeters,
part number 622-4542-221, in lieu of those specified
(customized version of D3442S001).
D3445E001 03/07/87 Revision to the ground proximity warning system to
provide an airport envelope feature.
D3445E010 01/17/92 Installation of a seller-furnished Sundstrand Ground
Proximity Warning System (GPWS) computer, part
number 965-0676-020, in lieu of that specified
(customized version of SCN D3445S009).
D3452E003 09/10/91 Installation of seller-furnished Collins DME
interrogators, part number 622-4540-021, in lieu of
those specified (customized version of D3452S001).
D3454E011 05/24/91 Installation of seller-furnished Collins ATC
transponders, part number 622-7878-201, in lieu of
those specified (customized version of D3454S008).
D3454E020 O1/13/92 Installation of buyer-furnished Bendix ATC
transponders, part number 006-01127-1301, in lieu of
the specified seller-furnished Collins transponders.
D3455C012A 10/28/91 Installation of a buyer-furnished Bendix Traffic Alert and
Collision Avoidance System (TCAS 11) utilizing existing
partial provisions.
D3455S003 07/26/89 Installation of partial provisions for ARINC 735 traffic
alert and collision avoidance system.
D3463C001 10/07/87 Installation of flight management computers with
navigation data base memory capacity of one million
words.
D3463S004 O1/25/90 Addition of FMS/IRS monitor page to monitor each IRU
for average position drift rate and ground speed bias
on the multifunction control/display units.
D3500S002 08/O1/89 Revision to the oxygen mask presentation altitude and
oxygen requirements for aircraft descent.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D3522E014 04/02/91 Installation of additional oxygen masks in the
passenger compartment.
D3530E024 12/11/90 Installation of BFE protective breathing equipment in
lieu of portable oxygen unit with smoke masks, and
revision to attendant/first aid portable oxygen
(customized version of D3530S003).
D3812E003 02/27/89 Additional of potable water and waste drain interface
for galley G8.
D3813S003 03/13/92 Editorial revision to specify that a water heater shall be
installed for each lavatory or pair of lavatories.
D3830S002 09/15/88 Miscellaneous water/waste system changes to define
current aircraft design.
D4901E001 03/09/87 Additional electrical power from the auxiliary power unit
with the aircraft on the ground.
D4902S001 04/09/90 Deletion of the ability to use APU bleed
air during takeoff.
D4920S001 05/23/89 Revision to specify current APU model series.
D5122E034 03/14/91 Application of decorative paint over the lower fuselage.
D5122E051 02/17/92 Application of Desoto Desothane 420H high solids
polyurethane topcoat paint for exterior markings.
D5241EOO1 03/17/87 Installation of interior latches for avionics and center
accessory compartment exterior doors.
D5254E002A 10/05/88 Automatic closing and locking of the flight
compartment door.
D527OEOO1A 04/17/91 Annunciation of unlatched tail cone and no. 2 engine
maintenance platform.
D5520S001 05/05/89 Specifies that the elevators shall be constructed
primarily of advanced composites in lieu of stiffened
aluminum.
D7200B005 O1/30/90 Selection of Pratt & Whitney 4460 engines.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D7200S008 11/28/88 Update of Pratt & Whitney Engine designation to PW
4460.
D7541E002 07/O1/87 Installation of an engine nacelle temperature indicating
system (Pratt & Whitney Engines).
D7732S005A 02/15/89 Installation of an engine vibration monitoring system.
D98OOSO11 11/04/88 Miscellaneous changes to define the current aircraft
configuration.
D98OOSO13 11/04/88 Miscellaneous changes to define the current passenger aircraft
configuration.
D9800S015 03/01/89 Miscellaneous changes to define current aircraft
configuration.
D9800S020 11/20/89 Miscellaneous editorial changes to define the current
aircraft configuration.
D9800S022 11/20/89 Miscellaneous editorial changes to define the
passenger and combi configurations.
D9800S028A 06/20/91 Miscellaneous editorial changes to define the current
aircraft configuration.
D9800S029 03/25/91 Miscellaneous editorial changes to define the current
aircraft configurations.
D9800S030 04/1O/91 Miscellaneous editorial changes.
D9900D001B 09/21 /89 Selection of buyer-furnished avionics equipment.
D9901EOO2A 04/07/92 Installation of Bendix buyer-furnished avionics
equipment in lieu of specified Collins seller-furnished
equipment which is supplied as delivery load
uninstalled equipment.
D9902E003 O1/30/91 Category change of buyer-furnished equipment to
seller-furnished equipment.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
SCN NO. SCN DATE SCN TITLE
- ------ -------- ---------
<S> <C> <C>
D9903S002 09/20/89 Revisions to the buyer-furnished avionics equipment.
D9903S003 09/07/89 Revisions to the buyer-furnished avionics equipment.
D9903S004 02/05/90 Revision to the buyer-furnished avionics equipment.
</TABLE>
-10-
<PAGE>
LOG BOOK INSERT
---------------
DATE: September 19, 1992
- ------------------------
N489GX
- ------
Serial Number: 48458
- --------------------
Total Time: 1838 Hours, 25 Minutes
- ----------------------------------
Installed cart module per S.T.C. SA5551NM-D
- -------------------------------------------
All work accomplished and details on file under Project Number
AED92001 on 8110-3 issued September 19, 1992.
Weight and Balance report installed in Weight and Balance Manual.
Aircraft returned to service for work performed.
Signed:
- -------------
Chuck Cupan
Director, Quality Assurance
Repair Station Number: ZL2R349L
<PAGE>
ATTACHMENT Y
------------
<TABLE>
<CAPTION>
"A" Check Work Package
Workcards to be accomplished:
1A1 Check: 2A4 Check:
<S> <C>
0001 None
0002
0005 2A5 Check:
0010
0201 None
0205
2A6 Check:
1A2 Check:
None
0202
0203 4A Check:
1A3 Check: None
0204 6A Check:
2A1 Check: None
0403
0430
0438
2A2 Check:
0404
0431
0439
2A3 Check:
0210
0432
0440
</TABLE>
-1-
ATTACHMENT Y
------------
to EXHIBIT E
<PAGE>
"C" Check Work Package
Workcards to be accomplished:
<TABLE>
<CAPTION>
1/4 C Check: 1C1 Check:
<S> <C> <C>
0068 0064 1355
0069 1000 1356
0075 1020 1357
0079 1022 1370
0640 1023 5700
0641 1025 5703
0642 1027 5706
0643 1028 5718
0644 1039 5741
0645 1043
0650 1045
0651 1059
0652 1064
0653 1079
0654 1092
0655 1093
0656 1094
0657 1096
0658 1301
0659 1304
0660 1307
0661 1312
0670 1315
4000 1318
4001 1321
4002 1324
1330
1/2 C Check: 1333
1336
0850 1338
0851 1342
0852 1345
0853 1350
0854 1351
0855 1352
0857 1353
4006 1354
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
1C2 Check: 1C3 Check:
<S> <C>
0084 None
0211
0212 1C4 Check:
0219
0220 None
1000
1001 2C1 Check:
1047
1055 1500
1056 1519
1057 1520
1058 1521
1070 1522
1071 1523
1074 1524
1076 1622
1080 5800
1085 5801
1097 5816
1302 5817
1305
1308 2C2 Check:
1313
1316 1511
1319 1542
1322 1543
1325 1550
1331 1551
1334 1620
1339 1621
1343 1623
1346 5806
1358 5814
1365
5719 2C3 Check:
5720
5721 None
5722
5723 2C4 Check:
5724
5725 None
5726
5727 2C5 Check:
5728
5729 None
</TABLE>
-3-
<PAGE>
2C6 Check:
None
2C7 Check:
None
2C8 Check:
None
-4-
<PAGE>
[date]
World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, VA 22071
Re: Aircraft Chattel Mortgage
-------------------------
Gentlemen:
Reference is made to that certain Aircraft Lease Agreement, dated as of
January 15, 1993, between Wilmington Trust Company, not in its individual
capacity but solely as Trustee ("Lessor"), as Lessor and World Airways, Inc.
("Lessee"), as Lessee (the "Lease"). Reference is also made to that certain
Aircraft Chattel Mortgage, dated ___________________, between Lessor as
Mortgagor and GATX Capital Corporation, as Security Agent, as Mortgagee (the
"Mortgage"). Both the Lease and the Mortgage are related to one MD-11 aircraft,
serial no. 48458, FAA Registration Number 489GX and three Pratt & Whitney PW4462
turbofan engines (collectively the "Aircraft").
Provided no Event of Default exists and is continuing under the Lease,
GATX Capital Corporation in its capacity as mortgagee under the Mortgage hereby
agrees that it will not interfere with the quiet enjoyment by Lessee of the
Aircraft pursuant to the terms and conditions of the Lease. GATX Capital
Corporation will cause any successor mortgagee to sign an equivalent letter to
Lessee.
Very truly yours,
GATX CAPITAL CORPORATION
By:_____________________
Its:____________________
EXHIBIT F
------------------------
to Aircraft Lease Agreement
<PAGE>
EXHIBIT COOPERATION AGREEMENT REGARDING ENGINES
------- ---------------------------------------
THIS AGREEMENT is made and entered into as of this
__________________________.
BETWEEN:
- --------
(A) Each of the lessors, owners and/or banks listed in each of the
supplements attached hereto from time to time (individually, a "Creditor" and
collectively the "Creditors") and
(B) WORLD AIRWAYS, INC. (the "Operator").
Each of the Creditors is the owner of or has an interest in an aircraft
engine or aircraft operated by the Operator. Operator has requested that
Creditors enter into this Agreement so that Operator has the flexibility to
install engines on all suitable aircraft within its fleet in which a Creditor
may have an interest. To this end, each Creditor and Operator wish to
recognize the right, title and/or interest of each Creditor in specific
engines operated by Operator. Moreover, each of the Creditors and Operator
wish to conform their agreement to cooperate with one another in order to
preserve each Creditor's right, title and/or interest in its respective
engines.
Accordingly, in consideration of and subject to the mutual covenants, terms
and conditions in this Agreement, each of the Creditors and Operator agree as
follows:
ARTICLE 1 DEFINITIONS
--------- -----------
The following words with initial capital letters have the following
meanings for ail purposes of this Agreement. The definitions are equally
applicable to the singular and plural forms of the words. Any agreement defined
below includes each amendment, modification, supplement and waiver thereto in
effect from time to time.
"Aircraft" means any of the aircraft (identified by type, manufacturer's
--------
serial number and registration mark) set forth on the supplements hereto.
"Creditor Agreement" means any agreement between a Creditor and Operator
------------------
or between Creditors set forth on the supplements hereto pertaining to a
Creditor Aircraft or Creditor Engine.
"Creditor Aircraft" means, in relation to an individual Creditor, any
-----------------
Aircraft in which such Creditor has an Interest, as set forth in the supplements
hereto.
EXHIBIT G
---------------------------
to Aircraft Lease Agreement
<PAGE>
"Creditor Engine" means, in relation to an individual Creditor, any
---------------
Engine in which such Creditor has an Interest, as set forth in the supplements
hereto.
"Engine" means any of the engines (identified by type and manufacturer's
--------
serial number) set forth in the supplements hereto.
"Interest" means the right, title and/or interest of a Creditor in an
--------
Engine or Aircraft, as set forth in the supplements hereto.
"Third Party Aircraft" means, in relation to an individual Creditor, an
--------------------
Aircraft in which another Creditor has an Interest.
"Third Party End" means, in relation to an individual Creditor, an Engine
---------------
in which another Creditor has an Interest.
ARTICLE 2 RECOGNITION OF INTEREST OF
--------- --------------------------
INDIVIDUAL CREDITOR IN CREDITOR ENGINE
--------------------------------------
Each Creditor and Operator hereby unconditionally and irrevocably agrees
that, notwithstanding any provisions contained in any of the Creditor Agreements
or in any other present or future agreement or instrument entered into between
Creditors or between any Creditor and Operator, and regardless of the location
of any of the Engines and their attachment to, or detachment from, any of the
Aircraft from time to time:
(a) As between the parties hereto, the Interest of a Creditor in its
Creditor Engine will at all times remain vested in such Creditor, irrespective
of whether such Creditor Engine is for the time being attached to a Third Party
Aircraft, in the possession of another Creditor or is being stored, repaired,
maintained or transported.
(b) No Creditor will at any time (i) challenge or dispute the Interest of
another Creditor in such other Creditor's Engine or (ii) claim that it possesses
any interest whatsoever in such other creditor's Engine.
(c) If a Creditor Engine is at any time attached to a Third Party Aircraft
or comes into the possession of a Creditor in circumstances where such Engine is
for that Creditor a Third Party Engine, such Creditor will not (subject to
Article 3 below) prevent or impede the removal or repossession of such Creditor
Engine by the Operator or the Creditor with an Interest in such Creditor Engine.
- 2 -
<PAGE>
ARTICLE 3 COOPERATION AMONG CREDITORS AND OPERATOR WITH
--------- ---------------------------------------------
RESPECT TO REPOSSESSION OF ENGINES
----------------------------------
In the event a Creditor becomes entitled to possession of its Creditor
Engine pursuant to its Creditor Agreement but the Creditor Engine which is the
subject of such Creditor Agreement has not been returned in accordance with the
terms of such Creditor Agreement and is in the possession of another creditor or
installed on a Third Party Aircraft, then;
(a) Such Creditor of the unreturned Creditor Engine will not immediately
take further steps to repossess its Creditor Engine but instead will give the
other Creditors and Operator written notice that such Creditor Engine has not
been returned to such Creditor.
(b) Upon receipt of such notice, Operator and the Creditors will consult
with one another promptly and in good faith and will use all best efforts to
facilitate the redelivery of such Creditor Engine to its creditor, including
making arrangements for the exchange of possession of Engines among Creditors
(but nothing herein will oblige any Creditor to incur expenditure in relation to
a Third Party Engine except to the extent that such Creditor may agree to do
so).
(c) If arrangements for the return of possession of such Creditor Engine,
satisfactory to the Creditor of such Creditor Engine, have not been made within
ten (10) days alter giving of such notice to the Operator and the other
Creditors, the Creditor of such Creditor Engine may then take such further steps
to repossess its Creditor Engine as may be permitted by its Creditor Agreement
and applicable law.
ARTICLE 4 OTHER RIGHTS AND OblIGATIONS
--------- ----------------------------
The provisions of this Agreement will not affect or detract from (i) as
between Operator and a Creditor, Operator's obligations to or the rights or
interests of such Creditor pursuant to its Creditor Agreement or (ii) except as
set forth herein, the rights and obligations of any Creditors between or among
themselves in relation to a particular Aircraft or Engine in which they have an
Interest.
ARTICLE 5 FURTHER AIRCRAFT
--------- ----------------
Operator agrees that it will not at any time lease or agree to
lease a further MD-11 or any other aircraft on which the Engines can be
installed and operated unless the owner(s) of such further aircraft and the
holder(s) of any mortgage, charge, option, lien or encumbrance over or affecting
such further aircraft (which owner or holder may already be a Creditor
89
<PAGE>
hereunder with respect to other Aircraft or Engines) has entered into a
supplement to this Agreement in the same form and substance as the supplements
hereto with regard to such other aircraft or unless such other lease agreement
specifically provides that such other lessor, owner or holder shall not acquire
any right, title or interest in the Aircraft or the Engines or any part of
either. Operator will provide each Creditor with a copy of each additional
supplement Creditor hereunder with respect to aircraft.
ARTICLE 6 DISPOSITION OF CREDITOR INTEREST
--------- --------------------------------
If a Creditor assigns, transfers or disposes of any part of its Interest
in its Creditor Aircraft, then the assignee or transferee will agree in writing
to the other parties hereto to be bound by the provisions of this Agreement. If
a Creditor assigns, transfers or disposes of any part of its Interest in its
Creditor Engine, then the assignee or transferee (even if already a Creditor
hereunder) will not receive the benefit of this Agreement unless it agrees in
writing to the other parties hereto to be bound by the provisions of this
Agreement with respect to such Creditor Engine.
ARTICLE 7 AUTOMATIC TERMINATION OF THIS AGREEMENT
--------- ---------------------------------------
This Agreement will terminate automatically with respect to (i) a
Creditor, when Operator no longer operates any Aircraft or Engines in which such
Creditor has an Interest and (ii) a Creditor Aircraft or Creditor Engine when
Operator no longer operates it and possession of it has been returned to its
Creditor.
ARTICLE 8 OPERATOR INDEMNITY
--------- ------------------
Operator will indemnify each Creditor for all reasonable legal fees
incurred by them in connection with (i) the negotiation and preparation of this
Agreement or any amendment hereto requested by Operator and (ii) the enforcement
of any of their respective rights hereunder against Operator.
ARTICLE 9 MISCELLANEOUS PROVISIONS
--------- -------------------------
(a) If more than one Creditor has an Interest in the same Engine, then as
between such Creditors only the provisions of Article 2 hereof will not apply.
(b) Any notice or communication given pursuant to this Agreement will be
in writing. Notices and communications will be deemed to have been given when
sent by telex, fax or (sent by
- 4 -
<PAGE>
certified mail, return receipt requested) addressed to Operator as set forth
below and to the parties as set forth in the supplements. Each party will be
entitled at any time, by notice to the other parties as provided herein, to
change its address for service of notices. Notices sent by telex or fax will be
deemed delivered when actually received. Notices sent by letter will be deemed
received within seven (7) days after posting.
Notice information on Operator is as follows:
WORLD AIRWAYS, INC.
13873 Park Center Road
Herndon, Virginia 22071
Attention: President
Fax: 703-834-9211
Telephone: 703-834-9200
(c) No party hereto will be deemed by virtue of this Agreement to an
agent of any other party, nor will this Agreement constitute a partnership
between the parties.
(d) The respective rights of the parties hereunder are cumulative and
in addition to other under general law. The parties may exercise their rights as
often as they consider appropriate. No consent or waiver, express or implied, by
a party to or of any breach or default by another party in such other party's
performance of its obligations hereunder will be deemed or construed to be a
consent or waiver to or of any other breach of or default in the performance by
such other party of the same or any other obligations of such party hereunder.
Failure on the part of any party to complain of any act or failure to act of any
other party, or to declare such other party in default, irrespective of how long
such failure continues, will not constitute a waiver by such party of its rights
hereunder. No act or course of conduct on the part of any party, or on its
behalf, will preclude it from exercising any such right or constitute a
suspension or variation of such right.
(e) If any legal action or other is brought in connection with any
provisions of this Agreement, the prevailing party will be entitled to recover
reasonable attorneys' fees and other costs incurred in connection with such
action or proceeding.
(f) Subject to Article 6, none of the parties hereto may assign its
rights under this Agreement without the prior written consent of the other
parties. Subject as aforesaid, this Agreement will ensure to the benefit of and
be binding upon each of the parties hereto and their respective successors and
assigns references herein to a party will be deemed to include a reference to
such party's permitted successors and assigns.
- 5 -
<PAGE>
(g) This Agreement will be governed by the laws of California (except
conflict of laws) and the parties submit to the non-exclusive jurisdiction of
the State and Federal courts situated in Los Angeles, California. Operator and
each Creditor agree that service of process may be made upon the other parties
in accordance with Section 415.40 of the California Code of Civil cure by
mailing a copy of the summons and complaint to the party to be served by first-
class, certified or registered mail, return receipt requested, to the address
set forth in the supplements.
(h) If any provision of this Agreement or the application thereof to any
person or circumstance is invalid or unenforceable to an extent the remainder of
this Agreement and application of suchprovision to other persons or
circumstances will not be affected thereby and will be enforced to the fullest
extent permitted by law.
(i) Article and schedule headings are for the convenience of the parties
only.
(j) References herein to Articles or schedules mean the Articles or
schedules hereto, unless otherwise specified.
(k) This Agreement and the supplements hereto constitute the entire
agreement between the parties regarding the subject matter of this Agreement. No
variation of this Agreement will be effective unless made in writing and signed
by all the parties hereto.
IN WITNESS WHEREOF, the Operator has executed this Agreement by signing
below and each Creditor has executed this Agreement by signing at the bottom of
the supplement applicable to such Creditor.
WORLD AIRWAYS, INC.
By ___________________
Its __________________
Date _________________
92
<PAGE>
SAMPLE SUPPLEMENT
By executing this Supplement, the following party becomes a Creditor
under the Cooperation Agreement Regarding Engines dated as of V"0"DATE OF
COOPERATION AGREEMENT"O"C"V with respect to the Engines and/or Aircraft listed
below.
Name of Creditor:
Address of Creditor:
Attention:
Telephone No. of Creditor:
Telex of Creditor:
Fax No. of Creditor:
For each Aircraft and Engine in which Creditor has right,title and/or interest,
- -------------------------------------------------------------------------------
list the following:
- ------------------
Nature of Interest of Creditor:
Name of applicable agreement(s) between Creditor and Operator:
If Aircraft, Manufacturer and Model:
If Aircraft, Manufacturer's Serial No:
If Aircraft, Registration No:
If Engine, Make and Model:
If Engine, Serial No:
"V"ONAME OF CREDITOR"OC"V
By_______________________
Its______________________
Date_____________________
93
<PAGE>
LIST OF INTERIOR DRAWINGS
Interior Layout:
- ---------------
Douglas Aircraft Company Drawing No. J055195 Rev. A dated June 7, 1991,
as revised by STC No. SA5551NM-D issued September 17, 1992 and
amended September 19, 1992.
Emergency Equipment:
- -------------------
Douglas Aircraft Company Drawing No. J016902, Rev. A-C, dated
September 9, 1992.
Exhibit H
----------------------
to Aircraft Lease Agreement
<PAGE>
EXHIBIT 10.66
LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT is dated April 23, 1993 (this "Lease Supplement")
between WILMINGTON TRUST COMPANY, a banking corporation organized under the
laws of the State of Delaware, not in its individual capacity but solely in
its capacity as Owner Trustee ("Lessor") under that certain Trust Agreement,
dated as of December 28, 1990, for the benefit of GATX Capital Corporation, a
corporation organized under the laws of the State of Delaware, and WORLD
AIRWAYS, INC., a corporation organized under the laws of the State of Delaware
("Lessee").
RECITALS
Lessor and Lessee have heretofore entered into a certain Aircraft Lease
Agreement, dated as of January 15, 1993 (the "Lease"), which provides for the
execution and delivery of a Lease Supplement in substantially the form hereof
for the purpose of leasing the Items of Equipment in accordance with the
terms thereof.
NOW, THEREFORE, in consideration of the premises, and pursuant to Article
2 of the Lease, Lessor and Lessee hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
-----------
used herein shall have the respective meanings given them in the Lease.
2. Delivery and Acceptance. Lessor hereby delivers and leases to
-----------------------
Lessee, and Lessee hereby accepts and leases from Lessor under the Lease, as
hereby supplemented, the Items of Equipment as follows:
Aircraft: One McDonnell Douglas MD-11 aircraft consisting of the
following:
(i) Airframe: Registration Number N489GX;
Manufacturer's Serial No. 48458.
Total Time: 2750:31 Total Cycles: 3135
(ii) Engines: Three PW4462 turbofan engines (each of which Engines
has 750 or more rated takeoff horsepower or the equivalent thereof),
installed on said Airframe, bearing, respectively, Manufacturer's Serial
Nos.:
<TABLE>
<CAPTION>
================================================================================
Engine Manufacturer's Total Total Time Since Cycles
Number Serial Number Time Cycles Repair Since
Since New Since New Repair
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
#3 P723811 177:15 114 177:15 114
#2 P723802 2307:21 3338 924:21 818
#1 P724032 50:16 12 50:16 12
================================================================================
</TABLE>
<PAGE>
(iii) Auxiliary Power Unit:
<TABLE>
<CAPTION>
===============================================================================
Make Manufacturer's Total Total Time Cycles Time to
and Serial Number Time Cycles Since Since Scheduled
Model Since New Since New Overhaul Overhaul Removal
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
TFCF
700-911 P10bc 1,010 N/A N/A N/A N/A
===============================================================================
</TABLE>
Lessee confirms that the Items of Equipment have been examined by its
duly appointed and authorized representatives and the records conform to the
information set forth above.
3. Aircraft Records. Lessor hereby delivers and Lessee hereby accepts
----------------
the manuals, log books, records and other documents relating to the Aircraft
described in Appendix A attached herein.
4. Lease Equipment. Lessor hereby delivers and Lessee hereby accepts and
---------------
agrees to return the additional items of equipment, identified in Appendix B
attached hereto, which Lessor is providing in connection with the Aircraft.
5. Additional Acceptance Items. Lessor and Lessee hereby agree that all
---------------------------
log book Items that are not completed as of the date hereof, and which are
identified on the attached Appendix C, shall be completed by Lessee and Lessor
shall compensate Lessee for Lessee's direct costs (without administrative
overhead or other mark-up) of such completion.
6. Fuel. As measured by the dip sticks, the Aircraft had 58,000 lbs. of
----
fuel on board at the time of its delivery and acceptance under the Lease.
7. Delivery Date. The Delivery Date of the Items of Equipment is the
-------------
date of this Lease Supplement, and the Items of Equipment are hereby
delivered and accepted on such date at 14:30 hours at Mojave, Calif.
8. Fly Away Kit. Lessor hereby delivers and Lessee hereby accepts the
------------
Fly Away Kit ("FAK") described on Appendix D hereto with the exceptions noted
by asterisk (*). World will advise GATX in a timely manner when the missing
items are received. The FAK shall remain aboard the Aircraft or shall be
completely removed from the Aircraft and properly stored in accordance with
the manufacturers' recommendations and the Maintenance Program in a locked
container, clearly marked as containing the property of Lessor, at Lessee's
facility at 12 McCullough Drive, Suite 1, Southgate Industrial Center, New
Castle, Delaware 19720.
2
<PAGE>
9. Basic Rent. Each payment of Basic Rent shall be in the amount of
----------
$575,000.00 commencing on the Delivery Date and on the first day of each month
thereafter, including any renewal of the Term pursuant to Section 8. If the
Delivery Date is not the first day of the month, the amount of Basic Rent
payable on the Delivery Date shall be $575,000 multiplied by a fraction the
numerator of which is the number of days from and including the Delivery Date
to and including the last day of the month in which the Delivery Date occurs
and the denominator of which is the number of days in such calendar month.
10. Additional Equipment. The equipment specified on Appendix E hereto,
--------------------
not installed on the Aircraft as of the date hereof, is the property of Lessor
and is subject to this Lease. The Appendix E equipment shall either (a) be
installed on the Aircraft or (b) be placed in storage by Lessee, clearly
identified as the property of Lessor, at Lessee's facility in New Castle
(Wilmington), Delaware. The Appendix E equipment shall be reinstalled in the
Aircraft at Lessee's expense at the end of the Term.
11. Governing Law. This Lease Supplement shall in all respects be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
12. Counterparts. This Lease Supplement may be executed in any number of
------------
counterparts, each of which shall be an original and all of which taken
together shall constitute a single instrument.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers on the date first
above written.
LESSOR: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee under the Trust Agreement dated as of
December 28, 1990
By: SIGNATURE ON FILE
--------------------------------------
Its:
--------------------------------------
LESSEE: WORLD AIRWAYS, INC.
By: /s/
--------------------------------------
Its: Sr. Vice Pres. Tech. Svcs.
--------------------------------------
3
<PAGE>
9. Basic Rent. Each payment of Basic Rent shall be in the amount of
----------
$575,000.00 commencing on the Delivery Date and on the first day of each month
thereafter, including any renewal of the Term pursuant to Section 8. If the
Delivery Date is not the first day of the month, the amount of Basic Rent
payable on the Delivery Date shall be $575,000 multiplied by a fraction the
numerator of which is the number of days from and including the Delivery Date
to and including the last day of the month in which the Delivery Date occurs
and the denominator of which is the number of days in such calendar month.
10. Additional Equipment. The equipment specified on Appendix E hereto,
--------------------
not installed on the Aircraft as of the date hereof, is the property of Lessor
and is subject to this Lease. The Appendix E equipment shall either (a) be
installed on the Aircraft or (b) be placed in storage by Lessee, clearly
identified as the property of Lessor, at Lessee's facility in New Castle
(Wilmington), Delaware. The Appendix E equipment shall be reinstalled in the
Aircraft at Lessee's expense at the end of the Term.
11. Governing Law. This Lease Supplement shall in all respects be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
12. Counterparts. This Lease Supplement may be executed in any number of
------------
counterparts, each of which shall be an original and all of which taken
together shall constitute a single instrument.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers on the date first
above written.
LESSOR: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee under the Trust Agreement dated as of
December 28, 1990
By: /s/
----------------------------------------
Its: Senior Trust Officer
----------------------------------------
LESSEE: WORLD AIRWAYS, INC.
By:
----------------------------------------
Its:
----------------------------------------
<PAGE>
APPENDIX A
to
LEASE SUPPLEMENT
AIRCRAFT RECORDS
see attached 6 pages
<PAGE>
APPENDIX A TO THE
REDELIVERY CERTIFICATE
RECORDS & MANUALS
BOX NO. CONTENTS REV. COPY NO.
- ------- -------- ---- --------
1. IPC VOL 5,6,7,8 1
SM VOL 1 9 1
2. IPC VOL 3,4,5,6
FM VOL 2 /2
3. IPC VOL 8,9,10
SM VOL 2 9 2
4. IPC VOL 7,8,9,10 9 1
FM VOL 1,2
5. IPC VOL 1,2,3,4 1
FM VOL 2 /3
6. IPC VOL 1,2,3,4 2
7. IPC VOL 1,2,9,10
SM VOL 1 9 3
8. IPC VOL 4,5,6,7
FM VOL 1 9 2/
9. IPC VOL 5,6,7,8,9
10. IPC VOL 1,2,3,10
FM VOL 2 /4
11. MM VOL 7,8,9,11,12,17,20
12. MM VOL 1,2,3,4,5,6,10
13. MM VOL 13,14,15,16,18,19
14. MM VOL 13,14,15,16,18,19
15. WDM VOL 8,9,10
16. WDM VOL 1 THRU 7 9
17. WDM VOL 4 THRU 10
SM VOL 1 9 4
<PAGE>
BOX NO. CONTENTS REV. COPY NO.
- ------- -------- ---- --------
18. WDM VOL 6,7,8,9,10
WDM VOL 1,2,3 9
19. WDM VOL 1 THRU 5
WDM VOL 8,9,10
20. WDM VOL 1 THRU 7 9
FM VOL 1,2 5 -5
21. (This box number not used)
22. (This box number not used)
/2COPIES
23. SECTION LIST LEVEL DRAWINGS 9-15-92 1-4
SECTION LIST INDEX 9-15-92 1
SECTION LIST DRAWINGS 5
RADIO LICENSE (GATX) 1
24. SECTION LIST LEVEL DRAWINGS 9-15-92 5-7
ON-BOARD WIRING DIAGRAM BOOK 2
25. MM VOL 1 THRU 6, 10
26. MM VOL 7,8,9,11,12,17,20
27. MM VOL 12,13,14,15,18,19
28. MM VOL 1,2,3,4,5,10,17,20
29. MM VOL 1 THRU 6,10
30. MM VOL 6 THRU 9,11,16
31. MM VOL 13 THRU 16,18,19
32. MM VOL 7,8,9,11,12,17,20
33. CMM VOL 6 THRU 10 /1
34. CMM VOL 1 THRU 5 1/
35. CMM VOL 1 THRU 5 2/
<PAGE>
BOX NO. CONTENTS REV. COPY NO.
- ------- -------- ---- --------
36. CMM VOL 6 THRU 10 /2
37. CMM VOL 1 THRU 5 3/
38. CMM VOL 6 THRU 10 /3
39. CMM VOL 1 THRU 5 4/
40. CMM VOL 6 THRU 10 /4
41. CMM VOL 6 THRU 10 /5
42. CMM VOL 1 THRU 5 5/
43. TRANSPONDER DATA 1
43. MDC REPORT MD K4769 1
INSP. & MAINT. PROGRAM FLT TEST
43. AIRWORTHINES LIMITATION INSTRUCTION 1
43. MAS VIDEO & MUX SYSTEM W.D. 1
43. PACKING SHEETS (DAC) 4
43. ENGINE ACCEPTANCE TEST SUMMARY 3 COPIES EACH ENG.
43. ENGINE HISTORICAL RECORDS 3 COPIES EACH ENGINE
43. INDUSTRY ITEMS LIST
(LIFE LIMITED PARTS LIST) 1 COPY EACH ENG.
ENGINE HISTORICAL RECORDS 1, 2, & 3
43. COMPLIANCE RECORD
(SERVICE BULLETIN LIST) 4
43. AIRCRAFT HISTORICAL RECORDS 1
(MEETS REQUIREMENTS OF FORM
912 & 337)
43. FUEL QUANTITY CALIBRATION CARD 3
43. SAFE-LIFE LIMITED COMPONENTS 4
(LANDING GEAR)
43. AIRWORTHINESS DIRECTIVE STATUS 3
43. APU LOG BOOK 1 BOOK
43. PRODUCTION FLIGHT FUNCTIONAL REPORT 3
<PAGE>
BOX NO. CONTENTS REV. COPY NO.
- ------- -------- ---- --------
43. AIRCRAFT FLIGHT LOG 3
43. FLIGHT WORK ORDERS 3
43. GALLEY WIRING DIAGRAMS 2 SET
43. UNINCORPORATED SERVICE BULLETIN 3
TABULATION
43. RIGGING ASSEMBLY OUTLINES 1 SET
43. FLIGHT RECORDER DATA 1 SET
43. TRANSPONDER DATA 5
43.A. WIRING REPRODUCIBLES 1-5
WIRING REPRODUCIBLES INDEX (Not Here) 1
43. WEIGHT AND BALANCE MANUAL 2
43. WEIGHT AND BALANCE SUPPLEMENTAL
REPORT (CHAPTER 2) 3
43. ACTUAL VS. GUARANTEED WEIGHT
REPORT 2
44. FAULT REPORTING MANUAL 1
44. 1A CK PACKAGE
44. 2A CK PACKAGE
44. 3A CK PACKAGE
44. WIRING DIAGRAM BOOK 1
44. CUSTOMER ITEM SQUAWKS RELATED
TO RFD 1 SET
45. TRANSIT CHECKS (3 PKGS)
45. FAA FIT CHECK DEMO.-CARGO COMP'TS (2 VOLS)
45. COMPLETED MAINTENANCE CHECK CARDS 1 SET
46. ENGINE LOG BOOK S/N 723802
46. AIRCRAFT LOG BOOK
46. NON ROUTINE WORKCARDS (CAL)
<PAGE>
BOX NO. CONTENTS REV. COPY NO.
- ------- -------- ---- --------
46. BELL OVEN CMM (Not Here) 3 NOV 15/89
46. CABIN/OPS/MAINT. LOGS
46. ENGINE RECORD BOOK P723801 (Old removed at Taipai)
46. FLEET PERFORMANCE MONTHLY REPORT DEC. '92
46. PACKING SHEET & UPDATE
46. RELIABILITY CONTROL PROGRAM
46. BORESCOPE LOGS
46. AFM 14
46. AIRCRAFT MAIN. PROGRAM
46. ENGINE RECORDS 723802 & 723801
46. 3 WIRING DIAGRAM HOOK UP CHART REV. INIT
46. 3 WIRING DIAGRAM WIRELIST REV. INIT
46. ENGINE 723811 (NEW #3) TREND MONITORING DATA
46. AIRSHOW INSTRUCTION BOOKLET
46. CAL ENGINE MONITORING LOG
46. CAL DEFERRED ITEMS RECORD
46. CAL DAILY/WEEKLY CHECKS
46. P&W SI 7F-93 INCORP. RECORD
47. WIRING DIAGRAM BOOK 3-10
48. WIRING DIAGRAM BOOK 1,2
IPC BOOK 1-4
49A. IPC 4-10
49B. MM BOOK 1-6,10
SCHEMATICS BOOK 1/1
<PAGE>
BOX NO. CONTENTS REV. COPY NO.
- ------- -------- ---- --------
49C. MM BOOK 12,13,14,17
FAULT ISOLATION MANUAL BOOK 2
49D. MM BOOK 7,8,9,11
FAULT ISOLATION BOOK 1
49E. MM BOOK 15,16,18,19,20
50. PRATT & WHITNEY FAA FORM 337
S/N P724032 (1 ENG.)
S/N P723802 (2 ENG.) 3/16/93
S/N P724032 (3 ENG.)
MOD STATUS/BORESCOPE
50. AEROTEST WEIGHING 4/19/93
50. GARRETT A.P.U. BORESCOPE 3/25/93
50. AEROTEST POWER ASSURANCE RUN DATA 4/19/93
50. DACO INSTALLATION OF SLIDE RAFTS SERVICECABLE PARTS
TAGS INFO.
50. MAINTENANCE MANUAL 9 15
One set of 7 tapes only
The N288 w A 4-22-93
50. IPC (one set of 3 tapes ea ok) 30 13
WIRING DIAGRAM 10 1 set 4MF
WIRING DIAGRAM-WIRE LIST INIT 4MF
WIRING DIAGRAM-HOOK UP CHARTS INIT 12
FAULT ISOLATION MANUAL 9 15
CERTIFICATE OF SANITARY
CONSTRUCTION-Not here 1 ORIGINAL
/2 COPIES
P&W IPC-1 cart
<PAGE>
APPENDIX B to LEASE SUPPLEMENT
List of Lease Equipment
<TABLE>
<CAPTION> RECEIVED
VENDOR NOMENCLATURE PART # QUANTITY
=================================================================================================================================
<S> <C> <C> <C>
AIR CRUISERS Life-Veste Crew D21244-101 17
Passenger D21242-101 410
AIRCRAFT PRODUCTS Coffeemaker 3510-0044-0 8
Coffee Warmers 453-0001-1 6
Warming Oven 2610-0001-01 7
AMR COMBS PBE Unit - Puritan 119003 7
PRE Stowage Box - Puritan 119053-01 7
AVOX Oxygen Mask - (Puritan) 114015 15
Oxygen Cylinder - (Scott) 9700 01A-BT23A 15
BUDERUG BELL Ovens 8701-01-0000 16
Airflow Insert 8201-01-7000 20
Shelf 8200-01-8000 160
COMPOSITES UNLIMITED Weste Container 907015-1 3
DREISSEN Standard Units DLH 294 86
Standard Drawers DLH 1675 110
LERMER Hot Cup HC2-M-1-M 2
MATSUSHITA Video System MAS-10001901 Kit
System Control Unit RD-AV3005-01 1
VHS VCR AG-7020 2
13" CRT Monitor, Fixed RD-AV2133 2
16" CRT Monitor, Fixed RD-AV2102 12
7" LCD Monitor RD-AV7073 10
7" LCD Power Supply RD-AV2908 10
Video Distr. Unit RD-AV4003 12
MATSUSHITA FAX Entertainment System
"dbx" Entry Music RD-AX7002-01 1
PRAM Main Unit RD-AX7271 1
PRAM CDU RD-AX7281 1
Scot Electronic Box RD-AX4352-10 130
MINE SAFETY APPLIANCES First Aid Kits 460218 4
</TABLE>
Page 1
<PAGE>
APPENDIX B to LEASE SUPPLEMENT
Use of Loose Equipment
<TABLE>
<CAPTION>
RECEIVED
VENDOR NOMENCLATURE PART # QUANTITY
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
<S> <C> <C> <C>
PTO Triple Seat 110072-401 27
Triple Seat 110072-402 25
Triple Seat 110072-403 1
Triple Seat 110073-404 1
Triple Seat 110073-405 1
Triple Seat 110073-406 1
Triple Seat 110073-407 1
Triple Seat 110073-408 1
Triple Seat 110073-409 5
Triple Seat 110073-411 1
Triple Seat 110073-412 1
Triple Seat 110073-413 2
Triple Seat 110073-415 2
Triple Seat 110073-417 2
Triple Seat 110073-418 2
Triple Seat 110073-419 2
Triple Seat 110073-420 2
Triple Seat 110073-420 2
Triple Seat 110073-421 1
Triple Seat 110073-422 1
Triple Seat 110073-423 2
Triple Seat 110073-424 2
Quad Seat 110074-401 26
Quad Seat 110074-405 3
Quad Seat 110074-407 2
Quad Seat 110074-411 1
Double Seat 110075-409 2
Double Seat 110075-410 2
Double Seat 110075-411 1
Double Seat 110075-412 1
Double Seat 110075-413 2
Double Seat 110075-414 2
TELEX Communications Headset 64082-000 3
Hand-Held Interphone Mikes 63099-003 3
Interphone Handsets 63274-011 10
OTHER EMERGENCY EQPT. Flashlight 12
Halon 7
Megaphone 2
</TABLE>
Page 2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
to
LEASE SUPPLEMENT
ADDITIONAL ACCEPTANCE ITEMS
see attached 1 pages
---
<PAGE>
APPENDIX C
TO
LEASE SUPPLEMENT
ADDITIONAL ACCEPTANCE ITEMS
1. 20 ea. cargo load latches are missing from the aircraft. The cargo load
latches will be provided to World, at no cost, by GATX as soon as
practical but in no case later than May 22, 1993.
2. The following serviceable components have been unit exchanged by World
with GATX for like unserviceable components:
<TABLE>
<CAPTION>
=============================================================
PART NUMBER NOMENCLATURE QTY
=============================================================
<S> <C> <C>
1150220-5 CONTROLLER AIR COND. 1
-------------------------------------------------------------
0871GD1 ICE SENSOR 1
-------------------------------------------------------------
4059025-904 FUEL SYSTEM COMPUTER 1
-------------------------------------------------------------
5D0245-150 CONTROL POWER REMOTE 1
=============================================================
</TABLE>
This exchange will be at no cost to GATX except that if a requirement
for replacement on the same component (by part number) shall occur on
any of World's MD-11s while in service, GATX will bear the cost of a
loan or exchange. Under no circumstance shall GATX be responsible for
the components or their associated costs after the components have been
returned to World in a serviceable condition. The removed unserviceable
components shall be placed for repair under the control of World who
agrees to have them repaired as quickly as possible.
3. World acknowledges that the entire ship set of seat electronic boxes
(138) have been purchased and provided by GATX and will be returned to
GATX in serviceable condition at the end of the Term.
4. The following conditions exist at delivery, and may at World's option
either be repaired or may continue to exist during the term and at
redelivery to Lessor:
a) #1 right hand flap dented on 2 places on the upper surface.
b) Lavatory ash trays missing.
c) Lavatory panel door hinge loose.
d) #2 engine tailcone firewall seal (P/N AKC7174-503) missing.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPARE PARTS LEASE AGREEMENT
Dated as of April 15, 1993
BETWEEN
GATX CAPITAL CORPORATION,
as Lessor,
AND
WORLD AIRWAYS, INC.,
as Lessee.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
SECTION 1 DEFINITIONS.......................................... 1
SECTION 2 DELIVERY AND ACCEPTANCE.............................. 5
2.1. Time and Place....................................... 5
2.2. A Letting Only....................................... 5
2.3. Lessor's Conditions to Delivery...................... 5
2.4. Lessee's Conditions to Delivery...................... 7
SECTION 3 TERM................................................. 7
SECTION 4 RENT................................................. 7
4.1. Basic Rent........................................... 7
4.2. Supplemental Rent.................................... 7
4.3. Prohibition Against Setoff, Counterclaim, Etc........ 8
4.4. Security Deposit..................................... 8
4.5. Manner and Place of Payment.......................... 8
SECTION 5 REPRESENTATIONS AND WARRANTIES; COVENANTS OF THE
PARTIES.............................................. 8
5.1. Lessor's Representations, Covenants, Warranties and
Disclaimer........................................... 8
5.2. Lessee's Representations and Warranties.............. 10
5.3. Covenants of Lessee.................................. 12
5.4. Covenants of Lessor.................................. 14
SECTION 6 POSSESSION; USE; LAWFUL INSURED OPERATIONS;
MAINTENANCE; REGISTRATION AND INSIGNIA............... 15
6.1. Possession........................................... 15
6.2. Use; Net Lease....................................... 15
6.3. Lawful Insured Operations............................ 16
6.4. Maintenance.......................................... 16
6.5. Insignia and Notices................................. 17
6.6. CRAF................................................. 17
SECTION 7 INSPECTION........................................... 17
SECTION 8 PURCHASE OPTION...................................... 17
SECTION 9 REPLACEMENT OF PARTS; ALTERATIONS, MODIFICATIONS, ETC 18
9.1. Replacement of Items................................. 18
9.2. Title to Replaced and Replacement Items.............. 18
9.3. Alterations, Modifications and Additions............. 18
i
</TABLE>
<PAGE>
TABLE OF CONTENTS
-----------------
(Continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
9.4. Title to Items.................................... 18
SECTION 10 TAXES............................................. 19
10.1. General........................................... 19
10.2. Withholding Taxes................................. 20
10.3. Amount of Indemnity............................... 20
10.4. Contest........................................... 21
10.5. Tax Returns....................................... 22
10.6. Mutual Assistance................................. 22
SECTION 11 EVENTS OF LOSS.................................... 22
11.1. Loss of the Items................................. 22
11.2. Application of Payments from Governmental
Authorities....................................... 23
SECTION 12 INSURANCE......................................... 23
12.1. Public Liability, Bodily Injury and Property
Damage Liability Insurance........................ 23
12.2. Insurance Against Loss or Damage to the Spare
Parts............................................. 24
12.3. Reinsurance....................................... 25
12.4. Replacement Insurance............................. 26
12.5. Application of Proceeds in an Event of Loss of all
Spare Parts....................................... 26
12.6. Application of Proceeds in the Absence of a Total
Event of Loss..................................... 26
12.7. Reports, etc...................................... 26
12.8. Lessor's Additional Insurance..................... 27
12.9. Lessor Not Liable For Premiums.................... 27
12.10. Government Indemnity.............................. 27
SECTION 13 GENERAL INDEMNIFICATION........................... 27
13.1. Scope............................................. 27
13.2. Lessee's Release.................................. 29
13.3. Contest........................................... 29
13.4. Repayment......................................... 29
13.5. Payment........................................... 29
SECTION 14 LIENS............................................. 30
SECTION 15 RETURN OF SPARE PARTS AND RECORDS................. 30
15.1. Location; Storage................................. 30
15.2. Replacement Items................................. 30
15.3. Maintenance....................................... 31
ii
</TABLE>
<PAGE>
TABLE OF CONTENTS
-----------------
(Continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
15.4. Final Inspection and Specific Return
Conditions.......................................... 31
15.5. Component Manuals and Documentation................. 31
15.6. Corrections and Subsequent Corrections.............. 32
SECTION 16 EVENTS OF DEFAULT................................... 32
16.1. Lessee's Defaults................................... 32
SECTION 17 RIGHTS AND REMEDIES................................. 34
17.1. Remedies............................................ 34
17.2. Further Rights...................................... 36
17.3. Remedies Cumulative................................. 36
SECTION 18 MISCELLANEOUS....................................... 36
18.1. Severability, Amendment, Construction and Applicable
Law................................................. 36
18.2. Notices............................................. 36
18.3. Lessor's Right to Perform........................... 37
18.4. Counterparts........................................ 37
18.5. Assignment by Lessor................................ 37
18.6. Service of Process; Waiver of Immunities............ 38
18.7. Language............................................ 38
18.8. Costs and Expenses.................................. 39
18.9. Survival............................................ 39
18.10. Further Assurances.................................. 39
18.11. Entire Agreement.................................... 39
18.12. Successors and Assigns.............................. 39
</TABLE>
Exhibits
- --------
Exhibit A Lease Supplement
Exhibit B Form of Engine Mortgage
Exhibit C Spare Parts
Exhibit D Opinion of Lessee's Counsel
Exhibit E Lessor's Certificate of Representations & Warranties
Exhibit F Designated Locations
Exhibit G Permitted Sublessees
Exhibit H Basic Rent Computation
iii
<PAGE>
SPARE PARTS
LEASE AGREEMENT
---------------
THIS SPARE PARTS LEASE AGREEMENT, dated as of April 15, 1993 ("Lease"),
between GATX CAPITAL CORPORATION, a Delaware corporation, as Lessor
("Lessor"), and WORLD AIRWAYS, INC., a Delaware corporation, as Lessee
("Lessee").
RECITAL
Lessor desires to lease the Spare Parts (as defined below) to Lessee and
Lessee desires to lease the Spare Parts from Lessor on the terms set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
Lessor and Lessee agree as follows:
SECTION
DEFINITIONS
-----------
Unless the context requires otherwise, the following terms shall have the
following meanings for all purposes of this Lease and such meanings shall be
equally applicable to both the singular and the plural forms of the terms
defined:
"AD" or "Airworthiness Directive" means any airworthiness directive
-- -----------------------
issued by the FAA and applicable to equipment of the same type as the Spare
Parts.
"Aircraft Lease" shall mean that certain Aircraft Lease Agreement
--------------
dated as of January 15, 1993 between Trustee and Lessee covering one MD-11
Aircraft.
"Airframe" shall mean any McDonnell Douglas MD-11 airframe.
--------
"Authorized Maintenance Provider" is defined in Section 6.4(f)
-------------------------------
below.
"Basic Rent" is defined in Section 4.1 hereof.
----------
"Basic Rent Payment Date" shall mean each date on which Basic Rent is
-----------------------
payable pursuant to Section 4.1 hereof.
"Business Day" shall mean any day other than a Saturday, Sunday or
------------
day on which commercial banking institutions in the cities of Chicago,
Illinois, or Washington, D.C., are authorized by law to be closed.
"Debt" shall mean any obligation for the payment of borrowed money or
----
deferred purchase price.
<PAGE>
"Default" shall mean any event or condition which, with the lapse
-------
of time the giving of notice or both, would constitute an Event of Default.
"Delivery Date" with respect to any Item shall mean the date on which
-------------
such Item is delivered to and accepted by Lessee pursuant to the provisions of
Section 2 hereof. Each Lease Supplement shall be dated the appropriate
Delivery Date.
"Designated Location" is defined in Section 5.3(g)
-------------------
"Dollars or $" (whether capitalized or not) shall mean United States
------- -
dollars.
"Event of Default" shall have the meaning specified in Section 16.
----------------
"Event of Loss" means, with respect to any Item of Equipment, any
-------------
of the following: (a) loss of such Item or the use thereof due to theft,
disappearance for a period of 30 consecutive days or more, destruction, damage
beyond repair or rendition of such Item permanently unfit for normal use for
any reason whatsoever; (b) any damage to such Item which results in an
insurance settlement with respect to such Item on the basis of a total loss;
(c) the condemnation, confiscation, requisition or other loss of title to such
Item; (d) the confiscation or seizure of, or requisition of use of, such Item
for a period in excess of 60 consecutive days; or (e) any divestiture of title
to an Item treated as an Event of Loss pursuant to Section 6.1 or other
provision hereof.
"FAA" shall mean, as context requires, the United States Federal
---
Aviation Administration and/or the Administrator of the United States Federal
Aviation Administration, or any person, governmental department, bureau,
commission or agency succeeding to the functions of either of the foregoing.
"FAR" or "Federal Aviation Regulation" shall mean one or more of the
--- ---------------------------
Federal Aviation Regulations issued by the FAA.
"Federal Aviation Act" shall mean the United States Federal
--------------------
Aviation Act of 1958, as amended, as in effect of the date of this Lease,
or any successor or substituted legislation at the time in effect
and applicable.
"Final Inspection" shall have the meaning specified in Section
----------------
15.4(a).
"Flight Hour" shall mean, with respect to an Item, each hour or
-----------
portion thereof during each period commencing when the aircraft on which such
Item is installed lifts off runway and concluding when such aircraft touches
down upon landing.
"Fly Away Kit" or "FAK" shall mean those Spare Parts which may be
------------ ---
carried on board an MD-11 aircraft by Lessee in support of dispatch reliability.
2
<PAGE>
"Government" shall mean the government of the United States of
----------
America or any instrumentality or agency thereof (provided the credit of such
instrumentality or agency is backed by the full faith and credit of the
United States of America).
"Hereby", "herein", "hereof", "hereunder", and other like words shall
------ ------ ------ ---------
refer to this Lease as originally executed or as amended, modified or
supplemented pursuant to the applicable provisions hereof, including, without
limitation, as supplemented by the applicable Lease Supplement.
"Incentive Rate" shall mean a per annum rate of interest equal to the
--------------
Prime Rate in effect from time to time, plus 3%, but in no event greater than
the maximum rate permitted by applicable law.
"Insured Value" with respect to any Item shall mean the Lessor's
-------------
Cost thereof.
"Item of Equipment" or "Item" shall mean any of the Spare Parts.
----------------- ----
"Lease" shall mean this Spare Parts Lease Agreement and, as executed,
-----
each Lease Supplement.
"Lease Supplement" shall mean any or all of the Lease Supplements,
----------------
substantially in the form of Exhibit A hereto, to be entered into by Lessor
and Lessee on each Delivery Date for the purpose of leasing the Items of
Equipment pursuant to the terms of this Lease. Each Lease Supplement shall be
deemed to incorporate by reference all of the provisions of this Lease to the
same extent as if such provisions were fully set forth therein.
"Lessor Lien" shall mean any Lien with respect to any Item which
-----------
results from (a) nonpayment by Lessor of any Tax or Loss imposed on it (except
a Tax or Loss as to which Lessee is obliged hereunder to indemnify Lessor),
(b) claims against Lessor not related to the transactions described in this
Lease or to the ownership of the Items of Equipment, or (c) an affirmative act
of Lessor not related to the transactions described in this Lease.
"Lessor's Cost" shall mean the cost to Lessor of each Item, which
-------------
shall be specified in the appropriate Lease Supplement. The total Lessor's
Cost of all Items delivered hereunder shall not exceed $10,000,000.
"Lien" shall mean any mortgage, pledge, lien, charge, encumbrance,
----
lease, exercise of rights, security interest or claim.
"Maintenance Program" shall have the meaning set forth in Section
-------------------
6.4(a) below.
3
<PAGE>
"Manufacturer" shall mean the manufacturer of each Item as specified
-----------
on the applicable Lease Supplement.
"Permitted Liens" shall mean (a) the respective rights of the parties
---------------
hereunder and of others as permitted under Sections 6 and 9, below; (b) Liens
for taxes, assessments or other governmental charges either not yet due or
being contested in good faith (and for the payment of which adequate reserves
have been provided) by appropriate proceedings so long as such proceedings do
not involve any material danger of the sale, forfeiture, loss or loss of use
of any Item or any interest therein; (c) materialmens, mechanics, workers,
repairers, employees, or other like Liens arising in the ordinary course of
business for amounts the payment of which is either not yet due or is being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss of use of any Item
or any interest therein; (d) Liens arising out of any judgment or award unless
the judgment secured shall not, within 60 days after entry thereof, have been
discharged, vacated or reversed or Lessee has commenced an appeal or
proceeding for review which is being prosecuted in good faith by Lessee and
with respect to which there shall have been secured a stay of execution
pending such appeal or proceeding for review; (e) any other Liens with respect
to which Lessee shall have provided security in form and amount acceptable to
Lessor; and (f) Lessor Liens.
"Permitted Sublessee" shall mean any of the air carriers identified
-------------------
on Exhibit G hereto provided that such carrier is authorized to operate MD-11
aircraft. Every six months the list of Permitted Sublessees constituting
Exhibit G hereto shall be revised and Lessor may add or remove any carriers
which Lessor in its reasonable judgment believes should be added or removed
based on changes in the carriers' financial condition or the political
condition in the host country. Lessee may at any time request that the name of
a carrier be added to the list of Permitted Sublessees and Lessor shall
promptly agree or refuse (on a reasonable basis) such request.
"Prime Rate" shall mean that rate publicly announced by Citibank,
----------
N.A., New York, New York, or its successor, as such bank's "prime" or best
rate for 90 day loans to commercial borrowers of the highest credit standing.
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
----
"Security Deposit" shall mean the sum of up to $2,000,000 to be paid
----------------
by Lessee to Lessor and held as security by Lessor pursuant to Section 4.4.
"Spare Parts" shall mean the Items described on Appendix 1 to each
-----------
Lease Supplement.
4
<PAGE>
"Spare Parts Records" shall mean the maintenance and overhaul
-------------------
documents relating to the Spare Parts.
"Supplemental Rent" shall mean all amounts, liabilities and
-----------------
obligations (other than Basic Rent) which Lessee assumes, agrees or is
obligated to pay hereunder.
"Supplier" shall mean the manufacturer, vendor or supplier of any
--------
Item of Equipment other than a Manufacturer.
"Tax" and "Taxes" shall have the meanings specified in Section 10.
--- -----
"Term" shall mean the period for which the Items of Equipment are
----
leased hereunder pursuant to Section 3.
"Trustee" shall mean Wilmington Trust Company, not in its individual
-------
capacity, but solely as Trustee under that certain Trust Agreement dated as of
December 28, 1990.
SECTION 2
DELIVERY AND ACCEPTANCE
2.1. Time and Place. Subject to the satisfaction of the conditions set
--------------
forth in Section 2.3, on each Delivery Date Lessor shall purchase the Spare
Parts being leased to Lessee on such date, either from Lessee or from the
vendor thereof, and shall deliver such Items, together with all manuals, log
books, records and other documents relating thereto to Lessee, at the location
specified in the applicable Lease Supplement or at such other location as may
be mutually agreed. The parties anticipate that the first Delivery Date shall
be on or about May 28, 1993. No Delivery Date shall occur after July 1, 1993.
Lessee and Lessor shall accept the Items being delivered on each such date by
executing and delivering a Lease Supplement whereupon such Items shall be
subject to this Lease; provided that only equipment specified on Exhibit C
hereto shall be eligible for lease hereunder.
2.2. A Letting Only. Except as expressly provided in Sections 8 and 9, at
--------------
all times during the Term, full legal title to the Items of Equipment shall
remain vested in Lessor to the exclusion of Lessee, notwithstanding the
delivery of the Items of Equipment to, and the possession and use thereof by,
Lessee.
2.3. Lessor's Conditions to Delivery. Lessor's obligation to deliver and
-------------------------------
lease the Items of Equipment to Lessee hereunder shall be subject to
satisfaction of the following conditions:
(a) Simultaneously with the execution of this Lease, Lessor shall
have received written evidence of appropriate corporate action, certified by
the Secretary or an
5
<PAGE>
Assistant Secretary of Lessee, duly authorizing or ratifying the lease of the
Items of Equipment hereunder and the execution, delivery and performance of
this Lease, together with an incumbency certificate as to the person or entity
or persons authorized to execute and deliver said certification and said
documents on behalf of Lessee.
(b) On each Delivery Date, Lessor shall receive:
(i) A Lease Supplement, duly executed by Lessee, dated the
Delivery Date;
(ii) Certificates executed by independent aircraft insurance
brokers evidencing Lessee's compliance with the insurance provisions of
Section 12 hereof;
(iii) An opinion of Lessee's counsel dated the Delivery Date,
substantially in the form of the attached Exhibit D;
(iv) A certificate signed by a duly authorized officer of
Lessee, dated the Delivery Date, to the effect that:
(A) the representations and warranties contained in
Section 5.2 hereof are true and correct on and as of such date as
though made on and as of such date, and all authorizations and
approvals of, givings of notice to, and filings and recordings with,
all regulatory bodies and authorities which may be conditions to the
validity or enforceability of this Lease or Lessee's performance of
the terms hereof have been duly accomplished;
(B) no Default or Event of Default has occurred and is
continuing, or would result from the lease of the Items of Equipment
hereunder;
(C) Lessee is an air carrier certificated under Section
604(b) of the Federal Aviation Act of 1958, as amended;
(v) Evidence satisfactory to Lessor confirming that this
Lease and such Lease Supplement have been duly fixed with the FAA and
any other appropriate governmental authorities;
(vi) Lessee shall have provided Lessor with second priority
mortgage in form and substance satisfactory to Lessor, recorded with
the FAA on one CF6-50C2 engine, in the form of Exhibit B hereto,
securing Lessee's obligations hereunder. Such mortgages shall be
subordinated only to the lien of PK AirFinance in an amount not to
exceed $1,378,000.
6
<PAGE>
2.4. Lessee's Conditions to Delivery. Lessee's obligation to accept and
-------------------------------
lease the Items of Equipment from Lessor hereunder shall be subject to the
satisfaction of the following conditions on or before the first Delivery
Date:
(a) Written evidence of appropriate corporate action by Lessor,
certified by the Secretary or an Assistant Secretary of Lessor, duly authorizing
or ratifying the lease of the Items of Equipment hereunder and the execution,
delivery and performance of this Lease, together with an incumbency certificate
as to the person or entity or persons authorized to execute and deliver said
certification and said documents on behalf of Lessor;
(b) A certificate substantially in the form of Exhibit E hereto
signed by a duly authorized officer of Lessor, dated the Delivery Date, to the
effect that (A) the representations and warranties contained in Section 5.1
hereof are true and correct on and as of such date as though made on and as of
such date, and (B) Lessor has not breached any of its covenants in this Lease.
SECTION 3
TERM
----
The Term shall commence with respect to each Item on the Delivery Date of
such Item and shall expire on January 1, 2000, unless earlier terminated
pursuant to Section 17 or extended pursuant to Sections 15.7(a) or 15.9.
SECTION 4
RENT
----
4.1. Basic Rent. Interim Period. On July 1, 1993, Lessee shall pay
---------- --------------
Lessor rent for each Item in an amount equal to the Lessor's Cost of such Item
multiplied by the decimal equivalent of the Prime Rate plus 1.5% divided by
365 multiplied by the number of days.
Base Period. Commencing on August 1, 1993 and on the first day
-----------
of every month throughout the Term (each a "Basic Rent Payment Date"), Lessee
shall pay Basic Rent for the Spare Parts in accordance with Exhibit I hereto.
4.2. Supplemental Rent. Lessee shall also pay to Lessor or Lessor's
-----------------
designee any and all Supplemental Rent promptly as the same shall become due
and payable. Lessee shall pay to Lessor, as Supplemental Rent, interest at the
Incentive Rate on any portion of any payment of Rent not paid on the due date
thereof. All computations of interest under this Lease to be made on the basis
of a 365-day year and actual days elapsed.
7
<PAGE>
4.3 Prohibition Against Setoff, Counterclaim, Etc. Lessee's obligation
---------------------------------------------
to pay Rent hereunder shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor. Except as provided in Section 10.2 in respect of withholding
Taxes, each payment of Rent shall be absolutely final and net to Lessor, so
that this Lease will yield to Lessor the full amount of Rent throughout the
Term without deduction. Nothing in this Section 4.3 shall be construed to
prevent Lessee, after complying with this Section 4.3, from pursuing any claim
it may have against Lessor or any other person in such court of law or
otherwise as Lessee may deem appropriate.
4.4 Security Deposit. Lessee agrees simultaneously with the execution
----------------
and delivery to Lessor of each Lease Supplement, to pay a portion of the
Security Deposit equal to 20% of Lessor's Cost of the Items covered by such
Lease Supplement, which shall be held by Lessor as security for Lessee's
performance of its obligations hereunder. Upon return of the Spare Parts to
Lessor in full compliance with Section 15, including the return conditions
specified therein, or purchase of the Spare Parts pursuant to Section 8, and
provided that all unpaid Rent has been paid, Lessor shall refund the Security
Deposit to Lessee. Interest shall be paid monthly in arrears on the Security
Deposit on the first Business Day of each month at a rate per annum equal to
the Prime Rate, as in effect from time to time, plus 1.5%.
4.5 Manner and Place of Payment. All amounts to be paid by Lessee
---------------------------
hereunder shall be paid by wire transfer of immediately available funds,
consisting of lawful currency of the United States of America, to the
following account:
The First National Bank of Chicago
ABA No. 071000013
Chicago, Illinois 60670
Credit: GATX Capital Corporation
Account No. 52 47209
or to such other party or account in the contiguous continental United States
of America as Lessor shall designate in writing. If any such amount is due to
be paid on a day other than a Business Day, such amount shall be payable on
the next succeeding Business Day.
SECTION 5
REPRESENTATIONS AND WARRANTIES: COVENANTS OF THE PARTIES
--------------------------------------------------------
5.1 Lessor's Representations, Covenants, Warranties and Disclaimer.
--------------------------------------------------------------
Lessor represents and warrants that:
8
<PAGE>
(a) Title; Condition. On each Delivery Date Lessor shall have such
----------------
title to the Items being delivered on such date as has been conveyed to Lessor
by the Lessee or the vendor thereof and clear of Lessor Liens.
THE WARRANTIES SET FORTH IN SECTION 5.1 HEREOF ARE EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES OF LESSOR WHETHER WRITTEN, ORAL OR IMPLIED, AND LESSOR
SHALL NOT BY VIRTUE OF HAVING LEASED THE SPARE PARTS UNDER THIS LEASE BE
DEEMED TO HAVE MADE ANY OTHER REPRESENTATION OR WARRANTY. LESSEE ACKNOWLEDGES
AND AGREES THAT: (A) LESSOR IS NOT A MANUFACTURER OF OR A DEALER IN PROPERTY
OF SUCH KIND AS THE SPARE PARTS; (B) LESSOR HAS NOT MADE, AND DOES NOT HEREBY
MAKE, ANY REPRESENTATION, WARRANTY OR COVENANT WITH RESPECT TO THE
MERCHANTABILITY, CONDITION, QUALITY OR DURABILITY OF THE SPARE PARTS, THEIR
SUITABILITY FOR THE PURPOSES AND USES OF LESSEE, OR ANY OTHER REPRESENTATION,
WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SPARE PARTS; AND (C) EXCEPT FOR LESSOR'S GROSS NEGLIGENCE OR
WILFUL MISCONDUCT, LESSOR SHALL NOT BE LIABLE TO LESSEE FOR ANY LIABILITY,
CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY OR
INDIRECTLY, BY ANY ITEM OR ANY INADEQUACY THEREOF FOR ANY PURPOSE, ANY
DEFICIENCY OR DEFECT THEREIN, THE USE OR MAINTENANCE THEREOF, ANY REPAIRS,
SERVICING OR ADJUSTMENTS THERETO, OR ANY INTERRUPTION OR LOSS OF SERVICE OR
USE THEREOF; OR ANY LOSS OF BUSINESS OR FOR ANY DAMAGE WHATSOEVER OR HOWSOEVER
CAUSED, as all such risks are to be borne by Lessee. Neither Lessee nor Lessor
make any representation as to the treatment of this Lease, the Spare Parts or
the rent for financial reporting or tax purposes. Lessor hereby assigns (but
only for such time as no Event of Default shall have occurred and be
continuing) to Lessee such rights as Lessor may from time to time have under
any warranty made by any Manufacturer or Supplier with respect to any Item of
Equipment, and, so long as no Event of Default exists and is continuing,
Lessee shall have the exclusive right to enforce such warranties and to use
such proceeds in accordance with the terms of this Lease to repair or modify
the Items of Equipment.
(b) Corporate Existence and Qualification. Lessor is a corporation
-------------------------------------
duly incorporated and validly existing under the laws of the jurisdiction of
its incorporation and has the power and authority to enter into and perform
its obligations hereunder and under the Lease Supplements.
(c) Authority and Binding Obligations. This Lease has been duly
---------------------------------
authorized, executed and delivered by Lessor. The Lease is, and the Lease
Supplements will be, upon due execution and delivery, the legal, valid and
binding obligations of Lessor, enforceable in accordance with their respective
terms and do not require any approval from
9
<PAGE>
stockholder, trustee or any holders of debt or other obligations of Lessor,
except such as has been duly obtained.
(d) No Violation. The execution and delivery by Lessor of this
------------
Lease is not, and the execution and delivery of the Lease Supplements will not
be, and the performance by Lessor of its obligations under each of the
foregoing documents will not be, inconsistent with the terms of its charter or
bylaws, do not and will not contravene any law, governmental rule or
regulation or any judgment or order applicable to it, and do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which Lessor is a party or by which
it is bound or require the consent or approval of, the giving of notice to,
the registration with or the taking of any action in respect of or by, any
governmental authority or agency or other person, except such as have been
obtained, given or accomplished.
(e) Litigation. There are no pending suits or proceedings against
----------
or affecting Lessor in any court or before any governmental authority or
arbitration board or tribunal that relate to this Lease or any Item or that,
if adversely determined, might materially adversely affect Lessor's ability to
enter into or perform under this Lease.
5.2. Lessee's Representations and Warranties. Lessee covenants,
---------------------------------------
represents and warrants that:
(a) Corporate Existence and Qualification. Lessee is a corporation
-------------------------------------
duly incorporated and validly existing under the laws of the state or country
of its incorporation and is an air carrier of persons and property in air
transportation, registered, licensed or otherwise certificated or duly
authorized by the FAA and any other appropriate aeronautics authority to
engage in such air transportation and is duly qualified or otherwise
authorized to do business as an air carrier in all jurisdictions in which it
has air routes, except for jurisdictions where failure to so qualify or obtain
authorization would not have a material adverse effect on the business of
Lessee and would not involve any material danger of the sale, forfeiture or
loss of any Item of Equipment or the impairment of the value thereof.
(b) Authority. Lessee has full corporate power and authority to
---------
enter into and perform this Lease and each Lease Supplement; and the
execution, delivery and performance of this Lease and each Lease Supplement
have been duly authorized by all necessary corporate action on the part of
Lessee, do not require any stockholder approval or approval or consent of any
trustee or holders of any Debt or other obligations of Lessee except such as
have been duly obtained and do not contravene any provision of any law,
governmental rule, regulation or order binding on Lessee, or any applicable
interpretation or administration of any such law, governmental rule,
regulation or order, or contravene the certificate of incorporation, by-laws
or other organic documents of Lessee or any indenture, mortgage, contract or
other agreement or instrument to which Lessee is a party or by which it or any
of its assets may be bound or affected.
10
<PAGE>
(c) Governmental Approvals. Except for the filing of this Lease and
----------------------
each Lease Supplement with the FAA, neither the making nor performance by
Lessee of this Lease or the Lease Supplements, nor the consummation of any of
the transactions by Lessee contemplated hereby or thereby, nor the
acquisition, ownership or leasing by Lessor of the Spare Parts under such
documents, requires the consent or approval of, the giving of notice to, the
registration or filing for recordation with, or the taking of any other action
in respect of, the Government or any political agency, subdivision or
instrumentality thereof, except such as have been obtained, made or taken.
(d) Binding Obligations. This Lease constitutes the valid and
-------------------
legally binding obligation of Lessee enforceable against Lessee in accordance
with the terms hereof.
(e) Litigation. Except as otherwise disclosed in the Lessee's most
----------
recent Form 10Q and Form 10K, there are no suits or proceedings pending or, to
the knowledge of Lessee, threatened in any court or before any regulatory
commission, board or other administrative or governmental agency against or
affecting Lessee which relate to the transactions contemplated hereby or
which, if adversely determined, would have a material adverse affect on the
ability of Lessor to perform its obligations hereunder.
(f) Financial Condition. The audited balance sheet of Lessee as of
-------------------
December 31, 1992 (the "1992 Balance Sheet"), and the audited statements of
profit and loss of Lessee for 1991, each certified by KPMG Peat Marwick,
fairly present the financial condition of Lessee and have been prepared in
accordance with generally accepted accounting principles. Lessee has no
contingent obligations, liabilities for taxes or unusual forward or long-term
commitments which could have a material adverse effect on its financial
condition, except as disclosed in the 1992 Balance Sheet. Since December 31,
1992, there has been no material adverse change in Lessee's operations or
financial condition from that reflected in such financial statements other
than changes in the ordinary course of business the effect of which has not
been materially adverse to the ability of Lessee to fulfill its obligations
hereunder.
(g) Pari Passu Ranking. The obligations of Lessee to pay Rent
------------------
hereunder will be direct and unconditional general obligations of Lessee, and
will rank in right of payment at least pari passu with all unsecured
obligations of Lessee.
(h) No Conflicting Agreements. Lessee is not a party to any
-------------------------
agreement or instrument or subject to any charter or other corporate
restriction which individually or in the aggregate is, in the reasonable
judgment of Lessee, likely to materially adversely affect its ability to
perform its obligations under this Lease or the Lease Supplements.
(i) No Default. No Default or Event of Default has occurred and is
----------
continuing.
11
<PAGE>
(j) Protective Filings. Other than the filing for recordation of
------------------
this Lease and each Lease Supplement with the FAA, no other filing or
recording of any document and no other action is necessary or advisable in the
United States of America, in order to establish and perfect Lessor's title to
and interest in the Spare Parts as against Lessee and any third parties
claiming against or through Lessee, including trustees, custodians and other
representatives or similar officials, under any bankruptcy or liquidation law
or regulations, or other regulations, or otherwise.
(k) Registration. Lessee is a "certificated air carrier" under
------------
Section 604(b) of the Federal Aviation Act of 1958, as amended.
5.3 Covenants of Lessee. Until payment in full of all Rent and
-------------------
performance by Lessee of all its other obligations hereunder, Lessee agrees
that:
(a) Financial Statements, Reports, etc. Lessee shall furnish to
----------------------------------
Lessor:
(i) As soon as available and in any event within 60 days after
the close of each of the first three quarters of each fiscal year of
Lessee, the balance sheet of Lessee as at the end of such quarterly period
and the related statement of earnings for such quarterly period, setting
forth in each case in comparative form the corresponding figures for the
end of the corresponding period of the preceding fiscal year, certified by
the principal financial officer of Lessee;
(ii) As soon as available and in any event within 120 days
after the close of each fiscal year of Lessee, the balance sheet of
Lessee as at the end of such fiscal year and the related statement of
earnings for such fiscal year, prepared in accordance with generally
accepted accounting principles and on a basis consistent with that used in
the preparation of the financial statements referred to in Section 5.2(f),
except as noted in such balance sheet and statements, certified by
Lessee's independent public accountants and including the accompanying
footnotes and such accountants' opinion thereon;
(iii) Promptly after Lessee shall have obtained knowledge of
the occurrence of any Default or Event of Default hereunder, a written
notice specifying the nature and period of existence thereof and what
action Lessee has taken or is taking or proposes to take with respect
thereto;
(iv) Within 30 days after receiving service of process or
equivalent notice of any litigation, including arbitrations, involving any
claim against Lessee in excess of $5,000,000 and of any proceeding by or
before any governmental agency, which litigation or proceeding, if
adversely determined, could materially adversely affect the properties,
business, prospects or financial condition of Lessee and its subsidiaries
on a consolidated basis;
12
<PAGE>
(v) Promptly after entering into or becoming bound or affected by
any pooling or interchange agreement or arrangement by which any Item may be
affected and promptly after each amendment or modification of any such
agreement or arrangement, a copy of such agreement, arrangement, amendment or
modification, duly certified by an officer of Lessee as being a complete and
correct copy;
(vi) Subject to applicable legal restrictions and Lessee's
reasonable confidentiality requirements, from time to time such other
information as Lessor may reasonably request, which relates to maintenance of
the Spare Parts and their location and the financial condition of Lessee.
(b) Authorizations. Lessee will obtain from time to time any and all such
--------------
consents, approvals, licenses and authorizations and make any and all such
filings and registrations as shall now or hereafter be required under
applicable law and regulations (including foreign exchange laws) for the
making and performance by Lessee of this Lease.
(c) Recording. Subject to the requirements of Section 5.4(a) and except
---------
during the 90 day period referenced in the fifth sentence of 5.3(g), Lessee
shall be responsible for and bear the expenses of recording and rerecording,
registering and filing and refiling this Lease, each and every Lease
Supplement, and such other instruments as are necessary or reasonably
requested by Lessor to protect the right, title and interest of Lessor
hereunder and as owner of the Spare Parts.
(d) Certificated Carrier. Lessee shall do or cause to be done all things
--------------------
necessary to preserve and keep in full force and effect its status as a duly
certificated air carrier pursuant to (or, in the event such law or regulation
is superseded, its authorization under) Section 604(b) of the Federal Aviation
Act and pursuant to the laws of the United States of America to be an air
carrier engaged in the carriage of persons and property for compensation or
hire.
(e) Corporate Existence. Lessee will at all times maintain its corporate
-------------------
existence. Without prior written notice to Lessor, Lessee will not consolidate
with or merge into any other entity, or sell, lease, exchange, transfer or
otherwise dispose (whether in one transaction or in a series of related
transactions) of all or substantially all its property, assets or revenues,
whether now owned or hereafter acquired.
(f) Place of Business. Lessee's principal place of business and executive
-----------------
office are located at 13873 Park Center Road, Suite 490, Harndon, VA 22071.
(g) Location of Items. At all times during the Term the Items shall be
-----------------
located at one or more of the "Designated Locations" specified on Exhibit F
hereto or shall be part of a Fly Away Kit on an MD-11 aircraft owned or leased
by Lessee. Any Item installed on an aircraft shall immediately be replaced in
accordance with Section 9 below.
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<PAGE>
Records sufficient to establish the location of each Item shall be maintained
at all times at Lessee's head office at the address specified in Section 18.2
hereof and shall be available to Lessor. If and whenever Lessee shall desire
to maintain the Items at any location which is not at the time a Designated
Location or Lessee shall otherwise desire to designate a location as a
Designated Location, provided that no Event of Default exists and is
continuing Lessee will deliver to Lessor the following: (x) if such new
location is in the United States, an executed supplement to this Lease
describing such location, suitable for filing with the FAA, and (y) if such
location is not in the United States, (i) an executed original counterpart of
all documents deemed necessary by Lessor to protect its interest in the Spare
Parts and this Lease, such documents to be in form and substance reasonably
satisfactory to Lessor, appropriately describing such location and reaffirming
the ownership of the Items by Lessor; provided, however, that none of such
documents shall obligate Lessee to agree to material covenants or restrictions
not already present in this Lease; (ii) an Officer's Certificate stating that
each such document has been duly authorized, executed and delivered by Lessee
and that no Event of Default exists and is continuing hereunder; and (iii) if
requested by Lessor, the favorable written opinion of counsel selected by
Lessee and reasonably acceptable to Lessor to the effect that all filings,
recordings and notices necessary or appropriate to perfect the ownership
interest of Lessor in the Items have been accomplished. Notwithstanding the
foregoing, provided that no Event of Default exists and is continuing. Lessee
shall have the right to remove a portion of the Items from a Designated
Location or from an MD-11 aircraft to a location which is not a Designated
Location and not an aircraft for a temporary period not to exceed 90 days.
Lessee shall give Lessor advance written notice of any location at which an
Item may be based which is not a Designated Location. The notice specified in
the preceding sentence shall specify the city and street address of the
location and the name of the individual or entity (if not the Lessee) charged
with custody of the Items.
5.4. Covenants of Lessor.
-------------------
(a) Registration. Lessor will take such action as may be
------------
reasonably requested by Lessee, at the expense of Lessee, in order to execute
and deliver for filing or recordation the Lease and the Lease Supplements with
the FAA. Lessor agrees to deliver to Lessee and to any other person or entity
specified by Lessee such notifications, certifications, reports or other
documents as may be required by law as a precondition to exemption or other
relief from (or reduction of) any Taxes which otherwise would be imposed with
respect to any amount payable by Lessee under this Lease.
(b) Quiet Enjoyment. So long as no Event of Default shall have
---------------
occurred and be continuing, Lessor agrees that, except as specifically
permitted by the terms of this Lease, it will not, through its own actions or
through the actions of others claiming through or under Lessor, interfere with
Lessee's peaceful and quiet use, operation and possession of the Spare Parts.
14
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(c) Lessor Liens. Lessor agrees to keep the Spare Parts free and
------------
clear of Lessor Liens and to indemnify Lessee for any loss, cost, damage or
expense suffered by Lessee by reason of the existence of any such Lessor
Liens.
(d) ERISA. Lessor represents that it has not purchased any Item
-----
with the assets of any "employee benefit plan" (or its related trust) as
defined in Section 3(3) of ERISA or Section 4975(e)(1) of the Internal Revenue
Code.
SECTION 6
POSSESSION; USE; LAWFUL INSURED OPERATIONS; MAINTENANCE
-------------------------------------------------------
REGISTRATION AND INSIGNIA
-------------------------
6.1. Possession. Except as expressly provided in this Lease, the Spare
----------
Parts and the operations performed therewith, subject to applicable law and
the rules and regulations of the FAA, shall be under the exclusive control of
Lessee until the same are returned pursuant to Section 15 or 17 hereof. Lessee
shall not without Lessor's prior written consent deliver, relinquish or
transfer possession of any Item or Items of Equipment, except for the transfer
of possession and replacement of Parts as provided in Sections 9.1 and 9.3;
provided, however, that, so long as no Event of Default shall have occurred
and be continuing, Lessee may, subject to Section 6.4, (a) deliver possession
of an Item of Equipment to an FAA-certificated maintenance facility for
service, repair, maintenance or overhaul work required by the terms hereof, or
for modifications, alterations or additions permitted by the provisions of
this Lease; (b) Lessee may transfer temporary possession of any Item to the
United States of America or any instrumentality or agency thereof pursuant to
Executive Order No. 10999, as amended, or any substitute or similar programs;
(c) for a period not to exceed 90 days, Lessee may subject any Item to a parts
pooling arrangement, customary in the airline industry, entered into in the
normal course of Lessee's business with responsible scheduled commercial air
carriers, and Lessee may sublease any Item for a period not to exceed two
years to any Permitted Sublessee; provided, however, (i) no agreement or
arrangement described in (a), (b) or (c) above shall contemplate or require
the transfer of title to any Item; (ii) any Item the possession of which is
transferred in accordance with (a), (b) or (c) above shall be required to be
returned to Lessee upon the expiration or termination of any such agreement or
arrangement. In all cases Lessee shall remain primarily liable hereunder for
the performance of all of the terms hereof to the same extent as if a transfer
permitted hereby had not occurred. A transfer of any Item pursuant to this
Section 6.1 which results in a transfer of title to such Item shall be treated
as an Event of Loss with respect to such Item.
6.2. Use; Net Lease. Lessee shall not use, or permit the use of, any Item
--------------
or Items of Equipment for any purpose for which it is not designed. Lessee
shall comply with all regulations of the FAA with respect to the Spare Parts.
Lessee shall pay for an provide all electric power, oil, fuel and lubricant
consumed by and required for the operation of the
15
<PAGE>
Spare Parts. Lessee shall promptly pay all repair or overhaul charges, the
nonpayment of which could result in a Lien upon any of the Items of Equipment.
6.3. Lawful Insured Operations. Lessee will not cause or permit any Item
-------------------------
of Equipment to be maintained, used or operated in violation of any law,
treaty, statute, rule, regulation or order of any government or governmental
authority having jurisdiction except to the extent any of the foregoing is
being contested by Lessee in good faith and by appropriate proceedings. Lessee
agrees not to use any Item of Equipment, or suffer the same to be used, (a)
unless such Item is covered by insurance or governmental indemnity as required
by the provisions of Section 12 hereof, or (b) contrary to the terms of the
insurance required by the provisions of Section 12 hereof. If any Item is
brought into any location or country in which the insurance or indemnity
required by Section 12 is not in full force and effect, Lessee, in addition to
its liability under Sections 17 and 18, shall be liable to Lessor for loss or
damage to the Item up to its replacement cost.
6.4. Maintenance. Lessee, at its own cost and expense, shall:
-----------
(a) Service, repair, maintain, overhaul, replace (but only in
accordance with Section 9 hereof) and test, or cause the same to be done to,
each Item leased hereunder (i) so as to keep such Item in good operating
condition and with a valid parts tag, and (ii) in compliance with Lessee's
FAA-approved MD-11 maintenance program (the "Maintenance Program");
(b) Maintain all records, logs and other materials required by the
FAA in respect of the Items of Equipment and all records required by the FAA
to establish traceability of all life-limited Items of Equipment. All
principal records, logs and other materials shall be maintained by Lessee in
the English language.
(c) Promptly furnish to Lessor such information as is known by
Lessee to be required, or as Lessor may request to enable Lessor to file any
reports required to be filed by Lessor with any governmental authority
concerning the Spare Parts;
(d) Incorporate into each Item all Alert Service Bulletins issued by
any Manufacturer or Supplier and all other Service Bulletins that relate to
safety and reliability of the Item which are incorporated into any other Spare
Parts owned or leased by Lessee. It is the agreement of the parties that
Lessee shall not discriminate against any of the Items of Equipment with
respect to any maintenance matter or modification status;
(e) Carry out on each Item all Airworthiness Directives ("AD")
imposed by the FAA which are applicable to such Item and which are due during
the Term; and
(f) Cause all modifications, repairs, maintenance and overhauls of
the Items of Equipment, whether scheduled or unscheduled, to be accomplished
at FAA
16
<PAGE>
licensed repair stations or by an FAA-certified mechanic. All scheduled
maintenance and overhauls of the Items of Equipment throughout the Term shall
be performed at FAA-certificated repair stations specified in the Maintenance
program (the "Authorized Maintenance Performer").
6.5. Insignia and Notices. Each Designated Location and other location
--------------------
in which the Items are based shall have displayed in a prominent location a
sign noting the presence of property of Lessor at such Location. Lessee will
not allow the name of any person or entity to be placed on any Item that might
be interpreted as a claim of ownership.
6.6. CRAF. Notwithstanding anything in this Lease to the contrary, any
----
compliance by Lessee with the requirements of the Civil Reserve Airfleet
Program, or any substitute or similar program, shall not, in and of itself,
result in a Default or Event of Default, provided that promptly after any such
requirement terminates Lessee complies with all of its obligations under this
Lease.
SECTION 7
INSPECTION
----------
Lessee shall furnish to Lessor a revised and updated list of the Items of
Equipment on a quarterly basis including the location (including a FAK) of the
Items of Equipment and a description of all replacement Items, all in a form
for filing with the FAA and reasonably acceptable to Lessor. Lessee shall
permit any person or entity designated in writing by Lessor to visit and
inspect (at any reasonable time upon reasonable notice) the Spare Parts, their
condition (including modification status) and the records maintained in
connection therewith, including the Maintenance Program, which shall not be
copied and shall be maintained as strictly proprietary and confidential.
Lessor shall have no duty to make any such inspection and shall not incur any
liability or obligation by reason of not making any such inspection. Lessor
agrees that such requests will be coordinated with Lessee so as to cause no
disturbance to Lessee's operation and no material disturbance to its
personnel. Lessor agrees that no more than two inspectors will be inspecting
the Spare Parts or the Spare Parts documentation at any one location at any
time. Lessor agrees that such inspections will be coordinated with Lessee so
that the down time of an aircraft will not be increased.
SECTION 8
PURCHASE OPTION
---------------
On not less than 100 days nor more than 270 days prior written notice,
Lessee shall have the option to purchase all, but not less than all, of the
Items of Equipment on the last
17
<PAGE>
day of the Term for a purchase price equal to thirty percent of the Lessor's
cost of all Items then subject to this Lease plus applicable sales and
transfer taxes.
SECTION 9
REPLACEMENT OF PARTS: ALTERATIONS, MODIFICATIONS, ETC.
9.1. Replacement of Items. Lessee, at its own cost and expense, shall as
--------------------
promptly as practical replace all Items which may from time to time be
installed on an aircraft or become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever. All replacement Items shall be free and clear of all
Liens, other than Permitted Liens, and shall be in as good operating condition
as, and shall have a value and utility at least equal to, the Items replaced,
assuming such replaced Items were in the condition and repair required to be
maintained by the terms hereof.
9.2. Title to Replaced and Replacement Items. All Items of Equipment shall
---------------------------------------
remain the property of Lessor and subject to this Lease, no matter where
located, until such time as such Items shall be replaced by Items which meet
the requirements for replacement Items specified above. Immediately upon any
replacement Item becoming incorporated, installed or attached as above
provided, without further act, (a) title to the replaced Item shall thereupon
vest in Lessee, free and clear of all rights of Lessor and its assigns; (b)
such replaced Item shall no longer be deemed an Item of Equipment hereunder;
(c) title to the replacement Item shall thereupon vest in Lessor; and (d) such
replacement Item shall become subject to this Lease and be deemed to be an
Item of Equipment hereunder to the same extent as the Items originally
delivered to Lessee under this Lease.
9.3. Alterations, Modifications and Additions. Except as provided in this
----------------------------------------
Section 9 and in Section 6.4 hereof, Lessee shall not make any alteration,
modification or addition to any Item of Equipment. Lessee, at its own
expense, provided no Event of Default is continuing, may from time to time
make such alterations and modifications in and additions to each Item of
Equipment as Lessee may deem desirable in the proper conduct of its business,
provided that no such alteration, modification or addition adversely alters
the structure of any Item or in any way diminishes the value, utility or
useful life of such Item of Equipment or impairs the condition thereof below
the value, utility, useful life and condition thereof immediately prior to
such alteration, modification or addition, assuming such Item of Equipment was
then of the value, utility and useful life and in the condition required to be
maintained by the terms of this Lease.
9.4. Title to Items. Subject to the provisions hereof, title to all parts
--------------
incorporated or installed in or attached or added to each Item as the result of
any alteration, modification or addition shall, without further act, vest in the
Lessor and become subject to this Lease; provided, however, that so long as no
-------- -------
Event of Default shall have occurred and be
18
<PAGE>
continuing at any time during the Term, the Lessee may remove any part from
an Item of Equipment, provided that (a) such part is in addition to, and not
in replacement of or in substitution for, any part originally incorporated or
installed in or attached to such Item at the time of delivery thereof
hereunder or any part in replacement of, or substitution for, any such
original part; (b) such part is not required to be incorporated or installed
in or attached or added to such Item pursuant to the terms hereof; and (c)
such part can be removed from such Item without diminishing or impairing the
value or utility which such Item would have had at such time had such
alteration, modification or addition not occurred. Upon the removal by Lessee
of any such part as above provided, title thereto shall, without further
act, vest in Lessee. Any part not removed by Lessee as above provided prior
to the return of the respective Item to Lessor hereunder shall remain the
property of Lessor and subject to this Lease.
SECTION 10
TAXES
-----
10.1. General. Lessee shall pay, assume liability for and indemnify,
protect, defend, save and hold Lessor, any permitted successor, assignee or
transferee of Lessor and any affiliate of any of the foregoing with which such
entity files a consolidated or combined return (each a "Tax Indemnitee"),
harmless from and against all taxes (including value-added taxes), fees
(including license and registration fees), levies, imposts, duties, charges or
withholdings of any nature whatsoever, together with any penalties, fines or
interest thereon (all the foregoing being collectively called "Taxes") which
are imposed by any government (or any political subdivision or fiscal or
taxing authority thereof) and are imposed on or with respect to, or are
measured by, (a) this Lease, (b) the Spare Parts, (c) the purchase,
acceptance, rejection, ownership, delivery, possession, use, presence,
storage, registration, deregistration, modification, maintenance, operation,
sale, return, leasing or other disposition thereof, or, (d) the receipts,
earnings or other amounts arising from the Spare Parts or this Lease;
provided, however, the foregoing indemnity shall not apply to (i) Taxes
imposed on or measured by the net income, capital adequacy, capital stock or
capital gains of a Tax Indemnitee or that are minimum or alternative minimum
Taxes or doing business Taxes imposed on or against a Tax Indemnitee, unless
such Tax resulted solely from the use by Lessee of the Spare Parts in such
jurisdiction; (ii) Taxes imposed with respect to the period prior to the
applicable Delivery Date or after full and final compliance by Lessee with all
terms of this Lease, (iii) Taxes imposed as a result of a sale, transfer of
title, mortgaging, pledging, financing or transfer or other disposition by any
Tax Indemnitee of all or any portion of the Spare Parts or interest therein or
any interest in or obligation under this Lease or in any Tax Indemnitee unless
such disposition occurs by reason of the exercise of the Lessor's remedies
under this Lease upon an Event of Default, or (iv) Taxes which any Tax
Indemnitee is subject to as a result of business or transactions unrelated to
the transactions contemplated by this Lease or that result from the Tax
Indemnitee or any affiliate being incorporated or maintaining an office or
place of business in the jurisdiction
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imposing the Tax (except to the extent such Tax is increased by reason of
Lessee's activities in such jurisdiction); (v) Taxes that are a result of (a)
the gross negligence or willful misconduct of any Tax Indemnitee or the breach
of any of the covenants of or the inaccuracy at the time made of any of the
representations or warranties of any Tax Indemnitee in this Lease or any
related document, (b) the failure of any Tax Indemnitee to file any return
properly and timely or to comply with any certification, information,
documentation, reporting or other similar requirement or (c) any Lessor Lien,
(vi) Taxes imposed under (A) Section 4975 of the Internal Revenue Code of 1986
as amended (the "Code") or under Part 4 or Part 5 of Subtitle B of the
Employment Retirement Income Security Act of 1974 as amended or (B) Sections
59A, 3406 or 4701 of the Code or (C) any analogous provisions of any successor
legislation.
10.2. Withholding Taxes. Except in the case of a Tax described in Section
-----------------
10.1 (i) through (vi), if Lessee is required by law to make any withholding
from Rent or any other amount payable by Lessee to Lessor (or any other Tax
Indemnitee) under this Lease, Lessee shall pay to such Tax Indemnitee such
additional amount as may be necessary to enable such Tax Indemnitee to receive
(after such withholding) an amount equal to the full amount then payable to
such Tax Indemnitee absent such withholding. As soon as practicable after
Lessee makes any withholding from any amount payable to a Tax Indemnitee under
this Lease, Lessee shall deliver to such Tax Indemnitee a receipt or other
document, reasonably satisfactory to such Tax Indemnitee and reasonably
obtainable by Lessee, evidencing such withholding and the payment of the
amount withheld to the relevant governmental authority, for the purpose of
enabling such Tax Indemnitee to substantiate a claim for credit or deduction
for income tax purposes of the amounts so withheld. Notwithstanding anything
to the contrary in this Lease, Lessee shall have no obligation to indemnify
for any Taxes (including withholding Taxes) imposed on or with respect to or
attributable to any Lien or Debt incurred by a Tax Indemnitee that is secured
by all or any portion of the Spare Parts or any Item.
10.3 Amount of Indemnity. Each indemnity provided for in this Section 10
shall be in an amount which, after taking into account all taxes, fees or
other charges imposed with respect thereto or as a result of the receipt
thereof by any jurisdiction (whether or not excepted above), and after taking
into account any deductions or tax savings (whether by credit, deduction or
otherwise) actually realized by such Tax Indemnitee as a result of the payment
of such amount or the event or circumstance which gave rise to the payment
shall be equal to the amount of such indemnity otherwise payable hereunder.
Any payment required to be made by Lessee under this Section 10 shall be due
and payable within 30 days following Lessee's receipt of a Tax Indemnitee's
written demand therefore (accompanied by a written statement of such Tax
Indemnitee describing in reasonable detail the Taxes for which such Tax
Indemnitee is demanding an indemnity and the computation of the amount of the
indemnity being demanded), subject to the provisions of Section 10.4. If any
Tax Indemnitee or any of its affiliates actually realizes a net tax benefit,
savings, deduction or credit as a result of any payment by Lessee pursuant to
this Section 10, not
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previously taken into account in computing such payment, the applicable Tax
Indemnitee shall promptly pay to Lessee an amount equal to the sum of (i) the
actual net reduction in Taxes, if any, realized by such Tax Indemnitee and its
affiliates which is attributable to such net tax benefit, savings, deductions
or credits and (ii) the actual net reduction in any Taxes realized by Tax
Indemnitee and its affiliates as the result of any payment made by such Tax
Indemnitee pursuant to this sentence.
10.4. Contest. If a claim is made against a Tax Indemnitee for any Tax
-------
that is subject to indemnification under this Section 10, such Tax Indemnitee
will promptly, and in any event within 30 days after such Tax Indemnitee is
aware of such claim, give Lessee written notice of such claim. If Lessee so
requests in writing within 30 days after receipt of such notice, (x) such Tax
Indemnitee shall permit Lessee to contest the claim in the name of such Tax
Indemnitee or in the name of Lessee, to the extent permitted by law, or (y) if
such claim together with other claims which could be made with respect to
other transactions to which such Tax Indemnitee is then a party would (if
sustained) have a material adverse effect on such Tax Indemnitee's business or
financial affairs (a "Special Claim"), or (z) if Lessee shall not be
permitted by law to contest such claim on behalf of such Tax Indemnitee, such
Tax Indemnitee shall contest such claim in good faith, provided in each case
only if: (a) such Tax Indemnitee shall have received an indemnity reasonably
satisfactory to it for all expenses reasonably expected to be paid in
contesting the claim (including attorneys' and accountants' fees and
disbursements); (b) the action to be taken will not involve any material risk
of the sale, forfeiture or loss of, or the creation of any Lien on (except a
Permitted Lien or a Lien which Lessee shall have bonded in an amount and
manner reasonably satisfactory to such Tax Indemnitee), the Spare Parts or any
interest therein; (c) if such contest shall be conducted in a manner requiring
the payment of the claim, Lessee shall have advanced the amount required on an
after-tax basis; (d) no Event of Default shall have occurred and be continuing
and Lessor, or such other Tax Indemnitee as may be appropriate, shall be
receiving all amounts of Rent when payable, without reduction by reason of
such Tax; and (e) if such claim is a Special Claim, such Tax Indemnitee shall
have received a legal opinion (at the expense of Lessee) from counsel
reasonably satisfactory to such Tax Indemnitee indicating that a reasonable
basis for such contest exists. Such Tax Indemnitee and Lessee shall in good
faith consider the other party's views regarding the conduct of the contest.
Such Tax Indemnitee and Lessee shall provide to each other, upon request, such
reasonably obtainable information and such other reasonable assistance as may
be necessary or advisable for the effective evaluation or conduct of such
contest. Notwithstanding the foregoing provisions of this Section 10.4, if at
any time Lessor waives its right of indemnification under this Section 10 in
respect of a claim, or if, after having received payment of indemnification
from Lessee hereunder in respect to such claim, Lessor tenders such payment to
Lessee, then Lessee shall not be entitled to contest, or to continue to
contest, any such claim. If any Tax Indemnitee or any of its affiliates shall
receive a refund of, or receive a credit for (or would have received such a
refund or credit but for a counterclaim or other claim not indemnified by
Lessee hereunder (a "deemed refund or credit")) all or any part of any Taxes
paid, reimbursed or
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advanced by or on behalf of Lessee pursuant to this Lease (including Sections
10.1, 10.2 or this 10.4), the applicable Tax Indemnitee shall pay to Lessee
within 10 days of such receipt (or, in the case of a deemed refund or credit,
within 10 days of the resolution of such contest), an amount equal to such
refund or credit or deemed refund or credit (along with any interest on such
amounts actually received from the applicable taxing authority fairly
attributable to such amounts).
10.5. Tax Returns. Lessee will provide such information as may be
-----------
reasonably requested by Lessor and reasonably obtainable by Lessee to enable
Lessor to fulfill its tax filing requirements with respect to the transactions
contemplated hereby. In the event that any return, statement or report is
required to be made or filed with respect to any Tax indemnified against by
Lessee under this Section 10, Lessee shall notify Lessor of such requirement
and (a) to the extent permitted by law and requested by Lessor or required by
law, make and file in its own name such return, statement or report in such
manner as will show the ownership of each Item in Lessor and furnish Lessor
with a copy of such return, statement or report or (b) where such return,
statement or report is required to be in the name of or filed by Lessor,
prepare and furnish such return, statement or report for filing by Lessor in
such manner as shall be satisfactory to Lessor and send the same to Lessor for
filing no later than 30 days prior to the due date. Where Lessor is required
to make or file a return, statement or report reflecting items other than or
in addition to Taxes indemnified against by Lessee under this Section 10,
Lessee shall, upon Lessor's request, provide Lessor with information, within a
reasonable time, sufficient to permit such return, statement or report to be
properly made and timely filed.
10.6. Mutual Assistance. Lessor, each Tax Indemnitee and Lessee agree
-----------------
to consider in good faith any reasonable modifications of the transaction
described in this Lease that would reduce or eliminate any Tax imposed on
either party as a result of such transaction and each such person shall
cooperate in good faith in providing information on forms or otherwise so as
to reduce or eliminate any Taxes subject to indemnification under this Lease.
Without limiting the foregoing, Lessor and Lessee shall cooperate (without any
expense to Lessor) as to the location of each Item at each Delivery Date in
order to minimize or eliminate any sales or use Tax that might otherwise be
payable in respect of the transactions contemplated hereby.
SECTION 11
EVENTS OF LOSS
--------------
11.1. Loss of the Items. Upon the occurrence of an Event of Loss with
-----------------
respect to any Item, Lessee shall forthwith (and in any event within 30 days
after such occurrence) give Lessor written notice thereof and Lessee shall
replace such Item as soon as reasonably possible (and, in any event, within
120 days following such Event of Loss) by duly conveying to Lessor, free and
clear of all Liens, except Permitted Lines, title to another Item of the
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same or an improved model and suitable for use on MD-11 aircraft, which Item
shall have a value and utility at least equal to, and be in as good operating
condition as, the Item with respect to which such Event of Loss shall have
occurred, assuming such Item was of the value and utility and in the condition
and repair as required by the terms hereof immediately prior to the occurrence
of such Event of Loss. Such replacement item shall be deemed an "Item" as
defined herein for all purposes hereunder. Lessee agrees to promptly notify
Lessor of any such substitution, provide Lessor with an officer's certificate
demonstrating full compliance with this Section 11.2 and Lessee agrees to take
such action and execute such documents, including a warranty bill of sale, as
Lessor may reasonably request in order that any such replacement Item shall be
duly and properly titled in the name of Lessor and leased hereunder to the
same extent as any Item replaced thereby. Lessor shall take such action and
shall execute such documents as are reasonably necessary to convey the Item
replaced pursuant to the preceding sentence to Lessee or its designee on an
as-is, where-is basis, without recourse to or warranty by Lessor except that
Lessor shall warrant that it has title free and clear of Lessor Liens and
Liens existing prior to the Delivery Date of such Item.
11.2. Application of Payments from Governmental Authorities. Payments
-----------------------------------------------------
received by Lessor or Lessee from any governmental authority or entity with
respect to an Event of Loss resulting from the condemnation, confiscation or
seizure of, or requisition of title to any Item shall be retained by Lessee,
or, if received by Lessor, promptly paid over to Lessee. Lessee shall promptly
replace such Item in accordance with Section 11.1. Payments received by Lessor
or Lessee with respect to periods after the end of the Term shall be paid to
(or retained by) Lessor.
SECTION 12
INSURANCE
----------
12.1 Public Liability, Bodily Injury and Property Damage Liability
-------------------------------------------------------------
Insurance. Lessee, at its own expense, shall maintain in effect third party
- ---------
aircraft liability insurance, passenger legal liability insurance and property
damage liability insurance, including contractual liability and products
liability insurance and war risk liability insurance in accordance with AV52
or its equivalent, including the buyback of all war risk perils (except
nuclear) during the Term in an amount not less than the greatest of (a)
$700,000,000, (b) that amount normally carried by national and international
carriers engaged in similar business and similarly situated to Lessee or (c)
the amount normally carried by Lessee on its owned or leased MD-11 aircraft,
for any one accident, or series of accidents arising out of any one event,
with respect to the Items of Equipment. Any such liability insurance policy
may be subject to a deductible in an amount not to exceed $1,250 each claim in
respect of passenger's baggage, or such other amount as is standard market
deductible for baggage, and $5,000 each claim in respect of freight. All such
policies shall be maintained in effect with insurers and (subject to Section
12.3 below) reinsurers of recognized
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reputation and responsibility, reasonably satisfactory to Lessor. Any policies
of insurance and reinsurance carried in accordance with this Section 12.1 and
any policies taken out in substitution or replacement for any of such policies
shall: (i) name, as additional insureds, Lessor, Credit Lyonnais and their
respective successors and assigns (notice of which assignment or successor and
the address of the new party and the fax and the telex numbers of all parties
having been supplied to Lessee's insurance broker) (collectively, the
"Additional Insureds"); (ii) provide that in respect of the interests of the
Additional Insureds such policies of insurance shall insure the Additional
Insureds regardless of any breach or violation of any warranty, declarations
or conditions contained in such policies by Lessee; and (iii) provide that if
such insurance is cancelled for any reason whatever, or the same is allowed to
lapse for nonpayment of premium, or if there is any adverse change in policy
terms and conditions, such cancellation, lapse or change shall not be
effective until 30 days (and with respect to war risk insurance, such shorter
period as shall be customary in the worldwide aviation insurance market for
such insurance in such area of the world) after receipt by the Additional
Insureds of written notice from such insurers of such cancellation, lapse or
change. Each liability policy shall (A) be primary without right of
contribution from any other insurance which is carried by the Additional
Insureds, (B) expressly provide that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured, but this shall not operate in respect
of loss of or damage to the Spare Parts insured under the Spares Policies
issued to Lessee, (C) provide that the insurers agree to waive any right of
subrogation against any Additional Insured but only to the extent that the
Lessee has waived its right of recovery against the Additional Insured; and
(D) provide for world wide coverage in full force and effect throughout any
geographical areas (except as are excluded from War Risk coverage) where any
Item is located. Without increasing the scope of coverage under the airline
liability policies, the insurers thereunder shall acknowledge the existence of
the indemnification provisions of this Lease.
12.2. Insurance Against Loss or Damage to the Spare Parts. Lessee, at its
---------------------------------------------------
own expense, shall maintain in effect with insurers and (subject to Section
12.3 below) reinsurers of recognized reputation and financial responsibility:
(a) all-risk spares coverage with respect to the Items of Equipment while
removed from the aircraft and replaced; and (b) war risk, hijacking (air
piracy), confiscation, nationalization, expropriation, and related perils
coverages. All such insurance shall be in full force and effect throughout any
geographical areas (except as are excluded from War Risk coverage) where any
Item is located, shall be payable in Dollars in the United States and shall be
in an amount of not less than the aggregate Lessor's Cost of all Items. Any
insurance carried in accordance with this Section 12.2 shall not contain a
provision for deductible or self-insured amounts in excess of $25,000. Any
policies carried in accordance with this Section 12.2 shall (i) name the
Lessor and the Lessee as loss payees; (ii) be made payable as provided in
Sections 12.5 and 12.6 below; (iii) provide that if such insurance is
cancelled for any reason whatever, or the same is allowed to lapse for
nonpayment of premium, or if there is any adverse change in policy terms and
conditions, such cancellation, lapse or change shall not be effective until 30
days (and with
24
<PAGE>
respect to war risk insurance, such shorter period as shall be customary in
the worldwide aviation insurance market for such insurance in such area of the
world) after receipt by the Additional Insureds of written notice from such
insurers of such cancellation, lapse or change; (iv) provide that in respect
of the interests of the Additional Insureds in such policies the insurance
shall insure the Additional Insureds regardless of any breach or violation of
any warranties, declarations or conditions contained in such policies by
Lessee; (v) include waivers by the insurers of any rights of subrogation or
set-off, counterclaim or other deduction whether by attachment or otherwise,
in respect of any liability of any Additional Insured but only to the extent
that the Lessee has waived its right of recovery against the Additional
Insured; (vi) be primary without right of contribution from any other
insurance which is carried by any Additional Insured as respects contingent
spares coverage; and (vii) provide that the Spares Policy shall be endorsed to
include a "50/50" clause in accordance with clause AVS 103 or its equivalent.
Lessee may obtain additional spares and liability insurance on the Spare
Parts, over and above the amounts required hereunder.
12.3 Reinsurance. The risks required to be insured against pursuant to
-----------
Sections 12.1 and 12.2 shall be either directly placed in the worldwide
aviation insurance market or shall be fully reinsured in the London, French,
American and/or Nordic markets (or any other market acceptable to Lessor) with
reinsurance companies or underwriters reasonably acceptable to Lessor (the
"Foreign Reinsurers"). All such reinsurance shall comply with all the terms
and conditions for insurance required by this Section 12. With respect to
reinsurance for the risks required to be insured against pursuant to Section
12.2 above, the Foreign Reinsurers shall be directly liable to the Additional
Insureds for all claims arising under such reinsurance in accordance with
"cut-through" endorsements in which the Foreign Reinsurers agree to make
payment of reinsurance proceeds directly to the Additional Insureds in
accordance with Sections 12.5 and 12.6. Payment directly to the Additional
Insureds shall be considered a complete discharge of the Foreign Reinsurers'
liability to Lessee's primary insurers (the "Local Insurers"). The Local
Insurers shall agree that, upon knowledge of any loss or losses which may give
rise to a claim under any reinsurance policy, they shall promptly advise the
Foreign Reinsurers thereof and shall promptly furnish the Foreign Reinsurers
with all information available from time to time respecting any loss or losses
which may be insured under such reinsurance policies, but any failure to give
such notice or furnish such information shall not affect any Foreign
Reinsurer's liability to the Additional Insureds under any reinsurance
policy provided that such Foreign Reinsurer has received notice of such loss
or losses from some other source. The Local Insurers shall agree that the
Foreign Reinsurers, at their option, shall also have the right to appoint
adjusters, assessors and/or surveyors and to control any loss or losses insured
under such reinsurance policies, but failure by the Local Insurers to abide by
the foregoing agreement shall not affect any Foreign Reinsurer's liability to
the Additional Insureds under the reinsurance policy.
25
<PAGE>
12.4. Replacement Insurance. If Lessee shall fail to maintain any or all
---------------------
of the insurance as provided in this Section 12, Lessor may at its option
provide such insurance and, in such event, Lessee shall demand, reimburse
Lessor as Supplemental Rent, for the cost thereof plus interest at the
Incentive Rate. Provided that Lessor has received not less than three Business
Days notice of Lessee's failure to maintain the required insurance, Lessor
shall give Lessee not less than one Business Day's notice prior to the
placement of substitute insurance by Lessor.
12.5. Application of Proceeds in an Event of Loss of all Spare Parts.
--------------------------------------------------------------
All payments under spares insurance policies required to be maintained
hereunder as the result of the occurrence of an Event of Loss with respect to
all the Items of Equipment subject hereto shall be applied as follows: Lessor
and Lessee shall proceed diligently and cooperate fully with each other in the
recovery of any and all proceeds of insurance applicable thereto, and so much
of such insurance proceeds as shall not exceed the aggregate Lessor's Cost
hereunder shall be paid to Lessor. Any proceeds of insurance maintained by
Lessee in excess of the sums due under Section 11.1 or received after full
payment of the sums due under Section 11.1 shall be payable to Lessee.
In any event Lessor shall be entitled to receive all insurance
proceeds derived from insurance coverage paid for by Lessor,
12.6. Application of Proceeds in the Absence of a Total Event of Loss. As
---------------------------------------------------------------
between Lessor and Lessee, the insurance payments for an Event of Loss with
respect to any Item of Equipment not constituting an Event of Loss with
respect to all Items will be applied as follows:
(a) in respect of a claim for damage not exceeding $250,00 any payment
from the insurers and/or reinsurers shall be released directly to Lessee, or
to a vendor, for replacement of the Items; and
(b) in respect of a claim where damage exceeds $250,000 any payment
from the insurers and/or reinsurers shall be payable to Lessor, but will be
paid over to Lessee in reimbursement for completed repairs or, where the
approved work has been contracted out, will be paid over to the repairer, or
for replacement of the lost or damaged Items.
Any amount referred to in this Section 12.6 which is payable to Lessee
shall not be paid to Lessee if at the time of such payment an Event of Default
shall have occurred and be continuing, but shall be held by Lessor as security
for the obligations of Lessee under this Lease and such amount shall be paid to
Lessee at such time as there no longer exists any Default or Event of Default.
12.7. Reports, etc. Lessee and Lessee's independent insurance broker shall
------------
advise Lessor in writing promptly of any default in the payment of any premium
and of any other
26
<PAGE>
act or omission on the part of Lessee which might invalidate or render
unenforceable, in whole or in part, any insurance or reinsurance on the Items
of Equipment. No notice from broker shall be required unless such broker has
knowledge of such act or omission. On the Delivery Date and at least 10 days
prior to the expiration or termination date of any insurance policy maintained
with respect to the Items of Equipment pursuant to this Section 12, Lessee
shall provide Lessor with a new certificate of insurance executed by an
independent aircraft insurance broker and the written opinion of such broker
as to Lessee's continued compliance with the provisions of this Section 12.
12.8 Lessor's Additional Insurance. Lessor, at its option and at its sole
-----------------------------
expense, may obtain insurance with respect to the Items of Equipment;
provided, that no such insurance shall have the effect of making more
expensive, suspending, impairing, defeating, invalidating or rendering
unenforceable or reducing, in whole or in part, the coverage of or the
proceeds payable under any insurance required to be provided and maintained by
Lessee pursuant to this Section 12.
12.9. Lessor Not Liable For Premiums. All policies of insurance and
------------------------------
reinsurance carried hereunder shall clearly state that none of the Additional
Insureds or any assignee thereof, shall have any liability for or obligation
with respect to premiums, commissions, assessments or calls.
12.10. Government Indemnity. Notwithstanding any other provision of this
--------------------
Lease requiring Lessee to maintain insurance, Lessor agrees to accept, in lieu
of insurance against any risk with respect to the Items of Equipment,
indemnification from the United States Government or any agency or
instrumentality thereof or Title XIII Insurance issued by the FAA or any
agency or department of the United States Government, or any substantially
similar successor or replacement program of the United States Government,
against such risk in an amount which, when added to the amount of insurance
against such risk maintained by Lessee (including permitted self-insurance as
set forth herein) with respect to the Items of Equipment, shall be at least
equal to the amount of insurance against such risk otherwise required by this
Section 12.
SECTION 13
GENERAL INDEMNIFICATION
-----------------------
13.1. Scope. Lessee shall hold Lessor and its successors, assigns,
-----
officers, directors, employees and agents (each an "Indemnitee") harmless
from any and all claims, demands, suits, causes of action and all legal
proceedings, whether civil or criminal, damages, losses, liabilities
(including, but not limited to, strict liability in tort), obligations,
penalties, judgments or fines and other sanctions, and any costs and expenses
in connection therewith, including reasonable legal fees and expenses of
whatever kind and nature ("Loss") which may result from or arise out of (a)
the condition, use or operation during the Term of any
27
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Item of Equipment either in the air or on the ground, or (b) any maintenance,
service, repair, overhaul or testing of any Item during the Term, whether or
not such Item is at the time in the possession of Lessee; provided, however,
that Lessee shall not be required to indemnify any Indemnitee, (i) to the
extent that a Loss is caused by acts or events which occur prior to the
Delivery Date of such Item or after full and final compliance by Lessee with
all terms of the Lease, (ii) for any Tax or a loss of tax benefit (it being
understood that Section 10 provides for Lessee's sole liability with respect
to Taxes), (iii) for a Loss which results solely from the gross negligence or
willful misconduct of any Indemnitee, (iv) to the extent an Indemnitee suffers
a Loss as a result of (A) the voluntary transfer of any Item or the voluntary
disposition of any Item by any Indemnitee other than pursuant to Sections 11
or 17 of this Lease, (B) a transfer or disposition of any Item by any
Indemnitee from bankruptcy or other proceedings for the relief of debtors in
which any Indemnitee is the debtor, whether voluntary or involuntary, or (C)
the breach by an Indemnitee of its covenants, representations or warranties
contained herein or in any other agreement delivered in connection herewith.
Nothing herein shall be deemed to constitute a guaranty of any useful life
or present or future residual value of any Item.
If an Indemnitee has actual knowledge of any claim or liability
indemnified against under this Section 13, it shall give prompt written notice
thereof to the Lessee. In case any action, suit or proceeding shall be brought
against any Indemnitee for which indemnity may be sought under this Section
13, such Indemnitee shall notify Lessee of the commencement thereof, and
Lessee may, at its expense, participate in and, to the extent that it shall
wish assume the defense thereof, with counsel reasonably satisfactory to such
Indemnity; provided, that no Event of Default shall have occurred and be
continuing pursuant to which the Lessor is exercising its remedies under
Section 17 of this Lease. If Lessee assumes the defense of such action, suit
or proceeding, such Indemnitee may participate in such defense at such
Indemnitee's expense; provided, however, that if in the written opinion of
counsel to such Indemnitee an actual or potential material conflict of
interest exists where it is advisable for such Indemnitee to be represented by
separate counsel, the reasonable fees and expenses of such separate counsel
shall be borne by the Lessee. With respect to any amount which the Lessee is
requested by an Indemnitee to pay by reason of this Section 13, the Indemnitee
shall, if requested by the Lessee and prior to any payment, submit such
additional information to the Lessee the Lessee may reasonably request
properly to substantiate the requested payment. Notwithstanding the foregoing,
the failure of any Indemnitee entitled to indemnity hereunder to notify the
Lessee as provided in this Section 13 shall not relieve the Lessee from any
liability it may have to any Indemnitee entitled to indemnify under this
Section 13 except to the extent delay in receiving notice increased the amount
due from Lessee under this Section 13.
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If Lessee has indemnified an Indemnitee for any Loss, the Lessee shall be
subrogated to any right of the Indemnitee in respect of the matter against
which such indemnity has been paid.
13.2. Lessee's Release. Lessee hereby waives and releases any claim now
----------------
or hereafter existing against any Indemnitee on account of any and all claims,
demands, suits, causes of action and all legal proceedings, whether civil or
criminal, damages, losses, liabilities (including, but not limited to, strict
liability in tort), obligations, penalties, judgments or fines and other
sanctions, and any costs and expenses in connection therewith, including
reasonable legal fees and expenses of whatever kind and nature, which may
result from or arise out of injury to or death of personnel of Lessee or loss
or damage to property of Lessee or the loss of use of any property which may
result from or arise out of (a) the condition, use or operation during the
Term of any Item of Equipment, either in the air or on the ground, or (b) any
maintenance, service, repair, overhaul or testing of any Item during the Term,
whether or not such Item is at the time in the possession of Lessee, unless
resulting solely from the gross negligence or willful misconduct of such
Indemnitee.
13.3 Contest. If Lessee is not permitted to contest in its own name and
-------
if an Indemnitee is unable to assign to Lessee whatever right such Indemnitee
may have to bring such an action, then if requested by Lessee in writing,
Lessor shall upon receipt of an opinion of Lessee's counsel stating that
reasonable grounds exist to take the action requested, in good faith contest
the validity, applicability or amount of any liability or loss which Lessor
may incur as a result of its contesting an indemnified amount (an
"Indemnified Amount") by (a) resisting payment thereof, (b) not paying the
same except under protest if protest is necessary and proper, or (c) if payment
is made, using reasonable efforts to obtain a refund in appropriate
administrative or judicial proceedings; provided, however, that Lessor need
not contest the applicability of any such Indemnified Amount, if the matter in
question is of a continuing nature and has previously been resolved pursuant
to the provisions of this Section 13.3.
13.4. Repayment. If an Indemnitee shall obtain a repayment of any
---------
Indemnified Amount paid by Lessee, such Indemnitee shall promptly pay to
Lessee the amount of such repayment, together with the amount of any interest
received by such Indemnitee on account of such repayment.
13.5. Payment. Subject to the provisions of Section 13.3 hereof, Lessee
-------
shall pay directly to each party indemnified hereunder all amounts due under
this Section 13 within 30 days of the receipt of notice that such payment is
due.
29
<PAGE>
SECTION 14
LIENS
-----
Lessee shall not, directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to any Item of Equipment or any interest
therein, except Permitted Liens. Lessee shall promptly, at its own expense,
take such action as may be necessary to duly discharge any Lien not excepted
above if the same shall arise at any time with respect to any Item of
Equipment.
SECTION 15
RETURN OF SPARE PARTS AND RECORDS
---------------------------------
This Section 15 shall not limit any rights or remedies of Lessor under
Section 17.
15.1. Location: Storage. At the end of the Term (whether at the last day
-----------------
of the Term or the earlier termination of the Lease), Lessee shall return the
Spare Parts to Lessor at any airport in the continental United States
designated by Lessor, or at any other mutually agreeable location. Inspection
and technical acceptance of the Spare Parts shall take place at the return
location. Spare Parts Records and maintenance work documents shall be
inspected and accepted at Lessee's headquarters except that Lessee shall pay
for shipment of such records to Lessor.
The Spare Parts shall be properly packed for shipping and shall be
returned in the same working order, condition and appearance as when received
pursuant to this Lease (reasonable wear and tear excepted), in serviceable
condition and fresh from overhaul (with overhaul tag attached), clean by
international commercial airline standards and ready for installation on an
FAA registered aircraft operating under FAR Part 121. All Items of Equipment
shall be free and clear of all Liens or other encumbrances of any kind, other
than Lessor Liens.
Following completion of the Final Inspection (as described in Section
15.7) and any repairs or maintenance by this Section 15, Lessor and Lessee
shall execute (a) a Certificate of Technical Acceptance, similar in form to
the Lease Supplements, evidencing the return of the Spare Parts and records to
Lessor and the condition thereof and (b) a Lease Termination Instrument, for
the purpose of removing this Lease from the FAA records.
15.2. Replacement Items. Lessee will return all Items of Equipment to
-----------------
Lessor, subject only to those replacements, additions and modifications which
may have been made and properly documented pursuant to this Lease or as
otherwise specifically approved in writing by Lessor. Lessee shall, at least
30 days prior to the last day of the Term, furnish Lessor with a listing of
all such Items to be returned, identified by part number and serial
30
<PAGE>
number, and shall deliver to Lessor a technical report listing the
modification standard and, without prejudice to the second paragraph of
Section 15.1 above, if the Item is a time-controlled component under Lessee's
Maintenance Program, the hours and cycles accumulated since the last overhaul
and the date of the last overhaul.
15.3. Maintenance. Lessee agrees to furnish due evidence that all
-----------
service, maintenance, repairs, overhauls and modifications required under this
Lease have been performed in accordance with the Maintenance Program.
15.4. Final Inspection and Specific Return Conditions. Immediately prior
-----------------------------------------------
to the return of the Spare Parts to Lessor, at Lessee's own expense:
(a) Lessee shall make all of the Items of Equipment available to
Lessor for the purpose of conducting a detailed inspection in order to verify
that the condition of the Items complies with the requirements set forth in
this Section 15 (such inspection being referred to herein as the "Final
Inspection"). Such Final Inspection shall take place at the location of
Lessee's primary spare parts depot or other mutually acceptable maintenance
facility and Lessee shall give Lessor not less than 30 days prior written
notice of the location and commencement date of such Final Inspection. To the
extent that any portion of a Final Inspection extends beyond the last day of
the Term because of work required by this Section 15, the Term of this Lease
with respect to the Items undergoing the Final Inspection shall be deemed to
have been automatically extended, and the obligation to pay Basic Rent
hereunder continued on a pro-rated daily basis until the Final Inspection and
all necessary work on the Items shall have been concluded;
(b) Lessee shall carry out on each Item the final completion of all
deferred maintenance items and service bulletins as required in Section 6
hereof and shall complete, on a terminating action or repetitive inspection
basis, as appropriate, all Airworthiness Directives issued by the FAA which
become effective on or before the date of return of the Spare Parts. Unless
approved in writing by Lessor, Lessee shall not request a waiver or delay in AD
compliance with respect to any Item of Equipment;
(c) All time-controlled components of the Spare Parts shall be
returned in zero time condition, and all components of the Spare Parts shall
be in fully serviceable condition and shall have an overhaul tag attached; and
(d) All Items shall be boxed and crated for shipment immediately
following the Final Inspection.
15.5. Component Manuals and Documentation. Following the Final Inspection
-----------------------------------
and immediately prior to the return of the Spare Parts to Lessor, Lessee
shall: deliver to Lessor the Spare Parts Records, in current, up to date
status and all logs, data, inspection,
31
<PAGE>
modification and overhaul records required to be maintained with respect to
such Items of Equipment under any applicable rules and regulations of the FAA.
Notwithstanding the foregoing, in order to enable Lessor to prepare
for attendance at the Final Inspection of the Spare Parts pursuant to Section
15.7, Lessee shall make available to Lessor at a time reasonably in advance of
the Final Inspection, all necessary Spare Parts Records and such other
documents relating to the use, maintenance and operation of the Spare Parts as
Lessor shall reasonably request.
15.6. Corrections and Subsequent Corrections. To the extent that any Item
--------------------------------------
fails to conform to any requirement imposed by this Section 15, Lessor may, at
its option, (i) continue the Lease in effect as to such Item on a day-to-day
basis until such time as the Item is brought into compliance or, (ii) accept
the return of the Item and thereafter have any such nonconformance corrected
as soon as Lessor may reasonably arrange, at commercial rates then charged by
the person selected by Lessor to perform such correction. Any expense incurred
by Lessor for such correction shall become Supplemental Rent payable by Lessee
within 30 days following the submission of a written statement by Lessor to
Lessee, identifying the items corrected and setting forth the expense of such
correction. Lessee's obligation to pay such Supplemental Rent shall survive
the last day of the Term or other termination of this Lease .
SECTION 16
EVENTS OF DEFAULT
-----------------
16.1. Lessee's Defaults. The following events shall constitute Events of
-----------------
Default:
(a) Lessee shall fail to make any payment of Basic Rent within
three days of the date such payment is due hereunder or shall fail to make any
payment of Supplemental Rent within five days after the due date thereof
provided that Lessor has invoiced Lessee for such Supplemental Rent; or
(b) Lessee shall fail to procure and maintain all insurance
required by Section 12 hereof or Lessee shall utilize any Item at any time or
in any geographic area when the insurance required by Section 12 shall not be
in effect or shall use any Item in any area excluded from the War Risk
coverage (unless a Governmental indemnity shall then be in effect); or
(c) Lessee shall fail to perform or observe in any material respect
any other of the covenants, conditions, or agreements to be performed or
observed by it hereunder and such failure shall continue for a period in
excess of 15 days from the date written notice is received from Lessor
requiring the same to be remedied, or if such failure
32
<PAGE>
can not be remedied within this time period, failure to have taken all
reasonable measures, so that it could be remedied promptly thereafter; or
(d) Any representation or warranty made by Lessee herein or in any
document or certificate furnished to Lessor in connection herewith or pursuant
hereto shall prove to have been incorrect in any material respect when made
and, if curable, has not been cured within 30 days of notice thereof from
Lessor; or
(e) Lessee shall consent to the appointment of a receiver, trustee or
liquidator of itself or of a substantial part of its property, or Lessee
admits in writing its inability to pay its debts generally as they become due,
or makes a general assignment for the benefit of creditors, or Lessee files a
voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization in a proceeding under any bankruptcy law (as now or hereafter
in effect) or an answer admitting the material allegations of a petition filed
against Lessee in any such proceeding, or Lessee by voluntary petition, answer
or consent seeks relief under the provisions of any other now existing or
future bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
(f) Lessee disposes or threatens to dispose of all or a substantial part
of its assets in a manner which would have a material adverse effect on the
business or financial condition of Lessee; or
(g) An obligation of Lessee in excess of $5,000,000 for payment of any
indebtedness for which it is liable (contingently or otherwise), or for
payment of the deferred purchase price of any property or for payment of any
obligation under any lease of aircraft or aircraft-related equipment, which
obligation shall be accelerated and declared entirely due and owing prior to
its stated maturity unless being contested by Lessee in good faith by
appropriate proceedings; or
(h) An order, judgment or decree is entered in any proceedings by any
court of competent jurisdiction appointing, with or without the consent of
Lessee, a receiver, trustee or liquidator of Lessee or of any substantial part
of its property, or any substantial part of the property of Lessee is
sequestered, and any such order, judgment or decree of appointment or
sequestration remains in force undismissed, unstayed or unvacated for a period
of 90 days after the date of entry thereof; or
(i) A petition against Lessee in a proceeding under any bankruptcy or
other insolvency law (as now or hereafter in effect) is filed, and any decree
or older adjudging Lessee a bankrupt or insolvent in such proceeding remains
in force undismissed or unstayed and not withdrawn for a period of 90 days
after such adjudication or, in case the approval of such petition by a court
of competent jurisdiction is required, the petition as filed or amended shall
be approved by such a court as properly filed and such approval
33
<PAGE>
shall not be withdrawn or the proceeding dismissed within 90 days thereafter,
or if, under the provisions of any law providing for reorganization or
winding-up of corporations which may apply to Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of Lessee or of
any substantial part of its property and such jurisdiction, custody or control
remains in force unrelinquished, unstayed or unterminated for a period of 90
days; or
(j) Substantially all the franchises, concessions, permits and
rights required for the conduct of the business and operations of Lessee are
voluntarily suspended or revoked, cancelled or otherwise terminated; or
(k) Judgment for the payment of money in excess of $5,000,000 is
rendered against Lessee by a court of competent jurisdiction and enforceable
against Lessee's assets and the same shall remain undischarged and unstayed
for a period of 30 days; or
(l) Any governmental authority shall have condemned, seized or
appropriated all or substantially all of the property of Lessee; or
(m) Any material adverse change occurs in the financial condition
of Lessee such that in Lessor's reasonable opinion a bankruptcy filing
(whether voluntary or involuntary) may be imminent; or
(n) An Event of Default shall exist and be continuing under that
certain Aircraft Lease Agreement, dated as of January 15, 1993, between
Trustee and Lessee, or any other lease or financing of aircraft or
aircraft-related equipment between Lessor and Lessee; or
(o) Lessee shall fail to accept any Item pursuant to Section 2.1
hereof upon proper tender by Lessor following five Business Days written
notice to Lessee.
SECTION 17
RIGHTS AND REMEDIES
-------------------
17.1 Remedies. Upon the occurrence of any Event of Default and at any
--------
time thereafter so long as the same shall be continuing, Lessor may, at its
option, declare this Lease to be in default and at any time thereafter, so
long as Lessee shall not have remedied all outstanding Events of Default,
Lessor may exercise one or more of the following remedies with respect to any
or all of the Items of Equipment as Lessor, in its sole discretion, shall
elect, to the extent available and permitted by, and subject to compliance
with any mandatory requirements of, applicable law then in effect:
34
<PAGE>
(a) Pursuant to Section 4.4, apply all or any portion of the Security
Deposit to Lessor's damages attributable to such Event of Default or to the
costs of curing such Event of Default; provided, however, the Event of Default
shall continue until the Security Deposit is restored to its original amount.
(b) Proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by Lessee of the applicable covenants of this
Lease and to recover damages for the breach thereof.
(c) Terminate this Lease and demand that Lessee, and Lessee shall upon
written demand of Lessor and at Lessee's expense, forthwith return the Spare
Parts to Lessor in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Section 15 hereof as if the Spare
parts were being returned at the end of the Term; or Lessor may enter upon the
premises where the Spare Parts are located and take immediate possession of
and remove the same by summary proceedings or otherwise, all without liability
for or by reason of such entry or taking of possession whether for the
restoration of damage to property caused by such taking or otherwise.
(d) In addition to all other legal and equitable rights of Lessor, upon
notice to Lessee, Lessor may, following an Event of Default:
(i) lease the repossessed Spare parts or any Item thereof to any
third party upon such terms and conditions as Lessor may determine;
(ii) sell the Spare Parts, or any Item, to the highest bidder at
public auction or private sale.
The total proceeds of any such leases and/or sales, less expenses of Lessor
(including attorneys' fees), to the extent actually received and retained by
Lessor, shall be applied to the total amount due to Lessor as provided herein
and Lessee shall immediately pay to Lessor any deficiency.
(e) On the date on which Lessor shall become entitled to repossession
of the Spare Parts, Lessor, in addition to all other remedies herein provided,
may by notice to Lessee, demand that Lessee pay, and Lessee shall pay, on the
first Basic Rent Payment Date following said notice, (i) any due and unpaid
Basic Rent and Supplemental Rent, together with interest at the Incentive Rate
from the due date to the date the same are paid, and (ii) as liquidated
damages for loss of a bargain and not as a penalty, an amount equal to the
difference between (a) the sum of all remaining payments of Basic Rent falling
due hereunder after the date of said notice, discounted to the date of said
notice at a rate of interest equal to the Prime Rate on a monthly basis, and
(b) the fair market rental (as determined by an independent aviation appraiser
of recognized standing, selected by Lessor) of the Spare parts for the
remaining Term, discounted at the same rate and frequency
35
<PAGE>
specified in (i) above; provided, however, if Lessor has already leased the
Spare Parts as permitted by Section 17.1(d)(i) above, the rental specified in
such lease (if it is on substantially the same terms and conditions as this
Lease) shall be conclusive as to the ``fair market rental''.
17.2. Further Rights. Lessee shall be liable for any and all unpaid Rent
--------------
and for all reasonable legal fees and other costs and expenses incurred by
reason of the occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto, including all costs and expenses incurred in
connection with the return of any Item in accordance with the terms of Section
15 hereof or in placing such Item in the condition and with airworthiness
certificates as required by Section 15.
17.3. Remedies Cumulative. Except as otherwise expressly provided in
-------------------
Section 18.1 hereof, no remedy referred to in this Section 17 is intended to
be exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor 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 of such other remedies. No express or implied waiver by Lessor of
any Event of Default shall in any way be, or be construed to be, a waiver of
any future or further Event of Default.
SECTION 18
MISCELLANEOUS
18.1. Severability, Amendment, Construction and Applicable Law. Any
--------------------------------------------------------
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. No term or provision of this Lease may be changed,
waived, discharged or terminated orally, but only by a written instrument
signed by the party against which the enforcement of the change, waiver,
discharge or termination is sought. The captions in this Lease are for
convenience of reference only and shall not define or limit any of the terms
or provisions hereof. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
18.2. Notices. All notices provided for herein shall be in writing and
-------
shall be deemed to have been given when delivered personally or when telexed
or telefaxed and receipt confirmed in a commercially reasonable manner or 10
days after deposit in the United States mail, registered first class postage
prepaid, addressed as follows:
36
<PAGE>
If to Lessee: World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, VA 22071
Attn: President
Telefax: (703) 834-9412
If to Lessor: GATX Capital Corporation
Four Embarcadero Center, Suite 2200
San Francisco, CA 94111
Attn: Contract Administration
Telefax: (415) 955-3444
or to such other address as any party may designate for itself by written
notice to the other party.
18.3. Lessor's Right to Perform. If Lessee fails to perform any of its
-------------------------
obligations hereunder, Lessor may, following five days (or one Business Day in
the case of insurance) notice to Lessee, discharge such obligation, and the
amount of the expenses of Lessor incurred in connection with such discharge,
together with interest thereon at the Incentive Rate, shall be deemed
Supplemental Rent, payable by Lessee upon Lessor's demand.
18.4. Counterparts. At least three counterparts of this Lease have been
------------
executed by the parties hereto, each of which shall be deemed to be an
original but all of which taken together shall constitute a single agreement.
One counterpart has been prominently marked "Lessor's Copy"; one counterpart
has been prominently marked "FAA Copy" and shall be filed for recordation
with the FAA.
18.5. Assignment by Lessor. Lessor shall have the absolute right to
--------------------
transfer or assign to any person, firm, corporation or other entity any or all
of Lessor's rights, obligations, benefits and interests under this Lease,
including, without limitation, the right to receive Rent or any other payment
due under this Lease, the right to transfer or assign title to any Item of
Equipment and the right to make all waivers and agreements, to give all
notices, consents and releases, to take all action upon the occurrence of an
Event of Default, or to do any and all other things which Lessor is or may
become entitled to do under this Lease. Lessee acknowledges that, if Lessor
should sell or transfer to a third party all of Lessor's interest under this
Lease and in the Spare Parts, Lessor shall thereupon be relieved of all of its
obligations hereunder and Lessor's transferee shall succeed to all of Lessor's
rights, interests and obligations under this Lease as though Lessor's
transferee had been the initial lessor hereunder; provided, however, that, in
the event of a transfer or assignment of less than the entire interest of
Lessor or of a security interest in any Item, Lessor shall remain liable
hereunder. In the event of a transfer of Lessor's entire interest in the Spare
Parts and the Lease, except following an Event of Default, Lessor agrees that
37
<PAGE>
such transferee will have a net worth of at least $50,000,000, unless the
obligations of the Lessor hereunder are fully guaranteed by an entity with
such a net worth.
18.6. Service of Process; Waiver of Immunities. Lessee and Lessor each
----------------------------------------
(a) irrevocably submits itself to the nonexclusive jurisdiction of the Supreme
Court of the State of New York, New York County, or the United States District
Court for the Southern District of New York, for the purpose of any suit,
action or other proceeding arising out of this Lease, or the subject matter
hereof or any of the transactions contemplated hereby or thereby, brought by
Lessor or its successor, subrogees or assigns, (b) irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such New York State or United States Federal court and (c) to the extent that
Lessee or Lessor has or hereafter may acquire any immunity from jurisdiction
of any court or from any legal process, waives such immunity, and agrees not
to assert, by way of motion, as a defense or otherwise, in any such suit,
action or proceeding the defense of sovereign immunity, any claim that it is
not personally subject to the jurisdiction of the above-named New York State
or United States Federal courts by reason of sovereign immunity or otherwise,
that it is immune 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, or attachment either prior
to judgment or on any day of execution, by reason of sovereign immunity, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper, or that this Lease or the
subject matter hereof may not be enforced in or by such courts.
The obligations of Lessee payable under this Lease in one currency (the
"first currency") may be discharged by an amount paid by Lessee pursuant to
any order or judgment of any court or other tribunal in another currency (a
"second currency"), but only to the extent that the amount so paid in a
second currency on prompt conversion to the first currency under normal
banking procedures yields the amount of the first currency due hereunder, and
Lessee shall indemnify Lessor and any other person entitled to payments
hereunder against any such shortfall. In the event that any payment in a
second currency by Lessee to any such person or entity, whether pursuant to a
judgment or otherwise, upon conversion and transfer to the designated place of
payment therefore does not result in payment of such amount of the first
currency, such person or entity shall have a separate cause of action against
Lessee for the additional amount necessary to yield the amount due and owing
to such person.
18.7. Language. The English language version of this Lease will be the
--------
official, controlling version and any dispute over the interpretation of the
Lease, whether directly between the parties or involving the courts of the
United States or elsewhere, shall be resolved based upon the Lease as written
in the English language, any interpretation thereof into another language
being merely for convenience of understanding. All notices, reports and other
communications given under this Lease shall be in the English language.
38
<PAGE>
18.8. Costs and Expenses. Each party shall be responsible for its costs
------------------
and expenses, including attorneys' fees, of negotiation and documentation of
this transaction. In the event of any litigation between the parties over this
Lease or the subject matter hereof, the prevailing party shall, in addition to
whatever other damages, costs and expenses are recovered, be entitled to
recover its costs and expenses of such litigation, including attorneys' fees
and expenses. Lessee shall be responsible for the cost, including attorneys'
fees and expenses, of registering this Lease in any foreign jurisdiction.
18.9. Survival. The indemnities of Lessee set forth in this Lease shall
--------
survive the expiration or other termination of this Lease to the extent
required for full performance and satisfaction thereof.
18.10. Further Assurances. Each party hereto shall, at its respective
------------------
expense, promptly and duly execute and deliver to the other party such further
documents and promptly take such further action not inconsistent with the
terms hereof as the other party may from time to time reasonably request in
order to more effectively carry out the intent and purpose of this Lease or to
perfect and protect the rights and, with respect to Lessor, remedies created
or intended to be created hereunder.
18.11. Entire Agreement. This Lease and the Lease Supplements executed
----------------
pursuant hereto constitute the entire agreement between Lessor and Lessee
regarding the Spare Parts and there are no other prior or contemporaneous
written or oral understandings with regard to the subject matter hereof.
18.12. Successors and Assigns. This Lease shall be binding on and shall
----------------------
inure to the benefit of Lessee, Lessor and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed by their authorized officers as of the date first above written.
GATX CAPITAL CORPORATION
ATTEST:
______________________ By: ___________________________
______________________Secretary Its: ___________________________
WORLD AIRWAYS, INC.
ATTEST:
BA
______________________ By: ___________________________
______________________Secretary Its: C.F.O.
___________________________
39
<PAGE>
LEASE SUPPLEMENT NO.
---
THIS LEASE SUPPLEMENT NO. ___ is dated _______________, 1993 (this "Lease
Supplement") between GATX CAPITAL CORPORATION, a corporation organized under
the laws of the State of Delaware ("Lessor"), and WORLD AIRWAYS, INC., a
corporation organized under the laws of the State of Delaware ("Lessee").
RECITALS
Lessor and Lessee have heretofore entered into a certain Spare Parts
Lease Agreement, dated as of April 15, 1993 (the "Lease"), which provides for
the execution and delivery of Lease Supplements in substantially the form
hereof for the purpose of leasing the Items of Equipment in accordance with
the terms thereof.
NOW, THEREFORE, in consideration of the premises, and pursuant to Article
2 of the Lease, Lessor and Lessee hereby agree as follows:
The terms used herein shall have the meaning given to such terms in the
Lease.
Lessee represents and warrants that (i) all of the Items of Equipment
described in Appendix 1 attached hereto have been fully assembled and conform
to all applicable performance criteria, and (ii) upon Lessor's payment in full
of the Lessor's Cost thereof set forth below, Lessor shall have good title to
the Items free and clear of all Liens except Permitted Liens.
Lessee confirms that on the date hereof (i) all of the Items described in
Appendix 1 attached hereto were duly accepted by Lessee and became subject to
the Lease; (ii) the Term of the Lease with respect to said Items commenced;
and (iii) Lessee became obligated to pay to Lessor Rent as provided in the
Lease.
The total Lessor's Cost of the Items subject to this Lease Supplement is
$_______.
The Spare Parts subject hereto will be maintained by or on behalf of
Lessee at _________.
EXHIBIT A
----------------------------------
to Spare Parts Lease Agreement
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers on the date first
above written.
LESSOR: GATX CAPITAL CORPORATION
By: _________________
Its: _________________
LESSEE: WORLD AIRWAYS, INC.
By: _________________
Its: _________________
2
<PAGE>
APPENDIX A
to
LEASE SUPPLEMENT NO.__
ITEMS OF EQUIPMENT
see attached ____ pages
3
<PAGE>
[FORM OF ENGINE MORTGAGE]
This ENGINE CHATTEL MORTGAGE is dated as of May 24, 1993, by and between
WORLD AIRWAYS, INC., a Delaware corporation ("Mortgagor" or "World", and
GATX CAPITAL CORPORATION, a Delaware corporation ("Mortgagee" or "GATX").
RECITALS
--------
World and GATX are parties to that certain Spare Parts Lease Agreement,
dated as of April 15, 1993 (the "Spares Lease"), which is being filed for
recordation with the Federal Aviation Administration contemporaneously
herewith.
World has agreed to grant GATX a mortgage on one General Electric
CF6-50C2 engine, as defined herein, in order to provide additional security
for the performance of World under the Spares Lease.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
-----------
have the meanings assigned to such terms in the Spares Lease. Certain terms
used herein are defined as follows:
"Collateral" shall have the meaning assigned in Section 2 hereof.
----------
"Engine" means the aircraft engine described in the Mortgage
------
Supplement hereto or any engine substituted therefor pursuant to the
provisions hereof, including in each case the Parts owned by the Mortgagor
incorporated or installed therein or attached thereto, and, after removal from
such Engine, for so long as such Part has not been installed on another
engine, but excluding any replacement Parts owned by any person other than the
Mortgagor and subject to a pooling or borrowing arrangement customary in the
airline industry and entered into in the ordinary course of the Mortgagor's
business; provided, however, that at such time as a replacement Engine shall
-----------------
be substituted pursuant to the applicable provisions hereof, the replaced
Engine shall cease to be an "Engine" hereunder.
"Event of Default" shall mean each of the following events:
(a) an "Event of Default" has occurred and is continuing under the
Spares Lease; or
EXHIBIT B
----------------------------------
to Spare Parts Lease Agreement
<PAGE>
(b) an event of default shall be declared and the indebtedness
thereunder accelerated pursuant to the Senior Mortgage.
"Event of Loss" shall mean, with respect to the Engine, any of the
-------------
following: (a) loss of such Engine or the use thereon due to theft,
disappearance for a period of 30 consecutive days or more, destruction, damage
beyond repair or rendition of such Engine permanently unfit for normal use for
any reason whatsoever; (b) any damage to such Engine which results in an
insurance settlement with respect to such Engine on the basis of a
constructive agreed or actual total loss; (c) the condemnation, confiscation,
requisition, sequestration, forfeiture or other loss of title to such Engine;
(d) the confiscation or seizure which deprives Mortgagor of the use or
possession of, or requisition of use of, such Engine for a period in excess of
60 consecutive days; (e) as a result of any rule, regulation, order or other
action by the FAA or other governmental body having jurisdiction, the use of
such Engine in the normal course of air transportation of persons shall have
been prohibited for a period of 180 days or more unless Mortgagor, prior to
the expiration of such period, shall have caused to be undertaken and
diligently carried forward all steps which are necessary or desirable to
permit the use of such property in the normal course of air transportation, or
in any event, if such use shall have been prohibited for a period of twelve
consecutive months.
"Lease" shall mean the Aircraft Lease Agreement, dated as of January
-----
15, 1993, between GATX, as Lessor, and World, as Lessee.
"Lien" is defined in Section 5 below.
----
"Mortgage" means this Engine Chattel Mortgage, between Mortgagor and
--------
Mortgagee, as the same may be supplemented or amended from time to time in
accordance with the terms hereof.
"Obligations" means all and "Obligation" means any of the
----------- ----------
obligations of the Mortgagor, now or hereafter existing under the Spares Lease
whether in respect of payment of Rent or any other amounts thereunder, and all
obligations of Mortgagor now or hereafter existing under this Mortgage.
"Parts" means all electronics, avionics, parts, appliances,
-----
instruments, and other equipment and accessories owned by Mortgagor and from
time to time incorporated or installed in or attached to the Engine.
"Permitted Liens" shall mean (a) the respective rights of the
---------------
parties hereunder and of others as permitted under this Agreement; (b) Liens
for taxes, assessments or other governmental charges either not yet due or
being contested in good faith (and for the payment of which adequate reserves
have been provided) by appropriate proceedings so long as such proceedings do
not involve any material danger of the sale, forfeiture, loss or
<PAGE>
loss of use of the Engine or any interest therein; (c) materialmens,
mechanics, workers, repairers, employees, or other like Liens arising in the
ordinary course of business for amounts the payment of which is either not yet
due or is being contested in good faith (and for the payment of which adequate
reserves have been provided) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of use of the Engine or any interest therein; (d) Liens arising out of any
judgment or award unless the judgment secured shall not, within 60 days after
entry thereof, have been discharged, vacated or reversed or Mortgagor has
commenced an appeal or proceeding for review which is being prosecuted in good
faith by Lessee and with respect to which there shall have been secured a stay
of execution pending such appeal or proceeding for review; (e) any other Liens
with respect to which Mortgagor shall have provided security in form and
amount acceptable to Mortgagee; (f) Lessor Liens; and (g) this Mortgage.
"Proceeds" means whatever is receivable or received when the Engine
--------
or any Part is sold, exchanged, collected, leased or otherwise disposed of,
including, without limitation, all amounts payable or paid under insurance,
requisition or other payments as the result of any loss (including an Event of
Loss) or damage to such Engine.
"Senior Mortgage" shall mean that certain Aircraft Engine Security
---------------
Agreement, dated as of December 1, 1989, between World, as debtor, and PK
Finans International Corporation, a Delaware corporation, as secured party,
relating to the Engine.
2. Security. In order to secure the performance by the Mortgagor of each
--------
and every Obligation, the Mortgagor hereby assigns, mortgages, pledges,
hypothecates and grants to Mortgagee a lien and continuing security interest
in and to, the following:
(a) all of Mortgagor's right, title and interest in and to the Engine
described in the Mortgage Supplements hereto;
(b) all right, title and interest of World in and to all warranties
(including, without limitation, warranties of title, merchantability, fitness
for a particular purpose, quality and freedom from defects) and rights of
recourse with regard to the Engine against manufacturers, assemblers, sellers
and others in connection with the foregoing, if any, but without any
representation or warranty with respect thereto by World;
(c) all documents, instruments, chattel paper and general intangibles
held, issued or arising in connection with any of the foregoing;
(d) all rents, issues, profits, products, revenues, earnings and other
income of the foregoing, and all the right, title and interest of every nature
whatsoever of World in and to the same and every part thereof;
<PAGE>
(e) all Proceeds of the foregoing.
All of the foregoing items are sometimes collectively referred to
hereinafter as the "Collateral".
3. Representations and Warranties. Mortgagor hereby represents and
------------------------------
warrants to Mortgagee that:
(a) Corporate Existence and Qualification. Mortgagor is a
-------------------------------------
corporation duly incorporated and validly existing under the laws of the state
or county of its incorporation and is an air carrier of persons and property
in air transportation, registered, licensed or otherwise certificated or duly
authorized by the FAA and any other appropriate aeronautics authority to
engage in such air transportation and is duly qualified or otherwise
authorized to do business as an air carrier in all jurisdictions in which it
has air routes, except for jurisdictions where failure to so qualify or obtain
authorization would not have a material adverse effect on the business of
Mortgagor and would not involve any material danger of the sale, forfeiture or
loss of the Engine or the impairment of the value thereof.
(b) Authority. Mortgagor has full corporate power and authority
---------
to enter into and perform this Mortgage and each Mortgage Supplement; and the
execution, delivery and performance of this Mortgage and each Mortgage
Supplement have been duly authorized by all necessary corporate action on the
part of Mortgagor, do not require any stockholder approval or approval or
consent of any trustee or holders of any Debt or other obligations of
Mortgagor except such as have been duly obtained and do not contravene any
provision of any law, governmental rule, regulation or order binding on
Mortgagor, or any applicable interpretation or administration of any such law,
governmental rule, regulation or order, or contravene the certificate of
incorporation, by-laws or other organic documents of Mortgagor or any
indenture, mortgage, contract or other agreement or instrument to which
Mortgagor is a party or by which it or any of its assets may be bound or
affected.
(c) Governmental Approvals. Except for the filing of this Mortgage
----------------------
and each Mortgage Supplement with the FAA, neither the making nor performance
by Mortgagor of this Mortgage or the Mortgage Supplements, nor the
consummation of any of the transactions by Mortgagor contemplated hereby or
thereby, requires the consent or approval of, the giving of notice to, the
registration or filing for recordation with, or the taking of any other action
in respect of, the Government or any political agency, subdivision or
instrumentality thereof, except such as have been obtained, made or taken.
(d) No Conflicting Agreements. Mortgagor is not a party to any
-------------------------
agreement or instrument or subject to any charter or other corporate
restriction which individually or in the aggregate is, in the reasonable
judgment of Mortgagor, likely to materially adversely affect its ability to
perform its obligations under this Mortgage or the Mortgage Supplements.
<PAGE>
(e) Protective Filings. Other than the filing for recordation
------------------
of this Mortgage and each Mortgage Supplement with the FAA, no other filing or
recording of any document and no other action is necessary or advisable in the
United States of America, in order to establish and perfect Mortgagee's
security interest in the Engines as against Mortgagor and any third parties
claiming against or through Mortgagor, including trustees, custodians and
other representatives or similar officials, under any bankruptcy or
liquidation law or regulations, or other regulations, or otherwise.
(f) Title to Engines. Mortgagor has, and at all times shall have,
----------------
good title to the Engines free and clear of all Liens except the Senior
Mortgage and Permitted Liens, and has, and at all times shall have, full power
and authority to mortgage and grant a lien and security interest in the
Engines as herein provided; and
(g) Filing; Binding Obligations. This Mortgage will be duly filed
---------------------------
for recording in accordance with the Federal Aviation Act against the Engine;
and this Mortgage has been duly executed and delivered by Mortgagor and
constitutes a legal, valid and binding obligation of Mortgagor, enforceable
against Mortgagor in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
4. Limitations on Mortgagee's Obligations. If required by Mortgagee,
--------------------------------------
at any time upon or following an Event of Default hereunder, any Proceeds,
when collected by Mortgagor, whether consisting of cash, checks, notes,
drafts, bills of exchange, money orders, commercial paper of any kind
whatsoever or other documents, received in payment for any Collateral, shall
be promptly forwarded to Mortgagee by Mortgagor in precisely the form
received, except for its endorsement when required, and until so turned over,
any such Proceeds shall be deemed to be held in trust by Mortgagor for and as
the property of Mortgagee. Such Proceeds, when delivered, shall continue to be
Collateral for the Obligations of Mortgagor and shall not constitute payment
thereof.
5. Liens. Mortgagor will not create, incur or suffer or permit to exist
-----
any mortgage, pledge, lien, charge, encumbrance, lease, exercise of rights,
security interest or claim (each a "Lien") upon or with respect to the Engines
except the lien of this Mortgage, the lien of the Senior Mortgage, Permitted
Liens and other Lien consented to in writing by Mortgagee. The Obligations
secured by the Senior Mortgage shall not exceed $1,378,000 at the time of
execution and delivery of this Mortgage. Mortgagor agrees not to increase the
outstanding principal balance due under the Senior Mortgage at any time.
6. Collateral Securities. Mortgagor agrees not to sell, transfer,
----------------------
assign or in any way dispose of its interest in the Engine without the express
written consent of Mortgagee. Any cash or other Proceeds and the proceeds of
any insurance maintained in accordance
<PAGE>
with this Agreement or otherwise obtained and maintained for the benefit of
the Mortgagor shall, pending application or distribution as otherwise provided
in this Mortgage, if an Event of Default exists and is continuing hereunder be
paid over to or held by Mortgagee and shall be invested by Mortgagee from time
to time in direct obligations of the United States of America.
7. Remedies. If any Event of Default shall occur and be continuing,
--------
Mortgagee may, to the extent permitted by applicable law, take any of the
following actions:
(a) exercise all of the rights and remedies upon default, in
foreclosure and otherwise, available to mortgagees, pledgees or secured
parties under the provisions of applicable law;
(b) institute legal proceedings to foreclose upon and against the lien
and security interest created by this Mortgage, to recover judgment for any
Obligation due and owing and to collect the same out of the Engine or the
Proceeds of any sale thereof;
(c) institute legal proceedings for the sale, under the judgment or
decree of any court of competent jurisdiction, of the entirety or any part of
the Engine; or
(d) personally or by agents or attorneys enter upon any premises where
the Engine or any portion thereof may then be located and take possession of
all or any part thereof, and hold, store and keep idle or lease, operate or
otherwise use or permit the use of, the Engine or any portion thereof, for
such time and upon such terms as Mortgagee may in its discretion deem to be in
its best interest, and demand, collect and retain all rent, earnings and other
sums due and to become due in respect of the same from any party, accounting
for net earnings, if any, arising from such use and charging against all
receipts from the use of the same or from the sale thereof, by court
proceedings or pursuant to the provisions below, all other costs, expenses,
charges, damages and other losses resulting from such use.
If Mortgagee elects to foreclose upon and against the lien and
security interest created in the Engine by this Mortgage, Mortgagor shall,
upon demand of Mortgagee, deliver to Mortgagee such property at such time or
times and place or places as Mortgagee may reasonably specify; and Mortgagee
is hereby authorized and empowered, to the extent permitted by applicable law,
to enter upon the premises where such property may be located and take
possession of and remove the same. To the extent permitted by applicable law,
Mortgagee may thereafter in a commercially reasonable manner sell, lease and
dispose of, or cause to be sold, leased and disposed of, the entirety or any
part of the Engine at one or more public or private sales, leasing or other
dispositions, at such places and times and on such terms and conditions as
Mortgagee may deem fit, provided that at any such sale Mortgagor or Mortgagee
may bid for and purchase such property. If practicable or if required by law,
Mortgagee agrees to provide Mortgagor prior written notice of the date
<PAGE>
fixed for any public sale of the Engine or of the date on or after which will
occur the execution of any contract providing for any private sale of any of
the Engine and any such sale shall be conducted in general so as to afford
Mortgagor a reasonable opportunity to bid.
8. Application of Proceeds. If Mortgagee shall have exercised any of
-----------------------
its rights or remedies pursuant to this Mortgage or otherwise pursuant to
applicable law, the Proceeds of any sale, lease or other disposition of
the Engine and all other sums realized by Mortgagee pursuant to this Mortgage
or any proceedings hereunder shall be applied in the following order of
priority:
First: to the payment of the reasonable costs and expenses of such
sale, lease, disposition or other realization, including reasonable
compensation to Mortgagee's agents and counsel, and all expenses, liabilities
and advances made or incurred by Mortgagee in connection therewith, including
without limitation, taxes upon or with respect to the sale, lease,
disposition or realization and the payment of taxes and liens, if any, prior
to the lien and the security interest of this Mortgage (except any taxes or
liens to which the respective sale, lease, disposition or realization shall
have been subject);
Second: to the payment of all amounts due and payable by the
Mortgagor with respect to the Obligations;
Third: to the extent that any Obligations are not yet due, Mortgagee
shall hold the remaining balance in a segregated cash collateral account to
secure such remaining Obligations for application as provided above; and
Fourth: Upon payment in full of all Obligations due or become due,
the balance, if any, to Mortgagor or to such other persons as may lawfully be
entitled to the remainder or as any court of competent jurisdiction may
direct.
9. General Provisions.
------------------
(a) Counterparts. This Mortgage may be simultaneously executed in
------------
several counterparts, each of which shall be deemed to be an original, and all
such counterparts together shall together constitute but one and the same
instrument.
(b) Severability, Amendment. Construction and Applicable Law. Any
----------------------- -------------------------------
provision of this Mortgage which is prohibited or unenforceable in any
jurisdiction shall, to the extent permitted by applicable law, as to such
jurisdiction, be ineffective to the extent of such prohibition or
enforceability 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 Mortgage may be changed, waived, discharged or terminated
orally, but only by a written
<PAGE>
instrument signed by the party against the enforcement of the change, waiver
discharge or termination is sought, The captions in this Mortgage are for
convenience of reference only and shall not define or limit any of the terms
or provisions hereof. This Mortgage shall in all respects be governed by, and
construed in accordance with, the laws of the State of California, including
all matters of construction, validity and performance.
(c) Notices. All notices, requests, demands or other
-------
communications required hereunder or given pursuant hereto shall be in writing
unless otherwise expressly provided and shall become effective by hand or
received by telex, telecopier, telegram or registered mail, postage prepaid,
addressed as follows:
If to Mortgagor:
World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, VA 22071
Attn: President
Telefax: (703) 834-9412
If to Mortgagee:
GATX Capital Corporation
Four Embarcadero Center, Suite 2200
San Francisco, CA 94111
Attn: Contract Administration
Telefax: (415) 955-3444 or (415) 955-3493
or at such other address as any party may from time to time designate for
itself by written notice to the other party,
(d) Mortgagee's Right to Perform. If Mortgagor fails to perform
----------------------------
any of its obligations hereunder, upon 10 business days' prior notice to
Mortgagor, Mortgagee may, but shall have no obligation to, discharge such
obligation.
10. Insurance. Mortgagee, at its own expense, shall maintain in effect
---------
with insurers of recognized reputation and financial responsibility: (a)
all-risk ground and flight insurance covering the Engine, all-risk spares
coverage with respect to the Engine while removed from an aircraft and
replaced; and (b) war risk, hijacking(air piracy), confiscation,
nationalization, expropriation, and related perils coverages. All such
insurance shall be in full force and effect throughout any geographical areas
(except as are excluded from War Risk coverage) where the Engine is located,
shall be payable in Dollars in the United States and shall be in an amount of
not less than $3,000,000. Any insurance carried in accordance with this
Section 10 shall not contain a provision for deductible or self-insured
amounts in
<PAGE>
excess of $25,000, unless installed on an aircraft, in which case the
deductible shall be no more than $100,000. Any policies carried in accordance
with this Section 10 shall (i) name the Mortgagee as loss payee; (ii) provide
that if such insurance is cancelled for any reason whatever, or the same is
allowed to lapse for nonpayment of premium, or if there is any adverse change
in policy terms and conditions, such cancellation, lapse or change shall not be
effective until 30 days (and with respect to war risk insurance, such shorter
period as shall be customary in the worldwide aviation insurance market for
such insurance in such area of the world) after receipt by the Mortgagee of
written notice from such insurers of such cancellation, lapse or change; (iii)
provide that in respect of the interests of the Mortgagee in such policies the
insurance shall insure the Mortgagee regardless of any breach or violation of
any warranties, declarations or conditions contained in such policies by
Mortgagor; (iv) include waivers by the insurers of any rights of subrogation
or set-off, counterclaim or other deduction whether by attachment or
otherwise, in respect of any liability of Mortgagee; (v) in the case of
Contingent Hull, Spare or Total Loss Only coverage be primary without right of
contribution from any other insurance which is carried by Mortgagee; and (vi)
provide that the Spares Policy and the Hull War and Allied Risks Policy shall
each be endorsed to include a "50/50" clause in accordance with clause AVS 103
or its equivalent.
Mortgagor may obtain additional spares and liability insurance on the
Engine, over and above the amounts required hereunder, provided the same in no
way impairs the coverage afforded Mortgagee hereunder.
11. Termination. Unless otherwise provided herein, this Mortgage and the
-----------
lien and security interest granted by this Mortgage shall terminate at the
time when all Obligations shall be fully paid and performed. Upon termination
of this Mortgage as a whole or in part, as aforesaid, Mortgagee shall execute
and deliver to Mortgagor, at Mortgagor's expense, such instruments of release
and termination as shall be appropriate in the premises.
12. Confirmation of the Rights of the Senior Mortgage. The Mortgagee
-------------------------------------------------
hereby confirms and agrees, for the benefit of the Mortgagor, that
notwithstanding anything to the contrary contained herein, Mortgagee's rights
and remedies under this Mortgage are subject in all respects to the rights of
the mortgagee under the Senior Mortgage.
13. Collateral Substitution. If World sells the Engine or if an Event of
-----------------------
Loss occurs World shall immediately, or within 60 days of the occurrence of such
Event of Loss, provide to the Mortgagee Substitute Collateral, in which event
the Mortgagee shall at World's expense promptly release and discharge the
Mortgagee's Lien on the Engine and other Collateral and such Substitute
Collateral and the Proceeds thereof shall be deemed the "Engine" for all
purposes of this Agreement.
<PAGE>
"Substitute Collateral" shall mean either (a) an engine suitable for
installation on DC-10-30 or MD-11 aircraft which has a Value of at least the
Minimum Value after subtracting from such Value the outstanding amount of any
senior lien then on such engine (it being understood that an engine with more
than one senior lien (not counting Permitted Liens) will not be eligible to be
Substitute Collateral), (b) a letter of credit from a bank reasonably
acceptable to the Mortgagee with face amount equal to the Minimum Value and in
form reasonably acceptable to the Mortgagee or (c) other collateral reasonably
acceptable to the Mortgagee. To constitute Substitute Collateral under clause
(a) or (c), World must grant to the Mortgagee a perfected Lien thereon,
subject to no other Liens other than Permitted Liens and one senior Lien.
"Value" shall mean the fair market sales value of the asset in
question as mutually agreed by World and the Mortgagee, or failing such
agreement within 15 days after request therefor by either party, by an
independent appraiser mutually agreed to by World and the Mortgagee. The fair
market sales value shall be the cash sale price of the asset in question which
would be realized by a lienholder selling the asset in a foreclosure context
and shall assume the asset to be in the lesser of its actual condition or
one-half time between overhauls or major repairs. The costs of the appraiser,
if any, shall be paid by World.
"Minimum Value" shall mean $2.0 million until December 31, 1994 and
$1.0 million thereafter, provided that no Event of Default has occurred at any
time under the Aircraft Lease or Spares Lease.
IN WITNESS WHEREOF, the undersigned have executed this Mortgage as of the
day and year first above written.
WORLD AIRWAYS, INC.,
Mortgagor
By: _________________________
Its: _________________________
GATX CAPITAL CORPORATION,
Mortgagee
By: _________________________
Its: _________________________
<PAGE>
MORTGAGE SUPPLEMENT NO. 1
MORTGAGE SUPPLEMENT NO. 1 dated May __, 1993, by and between WORLD
AIRWAYS, INC., a Delaware corporation ("Mortgagor" or "World"), and GATX
CAPITAL CORPORATION, a Delaware corporation ("Mortgagee" or "GATX").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Mortgagor and Mortgagee are parties to that certain Engine
Chattel Mortgage, dated as of May 24, 1993 (the "Mortgage"); and
WHEREAS, the Mortgage provided for the execution and delivery of a
Supplement thereto, which shall particularly describe the Engine and any
replacement engine included in the Collateral covered by the Mortgage
(capitalized terms used and not defined herein having the meaning specified by
reference to the Mortgage).
NOW, THEREFORE, the Mortgagor hereby acknowledges that the Engine
referred to below in this Mortgage Supplement has been delivered to the
Mortgagor on the date hereof and is part of the "Collateral" under the
Mortgage.
One aircraft engine having 750 or more horsepower or the equivalent
thereof, identified as follows:
MANUFACTURER MODEL SERIAL NUMBER
- ------------ ----- -------------
General Electric CF6-50C2 517-309
Complete with one transportation and storage stand and one [manufacturer]
Quick Engine Change (QEC) Kit bearing Serial Number ________.
IN WITNESS WHEREOF, the Mortgagor and Mortgagee have caused this Mortgage
Supplement to be duly executed by their officers thereunto duly authorized on
the day and year first above written.
WORLD AIRWAYS, INC.,
Mortgagor
By: _____________________
Its: _____________________
GATX CAPITAL CORPORATION,
Mortgagee
By: _____________________
Its: _____________________
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MD-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O.#
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
ABH7760-501 MODULE 1 MCDONNELL DOUGLAS MD27500
- --------------------------------------------------------------------------------
H05A0040-1 ANNUNCIATOR CONTROL UNIT 1 MCDONNELL DOUGLAS MD27500
- --------------------------------------------------------------------------------
H05A0040-1 ANNUNCIATOR CONTROL UNIT 1 MCDONNELL DOUGLAS MD27500
- --------------------------------------------------------------------------------
H05A0040-1 ANNUNCIATOR CONTROL UNIT 1 MCDONNELL DOUGLAS MD27500
- --------------------------------------------------------------------------------
H05A0040-1 ANNUNCIATOR CONTROL UNIT 1 MCDONNELL DOUGLAS MD27500
- --------------------------------------------------------------------------------
622-5272-020 HF TRANSCEIVER 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
622-5272-020 HF TRANSCEIVER 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
622-5272-020 HF TRANSCEIVER 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
65066-06 PUMP 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
65066-06 PUMP 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
65066-06 PUMP 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
65066-06 PUMP 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
65066-06 PUMP 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
792-6140-001 HIGH FREQUENCY ANTENNA COUPLING 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
792-6140-001 HIGH FREQUENCY ANTENNA COUPLING 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
792-6140-001 HIGH FREQUENCY ANTENNA COUPLING 1 MITCHELL A/C MD27508
- --------------------------------------------------------------------------------
E650-02-001 BATTERY 1 PAGE AEROSPACE MD27511
- --------------------------------------------------------------------------------
E650-02-001 BATTERY 1 PAGE AEROSPACE MD27511
- --------------------------------------------------------------------------------
E650-02-001 BATTERY 1 PAGE AEROSPACE MD27511
- --------------------------------------------------------------------------------
</TABLE>
PAGE 1 of 8
Exhibit C
---------
to Spare Parts Lease Agreement
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MD-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O.#
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E650-02-001 BATTERY 1 PAGE AEROSPACE MD27511
- --------------------------------------------------------------------------------
E650-02-001 BATTERY 1 PAGE AEROSPACE MD27511
- --------------------------------------------------------------------------------
E650-02-001 BATTERY 1 PAGE AEROSPACE MD27511
- --------------------------------------------------------------------------------
WL101AMS5 ALTIMETER/AIR SPEED IND 1 SMITHS IND.-FLIGHT SYS. MD27520
- --------------------------------------------------------------------------------
WL101AMS5 ALTIMETER/AIR SPEED IND 1 SMITHS IND.-FLIGHT SYS. MD27520
- --------------------------------------------------------------------------------
WL101AMS5 ALTIMETER/AIR SPEED IND 1 SMITHS IND.-FLIGHT SYS. MD27520
- --------------------------------------------------------------------------------
WL101AMS5 ALTIMETER/AIR SPEED IND 1 SMITHS IND.-FLIGHT SYS. MD27520
- --------------------------------------------------------------------------------
360-112-004 DATA UNIT CONTROL 1 CRC MD27524
- --------------------------------------------------------------------------------
360-112-004 DATA UNIT CONTROL 1 CRC MD27524
- --------------------------------------------------------------------------------
360-112-004 DATA UNIT CONTROL 1 CRC MD27524
- --------------------------------------------------------------------------------
366-008-019 DISPLAY UNIT 1 CRC MD27524
- --------------------------------------------------------------------------------
367-040-081 MODULE 1 CRC MD27524
- --------------------------------------------------------------------------------
367-040-081 MODULE 1 CRC MD27524
- --------------------------------------------------------------------------------
622-4542-221 RADIO ALTIMETER REC 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-4542-221 RADIO ALTIMETER REC 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-4542-221 RADIO ALTIMETER REC 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-4542-221 RADIO ALTIMETER REC 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-4542-221 RADIO ALTIMETER REC 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-5132-120 RADAR TRANCEIVER 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
</TABLE>
PAGE 2 of 8
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MID-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O. #
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
622-5132-120 RADAR TRANCEIVER 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-5132-120 RADAR TRANCEIVER 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-5272-020 HIGH FREQUENCY TRANSCEIVER 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
622-5272-020 HIGH FREQUENCY TRANSCEIVER 1 AAR ALLEN MD27526
- --------------------------------------------------------------------------------
60291-115 SLIDE 1 AIR CRUISERS CO MD27537
- --------------------------------------------------------------------------------
60291-116 SLIDE 1 AIR CRUISERS CO MD27537
- --------------------------------------------------------------------------------
2610-11-1 CHRONOMETER, ELEC 1 SMITHS IND.-MALVERN MD27550
- --------------------------------------------------------------------------------
2610-11-1 CHRONOMETER, ELEC 1 SMITHS IND.-MALVERN MD27550
- --------------------------------------------------------------------------------
2610-11-1 CHRONOMETER, ELEC 1 SMITHS IND.-MALVERN MD27550
- --------------------------------------------------------------------------------
2610-11-1 CHRONOMETER, ELEC 1 SMITHS IND.-MALVERN MD27550
- --------------------------------------------------------------------------------
70740-1 VALVE 1 STERER ENGINEERING MD27552
- --------------------------------------------------------------------------------
965-0676-020 GROUND PROXIMITY WARNING UNIT 1 SOUNDAIR MD27556
- --------------------------------------------------------------------------------
965-0676-020 GROUND PROXIMITY WARNING UNIT 1 SOUNDAIR MD27556
- --------------------------------------------------------------------------------
965-0676-020 GROUND PROXIMITY WARNING UNIT 1 SOUNDAIR MD27556
- --------------------------------------------------------------------------------
4305790022 COMPUTER 1 LABINAL MD27564
- --------------------------------------------------------------------------------
622-9738-220 ILS RECEIVER 1 ILFC (COLLINS) MD27569
- --------------------------------------------------------------------------------
622-9738-220 ILS RECEIVER 1 ILFC (COLLINS) MD27569
- --------------------------------------------------------------------------------
622-9738-220 ILS RECEIVER 1 ILFC (COLLINS) MD27569
- --------------------------------------------------------------------------------
226260-501 AIR DRIVEN GENERATOR 1 KAISER MARQUARDT MD27571
- --------------------------------------------------------------------------------
PAGE 3 of 8
</TABLE>
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MD-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O. #
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
6026D0001-01 LATCH ACTUATOR 1 VICKERS ELECTROMECH MD27577
- --------------------------------------------------------------------------------
6026D0001-01 LATCH ACTUATOR 1 VICKERS ELECTROMECH MD27577
- --------------------------------------------------------------------------------
6026D0001-01 LATCH ACTUATOR 1 VICKERS ELECTROMECH MD27577
- --------------------------------------------------------------------------------
6026D0001-01 LATCH ACTUATOR 1 VICKERS ELECTROMECH MD27577
- --------------------------------------------------------------------------------
6305J0001-01 CENTER CARGO DOOR ACTUATOR. 1 VICKERS ELECTROMECH MD27577
- --------------------------------------------------------------------------------
6305J0001-01 CENTER CARGO DOOR ACTUATOR. 1 VICKERS ELECTROMECH MD27577
- --------------------------------------------------------------------------------
6305J0001-01 CENTER CARGO DOOR ACTUATOR. 1 VICKERS ELECTROMECH MD27577
- --------------------------------------------------------------------------------
6305J0001-01 CENTER CARGO DOOR ACTUATOR. 1 VICKERS ELECTROMECH MD 27577
- --------------------------------------------------------------------------------
4059050-907 FLIGHT MANAGEMENT COMPUTER 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
H05A0035-52 CENTRAL AURAL WARNING UNIT 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
H05A0035-52 CENTRAL AURAL WARNING UNIT 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
H05A0035-52 CENTRAL AURAL WARNING UNIT 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
HG1150BD02 INERTIAL REFERENCE UNIT 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
HG1150BD02 INERTIAL REFERENCE UNIT 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
HG1150BD02 INERTIAL REFERENCE UNIT 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
HG1150BD02 INERTIAL REFERENCE UNIT 1 WORLD AVIATION MD27582
- --------------------------------------------------------------------------------
SYLZ51767 WNDSHLD ANTI-ICE CONTROL 1 BARBER-COLMAN MD27587
- --------------------------------------------------------------------------------
SYLZ51767 WNDSHLD ANTI-ICE CONTROL 1 BARBER-COLMAN MD27587
- --------------------------------------------------------------------------------
SYLZ51767 WNDSHLD ANTI-ICE CONTROL 1 BARBER-COLMAN MD27587
- --------------------------------------------------------------------------------
PAGE 4 OF 8
</TABLE>
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MD-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O.#
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
42-853-1 CONTROL UNIT 1 HYDRO-AIRE MD27589
- --------------------------------------------------------------------------------
2235000-2 DIGITAL FLT DATA ACQUISITION UNIT 1 TELEDYNE CONTROLS MD27601
- --------------------------------------------------------------------------------
722100 PUMP 1 ARGO TECH MD27603
- --------------------------------------------------------------------------------
722100 PUMP 1 ARGO TECH MD27603
- --------------------------------------------------------------------------------
1502587-003 SUPPLY CONTROL UNIT 1 BENDIX ENERGY CNTRL MD27604
- --------------------------------------------------------------------------------
722100 PUMP 1 MITCHELL MD27617
- --------------------------------------------------------------------------------
722100 PUMP 1 MITCHELL MD27617
- --------------------------------------------------------------------------------
791100-6-075 ELECTRONIC ENGINE CONTROLLER 1 MITCHELL MD27617
- --------------------------------------------------------------------------------
791100-6-075 ELECTRONIC ENGINE CONTROLLER 1 MITCHELL MD27617
- --------------------------------------------------------------------------------
801000-2 METERING UNIT 1 MITCHELL MD27617
- --------------------------------------------------------------------------------
4059001-903 AUTO FLIGHT CONTROL COMPRESSOR 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059001-903 AUTO FLIGHT CONTROL COMPRESSOR 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059001-903 AUTO FLIGHT CONTROL COMPRESSOR 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059001-903 AUTO FLIGHT CONTROL COMPRESSOR 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059001-903 AUTO FLIGHT CONTROL COMPRESSOR 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059002-903 GLARESHIELD CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059002-903 GLARESHIELD CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059002-903 GLARESHIELD CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059002-903 GLARESHIELD CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
</TABLE>
PAGE 5 of 8
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MD-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O.#
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4059002-903 GLARESHIELD CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059005-901 ACTUATOR 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059005-901 ACTUATOR 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059010-901 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059010-901 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059010-901 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059010-901 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059011-905 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059011-905 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059011-905 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059011-905 DISPLAY UNIT 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059021-902 HYDRAULIC SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059021-902 HYDRAULIC SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059021-902 HYDRAULIC SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059021-902 HYDRAULIC SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059023-903 ENVIRONMENTAL SYS. CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059023-903 ENVIRONMENTAL SYS. CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059023-903 ENVIRONMENTAL SYS. CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059023-903 ENVIRONMENTAL SYS. CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
PAGE 6 of 8
</TABLE>
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MID-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O. #
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
4059024-901 FUEL CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059024-901 FUEL CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059024-901 FUEL CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059025-904 FUEL SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059025-904 FUEL SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059025-904 FUEL SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059025-904 FUEL SYSTEM CONTROLLER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059026-902 FUEL SYSTEM CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059026-902 FUEL SYSTEM CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059026-902 FUEL SYSTEM CONTROL PANEL 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059027-902 ISCELLANEOUS SYSTEMS CONTROLLE 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059027-902 ISCELLANEOUS SYSTEMS CONTROLLE 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059027-902 ISCELLANEOUS SYSTEMS CONTROLLE 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059027-902 ISCELLANEOUS SYSTEMS CONTROLLE 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059031-901 ELECTRONIC SYSTEMS CONTROL PANE 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059031-901 ELECTRONIC SYSTEMS CONTROL PANE 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059031-901 ELECTRONIC SYSTEMS CONTROL PANE 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059040-903 INTERFACE UNIT ASSEMBLY 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059050-907 FLIGHT MANAGEMENT COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
PAGE 7 of 8
</TABLE>
<PAGE>
GATX SPARES PROGRAM
FOR WORLD AIRWAYS MD-11 AIRCRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER NOMENCLATURE QTY VENDOR P.O. #
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
4059050-907 FLIGHT MANAGEMENT COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059050-907 FLIGHT MANAGEMENT COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059050-907 FLIGHT MANAGEMENT COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059051-902 MULTIFUNCTION CONTROL DISPLAY 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059051-902 MULTIFUNCTION CONTROL DISPLAY 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059051-902 MULTIFUNCTION CONTROL DISPLAY 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059051-902 MULTIFUNCTION CONTROL DISPLAY 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059051-902 MULTIFUNCTION CONTROL DISPLAY 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059051-902 MULTIFUNCTION CONTROL DISPLAY 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059060-901 DIGITAL AIR DATA COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059060-901 DIGITAL AIR DATA COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059060-901 DIGITAL AIR DATA COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
4059060-901 DIGITAL AIR DATA COMPUTER 1 HONEYWELL MD27634
- --------------------------------------------------------------------------------
PAGE 8 of 8
</TABLE>
<PAGE>
[Morgan, Lewis & Bockius Letterhead]
[To be dated the Delivery Date]
GATX Capital Corporation
Four Embarcadero Center
Suite 2200
San Francisco, CA 94111
Gentlemen and Ladies:
I have acted as counsel for WORLD AIRWAYS, INC., a corporation organized
under the laws of the State of Delaware ("Lessee"), in connection with that
certain Spare Parts Lease Agreement dated as of April 15, 1993 (the "Lease")
between GATX CAPITAL CORPORATION, a corporation organized under the laws of the
State of Delaware ("Lessor"), and Lessee. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings given such terms in the
Lease.
In connection with this transaction, I have reviewed such records and
documents and matters of law as I have deemed necessary for the purposes of
this opinion.
In giving the opinions expressed below, I have relied upon the following
assumptions:
(a) the genuineness of all signatures (other than those of Lessee's
officers) and the conformity with the original documents submitted to me as
copies;
(b) the legal right, authority and power of Lessor under all relevant
laws to enter into, execute, deliver and perform its obligations under the
Lease; and
(c) that the Lease has been duly authorized by Lessor in accordance with
all relevant laws.
Based on the assumptions set forth above, I am of the following opinion:
(1) Lessee has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, is
qualified to do business in all locations material to its operation, and has
full corporate power and authority to carry on the business in which it is
presently engaged, and to perform its obligations under the Lease.
EXHIBIT D
--------------------------------
to Spare Parts Lease Agreement
<PAGE>
GATX Capital Corporation
[To Be Dated Each Delivery Date]
Page 2
(2) The execution and delivery of the Lease and the Lease Supplements
(hereinafter referred to as the "Lease Documents"), the consummation by Lessee
of the transactions therein contemplated and compliance by Lessee with the
terms and provisions thereof do not and will not result in the violation of
the provisions of the certificate of incorporation or the bylaws of Lessee as
in effect on the date hereof; and do not and will not conflict with or result
in a breach of any terms or provisions of, or constitute a default under, or
result in the creation or imposition of any Lien upon any property or assets
of Lessee, under any indenture, mortgage, or other agreement or instrument to
which Lessee is a party or by which it or any of its properties are or may be
bound, or any existing applicable law, rule or regulation, or any judgment, or
order or decree now in effect, or any government, governmental instrumentality
or court having jurisdiction over Lessee or any of its activities or
properties.
(3) The Lease Documents have been duly authorized, executed and delivered
by Lessee, and each such instrument is a valid, enforceable and binding
obligation of Lessee, in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other laws of
general application affecting the enforcement of creditors' rights.
(4) To my knowledge, except as set forth in Lessee's quarterly or annual
filings with the Securities Exchange Commission which have been provided to
Lessor, there are no suits or proceedings pending or threatened against Lessee
or any subsidiary in any court or before any regulatory commission, board or
other administrative governmental agency against or affecting Lessee which
relate to the transactions contemplated hereby or which, if adversely
determined, would have a material adverse effect on the ability of Lessee to
perform its obligations under the Lease.
(5) Lessee holds all licenses, certificates and permits from the FAA and
any other applicable governmental authorities necessary for the conduct of its
business as an air carrier.
(6) No authorization, approval, consent, license or order of, or
registration with, or the giving of notice to any regulatory body or authority
is required for the valid authorization, execution, delivery and performance
by Lessee of the Lease Documents, except such filings of the Lease Documents
which have already been made or as may be required by the FAA.
<PAGE>
GATX Capital Corporation
[To Be Dated Each Delivery Date]
Page 3
I am a member of the Bar of the State of New York. This opinion is
limited to the federal laws of the United States of America, the laws of the
State of New York and the General Corporation Law of the State of Delaware.
The Mortgagee may rely upon this opinion as if it was addressed to them.
Sincerely,
MORGAN, LEWIS & BOCKIUS
<PAGE>
GATX CAPITAL CORPORATION
OFFICER'S CERTIFICATE
---------------------
I, , of GATX CAPITAL CORPORATION ("Lessor") do hereby
certify that the representations and warranties of Lessor contained in Section
5.1 of Spare Parts Lease Agreement dated as of April 15, 1993, between Lessor
and World Airways, Inc., are true and correct as of the date of this
Certificate.
IN WITNESS WHEREOF, I have executed this Certificate as of ______________,
1993.
-----------------------
EXHIBIT E
--------------------------------
to Spare Parts Lease Agreement
<PAGE>
DESIGNATED LOCATIONS
Wilmington, Delaware, 12 McCullough Drive, Suite 1, Southgate Industrial
Center, New Castle, Delaware 19720
Charleston, South Carolina, 2460 Remount Road, Suite 106, N. Charleston, South
Carolina 29418
Philadelphia, Pennsylvania, Building 2, Philadelphia International Airport,
Philadelphia, Pennsylvania 19153
John F. Kennedy International Airport, Cargo Building 263, Door #1, Jamaica,
New York 11430
EXHIBIT F
--------------------------------
to Spare Parts Lease Agreement
<PAGE>
PERMITTED SUBLESSEES
INITIAL LIST OF APPROVED SUBLESSEES
-----------------------------------
ELIGIBLE LIST MD - 11 SUBLESSEES
--------------------------------
<TABLE>
<S> <C> <C>
AER LINGUS AEROMEXICO MALEV
AIR 2000 ALM VIRGIN ATLANTIC
BWIA TURKISH
AIR FRANCE LAN CHILE AEROLINEAS ARGENTINAS
MEXICANA AVENSA
AIR U.K. VARIG AVIANCA
ALITALIA VIASA LADECO
AUSTRIAN
BALAIR AIR JAMAICA
BRITANNIA AIR AFRIQUE
BRITISH AIR AIR INDIA
CALENDONIAN AIR CANADA AIR INTER
CARGOLUX ALASKA (ALL CHINESE CARRIERS
THAT WERE GOVERNED BY
THE CAAC IMMEDIATELY
PRIOR TO ITS
RESTRUCTURING)
CONDOR AMERICAN
FINNAIR A.T.A.
GERMAN AIR CARGO CANADIAN
HAPAG-LLOYD DELTA
IBERIA FEDERAL EXPRESS
ICELANDAIR SOUTHWEST
KLM UNITED
LAUDA U.P.S.
LTU (GROUP) LUFTHANSA
LUXAIR
MAERSK AIR CHINA
MARTINAIR AIR NEW ZEALAND
MONARCH ALL NIPPON
SABENA AIR PACIFIC
SAS ANSETT
SCANAIR ASIANA
STERLING AUSTRALIAN
SWISSAIR CATHAY PACIFIC
TAP CHINA AIRLINES
TRANSAVIA EVA AIRWAYS
UTA GARUDA
JAPAN AIRLINES
JAPAN AIR SYSTEM
KOREAN AIR
AIR MAURITIUS MALAYSIA
AIR SEYCHELLES QUANTAS
EL AL ROYAL BRUNEI
EMIRATES SINGAPORE
GULFAIR THAI INTERNATIONAL
KUWAIT SAUDIA
SOUTH AFRICAN
</TABLE>
Effective through September 1, 1993
EXHIBIT G
----------------------------------
to Spare Parts Lease Agreement
<PAGE>
Exhibit H
Basic Rent Schedule
The payment of Basic Rent due on any Basic Rent Payment Date will be the sum
of the Fixed Rent and the Variable Rent. The Fixed Rent is listed below. The
Variable Rent shall be the product of the applicable Prime Rate (represented
as an annual rate) and the Variable Factor listed below. For example, if the
applicable Prime Rate for rent due 8/1/93 is 6%, then the Variable Rent will
equal (833333.3333 *.06) or $50,000. Using this example the Basic Rent due on
8/1/93 will be $62,500.
<TABLE>
<CAPTION>
Date Fixed Rent Variable Factor Date Fixed Rent Variable Factor
<S> <C> <C> <C> <C> <C>
07/01/93 $12,500 833,333.3333 11/01/96 $10,000 666,666.6667
08/01/93 $12,500 833,333.3333 12/01/96 $10,000 666,666.6667
09/01/93 $12,500 833,333.3333 01/01/97 $1,010,000 666,666.6667
10/01/93 $12,500 833,333.3333 02/01/97 $8,750 583,333.3333
11/01/93 $12,500 833,333.3333 03/01/97 $8,750 583,333.3333
12/01/93 $12,500 833,333.3333 04/01/97 $8,750 583,333.3333
01/01/94 $512,500 833,333.3333 05/01/97 $8,750 583,333.3333
02/01/94 $11,875 791,666.6667 06/01/97 $8,750 583,333.3333
03/01/94 $11,875 791,666.6667 07/01/97 $8,750 583,333.3333
04/01/94 $11,875 791,666.6667 08/01/97 $8,750 583,333.3333
05/01/94 $11,875 791,666.6667 09/01/97 $8,750 583,333.3333
06/01/94 $11,875 791,666.6667 10/01/97 $8,750 583,333.3333
07/01/94 $11,875 791,666.6667 11/01/97 $8,750 583,333.3333
08/01/94 $11,875 791,666.6667 12/01/97 $8,750 583,333.3333
09/01/94 $11,875 791,666.6667 01/01/98 $2,008,750 583,333.3333
10/01/94 $11,875 791,666.6667 02/01/98 $89,584 416,666.6667
11/01/94 $11,875 791,666.6667 03/01/98 $89,480 409,722.1667
12/01/94 $11,875 791,666.6667 04/01/98 $89,376 402,777.6667
01/01/95 $511,875 791,666.6667 05/01/98 $89,271 395,833.1667
02/01/95 $11,250 750,000.0000 06/01/98 $89,167 388,888.6667
03/01/95 $11,250 750,000.0000 07/01/98 $89,063 381,944.1667
04/01/95 $11,250 750,000.0000 08/01/98 $88,959 374,999.6667
05/01/95 $11,250 750,000.0000 09/01/98 $88,855 368,055.1667
06/01/95 $11,250 750,000.0000 10/01/98 $88,751 361,110.6667
07/01/95 $11,250 750,000.0000 11/01/98 $88,646 354,166.1667
08/01/95 $11,250 750,000.0000 12/01/98 $88,542 347,221.6667
09/01/95 $11,250 750,000.0000 01/01/99 $88,438 340,277.1667
10/01/95 $11,250 750,000.0000 02/01/99 $88,334 333,332.6667
11/01/95 $11,250 750,000.0000 03/01/99 $88,230 326,388.1667
12/01/95 $11,250 750,000.0000 04/01/99 $88,126 319,443.6667
01/01/96 $1,011,250 750,000.0000 05/01/99 $88,021 312,499.1667
02/01/96 $10,000 666,666.6667 06/01/99 $87,917 305,554.6667
03/01/96 $10,000 666,666.6667 07/01/99 $87,813 298,610.1667
04/01/96 $10,000 666,666.6667 08/01/99 $87,709 291,665.6667
05/01/96 $10,000 666,666.6667 09/01/99 $87,605 284,721.1667
06/01/96 $10,000 666,666.6667 10/01/99 $87,501 277,776.6667
07/01/96 $10,000 666,666.6667 11/01/99 $87,396 270,832.1667
08/01/96 $10,000 666,666.6667 12/01/99 $87,292 263,887.6667
09/01/96 $10,000 666,666.6667 01/01/2000 $87,172 256,943.1667
10/01/96 $10,000 666,666.6667
</TABLE>
<PAGE>
AMENDMENT NO. 1
to
AIRCRAFT LEASE AGREEMENT
THIS LEASE AMENDMENT is made this _____ day of November, 1992, by and
between INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation,
whose address and principal place of business is 1999 Avenue of the Stars,
39th Floor, Los Angeles, California 90067 (hereinafter referred to as
"LESSOR"), and WORLD AIRWAYS, INC., a Delaware corporation whose address and
principal place of business is at 13873 Park Center Road, Herndon, Virginia
22071 (hereinafter referred to as "LESSEE").
RECITALS
- --------
A. LESSOR and LESSEE have previously entered into that certain
`Aircraft Lease Agreement dated September 30, 1992 (the "Lease"), relating to
one (1) McDonnell Douglas MD-11 aircraft, bearing Manufacturer's serial No.
48518, and FAA registration number N271WA (the "Aircraft").
B. LESSOR and LESSEE now desire to amend the Lease as set forth
below.
In consideration of the terms and conditions set forth in the Lease and
set forth below, LESSOR and LESSEE hereby agree as follows:
1. Exhibits A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P and Q of the
Lease are hereby deleted in their entirety and replaced with the Exhibits set
forth on the following pages of this Amendment No. 1.
2. Articles 6.2 of the Lease is hereby amended by adding the following to
the end thereof:
"LESSOR agrees that upon the request of LESSEE, LESSOR will
provide LESSEE with copies of all written communications
between LESSOR and Manufacturer relating to the Aircraft to
the extent not related to the price of the Aircraft."
3. Article 24.14(a) of the Lease is hereby amended by adding the
following to the end thereof:
"Notwithstanding anything to the contrary set forth in Article
12.10 hereof, for the purpose of the inspections described in this Article
24.14(a), LESSOR agrees that no more than four (4) inspectors will be on the
Aircraft at any one
<PAGE>
time and no more than three (3) inspectors will be at LESSEE's
premises inspecting the Aircraft Documentation at any one time."
4. Any requirements in the Lease that information described in Exhibit P be
delivered by LESSEE shall only mean any such information as is applicable to
the Aircraft.
5. Except as specifically set forth in this Amendment, all terms and
conditions of the Lease will remain in full force and effect during the Term
of the Lease.
IN WITNESS WHEREOF, LESSOR AND LESSEE have caused this Amendment No. 1
to Aircraft Lease Agreement dated September 30, 1992, to be executed by their
respective officers on the day and year first written above.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS, INC.
CORPORATION
By: /s/ By: /s/
______________________ ____________________
Its: Senior Vice President Its: C.E.O
_____________________ ____________________
Date: Date:
_____________________ ____________________
<PAGE>
AMENDMENT NO. 2
to
AIRCRAFT LEASE AGREEMENT
THIS LEASE AMENDMENT is made this 8th day of March, 1993, by and between
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation, whose
address and principal place of business is 1999 Avenue of the Stars, 39th
Floor, Los Angeles, California 90067 (hereinafter referred to as "LESSOR"),
and WORLD AIRWAYS, INC., a Delaware corporation whose address and principal
place of business is at 13873 Park Center Road, Herndon, Virginia 22071
(hereinafter referred to as "LESSEE").
RECITALS
- --------
A. LESSOR and LESSEE have previously entered into that certain Aircraft
Lease Agreement dated September 30, 1992 (the "Lease"), relating to one (1)
McDonnell Douglas MD-11 aircraft, bearing Manufacturer's serial No. 48518, and
FAA registration number N271WA (the "Aircraft").
B. Pursuant to Article 5.2.1 of the Lease, LESSOR and LESSEE agreed
that in addition to the Fixed Rent amounts, Lessee shall pay to LESSOR, 1.25%
of the cost of any SCN's requested by LESSEE and paid for by LESSOR over and
above LESSOR's 409Y baseline configuration and the cost of any Buyer Furnished
Equipment paid for by LESSOR in excess of US$ 2,100,000. The cost of SCN's
requested by LESSEE and paid for by LESSOR over and above LESSOR's 409Y
baseline configuration totalled US$ 27,187. 1.25% of US$ 27,187 equals a
monthly Fixed Rent increase in the amount of US$ 340. At Delivery, the cost of
any Buyer Furnished Equipment paid for by LESSOR was within US$ 2,100,000.
C. LESSOR and LESSEE now desire to amend the Lease as set forth below.
In consideration of the terms and conditions set forth in the Lease and
set forth below, LESSOR and LESSEE hereby agree as follows:
1. The Fixed Rent schedule in Article 1.6 of the Lease is hereby deleted in
its entirety and replaced with the following Fixed Rent schedule:
<TABLE>
<CAPTION>
"1.6 Period of Lease Term Fixed Rent
-------------------- ----------
<S> <C> <C>
Year 1 US$ 575,740
Year 2 US$ 581,494
Year 3 US$ 587,248
Year 4 US$ 593,002
Year 5 US$ 598,756"
</TABLE>
<PAGE>
2. The Fixed Rent schedule in Article 1.7 of the Lease is hereby deleted in
its entirety and replaced with the following Fixed Rent schedule:
"1.7 Period of Lease Term Fixed Rent
____________________ __________
Year 6 US$ 600,340
Year 7 US$ 601,840
Year 8 US$ 603,340
Year 9 US$ 604,840
Year 10 US$ 606,340
Year 11 US$ 607,840
Year 12 US$ 609,340
Year 13 US$ 610,840
Year 14 US$ 612,340
Year 15 US$ 613,840"
3. The schedule in Article 5.2.1 of the Lease is hereby deleted in its en-
tirety and replaced with the following schedule:
"5.2.1 Period of Lease Term Fixed Rent
____________________ __________
Year 1 US$ 575,740
Year 2 US$ 581,494
Year 3 US$ 587,248
Year 4 US$ 593,002
Year 5 US$ 598,756"
4. The schedule in Article 5.3 of the Lease is hereby deleted in its entirety
and replaced with the following schedule:
"5.3 Period of Lease Term Fixed Rent
____________________ __________
Year 6 US$ 600,340
Year 7 US$ 601,840
Year 8 US$ 603,340
Year 9 US$ 604,840
Year 10 US$ 606,340
Year 11 US$ 607,840
Year 12 US$ 609,340
Year 13 US$ 610,840
Year 14 US$ 612,340
Year 15 US$ 613,840"
<PAGE>
5. For avoidance of doubt, the Variable Rent stipulated in Articles 1.6,
1.7, 5.2.2 and 5.3 will remain the same, unchanged, in full force and effect.
6. Except as specifically set forth in this Amendment, all terms and
conditions of the Lease will remain in full force and effect during the
Term of the Lease.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Amendment No. 2
to Aircraft Lease Agreement dated September 30, 1992, to be executed by
their respective officers on the day and year first written above.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS, INC.
CORPORATION
By: Kenneth D. Taylor By: Joseph J. Shilburn
Its: Vice President Its: Sr. Vice Pres. Tech Svcs
Date: 3-8-93 Date: Mar. 8, 1993
<PAGE>
ASSIGNMENT OF RIGHTS (AIRFRAME)
-------------------------------
McDonnell Douglas Corporation
3855 Lakewood Boulevard
Long Beach, California 90846
Subject: Assignment of Rights MD-11 Aircraft
- -------- -----------------------------------
Gentlemen:
In connection with INTERNATIONAL LEASE FINANCE CORPORATION ("ILFC") leasing to
WORLD AIRWAYS, INC. ("LESSEE") a certain
MD-11 aircraft identified below, reference is made to the following documents:
1. Purchase Agreement No. DAC 88-43-D dated March 9, 1989 as amended by Letter
Agreements Nos. 1-5, between McDonnell Douglas Corporation ("MDC") and ILFC
(the "Purchase Agreement") pursuant to which ILFC purchased the McDonnell
Douglas model MD-11 aircraft bearing manufacturer's Serial Number 48518
(the "Aircraft").
2. Aircraft Lease Agreement dated as of September 30, 1992 between ILFC and
LESSEE.
Pursuant to the Aircraft Lease Agreement, ILFC has leased the Aircraft,
including in such lease the transfer to LESSEE of warranty rights related to
the Aircraft. ILFC hereby assigns to LESSEE for the duration of the Lease Term
(unless such assignment is revoked in accordance with Paragraph No. 5 of the
Agency Agreement between ILFC and LESSEE as acknowledged and consented to by
MDC), all of its rights under Exhibit C and Section 12 of the Purchase
Agreement with respect to the Aircraft (including all of its rights under Part
II of Exhibit C. In order to accomplish such transfer of rights, as authorized
by the provisions of Article 13 of the Purchase Agreement:
(i) In exercising any right under the Purchase Agreement or in making
any claim with respect to the Aircraft or goods or services
delivered under the Purchase Agreement, the terms and conditions of
the Purchase Agreement (including those contained in Article 13
thereof) relating to such exercise shall apply to and be binding
upon Lessee to the same extent as ILFC.
(ii) ILFC agrees to remain responsible for any payments due MDC with
respect to the Aircraft.
Nothing contained herein shall subject MDC to any liability to which it would
not otherwise be subject under the Purchase Agreement or modify in any respect
the contract rights of MDC thereunder.
<PAGE>
We request that MDC upon receipt of this letter, acknowledge receipt thereof
and the transfer of rights, under the Purchase Agreement as set forth above,
by signing the acknowledgment set forth below and forwarding one copy of this
letter, so acknowledged to each of the undersigned.
Very truly yours,
WORLD AIRWAYS, INC. INTERNATIONAL LEASE FINANCE
CORPORATION
By: /s/ By: /s/
-------------- ----------------
Its: CEO Its: Senior Vice President
------------- ---------------------
Date: 8 March 1993 Date: 8 March 1993
------------ ------------
Receipt of the above letter acknowledged and transfer of rights under the
Purchase Agreement with respect to the Aircraft, confirmed effective as of the
date indicated below.
MCDONNELL DOUGLAS CORPORATION
By: /s/
--------------------
Its: Vice Pres. Contracts
--------------------
Date: 8 March 1993
-------------------
<PAGE>
ASSIGNMENT OF RIGHTS (ENGINES)
------------------------------
- -----------, 199-
In consideration of WORLD AIRWAYS, INC. ("LESSEE") leasing from International
Lease Finance Corporation ("ILFC") one (1) McDonnell Douglas MD-11 Aircraft
with three (3) Pratt & Whitney PW4462 engines installed on the aircraft, it is
hereby agreed as follows:
1. ILFC hereby assigns and transfers to LESSEE all of ILFC's respective rights
and interest in and to and in and under the Engine Sales Warranty and
Service Policy benefits (the "Engine Warranties") of the Consolidated JT8D-
200 Series/PW2000 Series/PW4000 Series Propulsion System/Engine Support
Proposal for ILFC dated May 11, 1988 (the "Support Agreement") between
United Technologies Corporation, Pratt & Whitney Group ("P&W") and ILFC
during the term of such lease so long as no Event of Default is continuing
thereunder.
2. P & W hereby consents to the assignment and transfers to LESSEE all of the
rights and interest of ILFC in, to and under the Engine Warranties and
P & W agrees that until it shall have received written notice that an Event
of Default is continuing under such lease from ILFC, it will allow LESSEE
on an exclusive basis, to exercise in its own name all rights and interest
that ILFC would have been entitled to pursuant to the Engine Warranties, it
being further agreed that LESSEE accepts all the limitations pertaining to
said Warranties as stated in the Support Agreement .
3. Each party agrees that at any time from time-to-time, on written request
of any other party hereto and at the expense of the party so requesting,
that it will promptly and duly execute and deliver any and all reasonable
documentation required to accomplish the assignment and transfer of the
rights and interest referred to above.
4. This Agreement shall be binding upon and inure to the benefit of each of
the parties hereto and their respective successors and assigns to the
extent permitted by the Support Agreement and hereunder.
5. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
6. This Agreement may be executed in any number of counterparts, each of which
when executed and delivered is an original but all of which taken together
constitute one and the same instrument and any party may execute this
Agreement by signing any counterpart.
<PAGE>
IN WITNESS WHEREOF, the authorized representative of the parties hereto have
executed this Agreement as of the day and year first above written.
For and on behalf of
INTERNATIONAL LEASE FINANCE CORPORATION
/s/
- -----------------------------------
By: John L Plueger
Its: Sr. V.P.
For and on behalf of
WORLD AIRWAYS, INC.
/s/
- ------------------------------------
By: A. Scott Andrews
Its: C.F.O.
For and on behalf of
UNITED TECHNOLOGIES CORPORATION
PRATT & WHITNEY GROUP
- --------------------------------
By:
Its:
<PAGE>
IN WITNESS WHEREOF, the authorized representative of the parties hereto have
executed this Agreement as of the day and year first above written.
For and on behalf of
INTERNATIONAL LEASE FINANCE CORPORATION
/s/
- ----------------------------------------
By: John L. Plueger
----------------
Its: Sr. V.P.
--------
For and on behalf of
WORLD AIRWAYS, INC.
/s/
- -------------------------
By:
Its: CEO
For and on behalf of
UNITED TECHNOLOGIES CORPORATION
PRATT & WHITNEY GROUP
/s/
- ---------------------------------
By:
Its: MGR Customer Warranty & Support Services
<PAGE>
ASSIGNMENT OF RIGHTS (ENGINES)
------------------------------
, 199
- ---------- -
In consideration of WORLD AIRWAYS, INC. ("LESSEE") leasing from International
Lease Finance Corporation ("ILFC") one (1) McDonnell Douglas MD-11 Aircraft
with three (3) Pratt & Whitney PW4462 engines installed on the aircraft, it is
hereby agreed as follows:
1. ILFC hereby assigns and transfers to LESSEE all of ILFC's respective
rights and interest in and to and in and under the Engine Sales Warranty
and Service Policy benefits (the "Engine Warranties") of the
Consolidated JT8D-200 Series/PW2000 Series/PW4000 Series Propulsion
System/Engine Support Proposal for ILFC dated May 11, 1988 (the "Support
Agreement") between United Technologies Corporation, Pratt & Whitney
Group ("P&W") and ILFC during the term of such lease so long as no Event
of Default is continuing thereunder.
2. P & W hereby consents to the assignment and transfers to LESSEE all of
the rights and interest of ILFC in, to and under the Engine Warranties
and P & W agrees that until it shall have received written notice that an
Event of Default is continuing under such lease from ILFC, it will allow
LESSEE on an exclusive basis, to exercise in its own name all rights and
interest that ILFC would have been entitled to pursuant to the Engine
Warranties, it being further agreed that LESSEE accepts all the
limitations pertaining to said Warranties as stated in the Support
Agreement.
3. Each party agrees that at any time from time-to-time, on written request
of any other party hereto and at the expense of the party so requesting,
that it will promptly and duly execute and deliver any and all
reasonable documentation required to accomplish the assignment and
transfer of the rights and interest referred to above.
4. This Agreement shall be binding upon and inure to the benefit of each of
the parties hereto and their respective successors and assigns to the
extent permitted by the Support Agreement and hereunder.
5. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
6. This Agreement may be executed in any number of counterparts, each of
which when executed and delivered is an original but all of which taken
together constitute one and the same instrument and any party may
execute this Agreement by signing any counterpart.
<PAGE>
IN WITNESS WHEREOF, the authorized representative of the parties hereto have
executed this Agreement as of the day and year first above written.
For and on behalf of
INTERNATIONAL LEASE FINANCE CORPORATION
/s/
- ---------------------------------
By: John L. Plueger
Its: Sr. V.P.
For and on behalf of
WORLD AIRWAYS, INC.
/s/
- ----------------------
By: A. Scott Andrews
Its: C.F.O.
For and on behalf of
UNITED TECHNOLOGIES CORPORATION
PRATT & WHITNEY GROUP
- --------------------------------
By:
Its:
<PAGE>
AGENCY AGREEMENT
----------------
Relating to McDonnell Douglas MD-11 Aircraft
THIS AGENCY AGREEMENT is made and entered into as this 15 day of January,
--
1993.
BETWEEN:
-------
WORLD AIRWAYS, INC., a Delaware corporation whose address and principal
place of business is at 13873 Park Center Road, Herndon, Virginia 22071
("Agent") and
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation, whose
address and principal place of business is at 1999 Avenue of the Stars, 39th
Floor, Los Angeles, California 90067 ("Buyer").
RECITAL
-------
Manufacturer and Buyer have entered into Aircraft Purchase Agreement No.
DAC 88-43-D (such purchase agreement as may be amended in accordance with the
provisions thereof is hereinafter referred to the "Purchase Agreement") under
which Manufacturer has agreed to manufacture and sell and Buyer has agreed to
purchase certain McDonnell Douglas MD-11 aircraft. Buyer has agreed to lease
one (1) of such aircraft bearing manufacturer's serial number 48518 (the
"Aircraft") to Agent pursuant to an Aircraft Lease Agreement between Buyer and
Agent dated September 30, 1992 (the "Lease").
Agent is engaged in business as a commercial air carrier and intends to
lease the Aircraft from Buyer, and Buyer is desirous of utilizing the
expertise of Agent as Buyer's agent in all matters to which the Purchase
Agreement relates with respect to the Aircraft except certain items as
indicated below, and Agent, as Buyer's agent, is willing to make such
expertise available to Buyer.
Accordingly, the parties agree as follows:
1. Buyer hereby appoints Agent as Buyer's sole and exclusive agent with
authority to perform, on behalf of Buyer, as Agent may in its discretion
determine to be necessary or desirable, the following:
(a) monitor Manufacturer's production, testing and delivery of the
Aircraft in accordance with the Purchase Agreement and
(b) do all such other things permitted by the Purchase Agreement
related to the technical and engineering aspects of Manufacturer's production
of the Aircraft, including without limitation, the exercise of the rights of
Buyer (including the right of Buyer to enforce Seller's obligations) under
Section 6(A)(1), (2), (4) and (5), Section 6(B)(2), the second
<PAGE>
sentence of Section 8(C) and Section 10(B) of the Purchase Agreement and
Sections B and C of Letter Agreement No. 1 to the Purchase Agreement.
2. Notwithstanding anything in the provisions of paragraph 1 above,
nothing in this Agreement shall confer authority upon or otherwise permit
Agent:
(a) to exercise any power of termination under the Purchase
Agreement,
(b) to make any payments due from Buyer to Manufacturer or to receive
on behalf of Buyer any payments due from Manufacturer, or (except as permitted
by the Purchase Agreement Partial Assignment dated as of January 15, 1993
between Agent and Buyer and except as permitted in the Assignment of Rights
Letter addressed to McDonnell Douglas Corporation dated 3/8/93) to alter any
of the terms and conditions of the Purchase Agreement or the Detail
Specifications of the Aircraft.
(c) to accept any repairs to the Aircraft prior to Delivery of the
Aircraft which in the reasonable opinion of Agent, Manufacturer and Buyer are
likely to reduce the residual value of the Aircraft.
3. Buyer agrees that it will not authorize any additional SCN's without
Agent's prior consent.
4. Buyer and Manufacturer agree that Agent shall be entitled to the
benefits of Sections VIII (to the extent paid for by Agent), IX, X and XI (to
the extent paid for by Agent) of Letter Agreement No. 5 to the Purchase
Agreement.
5. Provided there is no Event of Default under the Lease which has not
been cured, Buyer hereby assigns to Agent Buyer's rights under Sections XIII,
XIV, XV, XVI and XVII of Letter Agreement No. 5 to the Purchase Agreement. In
order to revoke such assignment Buyer shall deliver a notice of such
revocation to Manufacturer, Attention: VP-Contracts.
6. In exercising any right under the Purchase Agreement or in making any
claim with respect to the Aircraft or goods or services delivered under the
Purchase Agreement, the terms and conditions of the Purchase Agreement
(including those contained in Article 13 thereof) relating to such exercise
shall apply to and be binding upon Agent to the same extent as Buyer.
7. Buyer shall not revoke the appointment of and authority granted under
this Agreement to Agent unless a termination of the Purchase Agreement or
Lease has occurred with respect to the Aircraft or Agent has failed to perform
a material obligation under this Agreement and such failure continues for five
(5) business days after notice thereof from Buyer. Notice of any such
revocation shall be provided in accordance with the provisions of Article 14 of
the Purchase Agreement and given to both Manufacturer and Agent.
<PAGE>
8. Manufacturer acknowledges the appointment of Agent for the purpose set
forth hereunder and Manufacturer and Buyer agree that due performance by
Manufacturer or Agent of an obligation under the Purchase Agreement shall
constitute due satisfaction of such obligation by such party and Buyer agrees
to be bound by the acts of Agent.
9. Nothing in this Agreement will subject Manufacturer to any liability
under the Purchase Agreement which it would not otherwise be subject to, or
modify Manufacturer's rights thereunder, or require Manufacturer to divest
itself of title to or possession of Aircraft or any other property which is
subject to the Purchase Agreement until payment therefor and delivery thereof
in accordance with the Purchase Agreement.
10. Buyer hereby assigns to Agent all of Buyer's rights and interests in
the EIGHT HUNDRED THOUSAND United States Dollar (US$ 800,000) spare parts
credit memorandum that Buyer is entitled to from Manufacturer pursuant to
Article XII of Letter Agreement No. 5 to the Purchase Agreement.
11. None of the parties hereto will be entitled to assign to any third
party any of their rights under this Agreement.
12. Agent will not delegate to any third party the performance of the
obligations imposed on it by this Agreement or appoint a sub-agent.
13. References to Manufacturer in this Agreement will include any
wholly-owned subsidiary of Manufacturer to which Manufacturer assigns any of
its rights and obligations under the Purchase Agreement pursuant to the terms
and conditions thereof.
14. This Agreement will be governed by the laws of the State of
California.
This Agreement has been executed by the parties hereto as of the day and
year first above written.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS, INC.
CORPORATION (BUYER) (AGENT)
By: /s/ By: /s/
------------------------ ------------------------
Its: Senior Vice President Its: CEO
------------------------ ------------------------
Date: 15 January 1993 Date: 15 January 1993
------------------------ ------------------------
<PAGE>
McDonnell Douglas Corporation ("MDC") acknowledges the appointment of WORLD
AIRWAYS, INC. ("Agent") as agent of International Lease Finance Corporation in
connection with the above referenced Aircraft as set forth in this Agency
Agreement and consents to all of the provisions of the Agency Agreement. MDC
agrees that Agent shall also be deemed to be the "Buyer" for all purposes of
Section 11 and the first sentence of Section 6(D) of the Purchase Agreement,
without in any way derogating from the obligations owed to the Buyer under said
Section and sentence, as if all references in said Sections were to Agent and
the Buyer. Agent agrees to indemnify MDC to the same extent as does the Buyer
under the second sentence of Section 6(D) to the extent resulting from
injuries to or deaths of Agent's representatives participating in inspections,
tests or flights.
MCDONNELL DOUGLAS CORPORATION (Manufacturer)
By: (Signature appears here)
---------------------------
Its: Vice President -- Contracts
---------------------------
Date: 15 January 1993
-------------------------
<PAGE>
AMENDMENT NO. 2
to
AIRCRAFT LEASE AGREEMENT
THIS LEASE AMENDMENT is made this 31st day of March 1993, by and between
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation, whose
address and principal place of business is 1999 Avenue of the Stars, 39th
Floor, Los Angeles, California 90067 (hereinafter referred to as ""LESSOR"),
and WORLD AIRWAYS, INC., a Delaware corporation whose address and principal
place of business is at 13873 Park Center Road, Herndon, Virginia 22071
(hereinafter referred to as "LESSEE").
RECITALS
- --------
A. LESSOR and LESSEE have previously entered into that certain Aircraft
Lease Agreement dated September 30, 1992 (the "Lease"), relating to one (1)
McDonnell Douglas MD-11 aircraft, bearing Manufacturer's Serial No. 48437
(formerly 48519), and FAA registration number N272WA (the "Aircraft").
B. LESSOR and LESSEE now desire to amend the Lease as set forth below.
In consideration of the terms and conditions set forth in the Lease and
set forth below, LESSOR and LESSEE hereby agree as follows:
1. The Initial Lease Term stated in Article 1.3 of the Lease is hereby
deleted in its entirety and replaced with the following:
"1.3 Initial Lease Term
------------------
From Delivery to September 15, 1995"
2. The Initial Lease Term stated in Article 4.1 of the Lease is hereby
deleted in its entirety and replaced with the following:
"4.1 Initial Lease Term. The term of leasing of the Aircraft will
------------------
commence on the Delivery Date and continue until September 15,
1995 (the "Initial Lease Term")."
3. In addition to the Fixed and Variable Rent for the Aircraft during the
Initial Term set forth in Articles 1.6, 5.2.1 and 5.2.3, at Delivery LESSEE
will pay to LESSOR additional Rent in an amount equal to the product obtained
by multiplying US$ 1,000 by the number of days from and including March 31,
1993 to and excluding the Delivery Date.
<PAGE>
4. LESSEE and LESSOR confirm that the Lease is in full force and effect,
except as modified by Amended and Restated Side Letter No. 1 dated September
30, 1992, Side Letter No. 2 dated September 30, 1992, Amendment No. 1 dated
October 27, 1992 and this Amendment No. 2.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Amendment No. 2 to
Aircraft Lease Agreement dated September 30, 1992, to be executed by their
respective officers on the day and year first written above.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS, INC.
CORPORATION
By: Kenneth D. Taylor By: Joseph J. Shilburn
----------------------- -------------------------
Its: Vice President Its: Sr. Vice Pres. Tech Svcs
---------------------- -------------------------
Date: 4/15/93 Date: 4/15/93
------------------------ -------------------
<PAGE>
AMENDMENT NO. 3
to
AIRCRAFT LEASE AGREEMENT
THIS LEASE AMENDMENT is made this 15th day of April, 1993, by and between
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation, whose
address and principal place of business is 1999 Avenue of the Stars, 39th
Floor, Los Angeles, California 90067 (hereinafter referred to as "LESSOR"),
and WORLD AIRWAYS, INC., a Delaware corporation whose address and principal
place of business is at 13873 Park Center Road, Herndon, Virginia 22071
(hereinafter referred to as "LESSEE").
RECITALS
- --------
A. LESSOR and LESSEE have previously entered into that certain Aircraft
Lease Agreement dated September 30, 1992 (the "Lease"), relating to one (1)
McDonnell Douglas MD-11 aircraft, bearing Manufacturer's serial No. 48437
(formerly 48519), and FAA registration number N272WA (the "Aircraft").
B. Pursuant to Lease Amendment No. 2 dated March 31, 1993, LESSOR and
LESSEE agreed that the Initial Lease Term will commence on the Delivery Date
and continue until September 15, 1995.
C. Pursuant to Article 5.2.1 of the Lease, LESSOR and LESSEE agreed that
in addition to the Fixed Rent amounts, LESSEE shall pay to LESSOR, 1.25% of
the cost of any SCN's requested by LESSEE and paid for by LESSOR over and
above LESSOR's 409Y baseline configuration and the cost of any Buyer Furnished
Equipment paid for by LESSOR in excess of US$2,100,000. The cost of SCN's
requested by LESSEE and paid for by LESSOR over and above LESSOR's 409Y
baseline configuration totalled US$159,868. 1.25% of US$159,868 equals a
monthly Fixed Rent increase in the amount of US$1,998. At Delivery, the cost
of Buyer Furnished Equipment paid for by LESSOR did not exceed US$2,100,000.
D. LESSOR and LESSEE now desire to amend the Lease as set forth below.
In consideration of the terms and conditions set forth in the Lease and
set forth below, LESSOR and LESSEE hereby agree as follows:
1. The Fixed Rent schedule in Article 1.6 of the Lease "Rent During Initial
Lease Term" is hereby deleted in its entirety and replaced with the following
Fixed Rent schedule:
<TABLE>
<CAPTION>
"1.6 Period of Lease Term Fixed Rent
-------------------- ----------
<S> <C> <C>
Year 1 (from Delivery) US$580,275
Year 2 through 9/15/95 US$586,058
(referred to as Year 2, but
actually an extended period
from the beginning of Year 2
through 9/15/95)"
</TABLE>
<PAGE>
2. The Fixed Rent schedule in Article 1.7 of the Lease "Rent During Lease
Extension Term" is hereby deleted in its entirety and replaced with the
following Fixed Rent schedule:
<TABLE>
<CAPTION>
"1.7 Period of Lease Term Fixed Rent
-------------------- ----------
<S> <C> <C>
Year 3 (9/16/95-9/15/96) US$591,841
Year 4 (9/16/96-9/15/97) US$597,623
Year 5 (9/16/97-9/15/98) US$603,406
Year 6 (9/16/98-9/15/99) US$604,998
Year 7 (9/16/99-9/15/00) US$606,506
Year 8 (9/16/00-9/15/01) US$608,013
Year 9 (9/16/01-9/15/02) US$609,521
Year 10 (9/16/02-9/15/03) US$611,028
Year 11 (9/16/03-9/15/04) US$612,536
Year 12 (9/16/04-9/15/05) US$614,043
Year 13 (9/16/05-9/15/06) US$615,551
Year 14 (9/16/06-9/15/07) US$617,058
Year 15 (9/16/07-9/15/08) US$618,566"
</TABLE>
3. The schedule is Article 5.2.1 of the Lease "Fixed Rent" is hereby deleted
in its entirety and replaced with the following schedule:
<TABLE>
<CAPTION>
"5.2.1 Period of Lease Term Fixed Rent
-------------------- ----------
<S> <C> <C>
Year 1 (from Delivery) US$580,275
Year 2 through 9/15./95 US$586,058
(called Year 2, but actually
an extended period from the
beginning of Year 2 through
9/15/95)"
</TABLE>
4. The Fixed Rent schedule in Article 5.3 of the Lease "Rent During Extension
Term" is hereby deleted in its entirety and replaced with the following Fixed
Rent schedule:
<TABLE>
<CAPTION>
"5.3 Period of Lease Term Fixed Rent
-------------------- ----------
<S> <C> <C>
Year 3 (9/16/95-9/15/96) US$591,841
Year 4 (9/16/96-9/15/97) US$597,623
Year 5 (9/16/97-9/15/98) US$603,406
Year 6 (9/16/98-9/15/99) US$604,998
Year 7 (9/16/99-9/15/00) US$606,506
Year 8 (9/16/00-9/15/01) US$608,013
Year 9 (9/16/01-9/15/02) US$609,521
Year 10 (9/16/02-9/15/03) US$611,028
Year 11 (9/16/03-9/15/04) US$612,536
Year 12 (9/16/04-9/15/05) US$614,043
Year 13 (9/16/05-9/15/06) US$615,551
Year 14 (9/16/06-9/15/07) US$617,058
Year 15 (9/16/07-9/15/08) US$618,566"
</TABLE>
<PAGE>
5. For avoidance of doubt, the Variable Rent stipulated in Articles 1.6, 1.7,
5.2.2 and 5.3 will remain the same, unchanged, in full force and effect.
6. Except as specifically set forth in this Amendment, all terms and
conditions of the Lease will remain in full force and effect during the Term
of the Lease.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Amendment No. 3 to
Aircraft Lease Agreement dated September 30, 1992, to be executed by their
respective officers on the day and year first written above.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS, INC.
CORPORATION
By: Kenneth D. Taylor By: /s/
------------------------ -----------------------
Its: Vice President Its: Sr. Vice Pres Tech Svcs
---------------------- ------------------------
Date: 4/15/93 Date: 4/15/93
--------------------------- ------------------------
<PAGE>
AGENCY AGREEMENT
----------------
Relating to McDonnell Douglas MD-11 Aircraft
THIS AGENCY AGREEMENT is made and entered into as of this 15 day of
--
January, 1993.
BETWEEN:
-------
WORLD AIRWAYS, INC., a Delaware corporation whose address and principal
place of business is at 13873 Park Center Road, Herndon, Virginia 22071
("Agent") and
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation, whose
address and principal place of business is at 1999 Avenue of the Stars, 39th
Floor, Los Angeles, California 90067 ("Buyer").
RECITAL
-------
Manufacturer and Buyer have entered into Aircraft Purchase Agreement No.
DAC 88-43-D (such purchase agreement as may be amended in accordance with the
provisions thereof is hereinafter referred to the "Purchase Agreement") under
which Manufacturer has agreed to manufacture and sell and Buyer has agreed to
purchase certain McDonnell Douglas MD-11 aircraft. Buyer has agreed to lease
one (1) of such aircraft bearing manufacturer's serial number 48437 (the
"Aircraft") to Agent pursuant to an Aircraft Lease Agreement between Buyer and
Agent dated September 30, 1992 (the "Lease").
Agent is engaged in business as a commercial air carrier and intends to
lease the Aircraft from Buyer, and Buyer is desirous of utilizing the expertise
of Agent as Buyer's agent in all matters to which the Purchase Agreement
relates with respect to the Aircraft except certain items as indicated below,
and Agent, as Buyer's agent, is willing to make such expertise available to
Buyer.
Accordingly, the parties agree as follows:
1. Buyer hereby appoints Agent as Buyer's sole and exclusive agent with
authority to perform, on behalf of Buyer, as Agent may in its discretion
determine to be necessary or desirable, the following:
(a) monitor Manufacturer's production, testing and delivery of the
Aircraft in accordance with the Purchase Agreement and
(b) do all such other things permitted by the Purchase Agreement
related to the technical and engineering aspects of Manufacturer's production
of the Aircraft, including without limitation, the exercise of the rights of
Buyer (including the right of Buyer to enforce Seller's obligations) under
Section 6(A)(1),(2),(4) and (5), Section 6(B)(2), the second
<PAGE>
sentence of Section 8(C) and Section 10(B) of the Purchase Agreement and
Sections B and C of Letter Agreement No. 1 to the Purchase Agreement.
2. Notwithstanding anything in the provisions of paragraph 1 above,
nothing in this Agreement shall confer authority upon or otherwise permit
Agent:
(a) to exercise any power of termination under the Purchase
Agreement,
(b) to make any payments due from Buyer to Manufacturer or to
receive on behalf of Buyer any payments due from Manufacturer, or (except as
permitted by the Purchase Agreement Partial Assignment dated as of January 15,
----------
1993 between Agent and Buyer and except as permitted in the Assignment of
Rights Letter addressed to McDonnell Douglas Corporation dated 4/15/93) to
-------
alter any of the terms and conditions of the Purchase Agreement or the Detail
Specifications of the Aircraft.
(c) to accept any repairs to the Aircraft prior to Delivery of the
Aircraft which in the reasonable opinion of Agent, Manufacturer and Buyer are
likely to reduce the residual value of the Aircraft.
3. Buyer agrees that it will not authorize any additional SCN's without
Agent's prior consent.
4. Buyer and Manufacturer agree that Agent shall be entitled to the
benefits of Sections VIII (to the extent paid for by Agent), IX, X and XI (to
the extent paid for by Agent) of Letter Agreement No. 5 to the Purchase
Agreement.
5. Provided there is no Event of Default under the Lease which has not
been cured, Buyer hereby assigns to Agent Buyer's rights under Sections XIII,
XIV, XV, XVI and XVII of Letter Agreement No. 5 to the Purchase Agreement. In
order to revoke such assignment Buyer shall deliver a notice of such
revocation to Manufacturer, Attention: VP - Contracts.
6. In exercising any right under the Purchase Agreement or in making any
claim with respect to the Aircraft or goods or services delivered under the
Purchase Agreement, the terms and conditions of the Purchase Agreement
(including those contained in Article 13 thereof) relating to such exercise
shall apply to and be binding upon Agent to the same extent as Buyer.
7. Buyer shall not revoke the appointment of and authority granted under
this Agreement to Agent unless a termination of the Purchase Agreement or
Lease has occurred with respect to the Aircraft or Agent has failed to perform
a material obligation under this Agreement and such failure continues for five
(5) business days after notice thereof from Buyer. Notice of any such
revocation shall be provided in accordance with the provisions of Article 14
of the Purchase Agreement and given to both Manufacturer and Agent.
<PAGE>
8. Manufacturer acknowledges the appointment of Agent for the purpose
set forth hereunder and Manufacturer and Buyer agree that due performance by
Manufacturer or Agent of an obligation under the Purchase Agreement shall
constitute due satisfaction of such obligation by such party and Buyer agrees
to be bound by the acts of Agent.
9. Nothing in this Agreement will subject Manufacturer to any liability
under the Purchase Agreement which it would not otherwise be subject to, or
modify Manufacturer's rights thereunder, or require Manufacturer to divest
itself of title to or possession of Aircraft or any other property which is
subject to the Purchase Agreement until payment therefor and delivery thereof
in accordance with the Purchase Agreement.
10. Buyer hereby assigns to Agent all of Buyer's rights and interests in
the EIGHT HUNDRED THOUSAND United States Dollar (US$ 800,000) spare parts
credit memorandum that Buyer is entitled to from Manufacturer pursuant to
Article XII of Letter Agreement No. 5 to the Purchase Agreement.
11. None of the parties hereto will be entitled to assign to any third
party any of their rights under this Agreement.
12. Agent will not delegate to any third party the performance of the
obligations imposed on it by this Agreement or appoint a sub-agent.
13. References to Manufacturer in this Agreement will include any
wholly-owned subsidiary of Manufacturer to which Manufacturer assigns any of
its rights and obligations under the Purchase Agreement pursuant to the terms
and conditions thereof.
14. This Agreement will be governed by the laws of the State of
California.
This Agreement has been executed by the parties hereto as of the day and
year first above written.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS, INC.
CORPORATION (BUYER) (AGENT)
By: [Signature appears here] By: [Signature appears here]
------------------------ -----------------------
Its: Senior Vice President Its: CEO
---------------------- ----------------------
Date: 15 January 1993 Date: 15 January 1993
---------------------- ---------------------
McDonnell Douglas Corporation ("MDC") acknowledges the appointment of WORLD
AIRWAYS, INC. ("Agent") as agent of International Lease Finance Corporation in
connection with the above referenced Aircraft as set forth in this Agency
Agreement and consents to all of the provisions of the Agency Agreement. MDC
agrees that Agent shall
<PAGE>
also be deemed to be the "Buyer" for all purposes of Section 11 and the first
sentence of Section 6(D) of the Purchase Agreement, without in any way
derogating from the obligations owed to the Buyer under said Section and
sentence, as if all references in said Sections were to Agent and the Buyer.
Agent agrees to indemnify MDC to the same extent as does the Buyer under the
second sentence of Section 6(D) to the extent resulting from injuries to or
deaths of Agent's representatives participating in inspections, tests or
flights.
MCDONNELL DOUGLAS CORPORATION (Manufacturer)
By: /s/
------------------------------
Its: Vice Pres. Contracts
------------------------
Date: 15 January 1993
---------------------------
<PAGE>
ASSIGNMENT OF RIGHTS (AIRFRAME)
-------------------------------
McDonnell Douglas Corporation
3855 Lakewood Boulevard
Long Beach, California 90846
Subject: Assignment of Rights MD-11 Aircraft
- ------- -----------------------------------
Gentlemen:
In connection with INTERNATIONAL LEASE FINANCE CORPORATION ("ILFC") leasing to
WORLD AIRWAYS, INC. ("LESSEE") a certain MD-11 aircraft identified below,
reference is made to the following documents:
1. Purchase Agreement No. DAC 88-43-D dated March 9, 1989 as amended by
Letter Agreements Nos. 1-5, between McDonnell Douglas Corporation ("MDC")
and ILFC (the "Purchase Agreement") pursuant to which ILFC purchased the
McDonnell Douglas mode MD-11 aircraft bearing manufacturer's Serial
Number 48437 (the "Aircraft").
2. Aircraft Lease Agreement dated as of September 30, 1992 between ILFC and
LESSEE.
Pursuant to the Aircraft Lease Agreement, ILFC has leased the Aircraft,
including in such lease the transfer to LESSEE of warranty rights related to the
Aircraft. ILFC hereby assigns to LESSEE for the duration of the Lease Term
(unless such assignment is revoked in accordance with Paragraph No. 5 of the
Agency Agreement between ILFC and LESSEE as acknowledged and consented to by
MDC), all of its rights under Exhibit C and Section 12 of the Purchase Agreement
with respect to the Aircraft (including all of its rights under Part II of
Exhibit C. In order to accomplish such transfer of rights, as authorized by the
provisions of Article 13 of the Purchase Agreement:
(i) In exercising any right under the Purchase Agreement or in making any
claim with respect to the Aircraft or goods or services delivered
under the Purchase Agreement, the terms and conditions of the
Purchase Agreement (including those contained in Article 13 thereof)
relating to such exercise shall apply to and be binding upon Lessee
to the same extent as ILFC.
(ii) ILFC agrees to remain responsible for any payments due MDC with
respect to the Aircraft.
Nothing contained herein shall subject MDC to any liability to which it would
not otherwise be subject under the Purchase Agreement or modify in any respect
the contract rights of MDC thereunder.
<PAGE>
We request that MDC upon receipt of this letter, acknowledge receipt thereof
and the transfer of rights, under the Purchase Agreement as set forth above,
by signing the acknowledgment set forth below and forwarding one copy of this
letter, so acknowledged to each of the undersigned.
Very truly yours,
WORLD AIRWAYS, INC. INTERNATIONAL LEASE FINANCE
CORPORATION
By: /s/ By: /s/
------------------- ------------------------
Its: CEO Its: Senior Vice President
------------------ ----------------------
Date: 4/15/93 Date: 4/15/93
---------------- ------------------------
Receipt of the above letter acknowledged and transfer of rights under the
Purchase Agreement with respect to the Aircraft, confirmed effective as of the
date indicated below.
MCDONNELL DOUGLAS CORPORATION
By: /s/
--------------------------
Its: Vice Pres Contracts
---------------------------
Dated: 4/15/93
-------------------------
<PAGE>
ASSIGNMENT OF RIGHTS (ENGINES)
------------------------------
April 15th, 1993
In consideration of WORLD AIRWAYS, INC. ("LESSEE") leasing from International
Lease Finance Corporation ("ILFC") one (1) McDonnell Douglas MD-11 Aircraft
with three (3) Pratt & Whitney PW4462 engines installed on the aircraft,
bearing Manufacturer's Serial Numbers P723913, P723912 and P723914, it is
hereby agreed as follows:
1. ILFC hereby assigns and transfers to LESSEE all of ILFC's respective
rights and interest in and to and in and under the Engine Sales Warranty
and Service Policy benefits (the "Engine Warranties") of the Consolidated
JT8D-200 Series/PW2000 Series/PW4000 Series Propulsion System/Engine
Support Proposal for ILFC dated May 11, 1988 (the "Support Agreement")
between United Technologies Corporation, Pratt & Whitney Group ("P&W")
and ILFC during the term of such lease so long as no Event of Default is
continuing thereunder.
2. P & W hereby consents to the assignment and transfers to LESSEE all of the
rights and interest of ILFC in, to and under the Engine Warranties and P &
W agrees that until it shall have received written notice that an Event of
Default is continuing under such lease from ILFC, it will allow LESSEE on
an exclusive basis, to exercise in its own name all rights and interest
that ILFC would have been entitled to pursuant to the Engine Warranties,
it being further agreed that LESSEE accepts all the limitations pertaining
to said Warranties as stated in the Support Agreement.
3. Each party agrees that at any time from time-to-time, on written request
of any other party hereto and at the expense of the party so requesting,
that it will promptly and duly execute and deliver any and all reasonable
documentation required to accomplish the assignment and transfer of the
rights and interest referred to above.
4. This Agreement shall be binding upon and inure to the benefit of each of
the parties hereto and their respective successors and assigns to the
extent permitted by the Support Agreement and hereunder.
5. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
6. This Agreement may be executed in any number of counterparts, each of
which when executed and delivered is an original but all of which taken
together constitute one and the same instrument and any party may execute
this Agreement by signing any counterpart.
<PAGE>
IN WITNESS WHEREOF, the authorized representative of the parties hereto have
executed this Agreement as of the day and year first above written.
For and on behalf of
INTERNATIONAL LEASE FINANCE CORPORATION
- ---------------------------
By: John L. Plueger
Its: Sr. V.P.
For and on behalf of
WORLD AIRWAYS, INC.
- ---------------------------
By:
Its: CEO
For and on behalf of
UNITED TECHNOLOGIES CORPORATION
PRATT & WHITNEY GROUP
- ----------------------------
By.: L.E. Pawlich
Its: MGR Customer Warranty & Support Services
<PAGE>
EXHIBIT 10.78
AMENDMENT NO. 2
to
AIRCRAFT LEASE AGREEMENT
THIS LEASE AMENDMENT is made this 22nd day of April, 1993, by and between
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation, whose
address and principal place of business is 1999 Avenue of the Stars, 39th
Floor, Los Angeles, California 90067 (hereinafter referred to as "LESSOR"),
and WORLD AIRWAYS, INC., a Delaware corporation whose address and principal
place of business is at 13873 Park Center Road, Herndon, Virginia 22071
(hereinafter referred to as "LESSEE").
RECITALS
- --------
A. LESSOR and LESSEE have previously entered into that certain Aircraft
Lease Agreement dated September 30, 1992 (the "Lease"), relating to one (1)
McDonnell Douglas MD-11 aircraft, bearing Manufacturer's serial No. 48520, and
FAA registration number N273WA (the "Aircraft").
B. Pursuant to Article 5.2.1 of the Lease, LESSOR and LESSEE agreed that
in addition to the Fixed Rent amounts, LESSEE shall pay to LESSOR, 1.25% of
the cost of any SCN's requested by LESSEE and paid for by LESSOR over and
above LESSOR's 409Y baseline configuration and the cost of any Buyer Furnished
Equipment paid for by LESSOR in excess or US$ 2,100,000. The cost of SCN's
requested by LESSEE and paid for by LESSOR over and above LESSOR's 409Y
baseline configuration totalled US$ 27,988. 1.25% of US$ 27,988 equals a
monthly Fixed Rent increase in the amount of US$ 350. At Delivery, the cost of
Buyer Furnished Equipment paid for by LESSOR did not exceed US$ 2,100,000.
C. LESSOR and LESSEE now desire to amend the Lease as set forth below.
In consideration of the terms and conditions set forth in the Lease and
set forth below, LESSOR and LESSEE hereby agree as follows:
1. The Fixed Rent schedule in Article 1.6 of the Lease is hereby deleted in
its entirety and replaced with the following Fixed Rent schedule:
"1.6 Period of Lease Term Fixed Rent
-------------------- ----------
Year 1 US$ 581,504
Year 2 US$ 587,316
Year 3 US$ 593,127
Year 4 US$ 598,939
Year 5 US$ 604,750"
<PAGE>
2. The Fixed Rent schedule in Article 1.7 of the Lease is hereby deleted in
its entirety and replaced with the following Fixed Rent schedule:
"1.7 Period of Lease Term Fixed Rent
--------------------- ----------
Year 6 US$ 606,350
Year 7 US$ 607,865
Year 8 US$ 609,380
Year 9 US$ 610,895
Year 10 US$ 612,410
Year 11 US$ 613,925
Year 12 US$ 615,440
Year 13 US$ 616,955
Year 14 US$ 618,470
Year 15 US$ 619,985"
3. The Fixed Rent schedule in Article 5.2.1 of the Lease is hereby deleted
in its entirety and replaced with the following schedule:
"5.2.1 Period of Lease Term Fixed Rent
-------------------- ----------
Year 1 US$ 581,504
Year 2 US$ 587,316
Year 3 US$ 593,127
Year 4 US$ 598,939
Year 5 US$ 604,750"
4. The Fixed Rent schedule in Article 5.3 of the Lease is hereby deleted in
its entirety and replaced with the following schedule:
"5.3 Period of Lease Term Fixed Rent
-------------------- ----------
Year 6 US$ 606,350
Year 7 US$ 607,865
Year 8 US$ 609,380
Year 9 US$ 610,895
Year 10 US$ 612,410
Year 11 US$ 613,925
Year 12 US$ 615,440
Year 13 US$ 616,955
Year 14 US$ 618,470
Year 15 US$ 619,985"
<PAGE>
5. For avoidance of doubt, the Variable Rent stipulated in Articles 1.6,
1.7, 5.2.2 and 5.3 will remain the same, unchanged, in full force and effect.
6. Except as specifically set forth in this Amendment, all terms and
conditions of the Lease will remain in full force and effect during the Term
of the Lease.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Amendment No. 2 to
Aircraft Lease Agreement dated September 30, 1992, to be executed by their
respective officers on the day and year first written above.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS,INC.
CORPORATION
By: Kenneth D. Taylor By: Joseph J. Shallcross
--------------------------- ------------------------------
Its: Vice President Its: Sr. Vice Pres Tech Svcs
-------------------------- -----------------------------
Date: 4/22/93 Date: 4/22/93
------------------------- ----------------------------
<PAGE>
EXHIBIT 10.79
AGENCY AGREEMENT
----------------
Relating to McDonnell Douglas MD-11 Aircraft
THIS AGENCY AGREEMENT is made and entered into as of this 15 day of
January, 1993.
BETWEEN:
--------
WORLD AIRWAYS, INC., a Delaware corporation whose address and principal
place of business is at 13873 Park Center Road, Herndon, Virginia 22071
("Agent") and
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation, whose
address and principal place of business is at 1999 Avenue of the Stars, 39th
Floor, Los Angeles, California 90067 ("Buyer").
RECITAL
-------
Manufacturer and Buyer have entered into Aircraft Purchase Agreement No.
DAC 88-43-D (such purchase agreement as may be amended in accordance with the
provisions thereof is hereinafter referred to the "Purchase Agreement") under
which Manufacturer has agreed to manufacture and sell and Buyer has agreed to
purchase certain McDonnell Douglas MD-11 aircraft. Buyer has agreed to lease
one (1) of such aircraft bearing manufacturer's serial number 48520 (the
"Aircraft") to Agent pursuant to an Aircraft Lease Agreement between Buyer and
Agent dated September 30, 1992 (the "Lease").
Agent is engaged in business as a commercial air carrier and intends to
lease the Aircraft from Buyer, and Buyer is desirous of utilizing the
expertise of Agent as Buyer's agent in all matters to which the Purchase
Agreement relates with respect to the Aircraft except certain items as
indicated below, and Agent, as Buyer's agent, is willing to make such
expertise available to Buyer.
Accordingly, the parties agree as follows:
1. Buyer hereby appoints Agent as Buyer's sole and exclusive agent
with authority to perform, on behalf of Buyer, as Agent may in its discretion
determine to be necessary or desirable, the following:
(a) monitor Manufacturer's production, testing and delivery of
the Aircraft in accordance with the Purchase Agreement and
(b) do all such other things permitted by the Purchase Agreement
related to the technical and engineering aspects of Manufacturer's production
of the Aircraft, including without limitation, the exercise of the rights of
Buyer (including the right of Buyer to enforce Seller's obligations) under
Section 6(A)(1), (2), (4) and (5), Section 6(B)(2), the second
<PAGE>
sentence of Section 8(C) and Section 10(B) of the Purchase Agreement and
Sections B and C of Letter Agreement No. 1 to the Purchase Agreement.
2. Notwithstanding anything in the provisions of paragraph 1 above,
nothing in this Agreement shall confer authority upon or otherwise permit
Agent:
(a) to exercise any power of termination under the Purchase
Agreement,
(b) to make any payments due from Buyer to Manufacturer or to
receive on behalf of Buyer any payments due from Manufacturer, or (except as
permitted by the Purchase Agreement Partial Assignment dated as of January 15,
1993 between Agent and Buyer and except as permitted in the Assignment of
Rights Letter addressed to McDonnell Douglas Corporation dated 4/22/93) to
alter any of the terms and conditions of the Purchase Agreement or the Detail
Specifications of the Aircraft.
(c) to accept any repairs to the Aircraft prior to Delivery of
the Aircraft which in the reasonable opinion of Agent, Manufacturer and Buyer
are likely to reduce the residual value of the Aircraft.
3. Buyer agrees that it will not authorize any additional SCN's
without Agent's prior consent.
4. Buyer and Manufacturer agree that Agent shall be entitled to the
benefits of Sections VIII (to the extent paid for by Agent), IX, X and XI (to
the extent paid for by Agent) of Letter Agreement No. 5 to the Purchase
Agreement.
5. Provided there is no Event of Default under the Lease which has
not been cured, Buyer hereby assigns to Agent Buyer's rights under Sections
XIII, XIV, XV, XVI and XVII of Letter Agreement No. 5 to the Purchase
Agreement. In order to revoke such assignment Buyer shall deliver a notice of
such revocation to Manufacturer, Attention: VP - Contracts.
6. In exercising any right under the Purchase Agreement or in making
any claim with respect to the Aircraft or goods or services delivered under
the Purchase Agreement, the terms and conditions of the Purchase Agreement
(including those contained in Article 13 thereof) relating to such exercise
shall apply to and be binding upon Agent to the same extent as Buyer.
7. Buyer shall not revoke the appointment of and authority granted
under this Agreement to Agent unless a termination of the Purchase Agreement
or Lease has occurred with respect to the Aircraft or Agent has failed to
perform a material obligation under this Agreement and such failure continues
for five (5) business days after notice thereof from Buyer. Notice of any
such revocation shall be provided in accordance with the provisions of Article
14 of the Purchase Agreement and the given to both Manufacturer and Agent.
<PAGE>
8. Manufacturer acknowledges the appointment of Agent for the purpose
set forth hereunder and Manufacturer and Buyer agree that due performance by
Manufacturer or Agent of an obligation under the Purchase Agreement shall
constitute due satisfaction of such obligation by such party and Buyer agrees
to be bound by the acts of Agent.
9. Nothing in this Agreement will subject Manufacturer to any
liability under the Purchase Agreement which it would not otherwise be subject
to, or modify Manufacturer's rights thereunder, or require Manufacturer to
divest itself of title to or possession of Aircraft or any other property
which is subject to the Purchase Agreement until payment therefor and delivery
thereof in accordance with the Purchase Agreement.
10. Buyer hereby assigns to Agent all Buyer's rights and interests in
the EIGHT HUNDRED THOUSAND United States Dollar (US$ 800,000) spare parts
credit memorandum that Buyer is entitled to from Manufacturer pursuant to
Article XII of Letter Agreement No. 5 to the Purchase Agreement.
11. None of the parties hereto will be entitled to assign to any third
party any of their rights under this Agreement.
12. Agent will not delegate to any third party the performance of the
obligations imposed on it by this Agreement or appoint a sub-agent.
13. References to Manufacturer in this Agreement will include any
wholly-owned subsidiary of Manufacturer to which Manufacturer assigns any of
its rights and obligations under the Purchase Agreement pursuant to the terms
and conditions thereof.
14. This Agreement will be governed by the laws of the State of
California.
This Agreement has been executed by the parties hereto as of the day and
year first above written.
INTERNATIONAL LEASE FINANCE WORLD AIRWAYS, INC.
CORPORATION (BUYER) (AGENT)
By: /s/ By: /s/
------------------------------ -------------------------------
Its: Senior Vice President Its: CEO
----------------------------- ------------------------------
Date: 1/15/93 Date: 1/15/93
---------------------------- -----------------------------
McDonnell Douglas Corporation ("MDC") acknowledges the appointment of WORLD
AIRWAYS, INC. ("Agent") as agent of International Lease Finance Corporation in
Connection with the above referenced Aircraft as set forth in this Agency
Agreement and consents to all of the provisions of the Agency Agreement. MDC
agrees that Agent shall
<PAGE>
also be deemed to be the "Buyer" for all purposes of Section 11 and the first
sentence of Section 6(D) of the Purchase Agreement, without in any way
derogating from the obligations owed to the Buyer under said Section and
sentence, as if all references in said Sections were to Agent and the Buyer.
Agent agrees to indemnify MDC to the same extent as does the Buyer under the
second sentence of Section 6(D) to the extent resulting from injuries to or
deaths of Agent's representatives participating in inspections, tests or
flights.
MCDONNELL DOUGLAS CORPORATION (Manufacturer)
By: /s/
--------------------------
Its: Vice Pres. Contracts
------------------------
Date: 1/15/93
------------------------
<PAGE>
EXHIBIT 10.80
ASSIGNMENT OF RIGHTS (AIRFRAME)
--------------------------------
McDonnell Douglas Corporation
3855 Lakewood Boulevard
Long Beach, California 90846
Subject: Assignment of Rights MD-11 Aircraft
- ------- -----------------------------------
Gentlemen:
In connection with INTERNATIONAL LEASE FINANCE CORPORATION ("ILFC") leasing to
WORLD AIRWAYS, INC. ("LESSEE") a certain MD-11 aircraft identified below,
reference is made to the following documents:
1. Purchase Agreement No. DAC 88-43-D dated March 9, 1989 as amended by
Letter Agreements Nos. 1-5, between McDonnell Douglas Corporation ("MDC")
and ILFC (the "Purchase Agreement") pursuant to which ILFC purchased the
McDonnell Douglas model MD-11 aircraft bearing manufacturer's Serial
Number 48520 (the "Aircraft").
2. Aircraft Lease Agreement dated as of September 30, 1992 between ILFC and
LESSEE.
Pursuant to the Aircraft Lease Agreement, ILFC has leased the Aircraft,
including in such lease the transfer to LESSEE of warranty rights related to
the Aircraft. ILFC hereby assigns to LESSEE for the duration of the Lease Term
(unless such assignment is revoked in accordance with Paragraph No. 5 of the
Agency Agreement between ILFC and LESSEE as acknowledged and consented to by
MDC), all of its rights under Exhibit C and Section 12 of the Purchase
Agreement with respect to the aircraft (including all of its rights under Part
II of Exhibit C. In order to accomplish such transfer of rights, as authorized
by the provisions of Article 13 of the Purchase Agreement:
(i) In exercising any right under the Purchase Agreement or in making
any claim with respect to the Aircraft or goods or services
delivered under the Purchase Agreement, the terms and conditions of
the Purchase Agreement (including those contained in Article 13
thereof) relating to such exercise shall apply to and be binding
upon Lessee to the same extent as ILFC.
(ii) ILFC agrees to remain responsible for any payments due MDC with
respect to the Aircraft.
Nothing contained herein shall subject MDC to any liability to which it would
not otherwise be subject under the Purchase Agreement or modify in any respect
the contract rights of MDC thereunder.
<PAGE>
We request that MDC upon receipt of this letter, acknowledge receipt thereof
and the transfer of rights, under the Purchase Agreement as set forth above,
by signing the acknowledgment set forth below and forwarding one of this
letter, so acknowledged to each of the undersigned.
Very truly yours,
WORLD AIRWAYS,INC. INTERNATIONAL LEASE FINANCE
CORPORATION
By: [SIGNATURE APPEARS HERE] By: John F. Kluger
--------------------------- ---------------------------
Its: CEO Its: Senior Vice President
-------------------------- --------------------------
Date: 4/22/93 Date: 4/22/93
------------------------- -------------------------
Receipt of the above letter acknowledged and transfer of rights under the
Purchase Agreement with respect to the Aircraft, confirmed effective as of the
date indicated below.
MCDONNELL DOUGLAS CORPORATION
By: Bill D. Ghee
--------------------------
Its: Vice Pres - Contracts
-------------------------
Date: 4/22/93
------------------------
<PAGE>
EXHIBIT 10.81
ASSIGNMENT OF RIGHTS (ENGINES)
------------------------------
MARCH 1, 1993
In consideration of WORLD AIRWAYS, INC. ("LESSEE") leasing from International
Lease Finance Corporation ("ILFC") one (1) McDonnell Douglas MD-11 Aircraft
with three (3) Pratt & Whitney PW4462 engines installed on the aircraft, it is
hereby agreed as follows:
1. ILFC hereby assigns and transfers to LESSEE all of ILFC's respective
rights and interest in and to and in and under the Engine Sales Warranty
and Service Policy benefits (the "Engine Warranties") of the Consolidated
JT8D-200 Series/PW2000 Series/PW4000 Series Propulsion System/Engine
Support Proposal for ILFC dated May 11,1988 (the "Support Agreement")
between United Technologies Corporation, Pratt & Whitney Group ("P&W")
and ILFC during the term of such lease so long as no Event of Default is
continuing thereunder.
2. P & W hereby consents to the assignment and transfers to LESSEE all of the
rights and interest of ILFC in, to and under the Engine Warranties and
P & W agrees that until it shall have written notice that an Event of
Default is continuing under such lease from ILFC, it will allow LESSEE on
an exclusive basis, to exercise in its own name all rights interest that
ILFC would nave been entitled to pursuant to the Engine Warranties, it
being further agreed that LESSEE accepts all the limitations pertaining to
said Warranties as stated in the Support Agreement.
3. Each party agrees that at any time from time-to-time, on written request
of any other party hereto and the expense of the party so requesting,
that it will promptly and duly execute and deliver any and all reasonable
documentation required to accomplish the assignment and transfer of the
rights and interest referred to above.
4. This Agreement shall be binding upon and inure to the benefit of each of
the parties hereto and their respective successors and assigns to the
extent permitted by the Support Agreement and hereunder.
5. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
6. This Agreement may be executed in any number of counterparts, each of
which when executed and delivered is an original but all of which taken
together constitute one and the same instrument and any party may execute
this Agreement by signing any counterpart.
<PAGE>
IN WITNESS WHEREOF, the authorized representative of the parties hereto have
executed this Agreement as of the day and year first above written.
For and on behalf of
INTERNATIONAL LEASE FINANCE CORPORATION
/s/
- -----------------------------
By: John L Plueger
Its: SR. V.P.
For and on behalf of
WORLD AIRWAYS,INC.
/s/ [SIGNATURE APPEARS HERE]
- -----------------------------
By: [NAME APPEARS HERE]
Its: CEO
For and on behalf of
UNITED TECHNOLOGIES CORPORATION
PRATT & WHITNEY GROUP
/s/
- -----------------------------
By: L. E. Pawlich
Its: MGR CUSTOMER WARRANTY & SUPPORT SERVICES
<PAGE>
Exhibit 10.82
AIRCRAFT CHARTER AGREEMENT
BETWEEN
WORLD AIRWAYS, INC.
AND
MALAYSIAN AIRLINE SYSTEM BERHAD
FOR THE LEASE OF 3 DC10-30 AND 1 MD-11
JULY 1993
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
ARTICLE 1 SCOPE 4
ARTICLE 2 TERM 6
ARTICLE 3 CHARGES 7
ARTICLE 4 PAYMENTS 10
ARTICLE 5 RESPONSIBILITIES 12
ARTICLE 6 FLIGHT OPERATIONS 18
ARTICLE 7 FLIGHT PROGRAM 20
ARTICLE 8 FLIGHT RE-ROUTING/INTERRUPTIONS 21
ARTICLE 9 SUBSTITUTION 22
ARTICLE 10 TAXES 24
ARTICLE 11 INSURANCE 25
ARTICLE 12 INDEMNITY 27
ARTICLE 13 FORCE MAJEURE 29
ARTICLE 14 CANCELLATION 30
ARTICLE 15 AIRLIFT EMERGENCY 31
ARTICLE 16 USE OF AIRCRAFT DURING HIATUS 32
ARTICLE 17 MISCELLANEOUS 33
ARTICLE 18 GOVERNING LAW 34
ARTICLE 19 TERMINATION 35
ARTICLE 20 CONFIDENTIALITY 36
ARTICLE 21 NOTICE 37
<CAPTION>
APPENDICES
- --------------
<S> <C> <C>
APPENDIX A FLIGHT ROUTINGS 40
APPENDIX B FLIGHT SCHEDULES 43
APPENDIX C AIR CARRIER'S STANDARD SECURITY PROGRAM 44
APPENDIX D MAS CABIN PERSONNEL 55
APPENDIX E AIRCRAFT DELIVERY RECEIPT 58
APPENDIX F SUB-AGREEMENT ON CONCESSION TRAVEL 59
APPENDIX G LETTER AGREEMENT RE SUB-CHARTER OF AIRCRAFT TO
TABUNG HAJI 61
APPENDIX H CATERING EQUIPMENT FURNISHED BY WORLD 63
APPENDIX I MAS/WORLD ENGINEERING HANDLING PROCEDURES 64
</TABLE>
<PAGE>
3
AIRCRAFT CHARTER AGREEMENT
--------------------------
AIRCRAFT CHARTER AGREEMENT (hereinafter called "Agreement") dated as of
--
24th July, 1993 between WORLD AIRWAYS, INC. (hereinafter called "WORLD"), a
- -----
corporation organised under the laws of Delaware, United States of America and
having its principal office of business at 13873 Park Center Road, Suite 400,
Herndon, Virginia 22071, United States of America, of the one part and,
MALAYSIAN AIRLINE SYSTEM BERHAD, (hereinafter called "MAS") a Company
incorporated in Malaysia and having its registered office at 33rd Floor,
Bangunan MAS, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia, of the other
part.
WITNESSETH:
In consideration of the mutual covenants and agreements contained herein and in
that certain Long Term Aircraft Charter Agreement dated as of 30 August 1986
between the parties hereto, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE>
ARTICLE 1 - SCOPE
- -----------------
1.1 WORLD will charter to MAS and MAS will take on charter from WORLD:
Three (3) DC10-30 aircraft equipped with CF6-50C2 engines in 364 (three
hundred and sixty four) all economy seating configuration.
One (1) MD-11 aircraft equipped with PW 4462 engines in 383 (three hundred
and eighty three) all economy seating configuration.
The above aircraft individually and collectively referred to as the
"Aircraft."
Each aircraft may perform as many round trips as desired
Malaysia/Jeddah/Malaysia during Phase One and Jeddah/Malaysia/Jeddah during
Phase Two subject to mutual agreement of the parties and as outlined in
Appendix A.
Each passenger shall be allowed checked baggage and hand baggage, provided
that the maximum takeoff gross weight and other safety limitations are not
exceeded, for the series of flight schedules to be specified in Appendix B
of this Agreement.
1.2 This Agreement is entered into by MAS both on its own behalf and as Agent
of all passengers and the owners of property, only as such owners, carried
on the Aircraft. Individual passengers or such owners shall not have the
right to claim any refund of the charter price or portions thereof from
WORLD except as may be specifically provided for in writing and signed by
WORLD.
<PAGE>
5
1.3 WORLD will ensure that the aircraft will have valid Certificate of
Airworthiness issued by the United States Federal Aviation Administration
(FAA) and each WORLD flight crew member will hold a valid U.S. license for
the operation of the Aircraft.
1.4 MAS and WORLD will coordinate all security arrangements to WORLD's
reasonable satisfaction. MAS at all times shall assure that all applicable
security procedures and practices specified in WORLD's FAA-approved
security program and in applicable Federal Aviation Regulations, as such
program and regulations may from time to time be amended, shall be strictly
observed. The provisions of WORLD's security program applicable to this
Agreement are set forth as Appendix C hereto.
<PAGE>
6
ARTICLE 2 - TERM
- ----------------
2.1 This Agreement shall be for the period commencing at a mutually agreed time
at Kuala Lumpur on or about the 26th day of April, 1993 and ending at a
mutually agreed time on or about the 25th day of May, 1993 at Jeddah for
Phase One and commencing at an agreed time at Jeddah on the 5th day of
June, 1993 and ending at a mutually agreed time on the 5th day of July,
1993 at Kuala Lumpur for Phase Two. The delivery or redelivery of the
Aircraft for fuel accounting purposes shall take place in Kuala
Lumpur/Penang or Jeddah.
2.2 The dates in the above are based on the planning of 106 (One Hundred and
Six) flights. The schedules to the extent the number of flights may be
reduced or Haj operations completed, individual aircraft positioning and
depositioning dates may vary in accordance with MAS actual requirements and
subject to approval by WORLD. This is for the convenience of both parties
and shall not in any way affect MAS schedule or requirements.
2.3 WORLD shall position the aircraft in Kuala Lumpur no less than 24 (twenty-
four) hours in advance of the commencement of Phase One.
<PAGE>
7
ARTICLE 3 - CHARGES
- -------------------
3.1 For positioning each Aircraft to Malaysia prior to the commencement of
Phase One, from Jeddah to a location suitable to WORLD at the end of Phase
One, from a chosen location to Jeddah prior to the commencement of Phase
Two and from Malaysia to a designated location at the end of Phase Two,
WORLD agrees such sum shall include the cost of fuel, handling, overfly,
landing, navigation charges and other operating expenses on positioning
sectors except for aircraft handling charges at points of arrival in
Malaysia prior to commencement of Phase One and at Jeddah prior
commencement of Phase Two. MAS agrees to pay a lump sum per Aircraft as
follows:
USD296,919.00 (UNITED STATES DOLLARS TWO HUNDRED AND NINETY SIX THOUSAND
NINE HUNDRED AND NINETEEN.
In addition, as part of positioning, MAS agrees to pay the following amount
for fuel based on USD18 (UNITED STATES DOLLARS EIGHTEEN ONLY) Saudi
benchmark price.
USD78,959.00 (UNITED STATES DOLLARS SEVENTY EIGHT THOUSAND NINE HUNDRED AND
FIFTY NINE) PER DC10-30 AIRCRAFT AND USD63,167 (UNITED STATES DOLLARS SIXTY
THREE THOUSAND ONE HUNDRED AND SIXTY SEVEN) PER MD-11 AIRCRAFT.
Based on WORLD's cost of fuel into wing at LAX on April 20, 1993, this
amount will be adjusted upward or downward by the same percentage as the
date varies from the USD18 (UNITED STATES DOLLARS EIGHTEEN) price.
<PAGE>
8
-
3.2 Upon completion of each positioning sector an invoice for one fourth of the
positioning cost will be presented to MAS for payment.
3.3 MAS agrees to pay WORLD for all block hours to be operated under this
Agreement (excluding positioning flights) the sum of USD6,566.67 (UNITED
STATES DOLLARS SIX THOUSAND FIVE HUNDRED SIXTY SIX AND CENTS SIXTY SEVEN)
per block hour flown up to the minimum utilisation and USD5,750 UNITED
STATES DOLLARS FIVE THOUSAND SEVEN HUNDRED AND FIFTY) will apply for each
block hour in excess of the minimum.
3.4 For the purpose of this Agreement, a block hour is defined as the total
time elapsed from the moment at which an aircraft moves under its own power
from its parking position for the purpose of taking off until the moment at
which it comes to rest at the end of a flight in a parked position.
3.5 Any deviation from the terms and conditions set out in this Agreement
subsequently made at the request of MAS may involve an increase in the
charges specified in Article 3.3 provided that such increase, if any,
should be directly attributable therefrom and shall be borne by MAS
exclusively.
3.6 WORLD shall be entitled to utilise, with MAS's prior consent, which shall
not be unreasonably withheld and shall be confirmed in writing, but without
refund of any portion of the charter price, any unused portion of the
chartered space and/or payload for the purpose of carrying its personnel
and equipment solely in connection with this charter operation.
<PAGE>
9
3.7 MAS and WORLD agree to settle any final adjustments in actual cost versus
payment before December 31, 1993.
3.8 For purposes of accounting, departure times, arrival times and dates
recorded in the Aircraft Log Book will be used.
3.9 MAS hereby guarantees to WORLD a minimum utilisation of 3,133 (Three
Thousand One Hundred and Thirty Three) block hours. In the event of a
cancellation prior to the commencement of the program by WORLD for reasons
beyond its control, the minimum guaranteed utilisation shall be reduced by
783 hours per aircraft.
<PAGE>
10
ARTICLE 4 - PAYMENTS
- --------------------
4.1 MAS shall make available a sum of USD1,000,000 (UNITED STATES DOLLARS ONE
MILLION ONLY) for each Aircraft as a deposit no later than the 7th January
1993 to enable WORLD to undertake the relevant preparations towards the
charter of the Aircraft for the 1993 Haj program. Such deposit shall be
wire-transferred to the account of WORLD with American Security Bank,
Washington, D.C. United States of America, ABA No. 054000551, Account No.
86712080 for credit to World Airways Account. This deposit shall constitute
and form part of the total cost of this Agreement. Such deposit shall be
deducted from the total payments due to WORLD under this Agreement for
services provided by WORLD during Phase Two. WORLD hereby acknowledges
receipt of the USD4,000,000 (UNITED STATES DOLLARS FOUR MILLION ONLY)
referred to herein.
4.2 This deposit will be refunded to MAS in full if this Agreement does not
come into effect due to unjustifiable reasons by WORLD. This deposit will
be forfeited to WORLD in full if this Agreement does not come into effect
due to unjustifiable reasons by MAS. In the event WORLD is unable to
furnish an aircraft due to unjustifiable reasons under this Agreement, it
shall be liable to MAS for sum of USD1,000,000 (UNITED STATES DOLLARS ONE
MILLION ONLY) per Aircraft. The parties agree it is impossible or
impractical to calculate a party's actual damages resulting from
unjustifiable cancellation by the other party and the above sum is a
reasonable estimate of such damages and is agreed to as liquidated damages
and is not a penalty.
<PAGE>
11
4.3 In addition to the above, MAS shall deliver to WORLD a Standby Letter of
Credit ("Letter of Credit") with mutually agreed wordings in favour of
WORLD in an amount equal to one quarter the cost of the planned number of
block hours and positioning cost. The Letter of Credit shall be
established with the American Security Bank, Washington, D.C., United
States of America, ABA No. 054000551 on or before April 26, 1993. WORLD may
draw on the Letter of Credit (i) in the event MAS fails to meet any of the
terms and conditions of this Agreement as it pertains to payment within
five (5) days after WORLD notifies MAS of such failure or (ii) upon
termination of this Agreement pursuant to Article 19.2.
4.4 All bank charges associated with the administrative cost of the Letter of
Credit referred to in Article 4.3, shall be borne by WORLD.
4.5 Upon completion or each rotation an invoice will be presented to MAS for
payment for actual block hours flown. MAS shall approve the invoices
without delay and authorize immediate bank transfer to WORLD's Account
Number 86712080 with American Security Bank, Washington, D.C. United States
of America, ABA No. 054000551.
<PAGE>
12
ARTICLE 5 - RESPONSIBILITIES
- ----------------------------
5.1 Responsibilities of WORLD. WORLD shall provide at its expense and will be
-------------------------
responsible for:
(A) Three (3) DC-10-30 aircraft including cockpit crew, maintained and
equipped and one (1) DC10-30 qualified cabin attendant per flight; one
(1) MD-11 aircraft maintained and equipped including cockpit and full
cabin crew.
(B) Ground transportation, hotel accommodation and subsistence expenses
for the aircraft cockpit crew, cabin crew and ground support personnel
employed by WORLD and other personnel required for the operation
except for hotel accommodations and ground transportation costs for
World's cabin crew at Jeddah.
(C) Aircraft maintenance at all scheduled stations except as provided in
Appendix I. MAS shall, if required, assist WORLD in providing such
aircraft maintenance which shall, if provided be charged to WORLD at a
labour rate of M$50 per manhour.
(D) (i) Sets of galley containers and rotable equipment necessary
for the operation inclusive of carts, trays and other galley
equipment unique to WORLD's aircraft, as specified in
Appendix H.
(ii) Water cups and disposable bassinets unique to WORLD's
aircraft.
<PAGE>
13
(E) Insurance as set forth herein.
(F) The cost of fuel, landing, handling charges, overflight fees,
navigation charges and other operating expenses on the positioning
sectors to Malaysia prior to the commencement of Phase One, from
Jeddah to a point designated by WORLD at the end of Phase One, from a
point designated by WORLD to Jeddah prior to commencement of Phase Two
and from Malaysia to a designated point at the end of Phase Two shall
be for the account of WORLD (with the exception of the aircraft
handling charges at Kuala Lumpur, Penang and Jeddah). WORLD shall have
the right to utilise the total payload available on the positioning
sectors for the purpose of carrying its personnel and equipment
directly related to the operation contemplated under this Agreement.
MAS has the right to utilize the residual payload not taken up by
WORLD.
(G) Qualified operational staff to take care of all operational matters
and all WORLD's crew administration.
(H) WORLD shall supply 3 (three) flight deck crew members on each flight.
(I) WORLD shall provide a standby crew for each flight.
(J) WORLD will rotate crew so that cumulative duration of stay in Malaysia
of each crew member shall not exceed 60 (sixty) days within a fiscal
year (1st January to 31st December).
<PAGE>
14
(K) WORLD shall provide one (1) DC10-30 qualified cabin attendant on each
DC10-30 flight as well as the cost of their salaries, fringes and per
diem.
(L) WORLD shall provide nine (9) cabin attendants on each MD11 flight as
well as the costs of their salaries, fringes and per diem.
(M) At MAS's cost, WORLD agrees to paint over WORLD's Logos and add MAS'
logos and colours on both sides of the hull and tail and the number
two engine of all 4 (four) Aircraft and to recolour same to WORLD's
logo at the end of the Agreement at a rate of USD35,000 (UNITED STATES
DOLLARS THIRTY FIVE THOUSAND ONLY) or the actual cost to WORLD per
Aircraft.
(N) WORLD will position a compliment of spares and qualified maintenance
personnel at Kuala Lumpur and a compliment of spares in Jeddah to
support the operation at WORLD's cost. WORLD shall draw upon its
current pooling arrangement with General Electric and Pratt and
Whitney and/or other organisations to secure spare CF6-50C2 engines
for the DC10 aircraft at BKK, JKT, LGW, etc. and PW4462 engines for
the MD11 aircraft at ZRH, SEL, etc.
5.2 Responsibilities of MAS. MAS shall provide at MAS' expense and will be
-----------------------
responsible for:
(A) Supply of full cabin crew for each flight in accordance with Appendix
D, except in the case of the MD-11 Aircraft, as well as hotel
accommodation and ground transportation cost at
<PAGE>
15
Jeddah for those cabin crew provided by WORLD in accordance with
Article 5.l(A), (K) and (L). MAS instructors will be trained and
tested to U.S. FAA standards by FAA certified instructors in
Kuala Lumpur or Virginia. These instructors will in turn train
and test MAS cabin crew prior to operating as qualified cabin
crew. All cost of instructors including hotel expenses and per
diem allowances shall be for the account of the respective party.
Each party agrees to supply the necessary training facilities at
Kuala Lumpur or Virginia within its own training unit.
(B) All landing fees, parking fees, navigation charges, overflight
charges, lighting fees or charges of a like nature.
(C) Aircraft interior cleaning and toilet cleaning at all points.
(D) Supply of all inflight catering for both passengers and crew.
(E) Commissary supplies.
(F) Payment for all ground handling of the Aircraft and passengers at all
stations.
(G) Non-revenue transportation of spare parts and supplies necessary for
WORLD's operation under this Agreement which can be physically
accommodated on air services operated by MAS.
<PAGE>
16
(H) All use taxes including (but without limitation) airport taxes and
passenger head taxes that are assessed by any agency or authority in
the performance of services under this Agreement.
(I) Aircraft fuel, on all sectors excluding positioning flights. Each
party delivering or redelivering the Aircraft to the other shall be
credited with the quantity of fuel in the tanks of the Aircraft at the
time of such delivery or redelivery and recorded on a document similar
to the attached hereto as Appendix "E". Settlement of the net balance
should be effected against an invoice at time of reconciliation of the
accounts at the end of each phase. The fuel price to be applied will
be at the ruling price of the last uplift point prior to the Aircraft
delivery or redelivery.
(J) Non-revenue firm airline transportation on the air services of MAS for
WORLD's aircrew, positioning staff and other personnel directly
related to the charter flights during the period between 20th April
1993 to 15th July 1993. If any of the schedules listed in Appendix "B"
are revised by MAS after the commencement of the operation, then MAS
shall provide, at its own cost ground or firm air transportation for
aircrew or ground staff.
<PAGE>
17
(K) MAS may supply to WORLD prior to the commencement of operation,
interior decals to be affixed to the Aircraft by WORLD in Kuala Lumpur
prior to the first pilgrim flight.
<PAGE>
18
ARTICLE 6 - FLIGHT OPERATIONS
- -----------------------------
6.1 WORLD at all times shall have operational control over all flights
performed under this Agreement and shall be solely responsible for
compliance with all applicable Federal Aviation Regulations in connection
with the flight operations contemplated under this Agreement. Consistent
with this provision, WORLD shall have the sole authority to determine
whether a particular flight may be safely operated, to assign crew members
for particular flights, to dispatch and release flights, to direct crew
members and to initiate and terminate flights. The Captain of the Aircraft
shall be in command of the Aircraft and shall have complete discretion
concerning the operation of the Aircraft and the initiation and termination
of any flight, and MAS undertakes to accept all decisions of the Captain.
The Captain shall have full authority and control in the operation of the
Aircraft and shall have full authority and control over other crew members
and their duties during flight time. All flight attendants seconded to
WORLD in accordance with Appendix D hereof shall at all times be under the
supervision, direction and control of the Captain while onboard the
Aircraft.
6.2 MAS and all passengers shall comply with all laws, regulations, orders,
demands and travel requirements of all states and countries to be flown
from, to or over and with the U.S. Federal Aviation Administration (FAA)
Rules and Regulations (FAR). WORLD shall not be liable for any aid or
information given by any agent or employee of WORLD to any passenger or MAS
in connection with obtaining necessary documents or complying with such
laws, etc. whether given in writing or otherwise or for the consequence to
any
<PAGE>
19
passenger or MAS resulting from the failure to obtain such documents or to
comply with such laws, etc. MAS and all passengers shall present all exit,
entry, health or other documents required by the laws, etc. of the states
and countries concerned. WORLD reserves the right to refuse carriage to any
passenger or to MAS whose documents are not completed or who has not
complied with the applicable laws, regulations, orders, demands or
requirements. WORLD shall not be liable for loss or expense due to failure
to comply with the requirements listed in this paragraph.
6.3 MAS agrees to pay for the transportation of any person who, on Government
regulation or order, is required to be returned to the point of origin or
elsewhere owing to inadmissibility into a state or country, whether of
transit or destination. If WORLD is required to pay or deposit any fine or
penalty or to insure or make any expenditure by reason of failure to comply
with the laws, etc., of the states and countries concerned MAS shall
reimburse WORLD for all amounts so paid or deposited and any expenditure so
incurred.
6.4 MAS will be responsible for obtaining all necessary Government permits,
traffic rights and authorisations (except for the positioning flights to
and from Kuala Lumpur or vice versa and Jeddah-Europe or vice versa which
will be the responsibility of WORLD) to operate the services hereunder and
MAS hereby agrees to indemnify and hold WORLD harmless from and against any
and all costs, expenses, liabilities including but not limited to any and
all expenses of litigation and reasonable attorney's fees or obligations
arising out of the failure of MAS to obtain such permits, traffic rights
and authorisations.
<PAGE>
20
ARTICLE 7 - FLIGHT PROGRAM
- --------------------------
7.1 Except as otherwise provided herein, WORLD agrees to comply with the
applicable aviation and operating regulations of which it has knowledge of
in all states and countries in connection with its duties hereunder.
7.2 (A) Carriage performed under this Agreement shall be subject to the
conditions of carriage contained or referred to in the traffic
documents of MAS (a copy of which is annexed hereto and incorporated
herein).
(B) MAS, its employees or its agents will at least 2 (two) hours prior to
departure of each charter flight issue to each passenger the necessary
tickets and baggage checks properly filled out and completed and any
other flight documents required for a particular flight hereunder.
7.3 MAS will be responsible for ensuring that the said documents and all
loading is properly completed in accordance with this Agreement, applicable
laws and regulations and the procedures mutually agreed upon.
7.4 MAS has the right, subject to the operating capabilities of the Aircraft
and crew duty time availability, to vary the starting time of each charter
flight or sector of a charter flight, on any given date, provided that, MAS
shall be responsible for any additional costs incurred by WORLD directly
arising from such variation of starting time. These costs will be mutually
agreed upon prior to the implementation of the variations as a condition
precedent to any such variation.
<PAGE>
21
ARTICLE 8 - FLIGHT RE-ROUTING/INTERRUPTION
- ------------------------------------------
8.1 In the event of re-routing or interruption of a charter flight for a
technical reason, the additional block hours performed inclusive of fuel,
landing, handling and passenger comfort costs as a result of such re-
routing or interruption will be for the account of WORLD. If a flight
should be diverted for reasons caused by MAS other than technical reasons,
then MAS will bear the cost of the additional block hours performed.
8.2 For the purpose of this Agreement and to that extent that it does not
contravene any other provision herein, whenever the term "technical"
appears it has the meaning of "maintenance."
8.3 In the event MAS requests a change or modification to the flight schedule
specified in Appendix B hereof, MAS shall reimburse WORLD for any
additional expenses incurred in connection with such change or
modification.
<PAGE>
22
ARTICLE 9 - SUBSTITUTION
- ------------------------
9.1 In case of delay due to technical problems(s) with the Aircraft beyond
WORLD's reasonable control, WORLD shall make all reasonable endeavours to
ensure the delay is as short as possible. In the event that the delay
exceeds 36 (Thirty Six) hours, then Article 9.2 shall apply.
9.2 Subject always to the conditions set out herein, in the event that the
Aircraft is not available for operation hereunder, WORLD shall use its
reasonable efforts to substitute another aircraft with the same or similar
configuration capable of accommodating 364 (Three Hundred and Sixty Four)
passengers and their baggage in the case of a DC10-30 aircraft and 383
(Three Hundred and Eighty Three) passengers in the case of a MD11 aircraft.
In the event of such substitution, reference to "The Aircraft" in this
Agreement shall be read and construed as reference to the substitute
aircraft. In addition, WORLD shall have the right to provide MAS substitute
service for any charter flight with another air carrier's service because
of operational requirements provided that the substitute aircraft conforms
to the conditions of this Article. If the Aircraft shall be unable to
depart at the scheduled time on any flight due to its unserviceability for
any reasons whatsoever (except those attributable to the negligent act or
omission of MAS), WORLD shall, in the case of the Aircraft being
unserviceable have 36 (thirty-six) hours from the scheduled time of
departure within which to rectify such unserviceability.
<PAGE>
23
During this period of unserviceability and until such time as the Aircraft
is ready to resume its programmed operations, MAS will be freed of its
contractual guarantee of operating the planned hours during such period of
unserviceability, and the guarantee of 3,133 block hours shall be reduced
by the number of planned block hours unflown by WORLD during the period of
unserviceability, provided, however, that such hours not actually flown by
WORLD shall be flown by MAS using its own aircraft or by another air
carrier on MAS's behalf. In the event that WORLD shall be unable to rectify
such unserviceability within 36 (thirty-six) hours, MAS shall be entitled
to make other arrangements for the carriage of the passengers as required
without payments of any cancellation fees.
<PAGE>
24
ARTICLE 10 - TAXES
- ------------------
10.1 WORLD will assume full responsibility for and indemnify and hold harmless
MAS from and against any and all U.S. taxes and customs duties of any
nature whatever which may arise from this Agreement and the operation of
the charter flights hereunder. MAS will assume full responsibility for and
indemnify WORLD against any and all other taxes and customs duties levied
by Malaysia, Saudi Arabia or any other state or country including without
limitation any sales, use, gross receipts of all occupational taxes or
royalty payments which may arise from this Agreement and the operation of
the charter flights hereunder.
<PAGE>
25
ARTICLE 11 - INSURANCE
- ----------------------
11.1 WORLD shall be responsible for maintaining Aircraft hull and third party
legal liability insurance up to a Combined Single Limit of
USD500,000,000.00 (UNITED STATES DOLLARS FIVE HUNDRED MILLION) any one
accident/occurrence in respect of the Aircraft for all risks including war
risk and hijacking and will furnish MAS signed certificates containing
details of such insurance not later than 10 (ten) days after signing this
Agreement.
11.2 The Aircraft hull insurance policy or policies shall provide for waiver of
underwriter's rights of subrogation against MAS to the extent WORLD has
waived its rights of recovery under this Agreement.
11.3 WORLD shall cause MAS to be named as additional insured under its third
party legal liability policies of insurance. MAS shall not be liable for
any premium in respect of such insurance.
11.4 WORLD will also cause all policies to be endorsed to provide that they may
not be cancelled without 7 (seven) days prior actual notice to MAS, except
for the policies of war risk and hijacking insurance, which may be
cancelled as described in the certificate.
11.5 Any additional insurance terms, conditions, or coverage as may mutually be
agreed in writing by MAS and WORLD and beyond the usual insurance terms,
conditions and coverage described above, shall be at MAS' own expense, and,
if arranged and paid for by WORLD, MAS shall reimburse WORLD for the cost
thereof.
<PAGE>
26
11.6 MAS shall be responsible for maintaining passenger, baggage and cargo legal
liability insurances in respect of all operation under this Agreement in
the amount of Combined Single Limit USD500,000,000.00 (UNITED STATES
DOLLARS FIVE HUNDRED MILLION ONLY) bodily injury and property damage any
one occurrence. MAS will furnish WORLD not later than 10 (ten) days after
signing this Agreement with signed certificates from its insurers with the
details of such insurance. MAS will have WORLD, its respective employees,
servants and agents named as additional assured under all such policies.
Such policies shall contain a waiver of underwriter's rights of subrogation
against WORLD to the extent MAS has waived its rights of recovery under
this Agreement. WORLD shall not be liable for any premium in respect of
such insurance.
<PAGE>
27
ARTICLE 12 - INDEMNITY
- ----------------------
12.1 WORLD shall be responsible for damage caused to the Aircraft arising out of
the performance of this Agreement and shall hold MAS harmless against any
claims for damage so caused except in the event that the Aircraft is
damaged or destroyed by negligence and/or wilful misconduct of MAS, its
employees, servants or agents.
12.2 WORLD will indemnify MAS against any and all claims brought against MAS by
any third party or other person arising out of the operation of the
Aircraft by WORLD under this Agreement excluding (i) those losses arising
out of claims made by passengers, and (ii) those losses arising out of the
negligence and/or wilful misconduct of MAS, its employees, servants or
agents.
12.3 WORLD hereby indemnifies and holds MAS, its officers, agents and employees
harmless from and against all liability claims, demands, suits, judgements,
damages and losses including the costs, expenses and reasonable legal fees
connected therewith or incident thereto, for death or injury to any officer
or employee of WORLD provided that such death or injury does not involve
any negligent act or omission on the part of MAS or which arises out of, or
in any way connected with the use or operation by WORLD of the Aircraft
under this Agreement.
12.4 MAS agrees to indemnify and hold harmless WORLD, its servants and agents
from all claims and expenses in respect of death or injury to passengers or
their parties, loss of, or damage to property including
<PAGE>
28
baggage and cargo, delay of baggage or cargo arising out of this Agreement;
however, this indemnification shall not apply to losses arising out of the
gross negligence or wilful misconduct of WORLD.
12.5 MAS hereby indemnifies and holds WORLD, its officers, agents and employees
harmless from and against all liabilities, claims, demands, suits,
judgements, damages and losses including the costs, expenses and reasonable
legal fees connected therewith or incident thereto, for death or injury to
any officer or employee of MAS provided that such death or injury does not
involve any negligent act or omission on the part of WORLD or does not
arise out of, or is in any way connected with, the performance by MAS of
its obligations under this Agreement.
12.6 The provision of this Article 12 shall survive the expiration or earlier
termination of this Agreement.
<PAGE>
29
ARTICLE 13 - FORCE MAJEURE
- --------------------------
13.1 Except as otherwise provided in Article 7.4 and 8.1 above, neither party
shall have any responsibility or liability whatsoever for any loss, damage,
delay or prevention of the start or completion of the charter flight(s),
arising out of, in connection with, or incidental to, or because of, force
majeure, (including without limitation) acts of God, loss or damage to the
Aircraft in an accident or other calamity, seizure or hijacking, quarantine
restrictions, fire, fog, flood, severe weather, riots or civil commotions,
strike, or labour stoppage, war or hazards or dangers incident to a state
of war, or any acts, matter or things, whether or not of a similar nature,
beyond the control of either party. Each party shall give the other prompt
notice of any such event and shall use its reasonable efforts to overcome
the effect of such event.
<PAGE>
30
ARTICLE 14 - CANCELLATION
- -------------------------
14.1 It is understood and agreed between WORLD and MAS that it would be
impossible or impractical to calculate WORLD's damages in the event MAS
failed to meet the minimum block hour guarantee specified in Article 3.9.
In the event MAS is unable to meet the guaranteed minimum of 3,133 block
hours as a result of cancellation of any flight, MAS shall pay to WORLD
USD6,566.67 (UNITED STATES DOLLARS SIX THOUSAND FIVE HUNDRED AND SIXTY SIX
AND CENTS SIXTY SEVEN) per block hour for each block hour remaining unflown
short of the minimum number of 3,133 guaranteed block hours. This charge
is a reasonable estimate of WORLD's damages and is agreed to as liquidated
damages and is not a penalty. This Article 14 shall not apply under the
circumstances specified in Article 9 and Article 13.
14.2 If WORLD is unable to perform any charter flight or sector thereof, or
service contemplated by this Agreement for the reasons set forth in Article
13 hereof, WORLD shall be under no obligation or liability to MAS except to
refund the deposit or other portion of the charter price paid for that
charter flight or sector or service.
<PAGE>
31
ARTICLE 15 - AIRLIFT EMERGENCY
- ------------------------------
15.1 WORLD shall have the right to terminate this Agreement in the event of an
Airlift Emergency as determined by the U.S. Secretary of Defence or his
designee or in the event of an Airlift Emergency or National Emergency
determined by the President of the United States, or if the U.S. Civil
Reserve Air Fleet is activated by order of the U.S. Secretary of Defence.
If in any of these cases such Aircraft is required, WORLD shall exercise
this right of termination by telegraphic notice to MAS. In the event this
Agreement is so terminated, MAS' duty to pay rent hereunder with respect to
such Aircraft shall cease and abate from the time MAS is deprived of the
beneficial use of such Aircraft.
<PAGE>
32
ARTICLE 16 - USE OF AIRCRAFT DURING HIATUS
- ------------------------------------------
16.1 The hiatus period is defined as the period between the termination in
Jeddah of the last flight of each Aircraft at the end of Phase One and at
the commencement of the first flight from Jeddah of each Aircraft in Phase
Two (approximately May 26, 1993 to June 4, 1993). During such a period,
WORLD agrees not to use the Aircraft for any military related operations
into any country whatsoever whilst in MAS' logos and colours. WORLD shall
indemnify, and hold harmless MAS, its agents and servants from and against
any liabilities and claims, demands, suits, judgements, damages and losses
of whatsoever nature including the costs, expenses and reasonable legal
fees connected therewith or incident thereto, arising out of or in any way
connected with or caused by the operation of the Aircraft for the reasons
outlined in this Article.
<PAGE>
33
ARTICLE 17 - MISCELLANEOUS
- --------------------------
17.1 The operation of the flight schedules herein are subject to approval by
Saudi Arabian Airlines.
17.2 All appendices referred to in this Agreement shall be deemed read and form
part of this Agreement.
17.3 Both parties agree that no brokers have acted on behalf of either party.
The charter prices agreed herein are net to WORLD and do not include any
commission whatsoever.
<PAGE>
34
ARTICLE 18 - GOVERNING LAW
- --------------------------
18.1 This Agreement shall be governed by and construed in accordance with the
laws of the State of Virginia without reference to the principles of
conflicts of laws.
18.2 Any commercial controversy or claim between the parties in existence at the
time the Aircraft is redelivered to WORLD at the expiration or termination
of this Agreement and arising out of or relating to this Agreement or any
breach thereof, shall be settled by arbitration before the American
Arbitration Association in Washington, D.C. in accordance with the rules of
the American Arbitration Association then in effect, and judgment upon any
award rendered by the arbitration may be entered in any court having
jurisdiction thereof. Each party hereto accepts for itself and its assets,
generally and unconditionally, the jurisdiction of the American Arbitration
Association and the courts, state and federal, located in the State of
Virginia and waives any defense it may have to such jurisdiction,
including, but without limitation, any defense from sovereign immunity or
immunity from service of process. Each party hereby appoints the Secretary
of State of the State of Virginia as its agent for service of process.
<PAGE>
35
ARTICLE 19 - TERMINATION
- ------------------------
19.1 Notwithstanding anything contained to the contrary in this Agreement, the
charter hereby created may be terminated forthwith by MAS without any
prejudice to any accrued rights or liabilities hereunder if WORLD goes into
liquidation (otherwise than as part of a scheme of voluntary reconstruction
or amalgamation).
19.2 Notwithstanding anything contained to the contrary in this Agreement the
charter hereby created may be terminated forthwith by WORLD without any
prejudice to any accrued rights or liabilities hereunder if MAS goes into
liquidation (otherwise than as part of a scheme of voluntary reconstruction
or amalgamation).
<PAGE>
36
ARTICLE 20 - CONFIDENTIALITY
- ----------------------------
20.1 MAS and WORLD hereby agree to keep this Agreement (and each of the terms
and conditions embodied therein), including any and all schedules,
attachments, appendices, annexes, supplements and addenda thereto, and any
and all modifications, amendments, additions, deletions, extensions,
renewals, or other changes thereto (for purposes of this ARTICLE 20 - the
"Agreement"), strictly confidential. MAS and WORLD further agree to cause
each of their respective officers, directors, employees, servants, agents
and assigns to keep strictly confidential, the Agreement. MAS and WORLD
agree not to disclose the existence of the Agreement or any of its terms
and conditions either verbally or in writing to any third party nor to
publish or otherwise reproduce the Agreement, in whole or in part, without
the prior written consent of the other party hereto.
<PAGE>
37
ARTICLE 21 - NOTICE
- -------------------
21.1 Any change or amendment to this Agreement shall be in writing signed by the
duly authorised representatives of both WORLD and MAS. The failure of
either party at any time to require the performance by any other of any of
the terms or provisions of this Agreement shall in no way affect the right
of that party thereafter to enforce the same, nor shall the waiver by
either party of any breach of the terms or conditions hereof be taken to be
a waiver or any succeeding breach of any such term or condition or as a
continuing waiver of such term or condition. Except as provided in
Appendix G and subject to Article 9.2 hereof, neither party shall assign
this Agreement or sub-charter the Aircraft without the prior written
consent of the other which consent shall become Appendix G of this
Agreement and shall be deemed to be part thereof.
<PAGE>
38
21.2 All notices hereunder shall be deemed to be validly given if sent by SITA,
telex and followed by hard copy within 48 (forty-eight) hours hereafter and
by prepaid telegram, mail or telex, addressed to each party as follows:
WORLD: World Airways, Inc.
13873 Park Center Road
Suite 400
Herndon, Virginia, USA 22071
Attention: Chief Executive Officer
Fax #: (703) 834-9412 or
(703) 834-9212
Copy To: Senior Vice President,
Marketing and Sales
Sita Code: IADSSWO
MAS: Malaysian Airline System Berhad
Attention: Managing Director
Dato' Kamaruddin Ahmad
Telex: MA 30450 LAYANG
Sita Code: KULDZMH
Copy To: KULDCMH - Bashir Ahmad
KULCHMH - Hairun Nisa
KULHJMH - Tuan Ibrahim
Tengku Abdullah
or as either party may designate otherwise to the other during the term of
this Agreement.
<PAGE>
39
As witness whereof, the hands of the authorised representative of the
parties have hereto set their hands the day and year first above written.
WORLD AIRWAYS, INC. MALAYSIAN AIRLINE SYSTEM
BERHAD
BY: BY:
------------------------- ---------------------
AHMAD M. KHATIB DATO' KAMARUDDIN AHMAD
TITLE: Senior Vice President TITLE: Managing Director
Marketing and Sales
WITNESS: WITNESS:
------------------------- -----------------------
NAME: James P. McGough NAME: Hairun Nisa
Abu Bakar
Director, Corporate Planning
Special Projects Manager
<PAGE>
40
APPENDIX A
----------
FLIGHT ROUTINGS - DC10-30
--------------- -------
<TABLE>
<CAPTION>
DC10-30 SECTOR TAKE OFF
ROUTE PAYLOAD TIME TIME
- ------ ------- ------ ----------
<S> <C> <C> <C>
PHASE ONE
- --------------
KUL/JED 83,000 LBS 8.45 24 HRS
JED/KUL 90,000 LBS 9.15 18L to 10L
JED/KUL 82,000 LBS 9.15 10L to 18L
PEN/JED 92,000 LBS 8.40 24 HRS
JED/PEN 92,000 LBS 9.10 18L to 10L
JED/PEN 83,000 LBS 9.10 10L to 18L
JHB/KUL 92,000 LBS 0.40 24 HRS
KUL/JHB 92,000 LBS 0.40 24 HRS
BKI/KUL 92,000 LBS 2.20 24 HRS
KUL/BKI 92,000 LBS 2.25 24 HRS
JHB/JED 86,800 LBS 9.05 NIGHT
JED/JHB 86,800 LBS 9.35 NIGHT
KUL/KCH 70,000 LBS 1.21 DAY
KCH/KUL 70,000 LBS 1.21 DAY
</TABLE>
<PAGE>
41
<TABLE>
<CAPTION>
DC10-30 SECTOR TAKE OFF
ROUTE PAYLOAD TIME TIME
- ----- ------- ---- ----
<S> <C> <C> <C>
PHASE TWO
- -----------
KUL/JED 83,000 LBS 9.15 24 HRS
JED/KUL 90,000 LBS 9.00 18L to 10L
JED/KUL 82,000 LBS 9.00 10L to 18L
PEN/JED 92,000 LBS 9.10 24 HRS
JED/PEN 92,000 LBS 8.55 18L to 10L
JED/PEN 83,000 LBS 8.55 10L to 18L
JHB/KUL 92,000 LBS 0.40 24 HRS
KUL/JHB 92,000 LBS 0.40 24 HRS
BKI/KUL 92,000 LBS 2.25 24 HRS
KUL/BKI 92,000 LBS 2.25 24 HRS
JHB/JED 86,800 LBS 9.55 NIGHT
JED/JHB 86,800 LBS 9.00 NIGHT
KUL/KCH 70,000 LBS 1.21 DAY
KCH/KUL 70,000 LBS 1.21 DAY
</TABLE>
<PAGE>
42
FLIGHT ROUTINGS - MD-11
--------------- -----
<TABLE>
<CAPTION>
MD-11 SECTOR TAKE OFF
ROUTE PAYLOAD TIME TIME
- ----- ------- ---- ----
<S> <C> <C> <C>
PHASE ONE
- -----------
KUL/JED 120,000 LBS 8.45 24 HRS
JED/KUL 120,000 LBS 9.15 18L to 10L
JED/KUL 120,000 LBS 9.15 10L to 18L
PHASE TWO
- -----------
KUL/JED 120,000 LBS 8.45 24 HRS
JED/KUL 120,000 LBS 9.00 18L to 10L
JED/KUL 120,000 LBS 9.00 10L to 18L
</TABLE>
<PAGE>
43
APPENDIX B
----------
FLIGHT SCHEDULES
----------------
Schedules and operational routings shall be mutually agreed by 20 April, 1993.
The following routings, however, would apply:
PHASE ONE
- ---------
Penang-Jeddah-Penang
Kuala Lumpur-Jeddah-Kuala Lumpur
Kuala Lumpur-Johore Bahru-Jeddah-Kuala Lumpur
Kuala Lumpur-Kota Kinabalu-Kuala Lumpur-Jeddah-Kuala Lumpur
Kuala Lumpur-Kuching-Kuala Lumpur-Jeddah-Kuala Lumpur
PHASE TWO
- ---------
Penang-Jeddah-Penang
Kuala Lumpur-Jeddah-Kuala Lumpur
Kuala Lumpur-Jeddah-Johore Bahru-Kuala Lumpur
Kuala Lumpur-Jeddah-Kuala Lumpur-Kota Kinabalu-Kuala Lumpur
Kuala Lumpur-Jeddah-Kuala Lumpur-Kuching-Kuala Lumpur
<PAGE>
44
APPENDIX C
----------
AIR CARRIER'S STANDARD SECURITY PROGRAM
---------------------------------------
I. PURPOSE AND APPLICABILITY
-------------------------
A. Purpose. The purpose of this security program is to prevent or deter
-------
aircraft hijacking, sabotage and related criminal acts. This program
is required by FAR Part 108 and describes the security procedures and
facilities related to:
1. The screening of all passengers and other persons and all
property intended to be carried in the cabin of airplanes or into
a sterile area by weapons detecting procedures or facilities as
described herein to prevent or deter the carriage of any
explosive, incendiary device or other deadly or dangerous weapon
aboard airplanes or into a sterile area.
2. Assuring that only persons authorised are permitted to have
access to their firearms while aboard its airplanes or in a
sterile area under the air carrier's control.
3. Controlling air carrier's facilities and operations areas to
prevent or deter unauthorized access to such areas and to
airplanes.
4. Accepting baggage and cargo.
<PAGE>
45
5. Controlling access to baggage and cargo intended for carriage
aboard airplanes.
6. Responding to threats considered to be against specific
airplanes.
7. Assuring that the screening of all persons affords for uniform,
courteous, and efficient treatment to the maximum extent
practicable.
B. Applicability. This program is applicable to scheduled and public charter
-------------
operations(s) conducted by the air carrier as follows:
1. 61 seats and above. All Sections and Appendices applicable except
Section XVI.
2. 1 through 60 seats where access to sterile area is desired. All
Sections and Appendices applicable except Section XVI. Section XV
lists special procedures applicable to this category of
operations.
3. 31 through 60 seats not requiring access to sterile areas.
Applicable Sections include II.C.1, X, XI, XVI and other
Sections as appropriate.
4. 1 through 30 seats not requiring access to sterile area. No
Sections or Appendices applicable unless air carrier
voluntarily seeks FAA approval of program. In that case,
Section XV identifies applicable Sections.
<PAGE>
46
NOTE : Although certain airplane operations of the air carrier may not
be required to be conducted pursuant to this program, all such
operations are required to be conducted in conformance with the
requirements contained in FAR Sections 108.11(b)-(e), 108.19 and
108.23.
II. SCREENING RESPONSIBILITIES AND PROCEDURES
-----------------------------------------
A. Responsibilities. The air carrier is responsible for the inspection
----------------
which constitutes screening of persons and hand-carried (carry-on)
items. Air carrier personnel or outside agency personnel contracted by
the air carrier(s) shall perform the screening. Guidelines pertaining
to these functions are contained in appendices to this program.
B. Persons. All persons desiring to pass beyond the screening point or
-------
board an airplane must undergo screening. Screening of persons is
normally accomplished through the use of metal detectors. Individuals
are not permitted to retain any hand-carried items in their possession
during screening other than articles of clothing and very small or
thin objects such as boarding passes or tickets. All indications of
unaccounted-for metal on an individual's person must be satisfactorily
resolved. Only upon satisfactory completion of screening and of the
inspection of all hand-carried items may the individual be permitted
to pass beyond the screening point.
<PAGE>
47
1. If a person alarms the metal detection device, a determination must be
made that the cause of this alarm is not a weapon or dangerous object.
This can be accomplished by a hand-held metal detector, by asking the
individual to remove extraneous metal from his or her person and
repassing through the walk-through detector, or by a consent search of
the person conducted by a representative of the air carrier. Persons
who cannot be cleared by the air carrier using any combination of
these procedures will be referred to the law enforcement officer.
2. Every person has the option to refuse screening or to request a
physical body search in lieu of metal detector screening. Persons who
refuse to be screened will be denied passage beyond the screening
point.
3. A consent search of the person shall be conducted by persons of the
same sex as that of the person being screened, unless the person being
screened agrees otherwise. Guidelines pertaining to the screening of
persons appear in Appendices to this program.
<PAGE>
48
C. Hand-Carried (Carry-on) Items. All carry-on items passing through the
-----------------------------
screening point or being carried aboard an airplane shall be screened.
Normally, this screening is accomplished by physical search or X-ray
inspection. The inspection should be thorough but not unreasonable.
Items cleared by this inspection may pass the screening point and be
carried into the airplane cabin. Should a person refuse to permit
inspection of any hand-carried item, such item shall not be allowed to
pass the screening point or be allowed to be carried into the airplane
cabin.
1. When the physical inspection method is used, all carry-on items
shall be adequately inspected to reasonably ascertain that such
items are not being used to conceal an explosive, incendiary, or
deadly or dangerous weapon. Guidelines pertaining to the
inspection of carry-on items appear in Appendices to this
program.
2. The X-ray inspection method requires the use of an adequately
trained operator. Whenever the operator sees on the display an
image that is or may conceal an explosive, incendiary, or deadly
or dangerous weapon, the hand-carried item must then undergo
physical search.
<PAGE>
49
D. Private Screening.
-----------------
a. The air carrier may conduct private screening provided the person
is then escorted into a sterile area or to the airplane.
b. Private screening shall not be routinely conducted, but may be
used at the discretion of the air carrier and/or upon the request
of the passenger when normal screening procedures are
inappropriate.
c. Private screening procedures used by the air carrier shall be
consistent with the purpose of this program to screen all
passengers and all property intended to be carried in the cabin
of the airplane.
E. Screening of Handicapped Persons.
--------------------------------
Persons on crutches, in wheelchairs or in stretchers, or wearing
prosthetic aids, etc., may be privately screened. With reason and
discretion, the person conducting the screening or consent search
using either a hand-held metal detection device or a physical search
or combination of both, shall assure that no weapons or dangerous
objects are on or about the person being screened. The person shall
then be escorted through or around the screening point. Hand-carried
items shall be screened in the normal manner.
<PAGE>
50
F. Charter Flights. On public charter flights, as defined in FAR Section
---------------
108.3, for which screening is required, all persons shall be screened
in the same manner as persons travelling on scheduled flights. Upon
request of the principal security inspector (PSI), the air carrier
shall furnish a current list of known public charters to include the
planned dates, times, and departure points of the flights. Private
charter passengers having been screened by virtue of affinity and
other existing safeguards may deplane into sterile areas without
further screening or escort. However, when an air carrier becomes
aware that a person on a private charter flight is in the possession
of a deadly or dangerous weapon and is not authorized pursuant to FAR
Section 108.11, the air carrier shall deny that person unescorted
access to any sterile area, air operations area, or nonpublic area and
shall report the situation to a law enforcement officer if deemed
appropriate.
<PAGE>
51
PHYSICAL INSPECTION GUIDELINES
------------------------------
1. General. Below are guidelines for physical inspection. Of course, the best
-------
guideline of all is common sense and caution.
a. In the whole approach to the screening process, good judgment should
prevail. For example, a pair of dressmaker scissors with other items
indicating a hobby of sewing carried by a lady would probably result
in a decision permitting her to carry the scissors. The same scissors
carried by a man or without other sewing items might be reason to
restrict carriage. Other devices or objects even though not commonly
thought of as dangerous objects, e.g., tools, knitting needles,
elongated scissors and the like, when carried by an individual who
does not obviously have a need for such items, may be questionable or
may be treated as dangerous objects.
b. Likewise, search of luggage also requires common sense and
organisation. First, all sections of a bag, whether zipper
compartments, including shaving kits, etc., must be opened and
inspected. Second, work in an organised manner so you know precisely
what you have inspected. Remember that weapons generally have common
characteristics. They weigh more than clothing. They tend to fall to
the lowest portion of a bag when disturbed, and they are solid or
rigid. Good hiding places are rolled clothing, including socks, and
cases designed for other items such as cameras, etc.
<PAGE>
52
c. Within the context of a reasonable search, a garment draped over the
shoulders or hand-carried in a manner which does not appear likely to
conceal a nonmetallic dangerous device, e.g., an explosive or
flammable liquid, could be inspected by the passenger's wearing or
carrying it through the metal detector. If a garment is "bunched up"
or appears to be wrapped around something, a physical or x-ray
inspection would be required. Similarly, magazines and newspapers can
be screened by the metal detector providing they do not appear to be
concealing some nonmetallic dangerous object. Some very small or thin
objects, e.g., boarding passes or tickets, can be screened by simple
visual observation or by passage through the metal detector.
d. The minute search and opening of pillboxes, medicines, small religious
articles, small notebooks and letters and the like, should not
normally be necessary. If there is no evidence of tampering and the
items are obviously that which they appear to be, they should not
require opening.
2. Special Items. Certain items have a greater potential for concealment or
-------------
pose special search problems. They are detailed in the following section:
a. Containers such as wrapped packages, boxes, and shaving kits packed in
carry-on luggage could contain a weapon or dangerous object. Each one
should be opened for inspection.
<PAGE>
53
b. Thick layers of packed clothing can be checked by running the hands
between the layers. Pat or feel rolled up soiled clothing.
c. Garment bags need careful checking. A weapon might be suspended from
the hangar or lying in a lower corner.
d. Umbrellas should be slightly opened to ensure they do not contain
weapons. Likewise slightly turn their handles to see if they are
rigid. If not, the handle itself could be a knife.
e. Attache cases and small suitcases should be examined to assure that
there is no false bottom or concealed compartments. This can be
accomplished by observing or feeling the bottom and sides to determine
that they have normal thickness. Be suspicious of any interior that
looks unprofessional or repaired.
f. Stuffed pillows and toys are particularly difficult to inspect. The
stuffing could prevent you from feeling a concealed weapon. Rely
primarily on the weight material and any gun or explosive hidden
within would normally make the toy unusually heavy.
g. Cigarette cartons, cigar boxes and other tobacco containers are also
light weight items. They can be inspected by holding to determine
that the weight is consistent with what is normally expected as well
as to open the container and visually check contents.
<PAGE>
54
h. Even shoes have been used to conceal weapons or explosive devices.
The inspection of shoes must include the removal of shoe trees to
ascertain that nothing is concealed in the toe of the shoe.
i. Aerosol cans should be inspected by holding them so as to determine
that the weight is consistent with what is normally expected. In
addition, squeeze the can; one that has been tampered with and no
longer pressurised will dent very easily. If the can is suspicious in
any way, it must be cleared of suspicion before being transported.
j. Cameras, or photography equipment, should be visually inspected to
determine that the lens is intact and that there are no suspicious
apertures which might conceal the muzzle of a customised firearm.
k. All portable electrical devices such as tape recorders, dictaphones,
and phonographs should also be visually inspected to determine if
there are any unusual apertures and if the batteries are in place.
Most can be operated as proof they have not been tampered with.
l. Books should be inspected to determine that they have not been altered
to conceal a dangerous object.
<PAGE>
55
APPENDIX D
----------
MAS CABIN PERSONNEL
-------------------
For the Term of this Agreement, MAS shall second to WORLD such cabin personnel
as are necessary for the performance of the flights contemplated by the
Agreement, in accordance with the following terms and conditions:
1. Qualifications
--------------
All MAS cabin personnel provided by MAS to WORLD in connection with this
Agreement shall be fully qualified on DC10 aircraft and fluent in the
English language. MAS shall provide WORLD with information regarding the
background, qualifications and employment history of all such cabin
personnel.
2. Secondment to WORLD
-------------------
MAS shall obtain from each cabin crew member a statement in form and
substance satisfactory to WORLD evidencing the consent of such cabin
crewmember (i) to the transfer of such cabin crewmember to WORLD's services
for the purpose of this Agreement and (ii) to abide by all applicable
rules, regulations and procedures of WORLD and all applicable Federal
Aviation Regulations.
3. Supervision
-----------
For the Term of this Agreement, WORLD shall station in Kuala Lumpur a
senior flight attendant supervisor ("WORLD Supervisor") whose
responsibility shall be to supervise all activities of the flight
attendants seconded to WORLD. The WORLD Supervisor shall be
<PAGE>
56
--
responsible for directing the activities of the flight attendants including
all matters involving scheduling, training, performance and discipline. All
flight attendants shall report directly to the WORLD Supervisor.
4. Scheduling and Training
-----------------------
All scheduling of flight attendants shall be conducted by the WORLD
Supervisor or under his/ her supervision and direction. All flight
attendants seconded to WORLD shall be required to satisfactorily complete
all applicable provisions of WORLD's FAA-approved training program for
flight attendants. All training shall be conducted by WORLD or under the
supervision and direction of WORLD.
5. Compliance with Applicable Requirements
---------------------------------------
All flight attendants seconded to WORLD shall at all times be subject to,
and shall comply with, all applicable WORLD rules, regulations and
procedures and all applicable Federal Aviation Regulations to the same
extent as any other WORLD flight attendant. While on the Aircraft the
attendants shall be subject to the supervision and direction of the
Captain.
6. Discharge
---------
At the sole discretion of the WORLD Supervisor, any flight attendant may be
discharged from secondment to WORLD. The WORLD Supervisor shall promptly
consult with MAS regarding any additional disciplinary action which might
be necessary or appropriate. A discharge flight attendant shall not be
eligible for subsequent
<PAGE>
secondment to WORLD. In the event of the discharge of a flight attendant,
MAS shall promptly provide a replacement in accordance with the provisions
of paragraph 1 above.
7. Compliance with Laws
--------------------
MAS represents that the secondment of flight attendants to WORLD in
accordance with the terms hereof will not violate any applicable laws,
rules, regulations or policies of Malaysia or any union contract or other
agreement to which it is a party or otherwise may be bound.
<PAGE>
58
APPENDIX E
----------
AIRCRAFT DELIVERY RECEIPT
-------------------------
Received from WORLD AIRWAYS, INC./MALAYSIAN AIRLINE SYSTEM BERHAD 3 (three)
DC10-30 Aircraft and 1 (one) MD-11 Aircraft bearing Nationality and Registration
Mark:
at _____________ hours local time on _____________________________________, 1993
Fuel on Board ________________ LBS
Name and Title _______________________________________________ Signed
-----------------------------------------------
-----------------------------------------------
For and on behalf of WORLD AIRWAYS, INC./MALAYSIAN AIRLINE SYSTEM BERHAD*
* Delete as appropriate.
<PAGE>
59
APPENDIX F
AIRCRAFT CHARTER AGREEMENT FOR HAJ SERVICES
-------------------------------------------
SUB-AGREEMENT ON CONCESSION TRAVEL
----------------------------------
REFERENCE is made to the Aircraft Charter Agreement entered into between
Malaysian Airline System Berhad (hereinafter called "MAS") and World Airways
Inc. (hereinafter called "WORLD") dated 24th day of July 1993, (hereinafter
--------
called "AGREEMENT").
It is hereby mutually agreed that:
1. MAS shall provide concession to WORLD's personnel involved in the Haj
services with MAS, to travel on MAS own scheduled services for their own
leisure or personal travel.
2. The applicable rebates on the published fares shall be as follows:
(a) For travel within domestic regions (including Singapore and Brunei)
___________________________________________________:50% firm
(b) For travel on international routes
________________________________: 75% subject to load or 50% firm.
3. The concession is only applicable to WORLD's personnel involved in the Haj
services with MAS, their spouse and children and shall be valid for travel
from 1st May 1993 to 1st August 1993 only.
<PAGE>
60
4. WORLD undertakes to ensure that the leisure, or personal travel performed
by WORLD's personnel shall not jeopardise the operation of the Haj
services.
IN WITNESS WHEREOF the parties hereto have hereto set their hands on 24th
------
day of July 1993.
FOR AND ON BEHALF OF FOR AND ON BEHALF OF
WORLD AIRWAYS INC. MALAYSIAN AIRLINE SYSTEM BERHAD
- --------------------------------------------------------------------------------
DATE: 24 July 1993 DATE: 24 July 1993
------------------ ----------------------
<PAGE>
61
APPENDIX G
----------
World Airways, Inc.
13873 Park Center Road
Suite 490
Herndon, Virginia 22071
United States of America
Dato' Kamaruddin Ahmad
Managing Director
Malaysian Airline System Berhad
33rd Floor, Bangunan MAS
Jalan Sultan Ismail
50250 Kuala Lumpur
Malaysia
Dear Dato',
In accordance with the Aircraft Charter Agreement made between World Airways,
Inc. (hereinafter called "WORLD") and Malaysian Airline System Berhad
(hereinafter called "MAS") dated 24th July 1993 (hereinafter called
-------
"Agreement"), World hereby consents to the sub-charter of the aircraft as
therein defined by MAS to:
(i) Perbadanan Pengangkutan dan Perusahaan Tabung Haji Sdn Bhd Malaysia of
Kuala Lumpur, Malaysia;
(ii) Saudi Arabia Airlines
only upon the following terms and conditions:
(i) The Agreement to remain in full force and effect throughout the period
of the sub-charter;
<PAGE>
62
--
(ii) MAS to remain bound by the terms of the Agreement throughout the period
of the sub-charter;
(iii) This consent shall be governed by and construed in accordance with the
laws of the State of Virginia.
Yours faithfully,
-----------------
AHMAD M. KHATIB
for World Airways, Inc.
Kindly sign at the foot of this consent where shown to indicate your acceptance
of the terms.
For Malaysian Airline System
Berhad
DATO' KAMARUDDIN AHMAD
Managing Director
<PAGE>
63
--
APPENDIX H
----------
CATERING EQUIPMENT FURNISHED
----------------------------
BY WORLD
--------
The catering equipment specified below shall be returned to WORLD upon the
expiration or earlier termination of this Agreement, in as good condition as
upon commencement of the services to be provided hereunder, normal wear and tear
excepted.
<TABLE>
<CAPTION>
DC10-30 MD-11
------- -----
<S> <C> <C>
WORLD 2/3 MEAL TRAY 8991 5000
LIQUOR CARRIER 48 98
OVEN INSERT 396 50
FOOD CARTS 228 102
LIQUOR DRAWERS 264 196
ICE BINS (BROWN) 30 NIL
CART SLEEVE 69 NIL
LIQUOR CART 4 NIL
SVC CENTRE ICE BIN 31 NIL
COFFEE BAR ICE BIN 21 NIL
WASTE BIN (AFT) 3 3
MILK BIN 24 NIL
CORY JUG 57 NIL
LOADING BOARD 3 NIL
COFFEE SERVERS - 10
</TABLE>
<PAGE>
64
--
APPENDIX I
----------
MAS/WORLD ENGINEERING HANDLING PROCEDURES
-----------------------------------------
This procedure is written as a general guide for engineering handling of World
Airways aircraft for as long as the aircraft is operating with MH flight
numbers.
1. ACCEPTANCE CHECKS
-----------------
1.1 Acceptance checks by MAS will be carried out in KUL upon arrival of
the aircraft as per MAS aircraft weekly Cabin Inspection check sheet.
1.2 Pre Service mod to be carried out by Cabin Interior Maintenance.
Decals will be provided by Line Maintenance.
1.3 Aircraft delivery receipt to be completed for delivery and re-
delivery. Fuel quantity/volume on arrival/departure to be actual
amount.
2. ENGINEERING GROUND HANDLING
---------------------------
2.1 Engineering ground handling for all Malaysian ports and JED will be
provided at MAS' expense.
2.2 Engineering handling are those items covered in MAS DC10 Transit
and/or Stayover checks.
2.3 All equipment required to perform the engineering handling will not be
re-chargeable to World Airways.
<PAGE>
65
2.4 World Airways Engineers will be at the aircraft 2 hours prior to STD
for ex-stayover/nightstop aircraft.
2.5 World Airways Engineers will be at the allocated parking bays 15
minutes prior to STA for all arrivals.
2.6 Ground Support Equipment provided to an aircraft with the APU shut
down will not be re-chargeable to WORLD AIRWAYS.
2.7 All work done by the servicing crew in ASU KUL/PEN/JHB/BKI/KCH is not
re-chargeable to WOA. A servicing team will comprise of 1 LAE and 2
mechanics.
2.8 MAS will provide appropriately trained Senior Artisans for ground to
cockpit communication on all Malaysian stations.
2.9 KORAN TAPES
a) Phase 1 - To be fitted prior to operation of Phase 1 by ASU KUL.
b) Phase 1 - To be removed at end of Phase 1 by WORLD JED and held.
c) Phase 2 - To be fitted prior to operation of Phase 2 by WORLD JED.
<PAGE>
66
d) Phase 2 - To be removed at end of Phase 2 by ASU KUL.
Note: Base Maintenance to liaise with Cabin Services for Koran tapes.
2.10 Wheel build up is not re-chargeable to WORLD.
3. CERTIFICATION
-------------
3.1 MAS DC10 Engineers to carry out Transit, Stayover and rectification
and sign for work accomplished in mechanics column of the Technical
Log.
3.2 World Airways Engineers will certify aircraft airworthiness release
for all stations.
3.3 World Airways will provide Travelling Engineers for certification in
KCH/BKI/JHB. World Engineers will travel as crew members.
3.4 Engineers travelling as crew members are required to be in possession
of valid passports for KCH/BKI stations. Engineers need not go through
CIQ formalities for transit stop. Immigration officials have the
right to demand/view crew passports even on Transit.
4. AIRCRAFT ROTABLE SPARES
-----------------------
4.1 WORLD will provide a reasonable stock of spares in KUL/PEN.
<PAGE>
4.2 Each aircraft will be equipped with a Flight Kit. Flight Kit list attached
for ASU Superintendent/Maintenance Superintendent PEN/Maintenance
Superintendent KCH/Maintenance Superintendent BKI/Station Engineer
JHB/Maintenance Controllers/Base Maintenance Superintendent/Engineering
Supplies Manager.
4.3 Ad-hoc loans of spares from MAS will be FOC for up to 7 days. Loan of
spares will be re-chargeable to WOA from 8th day as tabulated below:
. 1st - 7th day - FOC
. 8th - 10th day - 1/2% per day
. 11th day and thereafter - 1% per day
. Administrative, availability and handling fees - FOC
. Basis is MAS' acquisition cost
. Maximum loan fee will be MAS' replacement cost
. WORLD to have the option to either pay premium loan fees for MAS parts
that may leave with the aircraft until parts are returned, or purchase
the part installed on the aircraft (subject to agreement by MAS) at MAS'
replacement cost.
4.4 World Airways Engineers are required to liaise with MAS Maintenance Control
Centre for requests of ad-hoc loans.
<PAGE>
68
4.5 World Airways spares destined for KUL must be addressed to Engineering
Supplies Manager, Malaysian Airline System Berhad, Building E3 - Ground
Floor, MAS Technical Operations Centre, 47200 Subang Airport, Selangor
Darul Ehsan, Malaysia. SITA KULEJMH copy KULELMH.
4.6 For ease of custom clearance, each consignment should be limited to a
------
maximum of 25 items.
4.7 World Airways spares will be held in MAS Engineering stores. World Airways
Engineers will have full access to the World Airways storage area and may
pick up spares from stores directly or request by walkie talkie through MCC
or ASU Progress Chase. 2 (Two) each main wheel/nose wheel/brake assemblies
will be prepositioned at Line Maintenance Hangar for use during turnaround.
4.8 Custom formalities and storage of spares will be at MAS' expense.
4.9 MAS Superintendent of Engineering Supplies will arrange to provide one
medium size capacity forklift for WORLD stores personnel's use in Central
Stores and Line Maintenance Hangar. MAS will assist WORLD personnel in
obtaining DCA permit for such forklift, lease charges will be rechargeable
to WORLD.
<PAGE>
69
5. ENGINE SUPPORT CF6-50C2 AND PW4462
----------------------------------
CF6-50C2
--------
5.1 World Airways will position two spare CF6-50C2 engines at KUL and LGW
to provide support for KUL.
5.2 In the event of engine change requirement at JED, the aircraft will be
"two engine ferried" to LGW for engine change.
5.3 World Airways will have 2 engine ferry crew available in KUL and JED.
5.4 KUL - Engine support from MAS will be on an-hoc basis. Authority for
usage of MAS engine must be obtained from MAS Engineering Planning
Manager or his designate. Administrative charges are not re-
chargeable.
5.5 In the event that no engine is available in KUL, G.E. pool engine at
BKK or SIN will be picked up. The aircraft will be "two engine
ferried" to BKK or SIN for the engine change.
PW4462
------
5.6 Spare PW4462 engines will be available at LAX and DOV and World
Airways will have access to Pratt and Whitney pool engines at SEL and
ZRH.
<PAGE>
70
5.7 In the event of engine change requirement at JED, the aircraft will be
"two engine ferried" to ZRH for engine change.
5.8 In the event of engine change requirement at KUL, the aircraft will be
"two engine ferried" to SEL for engine change.
5.9 World Airways will have two engine ferry crew available in KUL and
JED.
<PAGE>
71
6. CONSUMABLES
-----------
6.1 Engine oil 2380 and Hydraulic fluid Skydrol LD4 will be at MAS'
expense.
6.2 Consumables available at free issue stores will be at MAS' expense.
6.3 Other consumables will follow procedure 4.7.
7. SCHEDULED MAINTENANCE
---------------------
7.1 To be confirmed by WOA. If check confirmed WORLD will action item 7.2
-7.4.
7.2 WORLD will provide the check package 3 weeks prior to scheduled
maintenance.
7.3 WORLD will provide all rotable and consumable spares.
7.4 WORLD will clear all the heavy check items on the PHASE check prior to
delivery and to limit the check in KUL to minimum requirements.
7.5 All manhours, spares and materials used are rechargeable to World
Airways.
8. ENGINEERING DELAYS
------------------
8.1 All flights operating with MH flight numbers will be treated as MAS
flight and will be monitored by MAS Maintenance Control Centre.
<PAGE>
72
8.2 a) Any delay of 3 minutes and above due to engineering reasons, a delay
report must be raised, for delays in KUL.
b) For Line Stations, a delay telex must be sent to KULELMH/KULWWMH/
KULKKWO/KULELWO/IADDDWO/IADMMZN/IADDKWO/IADSSWO and onward station for
delays of 3 minutes and above. Details required in the telex will be as
follows:
i) Station/Aircraft registration/flight number/date.
ii) Reason for delay.
iii) Duration of delay.
8.3 In the event of lengthy delays, an update telex must be sent every 3 to 4
hours, followed by a final telex.
8.4 a) In JED, World Airways Engineer will be required to carry out the above
function.
b) In all Malaysian stations except KUL, the Station Engineer or Engineer
in charge will send the telex but World Airways Engineer is required to
provide the details.
<PAGE>
73
8.5 A delay warning telex must be sent whenever a delay is anticipated. For
delays of less than 30 minutes, delay warning telex is not required. Delay
telex per 8.2 (b) should be sent immediately.
9. ADMINISTRATION
--------------
9.1 World Airways Engineers will be provided with a van for their movement
within Subang Airport. DCA driving permit required. MAS will assist
World Engineers.
9.2 World Airways Engineers are welcome to the use of MAS Engineers crew
room and facilities. There is one crew room in the MAS Line
Maintenance Hangar.
9.3 Reasonable office space will be provided to World Airways Maintenance
Manager, at Line Maintenance Hangar.
9.4 World Airways Engineers are encouraged to discuss administrative or
technical matters requiring urgent attention with MAS Duty Engineer or
MAS MCC.
9.5 MAS Radio Engineers will carry out boarding music and IFE test on each
transit/stayover aircraft in KUL and PEN.
<PAGE>
9.6 MAS Fuel and Oil Log will be used for all flights with MH flight
numbers for accounting purposes only and will be completed by MAS
Engineers at all stations within Malaysia and by WOA Engineers at JED.
Details required are:
a) Aircraft registration/sector/date/flight number.
b) Ground Engineer's column (left hand portion of Log).
c) Engine oil and Hydraulic fluid uplift.
d) Circulation will be as per requirement for MAS aircraft.
9.7 For Phase 2 of the operation, a stretcher kit will be positioned in
JED. There will be 3 other kits available in KUL.
9.8 Useful SITA CODES:
KULELMH - Maintenance and Control Centre ) 24
Duty Engineer, Aircraft ) Hrs
Servicing Unit
Line Maintenance (Office Hrs)
KULEJMH - Engineering Supplies (24 Hrs)
KULEYMH - Engineering Planning (Office Hrs)
Schedule Hangar Maint.
PENKEMH - Maint. Superint. PEN ) 24 Hrs
JHBKEMH - Station Engineer JHB
(0700/2100LT)
KCHKEMH - Maint. Superint. KCH ) 24 Hrs
BKIKEMH - Maint. Superint BKI ) 24 Hrs
<PAGE>
JEDKDMH - Airport Manager MAS JED
JEDKKWO - WOA Airport Manager JED
BKKTLTG - Shift Manager (24 Hrs)
Line Maintenance Manager
JEDHJMH - Haj Terminal
CHSMMWO - WOA MM Base/Director Maintenance
CHSJRWO - WOA Stores
IADDDWO - WOA Dispatch
KULKKWO - WOA KUL Ops/Maintenance
IADMMWO - WOA MCC/QC/V.P. Maint./Director QC
9.9 All WOA engineers are required to obtain Airport passes for KUL or
PEN. Two passport size photos required. MAS will assist to obtain
airport pass.
9.10 All reportable flight incidents to FAA must be copied to DCA Malaysia
using DCA irregularity form.
10. RECHARGEABLE REQUEST BY WOA
---------------------------
10.1 All re-chargeable request for manpower, equipment, spares and
materials by WOA must be accompanied by Work Order issued by WOA
Inspector or Maintenance Manager.
<PAGE>
As of July 24, 1993
BY HAND
- -------
Mr. Ahmad M. Khatib
Senior Vice President
Sales and Marketing
World Airways, Inc.
13873 Park Center Road
Suite 400
Herndon, Virginia 22071
RE : 1993 HADJ AGREEMENT -
PAYMENT OF WORLD EXPENSES
Dear Mr. Khatib,
This letter will confirm our agreement that certain expenses incurred by World
Airways ("World") in connection with the performance of that certain Aircraft
Charter Agreement dated Jul 24, 1993 (the "Agreement"), shall be paid directly
by Malaysia Airline System Berhad ("MAS") to World's suppliers on World's
behalf. The expenses covered by this agreement shall be as follows:
(1) Hotel accommodation and ground transportation costs for cabin crew
provided by World in accordance with the Agreement;
(2) Hotel accommodation and ground transportation costs for flight
instructors provided by World in accordance with the Agreement;
(3) All landing fees, parking fees, navigation charges, overflight charges,
lighting fees or charges of a like nature;
(4) Aircraft interior cleaning and toilet cleaning at all points;
(5) Supply of all inflight catering for both passengers and crew;
<PAGE>
Mr. Ahmad M. Khatib
July 24, 1993
Page 2
(6) Commissary supplies;
(7) Payment for all ground handling of the Aircraft and passengers at all
stations; and
(8) Aircraft fuel on all sectors excluding positioning flights,
MAS shall provide World with a reconciliation all such charges at the time of
the final adjustment provided for in Article 3.7 of the Agreement.
Very truly yours,
Puan Hairun Nisa Abu Bakar
Corporate Planning Manager
<PAGE>
Amendment No. 1
This Amendment No. 1, dated May 14, 1993, between World Airways, Inc.
a Delaware corporation, and Federal Express Corporation, a Delaware
corporation, as successor in interest to the Connecticut National Bank, as
lessor.
WHEREAS, the parties (or their predecessors in interest) are party to
a Lease Agreement, dated as of March 30, 1987 (the "Lease"), recorded with the
Federal Aviation Authority on __________, 1987 at ________ and desire to amend
certain of the terms thereof;
WHEREAS, terms used herein without definition are used as defined in
the Lease.
NOW, THEREFORE, the parties agree as follows:
1. Extension. The Lease is hereby extended until July 10, 1994 for one
---------
Aircraft, a date selected at the Lessee's discretion between July 10 and
August 15, 1994 for one Aircraft and one Spare Engine and a date selected at
the Lessee's discretion between September 1 and September 19, 1994 for the
third Aircraft and the second Spare Engine (each such date a "Return Date");
provided that the first Spare Engine need not be returned on such schedule if
at that time it is undergoing repair or overhaul and instead shall be returned
when such repair and/or overhaul are completed. The Lessee shall decide in its
sole discretion which Aircraft and which Spare Engine is returned at which
Return Date, except that the Aircraft N106WA may not be delivered on the third
Return Date. The Lessee shall notify the Lessor at least 90 days before each
Return Date as to which Aircraft and, if applicable, which Spare Engine will
be returned on such Return Date and, in the case of the second and third
Return Date, on precisely what day the Return Date will be.
2. Stipulated Loss Value. The Stipulated Loss Value for the Aircraft
----------------------
during the extension shall continue in the same pattern as set forth on Exhibit
B to the Lease, i.e. the Stipulated Loss Value percentage shall reduce by .09%
on each Basic Rent payment date.
3. Return. Notwithstanding anything to the contrary in the Lease,
------
(a) each cargo loading system (including the net and smoke barrier)
shall be returned with its related Aircraft, but will not be installed on such
Aircraft;
(b) all passenger-related equipment not required for operation of an
Aircraft as a freighter shall be removed by the Lessee from each Aircraft
prior to its return and shall be retained by the Lessee without any
compensation therefore, provided that this clause (b) is contingent on
McDonnell Douglas Corporation granting its consent thereto, and the parties
agree to diligently attempt to obtain such consent;
<PAGE>
(c) all returns shall take place anywhere on the route structure of
Federal Express Corporation as selected mutually by the parties hereto, or
such other place as the parties mutually agree;
(d) At the time of their return no more than seven Engines and Spare
Engines shall have accumulated more than 900 Cycles per Engine or Spare Engine
since its last heavy maintenance visit.
(e) each Aircraft need not be fresh out of a "C" check at its return,
provided that the Lessee shall pay to the Lessor for each of the first and
last Aircraft to be returned $300,000 at their return provided that the Lessor
shall first withdraw from the "C" check Maintenance Reserve Payments to
satisfy this payment obligation, any shortfall shall be paid by the Lessee and
any overage remaining from such Reserve Payments shall be paid by the Lessor
to the Lessee. In the event Lessee returns an Aircraft with an FAA extension
for "C" check, Lessor agrees to accept such Aircraft without any additional
compensation or work other than as set forth in this paragraph;
(f) Sections 12(b)(ii) and 12(d) of the Lease shall be applicable on
April 1, 1994 even though no returns are occurring on such date;
(g) A new Section 12(i) is added as follows:
"(i) Return of Engines: Off-Wing Maintenance. The Lessee shall pay to the
----------------------------------------
Lessor the product of $150.00 and the number of Flight Hours incurred by such
Engine or Spare Engine since April 1, 1994. Such payments shall be made on the
10th day of each month regarding usage during the prior month. Notwithstanding
anything in this Lease to the contrary, in the event for any reason any Engine
or Spare Engine needs any off-wing repair, maintenance, overhaul, modification
(if such modification is required by this Lease) or other work done to it
("Off-Wing Work"), the Lessee shall notify the Lessor thereof as soon as
practical and the Lessor shall arrange for such Off-Wing Work to be done as
promptly as practical and solely at the expense and risk of the Lessor,
including shipping costs. The Lessor shall have no responsibility to replace
such Engine or Spare Engine, however, while it is undergoing such Off-Wing
Work. The Lessee shall remain solely responsible for any repair, maintenance,
overhaul, or modification required by this Lease which can be done while the
Engine or Spare Engine is installed on an Aircraft or aircraft."
(h) No payments shall be due under Section 5(e)(iii) of the Lease on
account of Flight Hours or Cycles accumulated after March 31, 1994 and none of
the payments previously made under said Section shall be used by the Lessor to
perform its obligations under Section 12(i) of the Lease.
(i) Section 12(c) of the Lease is rewritten as follows: (c)
Overhaul-Airframe. In the event that Lessee does not meet the conditions in
- -----------------
clause (i)(1) of Paragraph (b) of this Article with respect to an Airframe,
Lessee shall pay Lessor the product of $60 multiplied by the number of Flight
Hours accumulated by such Airframe over 50% of the allowable Flight Hours
between Airframe overhauls, major block maintenance or "D" check, whichever
shall
<PAGE>
then apply. Lessor shall satisfy this obligation first by utilizing the
Maintenance Reserve for the Airframe and any shortfall shall be paid by
Lessee.
3. CRAF. (a) The parties acknowledge that Lessee may commit the
----
Aircraft to the U.S. Civil Reserve Air Fleet for Stage I, II and III for the
fiscal year ending September 30, 1994 (as such period may be extended at the
option of the U.S. Government (the "Government")) (such potential commitment
period is known as the "Call-up Period") and therefore agree that,
notwithstanding anything to the contrary in the Lease, in the event of a Civil
Reserve Fleet Mobilization (a "Mobilization") during the Lease Term, as
extended above, during which the Government requires Lessee to provide airlift
services which requires the services of an Aircraft, the Lease of such
Aircraft shall continue in effect until the later of the scheduled expiration
of the Lease, as so extended, or the date such Aircraft is returned by the
Government to Lessee. If such Aircraft is returned by the Government to Lessee
after the scheduled expiration of the Lease for such Aircraft, Lessee will
return such Aircraft to the Lessor in accordance with the terms of the Lease as
promptly as practical after such Aircraft is returned by the Government to
Lessee.
(b) In the event that an Aircraft is so required by the Government
under its contract with Lessee at any time after the end of the Lease Term for
such Aircraft, but not later than the end of the Call-up Period, Lessee shall
immediately dispatch notice to the Lessor advising it of the Mobilization and
specifying the Aircraft required in order to satisfy the requirements of the
Mobilization, and Lessor, subject to causes beyond Lessor's control and
without its fault or negligence, shall within 24 hours of receipt of such
notice for aircraft called up for CRAF Stages I and II and 48 hours of receipt
of such notice for aircraft called up for CRAF Stage III, or such additional
time as the Government may permit, position and deliver the specified Aircraft
and the required flight crews and material as required by the Government. The
Lease to Lessee shall be deemed in effect for the entire call up period for
such Aircraft.
Lessee agrees that, in the event of a Mobilization, it will exercise
its best reasonable efforts to utilize other DC-10 aircraft then in its fleet
to perform its airlift obligations under its contracts with the Government
before requiring Lessor to deliver the Aircraft under this Section 3(b);
provided, however, that nothing in this paragraph shall abridge Lessee's right
to require Lessor to deliver an Aircraft to it if, as directed by the
Government, such Aircraft is required for the performance of airlift services
required under Lessee's CRAF contracts.
The parties agree that they shall from time to time do and perform
such other and further acts as may be reasonably requested by the other party
in order to carry out and effect the intent and purpose of this Section 3.
Lessor will not take any action with respect to the Aircraft during the
Call-up Period which would violate the terms of the standard CRAF contract for
fiscal year 1994.
(c) Notwithstanding anything in the Lease to the contrary, no Event
of Default shall be deemed to occur during a Mobilization of an Aircraft if
such Event of Default cannot be cured by Lessee as a result of such
Mobilization, provided that, upon return of such Aircraft by the Government to
Lessee, Lessee cures such Event of Default as promptly as practical.
<PAGE>
(d) While the Lease is in effect pursuant to Section 3(b), Lessee and
Lessor agree that Lessor shall perform such airlift services as the Government
may direct during the Mobilization, and shall adhere to and be bound by the
standards, procedures and requirements under Lessee's CRAF contract with the
Government and shall perform Lessee's obligations, and have the exclusive
right to exercise Lessee's rights, under the Lease (except that (x) Lessor
shall cause any public liability insurance carried by it (or any substitute
protection pursuant to Section 8(c) of the Lease) to name Lessee as an
additional insured and (y) during such reinstatement period Sections 10,
15(c), and 16(a), (k), (l) and (m) shall not apply) and for such purpose
Lessee will permit Lessor to have complete control and possession of the
Aircraft subject to the Mobilization. All sums received by Lessee with respect
to such Aircraft resulting from its actual Mobilization shall be paid to
Lessor promptly after receipt, after deducting therefrom a commission equal to
1.0% of the amounts actually received by Lessee, which commission shall be
retained by Lessee. Any failure of Lessor to satisfy Lessee's obligations
under the Lease during such call up period shall be deemed excused to the
extent Lessor has excused Lessee from such obligations.
In the event of a Mobilization of an Aircraft pursuant to Section 3(b),
the parties agree to negotiate in good faith (i) amendments to this Amendment
to effectuate the intent of this Section 3, subject to the requirements of
CRAF, (ii) an allocation of the risks covered by Sections 15(a) and (b) of the
Lease between Lessee and Lessor in a manner consistent with the other
provisions of this Section 3 and (iii) to determine which Sections of the
Lease shall not apply during such Mobilization in addition to those specified
in the last parenthetical of the preceding paragraph (the references to such
Sections not being deemed in any way a presumption that other Sections in the
Lease should apply during a Mobilization).
Lessee agrees to provide to Lessor a copy of its CRAF contracts that
relate to the Aircraft promptly after the execution thereof.
4. Miscellaneous. Except as amended hereby, the Lease is ratified and
-------------
confirmed in all respects. This Amendment may be signed in any number of
counterparts, each of which is an original, but all of which constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to have
been duly executed and delivered on the date first above written.
World Airways, Inc.
By: /s/
-----------------------
Title: President
Federal Express Corporation
Approved as to Legal Form: By: /s/
----------------------
Title: Vice President
By: KHS
-------------------------
Date: 5/14/93
---------------------------
<PAGE>
Amendment No. 2
This Amendment No. 2, dated May 14, 1993, between World Airways, Inc. a
Delaware corporation, as Lessee (the "Lessee") and Federal Express
Corporation, a Delaware corporation, as Lessor (the "Lessor") as successor in
interest to The Connecticut National Bank, as Lessor, under Trust Agreement
dated as of March 30, 1987, now known as Shawmut Bank Connecticut, National
Association.
WHEREAS, the parties (or their predecessors in interest) are parties to a
Lease Agreement, dated as of March 30, 1987, recorded by the Federal Aviation
Administration on April 2, 1987 and assigned Conveyance No. G64102 as
supplemented, assigned and amended, as more particularly described on Annex I
attached hereto (collectively, the "Lease") desire to amend certain of the
terms thereof;
WHEREAS, the terms used herein without definition are used as defined in
the Lease.
NOW, THEREFORE, the parties agree as follows:
1. Extension. The Lease is hereby extended until July 10, 1994 for one
---------
Aircraft, a date selected at the Lessee's discretion between July 10 and
August 15, 1994 for one Aircraft and one Spare Engine and a date selected at
the Lessee's discretion between September 1 and September 19, 1994 for the
third Aircraft and the second Spare Engine (each such date a "Return Date");
provided that the first Spare Engine need not be returned on such schedule if
at that time it is undergoing repair or overhaul and instead shall be returned
when such repair and/or overhaul are completed. The Lessee shall decide in its
sole discretion which Aircraft and which Spare Engine is returned at which
Return Date, except that the Aircraft N106WA may not be delivered on the third
Return Date. The Lessee shall notify the Lessor at least 90 days before each
Return Date as to which Aircraft and, if applicable, which Spare Engine will
be returned on such Return Date and, in the case of the second and third
Return Date, on precisely what day the Return Date will be.
2. Stipulated Loss Value. The Stipulated Loss Value for the Aircraft
---------------------
during the extension shall continue in the same pattern as set forth on
Exhibit B to the Lease, i.e. the Stipulated Loss Value percentage shall reduce
by .09% on each Basic Rent payment date.
3. Return. Notwithstanding anything to the contrary in the Lease,
------
(a) each cargo loading system (including the net and smoke barrier) shall
be returned with its related Aircraft, but will not be installed on such
Aircraft;
(b) all passenger-related equipment not required for operation of an
Aircraft
<PAGE>
as a freighter shall be removed by the Lessee from each Aircraft prior to its
return and shall be retained by the Lessee without any compensation therefore,
provided that this clause (b) is contingent on McDonnell Douglas Corporation
granting its consent thereto, and the parties agree to diligently attempt to
obtain such consent;
(c) all returns shall take place anywhere on the route structure of
Federal Express Corporation as selected mutually by the parties hereto, or
such other place as the parties mutually agree;
(d) At the time of their return no more than seven Engines and Spare
Engines shall have accumulated more than 900 Cycles per Engine or Spare Engine
since its last heavy maintenance visit.
(e) each Aircraft need not be fresh out of a "C" check at its return,
provided that the Lessee shall pay to the Lessor for each of the first and
last Aircraft to be returned $300,000 at their return provided that the Lessor
shall first withdraw from the "C" check Maintenance Reserve Payments to
satisfy this payment obligation, any shortfall shall be paid by the Lessee and
any overage remaining from such Reserve Payments shall be paid by the Lessor
to the Lessee. In the event Lessee returns an Aircraft with an FAA extension
for "C" check, Lessor agrees to accept such Aircraft without any additional
compensation or work other than as set forth in this paragraph;
(f) Sections 12(b)(ii) and 12(d) of the Lease shall be applicable on April
1, 1994 even though no returns are occurring on such date;
(g) A new Section 12(i) is added as follows:
"(i) Return of Engines; Off-Wing Maintenance. The lessee shall pay to the
---------------------------------------
Lessor the product of $150.00 and the number of Flight Hours incurred by such
Engine or Spare Engine since April 1, 1994. Such payments shall be made on the
10th day of each month regarding usage during the prior month. Notwithstanding
anything in this Lease to the contrary, in the event for any reason any Engine
or Spare Engine needs any off-wing repair, maintenance, overhaul, modification
(if such modification is required by this Lease) or other work done to it
("Off-Wing Work"), the Lessee shall notify the Lessor thereof as soon as
practical and the Lessor shall arrange for such Off-Wing Work to be done as
promptly as practical and solely at the expense and risk of the Lessor,
including shipping costs. The Lessor shall have no responsibility to replace
such Engine or Spare Engine, however, while it is undergoing such Off-Wing
Work. The Lessee shall remain solely responsible for any repair, maintenance,
overhaul, or modification required by this Lease which can be done while the
Engine or Spare Engine is installed on an Aircraft or aircraft."
(h) No payments shall be due under Section 5(e)(iii) of the Lease on
account of Flight Hours or Cycles accumulated after March 31, 1994 and none of
the payments previously made under said Section shall be used by the Lessor to
perform its obligations under Section 12(i) of the Lease.
<PAGE>
(i) Section 12(c) of the Lease is rewritten as follows: (c)
Overhaul-Airframe. In the event that Lessee does not meet the conditions in
- ------------------
clause (i)(1) of Paragraph (b) of this Article with respect to an Airframe,
Lessee shall pay Lessor the product of $60 multiplied by the number of Flight
Hours accumulated by such Airframe over 50% of the allowable Flight Hours
between Airframe overhauls, major block maintenance or "D" check, whichever
shall then apply. Lessor shall satisfy this obligation first by utilizing the
Maintenance Reserve for the Airframe and any shortfall shall be paid by
Lessee.
3. CRAF. (a) The parties acknowledge that Lessee may commit the Aircraft
----
to the U.S. Civil Reserve Air Fleet for Stage I, II and III for the fiscal
year ending September 30, 1994 (as such period may be extended at the option of
the U.S. Government (the "Government")) (such potential commitment period is
known as the "Call-up Period") and therefore agree that, notwithstanding
anything to the contrary in the Lease, in the event of a Civil Reserve Fleet
Mobilization (a "Mobilization") during the Lease Term, as extended above,
during which the Government requires Lessee to provide airlift services which
requires the services of an Aircraft, the Lease of such Aircraft shall
continue in effect until the later of the scheduled expiration of the Lease, as
so extended, or the date such Aircraft is returned by the Government to Lessee.
If such Aircraft is returned by the Government to Lessee after the scheduled
expiration of the Lease for such Aircraft, Lessee will return such Aircraft to
the Lessor in accordance with the terms of the Lease as promptly as practical
after such Aircraft is returned by the Government to Lessee.
(b) In the event that an Aircraft is so required by the Government under
its contract with Lessee at any time after the end of the Lease Term for such
Aircraft, but not later than the end of the Call-up Period, Lessee shall
immediately dispatch notice to the Lessor advising it of the Mobilization and
specifying the Aircraft required in order to satisfy the requirements of the
Mobilization, and Lessor, subject to causes beyond Lessor's control and
without its fault or negligence, shall within 24 hours of receipt of such
notice for aircraft called up for CRAF Stages I and II and 48 hours of receipt
of such notice for aircraft called up for CRAF Stage III, or such additional
time as the Government may permit, position and deliver the specified Aircraft
and the required flight crews and material as required by the Government. The
Lease to Lessee shall be deemed in effect for the entire call up period for
such Aircraft.
Lessee agrees that, in the event of a Mobilization, it will exercise its
best reasonable efforts to utilize other DC-10 aircraft then in its fleet to
perform its airlift obligations under its contracts with the Government before
requiring Lessor to deliver the Aircraft under this Section 3(b); provided,
however, that nothing in this paragraph shall abridge Lessee's right to require
Lessor to deliver an Aircraft to it if, as directed by the Government, such
Aircraft is required for the performance of airlift services required under
Lessee's CRAF contracts.
The parties agree that they shall from time to time do and perform such
other and further acts as may be reasonably requested by the other party in
order to carry out and effect the intent and purpose of this Section 3.
Lessor will not take any action with respect
<PAGE>
to the Aircraft during the Call-up Period which would violate the terms of the
standard CRAF contract for fiscal year 1994.
(c) Notwithstanding anything in the Lease to the contrary, no Event
of Default shall be deemed to occur during a Mobilization of an Aircraft if
such Event of Default cannot be cured by Lessee as a result of such
Mobilization, provided that, upon return of such Aircraft by the Government to
Lessee, Lessee cures such Event of Default as promptly as practical.
(d) While the Lease is in effect pursuant to Section 3(b), Lessee and
Lessor agree that Lessor shall perform such airlift services as the Government
may direct during the Mobilization, and shall adhere to and be bound by the
standards, procedures and requirements under Lessee's CRAF contract with the
Government and shall perform Lessee's obligations, and have the exclusive
right to exercise Lessee's rights, under the Lease (except that (x) Lessor
shall cause any public liability insurance carried by it (or any substitute
protection pursuant to Section 8(c) of the Lease) to name Lessee as an
additional insured and (y) during such reinstatement period Sections 10,
15(c), and 16(a), (k), (l) and (m) shall not apply) and for such purpose
Lessee will permit Lessor to have complete control and possession of the
Aircraft subject to the Mobilization. All sums received by Lessee with respect
to such Aircraft resulting from its actual Mobilization shall be paid to
Lessor promptly after receipt, after deducting therefrom a commission equal to
1.0% of the amounts actually received by Lessee, which commission shall be
retained by Lessee. Any failure of Lessor to satisfy Lessee's obligations
under the Lease during such call up period shall be deemed excused to the
extent Lessor has excused Lessee from such obligations.
In the event of a Mobilization of an Aircraft pursuant to Section 3(b),
the parties agree to negotiate in good faith (i) amendments to this Amendment
to effectuate the intent of this Section 3, subject to the requirements of
CRAF, (ii) an allocation of the risks covered by Sections 15(a) and (b) of the
Lease between Lessee and Lessor in a manner consistent with the other
provisions of this Section 3 and (iii) to determine which Sections of the
Lease shall not apply during such Mobilization in addition to those specified
in the last parenthetical of the preceding paragraph (the references to such
Sections not being deemed in any way a presumption that other Sections in the
Lease should apply during a Mobilization).
Lessee agrees to provide to Lessor a copy of its CRAF contracts that
relate to the Aircraft promptly after the execution thereof.
4. Miscellaneous. Except as amended hereby, the Lease is ratified
-------------
and confirmed in all respects. This Amendment may be signed in any number of
counterparts, each of which is an original, but all of which constitute one
and the same instrument.
<PAGE>
IN WITHESS WHEREOF, the parties have caused this Amendment No. 2 to have
been duly executed and delivered on the date first above written.
World Airways, Inc.
By: /s/
----------------
Title: Sr. Vice Pres Tech Svcs
Federal Express Corporation
Aproved as to Legal Form: By: /s/
--------------------------
Title: Vice President
By: KHS
--------------------------
Date: 5/14/93
--------------------------
<PAGE>
Annex I
to Amendment No. 2
Description of Lease
------------------------
Lease Agreement dated as of March 30, 1987 between Shawmut Bank Connecticut,
National Association (formerly known as The Connecticut National Bank), as
owner trustee under Trust Agreement dated as of March 30, 1987, as lessor and
World Airways, Inc., as lessee, which was recorded by the Federal Aviation
Administration on April 2, 1987 and assigned Conveyance No. G64102, as
supplemented, assigned and amended by the following described instruments:
Date of FAA FAA
Instrument Instrument Recording Date Conveyance No.
- ---------- ---------- -------------- --------------
Lease Supplement
No. 1 04/01/87 04/02/87 G64102
Assignment of Lease,
between Shawmut Bank
Connecticut, National
Association (formerly
known as The
Connecticut National
Bank), as owner
trustee under Trust
Agreement dated as of
March 30, 1987, as
assignor, and Federal
Express Corporation, as of
as assignee 11/01/89 12/12/89 A36513
[Sub] Lease Amendment as of
No. 1 12/31/91 01/17/92 J68889
<PAGE>
AGREEMENT
This Agreement is made and entered into as of the 9th day of July, 1993,
by and among World Airways, Inc. ("World"), WorldCorp Inc. ("WorldCorp"),
International Lease Finance Corporation ("ILFC"), McDonnell Douglas
Corporation ("MDC") and McDonnell Douglas Finance Corporation ("MDFC").
Recitals
--------
A. World is presently leasing from MDFC two DC-10-30 aircraft bearing FAA
registration numbers N114WA and N115WA, respectively (collectively, the
"DC-10 Aircraft" and, individually, an "Aircraft"), under separate lease
agreements (collectively, the "Leases" and, individually, a "Lease"), each
dated as of February 12, 1992, guarantied by WorldCorp.
B. Pursuant to, and subject to the terms and conditions of, Purchase
Agreement DAC 88-43-D, as amended (the "Purchase Agreement"), ILFC has
purchased or will purchase from MDC six MD-11 aircraft for which firm
orders have been placed as of the date hereof, that ILFC intends to lease
to World (the "MD-11 Aircraft").
C. In order to facilitate the purchase of the MD-11 Aircraft and the lease
thereof to World, and for other good and valuable consideration, the
parties desire to enter into the agreement hereinafter set forth.
Agreement
---------
1. Assignment and Assumption of the Leases. (the assignment dates hereinafter
---------------------------------------
referred to, with respect to each Lease, as the "Effective Date"), and MDC
shall assume all of World's obligations thereunder. Concurrently with the
assignment to and assumption by MDC of the Leases, (a) World shall be released
from all of its obligations arising thereunder on and after the Effective Date
(the "Assumed Obligations") and (b) WorldCorp shall be released from its
obligations arising under its guaranties of the Leases on account of the
Assumed Obligations (but the guaranties shall continue in full force and
effect with respect to the obligations of World arising under the Leases
through the Effective Date).
2. Consent of MDFC. Subject to the terms of Section 3 of this Agreement,
---------------
MDFC shall consent to the assignment and assumption of the Leases and the
releases effected by Section 1 hereof.
3. Conditions. The obligations of MDC and MDFC under this
----------
<PAGE>
(a) No default in the payment of Basic Rent and no Event of Default (as such
capitalized terms are defined in the Leases) shall have occurred and be
continuing under the Leases, in each case as of the Effective Date, (b) or
cause to be delivered, the DC-10 Aircraft to MDC in Long Beach, California or
at such other location (or locations) as MDC and World may agree, and (c) if
MDC and World are unable to agree upon the amount of the Deposit or upon
whether such return conditions have been satisfied by July 15, 1993, with
respect to the N114WA Aircraft, or by July 24, 1993, with respect to the N115WA
Aircraft, then MDC and World shall mutually select an independent third party
who shall determine the amount of the Deposit and/or the compliance with such
return conditions. The determination of such third party shall be final and
binding. World shall make the Aircraft available for inspection by MDC upon
reasonable notice, as agreed, prior to the Effective Date. MDC shall use
reasonable efforts to minimize the expense of such maintenance or repairs.
4. Payment Covenants. MDC acknowledges that ILFC paid to MDC the amount of
-----------------
$2,500,000 on or before April 1, 1993. World shall pay to MDC the amount of
$750,000 on or before the Effective Date with respect to the N114WA
Aircraft, and $750,000 on or before the Effective Date with respect to the
N115WA Aircraft, provided MDC and MDFC have certified to World that all the
conditions in the preceding section, except satisfaction of the return
conditions and payment of the Deposit, if not settled, have either been
satisfied or waived with respect to such Aircraft, and shall pay on demand by
MDC a sum equal to any shortfall between the Deposit and the actual expense of
the work required to return such Aircraft to the Agreed Condition, with any
excess of the Deposit over such expense to be returned to World with interest
at MDC's overnight borrowing rate. If the conditions contained in Section 3
hereof have not been satisfied by World or waived by MDC and MDFC by the
Effective Date, then the parties hereto will negotiate in good faith to
resolve their differences. Failing such resolution, MDC shall return to ILFC,
within twenty days after the second Effective Date, the sum of $2,500,000
theretofore paid by ILFC, with interest from April 1, 1993 at MDC's overnight
borrowing rate.
5. Subleases of the Aircraft. MDC shall use reasonable efforts to cause
-------------------------
each of the DC-10 Aircraft to be and remain at all times subleased or subject
to a New Lease (as such term is hereinafter defined), and ILFC and World shall
cooperate in such efforts, during the original scheduled term of the Lease of
the Aircraft.
2
<PAGE>
MDC shall offer and recommend the DC-10 Aircraft to prospective operators
before other DC-10 aircraft being marketed by MDC, but MDC shall not be
obligated to withhold such other DC-10 aircraft from the market should an
operator express an interest in such other aircraft. The standard of care by
which MDC's (or if a sublease is converted to a New Lease, MDFC's) fulfillment
of its obligations under the two preceding sentences shall be judged is: MDC
(or MDFC) shall make all decisions regarding the DC-10 Aircraft, including
with respect to marketing the DC-10 Aircraft, whether to make modifications to
the DC-10 Aircraft, the terms of each sublease (or lease), and the
administration and enforcement of each sublease (or lease) (a) as if MDC (or
MDFC) were the owner of the Aircraft, (b) without regard to the sharing and
other provisions of this Agreement, and (c) without any intent to benefit
interests of MDC (or MDFC) not related to the Aircraft that will be or is
subleased or leased, if such decisions, terms or action or inaction of MDC (or
MDFC) would be detrimental to the rights or obligations of ILFC or World
hereunder.
MDC shall be responsible for the expenses of legal and other services and
of modifications to the Aircraft which MDC chooses to provide to a sublessee,
as provided in the prior paragraph (the "Sublease Expenses"). Sublease
Expenses shall be amortized (and applied as described in Section 6.2) in
monthly installments over the scheduled term of the sublease of each Aircraft,
with interest at a rate equal to 8.25 percent per annum.
Notwithstanding the foregoing, MDC shall have no obligation (a) to give
priority to the sublease of the DC-10 Aircraft in preference to the sale,
lease or other disposition of any other used aircraft, except for other DC-10
aircraft, or any new aircraft, whether owned by MDC or by another person for
whom MDC may provide remarketing services, or (b) to exert efforts with
respect to the sublease of an Aircraft to a particular potential customer if
the exertion of such efforts would interfere with or compete with any other
active marketing, sales or leasing activity of MDC with respect to such
customer, except that MDC shall offer the DC-10 Aircraft before other DC-10
aircraft, as set forth above.
Unless otherwise approved by all of the parties hereto, approval not to
be unreasonably withheld or delayed, any sublease of an Aircraft shall provide
for rent payable monthly in advance.
6. Subrents.
--------
6.1 Contribution to Subrents. Commencing in August, 1993, and continuing
------------------------
each calendar month through March, 2004, during which month the final payments
of Basic Rent (as such term is defined in the Leases) shall be due under the
Leases, each of ILFC and World shall pay to MDC, in immediately available
funds, not later than ten days following receipt of a statement showing
3
<PAGE>
the calculation of the payment and an invoice therefor, an amount for each of
the DC-10 Aircraft equal to one third (1/3) of the excess, if any, of (i)
$300,000 over (ii) the sum of the regular scheduled payments of rent actually
received by MDC under a sublease of the Aircraft for the month (the
"Subrents"). The subrents shall equal zero and, therefore, the excess of (i)
over (ii) above shall equal $300,000 if the Aircraft has not been subleased
during the month or, for any reason, no regular scheduled payments of rent
actually have been received by MDC on account of the Aircraft in the month.
Notwithstanding the foregoing, the aggregate obligation of ILFC and World
under this Section 6.1 and Section 10 shall be limited to a maximum of
$3,700,000, to be shared equally between them, such that neither ILFC nor
World shall be required to pay a sum greater than $1,850,000.
6.2 Sharing of Subrents. If (i) the Subrents produced by either of the
-------------------
DC-10 Aircraft for any calendar month during the term of the Leases exceed
(ii) the sum of $350,000 plus the installment, if any, of Sublease Expenses
attributable to such Aircraft for such month, then MDC shall pay to each of
ILFC and World for the Aircraft, in immediately available funds not later than
ten days following receipt of such rent, a sum equal to one third (1/3) of the
excess of (i) over (ii) above and shall furnish to each of ILFC and World a
statement showing the calculation of the payment. Subrents shall be shared for
both of the DC-10 Aircraft if each Aircraft is eligible for sharing.
6.3 Release of ILFC and World. If MDC shall refuse to accept an offer to
-------------------------
sublease, for a rental payable monthly in advance (or on such other terms as
approved by all of the parties hereto) of not less than $300,000 per Aircraft,
one or both of the DC-10 Aircraft, tendered by a Permitted U.S. Air Carrier or
Permitted Foreign Air Carrier (as such terms are defined in the Leases) or by
a foreign sublessee consented to by MDFC, which proposed sublease contains
terms generally comparable with the terms of the Leases, then ILFC and World
shall have no further obligation to make contributions to or right to receive
a share of the Subrents produced by the Aircraft to be subleased. This Section
6.3 shall not apply to an offer to sublease tendered more than 30 days prior
to the Effective Date.
6.4 Consent of MDFC. MDFC shall not unreasonably withhold its consent to
---------------
a sublease with a foreign sublessee, even though not included in the list of
Permitted Foreign Air Carriers current on the date MDFC receives notice of the
proposed sublease (the "Approved List"), provided the sublessee has credit
comparable, in MDFC's reasonable judgment, to other air carriers included in
the Approved List.
6.5 Casualty; Sale. In the event of the sale or a total loss,
--------------
constructive total loss or permanent condemnation or
4
<PAGE>
seizure of an Aircraft, all rights and obligations of the parties hereto with
respect to such Aircraft shall be deemed terminated except to the extent
already accrued.
7. [Intentionally Deleted]
8. Adjustment of Obligations. MDC shall reimburse ILFC and World on account
-------------------------
of payments made to MDC by them under Section 5, 6 or 10 hereof, and MDFC
shall reimburse MDC, ILFC and World on account of payments made to MDFC by
them under Section 5 or 10 hereof (all of such payments referred to herein as
"Compensation Payments"), without interest, to the extent that MDC or MDFC, as
the case may be (the "Compensated Party"), subsequently receives recovery of
payments from a sublessee, a New Lessee (as such term is hereinafter defined)
or another source, on account of which the Compensation Payments were made.
Conversely, the obligation of ILFC and World to make Compensation Payments to
MDC and the obligation of MDC, ILFC and World to make Compensation Payments to
MDFC shall be reinstated to the extent the Compensated Party is required for
any reason to return any payment, with respect to which the Compensated Party
would have been entitled to receive Compensation Payments had the required
payment not been made, previously received from a sublessee or a New Lessee.
9. Indemnities. MDC shall indemnify, defend and hold harmless World and ILFC
-----------
from and against any liability, loss, cost or expense suffered or incurred by
World or ILFC, including, without limitation, reasonable attorneys' fees,
arising from the use or condition of each Aircraft after its Effective Date,
except to the extent resulting from the failure of World to return such
Aircraft in the condition required by Article 13 of the Leases. World and
WorldCorp affirm the indemnities contained in Article 8 of each of the Leases
with respect to the period continuing through the respective Effective Dates,
which indemnities shall survive the assignment of the Leases to, and the
assumption thereof by, MDC. World and WorldCorp shall jointly and severally
indemnify, defend and hold harmless ILFC, MDC and MDFC from and against any
liability, loss, cost or expense suffered or incurred by ILFC, MDC or MDFC,
including, without limitation, reasonable attorneys' fees, arising from the
failure of World to satisfy the conditions contained in Section 3 (a), (b) or
(c) hereof (except to the extent waived).
10. Certain Rights of MDFC. Upon not less than ten days prior written notice
----------------------
given by MDFC to the sublessee and the other parties to this Agreement, MDC
shall assign to MDFC any sublease of an Aircraft and the Lease of the Aircraft
shall be terminated, so that the sublease shall be reconstituted as a direct
lease (the "New Lease") of the Aircraft between MDFC, as lessor, and the
sublessee, as lessee (the "New Lessee"). Thereafter, MDC shall guaranty the
New Lessee's performance under the New Lease and, commencing with the calendar
month in which the next
5
<PAGE>
scheduled payment of Basic Rent under the Lease would have become due but for
the termination of the Lease, and continuing each calendar month thereafter
until the expiration or earlier termination of the New Lease, MDC shall pay to
MDFC, in immediately available funds, not later than ten days following
receipt of a statement showing the calculation of the payment and an invoice
therefor, an amount equal to the excess, if any, of Basic Rent that would have
become due under the Lease over rent actually received by MDFC under the New
Lease for the month (the "New Rental"). In turn, each of ILFC and World shall
pay to MDC an amount equal to one third of the excess, if any, of $300,000
over the New Rental (but subject to the maximum limitation contained in the
last sentence of Section 6.1), in immediately available funds, not later than
ten days following receipt of a statement showing the calculation of the
payment and an invoice therefor. If the New Rental exceeds the Basic Rent that
would have been due under the Lease for any calendar month during the term of
the New Lease, then MDFC shall pay to MDC in immediately available funds not
later than ten days following receipt of such rent, a sum equal to the excess.
MDC shall pay to each of ILFC and World, in immediately available funds, not
later than fifteen days following the last day of the month, a sum equal to
the excess, if any, of the New Rental over the sum of $350,000 plus the
installment, if any, of Sublease Expenses attributable to such Aircraft for
such month, and shall furnish a statement showing the calculation of the
payment. If the New Lease terminates or expires in advance of the date the
Lease would have expired but for the early termination thereof, then the Lease
shall be reinstated immediately following the last day of the New Lease for
the remainder of its scheduled term, and the rights and obligations of the
parties hereto shall continue as set forth in the preceding sections of this
Agreement.
11. Miscellaneous.
-------------
11.1 Survival. The representations, warranties and agreements made herein
--------
shall survive the execution and delivery of this Agreement and the
consummation of the transactions described herein.
11.2 Successors and Assigns. This Agreement shall be binding upon, and
----------------------
inure to the benefit of, the parties hereto and their respective successors
and assigns.
11.3 Notice. Any notice, request or other communication required or
------
permitted to be given under any of the provisions of this Agreement shall be
in writing and shall be deemed given, if by personal delivery, courier or
facsimile, upon receipt, and if by mail, three days after the date the same is
mailed to the party for which it is intended by certified or registered mail,
return receipt requested, postage prepaid. Notices to any party shall be
addressed to such party at its address or facsimile
6
<PAGE>
number, as the case may be, set forth below or at such other address or
facsimile number as may have been specified by such party in a like notice.
World's address and facsimile:
World Airways, Inc.
13873 Park Center Road
Suite 490
Herndon, Virginia 22071
Facsimile No. (703) 834-9211
WorldCorp's address and facsimile:
WorldCorp Inc.
13873 Park Center Road
Suite 490
Herndon, Virginia 22071
Facsimile No. (703) 834-9211
ILFC's address and facsimile:
International Lease Finance Corporation
1999 Avenue of the Stars
39th Floor
Los Angeles, CA 90067
Facsimile No. (310) 788-1990
MDC's address and facsimile:
McDonnell Douglas Corporation
3855 Lakewood Boulevard
Long Beach, California 90846
Facsimile No. (310) 496-8816
MDFC's address and facsimile:
McDonnell Douglas Finance Corporation
340 Golden Shore
Long Beach, CA 90802
Facsimile No. (310) 491-3284
11.4 Governing Law. This Agreement shall be governed by and interpreted
-------------
under the laws of the State of California applicable to contracts made and to
be performed therein, without giving effect to the principles of conflict of
laws thereof.
11.5 Captions. Captions used herein are inserted for reference purposes
--------
only and shall not affect the interpretation or construction of this
Agreement.
11.6 Counterparts. This Agreement may be executed in one
------------
7
<PAGE>
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
11.7 Entire Agreement. This Agreement, together with the exhibits hereto
----------------
and other documents referenced herein, and the letter of 2 October 1992 from
Robert H. Hood, Jr. to Steven F. Udvar-Hazy, supersedes all previous
arrangements and agreements, whether written or oral, and comprises the entire
agreement among the parties hereto in respect of the subject matter hereof.
11.8 Amendments. This Agreement may be amended or varied only by writing,
----------
of even or subsequent date, executed by all of the parties hereto.
11.9 Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision.
11.10 Further Assurances. Each of the parties hereto agrees to execute
------------------
and deliver promptly to the others all such further instruments and documents
as may reasonably be requested by the other in order to carry out fully the
intent, and to accomplish the purposes, of the transactions referred to
herein.
11.11 Attorneys' Fees. In the event of the bringing of any action or suit
---------------
by a party hereto against any other party hereunder by reason of any breach
of any of the covenants or agreements or any inaccuracies in any of the
representations and warranties on the part of the other party arising out of
this Agreement, then in that event, by prevailing party in such action or
dispute, whether by final judgment, or out of court settlement, shall be
entitled to have and recover of and from the other party all costs and
expenses of suit, including reasonable attorneys' fees.
11.12 Jurisdiction. The parties hereto (i) agree that any suit, action
------------
or other legal proceeding arising out of this Agreement may be brought in the
state or federal courts located in Los Angeles County, California, and (ii)
consent to the jurisdiction of any such courts in any such suit, action or
proceedings, and thus waive any objection which such party may have to the
laying of venue of any such suit, action or proceeding in any such court.
11.13 Time of the Essence. Time is of the essence in the performance of
-------------------
the parties' respective obligations under this Agreement.
11.14 Several Liability. World and ILFC are liable only for their
-----------------
respective obligations hereunder and are not liable for such obligations on a
joint basis.
8
<PAGE>
SHH849J.DOC
<PAGE>
This agreement is made and entered into as of the date and year first
above written.
WORLD AIRWAYS, INC.
By: /s/
--------------------------
Title: Sr. Vice Pres. Tech Svcs.
-----------------------
WORLDCORP INC.
By: /s/
--------------------------
Title: Sr. Vice Pres. Tech Svcs.
-----------------------
INTERNATIONAL LEASE FINANCE CORPORATION
By:
--------------------------
Title:
-----------------------
McDONNELL DOUGLAS CORPORATION
By:
--------------------------
Title:
-----------------------
McDONNELL DOUGLAS FINANCE CORPORATION
By:
--------------------------
Title:
-----------------------
<PAGE>
This Agreement is made and entered into as of the date and year first
above written.
WORLD AIRWAYS, INC.
By:
----------------------------
Title:
-------------------------
WORLDCORP INC.
By:
----------------------------
Title:
-------------------------
INTERNATIONAL LEASE FINANCE CORPORATION
By:
-----------------------------
Title:
--------------------------
McDONNELL DOUGLAS CORPORATION
By: /s/
-----------------------------
Title: V.P. Contracts
--------------------------
McDONNELL DOUGLAS FINANCE CORPORATION
By:
-----------------------------
Title:
--------------------------
<PAGE>
This Agreement is made and entered into as of the date and year first
above written.
WORLD AIRWAYS, INC.
By:
-----------------------------
Title:
--------------------------
WORLDCORP I
By:
-----------------------------
Title:
--------------------------
INTERNATIONAL LEASE FINANCE CORPORATION
By: /s/
-----------------------------
Title: Senior Vice President
--------------------------
McDONNELL DOUGLAS CORPORATION
By:
------------------------------
Title:
---------------------------
McDONNELL DOUGLAS FINANCE CORPORATION
By:
--------------------------------
Title:
-----------------------------
<PAGE>
This Agreement is made and entered into as of the date and year first
above written.
WORLD AIRWAYS, INC.
By: -------------------------------
Title: ----------------------------
WORLDCORP INC.
By: -------------------------------
Title: ----------------------------
INTERNATIONAL LEASE FINANCE CORPORATION
By: -------------------------------
Title: ----------------------------
McDONNELL DOUGLAS CORPORATION
By: --------------------------------
Title: -----------------------------
McDONNELL DOUGLAS FINANCE CORPORATION
/S/
By: ---------------------------------
PRESIDENT
Title: ------------------------------
<PAGE>
EXHIBIT 11.1
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
CALCULATION OF EARNINGS (LOSS) PER COMMON SHARE
(in thousands except share data)
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ --------------
<S> <C> <C> <C>
Earnings (loss) before
extraordinary item
and change in accounting principle $ (30,945) $ (42,891) $ 6,830
Extraordinary item -- (3,253) 3,535
Change in accounting principle -- (1,973) --
----------- ----------- -----------
Net earnings (loss) applicable to
common stock $ (30,945) $ (48,117) $ 10,365
=========== =========== ===========
Weighted average common shares
outstanding 14,590,265 14,175,065 13,263,374
Weighted average options and
warrants treated
as common stock equivalents -- -- 1,643,937
----------- ----------- -----------
Primary number of shares 14,590,265 14,175,065 14,907,311
Incremental weighted average
options and
warrants treated as common stock
equivalents for fully diluted
purposes -- -- 1,339,517
----------- ----------- -----------
Fully diluted number of shares 14,590,265 14,175,065 16,246,828
=========== =========== ===========
Earnings (loss) per share of common
stock
before extraordinary item and
change in
accounting principle
Primary $ (2.12) $ (3.02) $ 0.46
Fully-diluted * * 0.42
Earnings (loss) per share of common
stock from
extraordinary item
Primary $ -- $ (0.23) $ 0.24
Fully-diluted * * 0.22
Loss per share of common stock from
change
in accounting principle
Primary $ -- $ (0.14) $ --
Fully-diluted * * --
Net earnings (loss) per share of
common stock
Primary $ (2.12) $ (3.39) $ 0.70
Fully-diluted * * 0.64
</TABLE>
* Fully diluted earnings per share are anti-dilutive
<PAGE>
EXHIBIT 22.1
WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Jurisdiction
---- ------------
<S> <C>
World Airways, Inc. Delaware
World Airways Cargo, Inc. Delaware
WorldCorp Services, Inc. Delaware
WorldCorp Leasing, Inc. Delaware
WorldCorp Leasing II, Inc. Delaware
WorldCorp Leasing III, Inc. Delaware
WorldCorp Investments, Inc. Delaware
World Flight Crew Services, Inc. Delaware
WorldGames, Inc. Delaware
US Order, Inc. Delaware
InterMedia Marketing, Inc. Delaware
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
WORLDCORP, INC. :
We consent to incorporation by reference in the registration statements (Nos.
33-29705 and 33-44245) on Form S-3 and registration statement (No. 33-33468) on
Form S-8 of WorldCorp, Inc. of our report dated March 14, 1994, relating to the
consolidated balance sheets of WorldCorp, Inc. and subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of operations,
changes in common stockholders' deficit, and cash flows and the related
consolidated financial statement schedules for each of the years in the three-
year period ended December 31, 1993, which report appears in the December 31,
1993 annual report on Form 10-K of WorldCorp, Inc. Our report refers to a
change in the method of accounting for postretirement benefits other than
pensions and income taxes.
KPMG PEAT MARWICK
Washington, D.C.
March 31, 1994
