U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR (15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
Commission File No. 0-23444
PAN AM CORPORATION
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(Exact name of registrant as specified in its charter)
FLORIDA 65-0450311
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(State of other jurisdiction of (IRS employer
incorporation of organization) Identification No.)
9300 N.W. 36TH STREET, MIAMI, FLORIDA 33178
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(Address of principal executive offices)
(305) 873-3000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 1, 1997, the Company had a total of 11,262,610 shares of Common Stock,
par value $.0001 per share outstanding.
As of May 1, 1997, the Company had 150,000 shares of Series A Convertible
Preferred Stock, par value $.0001 per share outstanding.
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PAN AM CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE NO.
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Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996.................................................. 3
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996........................................... 4
Consolidated Statement of Stockholders' Equity for the three months
ended March 31, 1997.............................................. 5
Consolidated Statements of Cash Flows for three months ended
March 31, 1997 and 1996............................... .......... 6
Notes to the Consolidated Financial Statements.................... 7-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................11-15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................ 16
Item 2. Changes in Securities............................................ 16
Item 4. Submission of Matters to a Vote of Security Holders.............. 16
Item 6. Exhibits and Reports on Form 8-K................................. 16
Signature................................................................. 17
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PAN AM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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MARCH 31, DECEMBER 31,
1997 1996
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,414,027 15,005,669
Trade accounts receivables, principally traffic 7,760,505 3,233,068
Receivable from underwriter (Note 4) 9,420,000
Expendable aircraft parts 261,787 261,787
Prepaid expenses and other assets 2,006,434 1,623,317
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Total current assets 27,862,753 20,123,841
PROPERTY - Net 8,730,752 2,066,308
OTHER ASSETS:
Service marks (net of accumulated amortization
of $136,840 and $126,314) 1,547,341 1,557,867
Organizational costs (net of accumulated
amortization of $24,342 and $20,789) 46,728 50,282
Deposits 3,738,301 2,745,352
Leasehold interest (Note 5) 4,443,432
Investment in affiliate 1,000 1,000
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TOTAL $46,370,307 26,544,650
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,527,111 7,084,751
Air traffic liability 8,902,640 4,164,313
Accrued compensation 367,350 243,900
Deferred income taxes 155,421 155,421
Other accrued expenses 1,441,918 612,602
Current portion of long-term debt 3,029 2,949
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Total current liabilities 19,397,469 12,263,936
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Long-term debt less current maturities 9,806 10,593
Deferred aircraft lease obligations 2,787,193 1,664,693
Stock subscriptions and warrants (Note 5) 10,977,881 945,381
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $100 stated value, $.0001 par
value, 250,000 authorized, 150,000 shares issued and
outstanding (Note 4) 15,000,000
Common stock, $.0001 par value, 100,000,000 shares
authorized,11,262,610 shares and 10,920,191 shares
issued and outstanding 1,126 1,092
Capital surplus 40,349,729 39,555,374
Accumulated deficit (42,111,419) (27,554,831)
Receivables from officers and stockholders (11,750 shares) (41,478) (341,588)
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Total stockholders' equity 13,197,958 11,660,047
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TOTAL $ 46,370,307 26,544,650
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See accompanying notes to consolidated financial statements.
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PAN AM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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FOR THE THREE MONTHS ENDED
MARCH 31,
1997 1996
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REVENUES:
Passenger $ 21,479,054
Cargo and mail 129,708
Other income 164,006 10
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Total revenues 21,772,768 10
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EXPENSES:
Aircraft rentals 5,975,231
Aircraft fuel and oil 5,968,189
Wages and related costs 3,862,625 278,764
Aircraft maintenance reserves,
materials and repairs 3,798,305
Ground handling and landing fees 2,613,383
Advertising 2,380,572 150,357
Reservations and sales 1,662,865 38,343
Facilities and other rents 1,658,821
Professional and technical 1,625,721 344,021
Passenger food expense 1,609,274
Traffic commissions 1,356,565
Personnel expenses 574,146
Insurance 756,992
Materials and supplies - other 729,052
Communications 142,043
Depreciation and amortization 134,010 25,298
Other 1,720,075 63,078
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Total expenses 36,567,869 899,861
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OPERATING LOSS (14,795,101) (899,851)
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NON-OPERATING
INCOME (EXPENSES):
Interest income 187,800 10,328
Write-down of investment (17,000)
Other 50,713 35,000
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Total non-operating income 238,513 28,328
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LOSS BEFORE DEFERRED
INCOME TAX PROVISION (14,556,588) (871,523)
DEFERRED INCOME
TAX PROVISION -- (155,421)
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NET LOSS $ (14,556,588) $ (1,026,944)
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NET LOSS PER SHARE $ (1.33) $ (0.36)
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WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 10,951,996 2,848,068
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See accompanying notes to consolidated financial statements.
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PAN AM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
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Receivables
Preferred Common Capital Accumulated From Officers
Stock Stock Surplus Deficit and Stockholders Total
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BALANCE, DECEMBER 31, 1996 $ 0 $1,092 $39,555,374 $(27,554,831) $(341,588) $11,660,047
Issuance of 45,000 shares for stock
subscription 4 324,496 324,500
Settlement of Stockholder Note 300,110 300,110
Issuance of 297,419 shares in settlement of
stockholder contribution (Note 5) 30 1,049,859 1,049,889
Issuance of 150,000 shares 15,000,000 (580,000) 14,420,000
Net loss for the three months
ended March 31, 1997 (14,556,588) (14,556,588)
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BALANCE, MARCH 31, 1997 $15,000,000 $1,126 $40,349,729 $(42,111,419) $ (41,478) $13,197,958
=========== ======= =========== ============ ========== ===========
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See accompanying notes to consolidated financial statements.
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PAN AM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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FOR THE THREE MONTHS ENDED
MARCH 31,
1997 1996
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Net loss $(14,556,588) $(1,026,944)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 134,010 25,298
Deferred compensation amortization -- 166,752
Deferred income taxes -- 155,421
Amortization of prepaid rent -- 28,582
Write-off of investment in affiliate -- 17,000
Changes in certain assets and liabilities: -- --
Increase in notes and accounts receivables (13,947,437) (1,948)
Increase in prepaid expenses and other assets (383,117) --
Increase in accounts payable and deferred credits 2,564,859 551,116
Increase in air traffic liability 4,738,327 --
Increase in accrued compensation 123,450 --
Increase in other accrued expenses 829,316 --
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Net cash used in operating activities (20,497,180) (84,723)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,227,806) --
Investment in affiliate -- (18,000)
Deposits (992,949) (150,000)
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Net cash used in investing activities (12,220,755) (168,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in receivable from stockholder 300,110 --
Principal payments on long-term debt (707) --
Issuance of preferred stock, net 14,420,000 --
Issuance of common stock 1,374,390 3,500,000
Stock subscriptions, warrants, and deposits 10,032,500 2,266,225
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Net cash provided by financing activities 26,126,293 5,766,225
NET (DECREASE) INCREASE IN CASH (6,591,642) 5,513,502
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 15,005,669 --
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 8,414,027 $ 5,513,502
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</TABLE>
See accompanying notes to consolidated financial statements.
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PAN AM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of Pan Am Corporation and
subsidiaries (the "Company" or "Pan Am") have been prepared in accordance with
instructions for reporting interim financial information on Form 10-Q and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. Accordingly, such
financial statements should be read in conjunction with the Company's
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The consolidated financial statements for the quarters ended March 31, 1997
and 1996 are unaudited and, in the opinion of management, include all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods. Results for the three months ended March 31, 1997 are not
necessarily indicative of results to be expected for the full fiscal year ending
December 31, 1997.
2. AIRCRAFT LEASES
As of March 31, 1997, Pan Am operated a total of four Airbus A300-B4
("A300") aircraft under operating leases for terms of five years with annual
lease payments totaling in the aggregate approximately $7.6 million. Under such
leases, the Company pays monthly maintenance reserves to the lessor to cover all
major engine and airframe overhauls on a flight hour usage basis. The ages of
such A300 aircraft range from fourteen to eighteen years old, with the average
age of such aircraft being 15.4 years. In addition, as of such date, Pan Am
leased three B727 aircraft on a wet-lease (ACMI) basis from Nations Air Express,
Inc., an unrelated third party airline operator, under short term lease
commitments. On April 18, 1997, the Company exercised its option to cancel these
agreements by giving the required notice of 30 days, effectively terminating the
agreements on May 17, 1997. The Company has negotiated agreements to lease
replacement aircraft from Carnival Air Lines, Inc. ("Carnival Air") under
similar terms.
In April 1997, Pan Am finalized a lease agreement with ING Lease on an
additional A300 aircraft, the fourth aircraft to be leased from ING. The
aircraft should begin revenue service in June 1997. Concurrent with this lease,
the Company terminated its contract with First Security Bank dated September 27,
1996 for an A300 aircraft.
3. COMMITMENTS AND CONTINGENCIES
Various claims, contractual disputes and lawsuits against the Company arise
periodically involving complaints which are normal and reasonably foreseeable in
light of the nature of the Company's business. The majority of these suits are
covered by insurance. In the opinion of management, the resolutions of these
claims will not have a material adverse effect on the business, operating
results or financial condition of the Company.
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4. PREFERRED STOCK
In March 1997, the Company authorized the issuance of 250,000 shares of a
"Series A Convertible Preferred Stock" (the "Preferred Stock"). Each share of
Preferred Stock has a stated value equal to $100 per share and a term of three
years. Such Preferred Stock accumulates dividends at the rate per share
(as a percentage of stated value per share) equal to 8% per annum, payable in
shares of Preferred Stock in arrears on the date that the Preferred Stock
becomes convertible into shares of Common Stock. The Preferred Stock is
convertible at the option of the holders thereof into shares of Common Stock
(following the registration of such underlying shares of Common Stock) at the
lesser of a fixed price (the "Fixed Price") or a floating price (the "Floating
Price") (the Fixed Price and the Floating Price hereinafter collectively
referred to as the "Conversion Price"). The Fixed Price is equal to $8.50 per
share (subject to a reset option as described in the Articles of Amendment). The
Floating Price is a discount to market beginning at 97%, with such discount
increasing 1% per month until said discount reaches 80%. Each share of Preferred
Stock is convertible into shares of Common Stock equal to the stated value per
share divided by the lesser of the Fixed Price or Floating Price (the
"Conversion Ratio"). Upon the expiration of the three year term, each share of
Preferred Stock will be mandatorily converted into shares of Common Stock at
such Conversion Ratio. Pan Am also has the option to redeem the Preferred Stock
for a cash value equal to the value of the shares of Common Stock issuable upon
conversion at 80% discount, plus the issuance of a warrant to purchase shares of
Common Stock in an amount equal to the value of the Preferred Stock so redeemed,
with an exercise price equal to the Fixed Price and a term expiring on March 18,
2000. In no event shall a holder of shares of Preferred Stock (or warrants) be
entitled to receive shares of Common Stock to the extent that the sum of (a) the
number of shares of Common Stock beneficially owned by the holder and (b) the
number of shares of Common Stock issuable upon the conversion of the shares of
Preferred Stock (or warrants) would result in beneficial ownership by the holder
of more than 4.9% of the outstanding shares of Common Stock.
The Preferred Stock ranks prior to all classes or series of equity
securities of Pan Am, including Common Stock and, except as otherwise provided
by law, the Preferred Stock has no voting rights. Upon any liquidation,
dissolution or winding-up of the Company, the Holders shall be entitled to
receive out of the assets of the Company, for each share of Preferred Stock, an
amount equal to the stated value, plus an amount equal to the accrued but unpaid
dividends per share, before any distribution or payment is made to the holders
of any junior securities.
As of March 31, 1997, the Company had issued 150,000 shares of the Preferred
Stock, resulting in net proceeds of $14.4 million, of which $5.0 million in cash
was received in March 1997 and the remainder was received in April 1997. In
connection with the offering, 401,070 warrants were granted which are
exercisable at $9.35 per common share.
Concurrent with the completion of the Merger with Carnival Air, an
additional $10 million of Preferred Stock will be issued.
5. RELATED PARTY TRANSACTIONS
In 1996, the Company issued 85,017 shares of common stock to a certain
Stockholder in consideration for a certain note receivable and a route authority
which had a combined estimated value of approximately $1.35 million. During the
first quarter of 1997, the Company received $800,000 in cash and spare parts
with an estimated value in excess of $500,000 from the stockholder in exchange
for the note receivable and the issuance of an additional 297,419 shares of the
Company's common stock.
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On March 31, 1997, the Company completed the purchase of an office complex
pursuant to a closing agreement dated February 11, 1997, which will temporarily
act as its corporate headquarters, from a major stockholder. The property
consists of the leasehold interest in certain buildings and real property and
approximately 18.0 acres of land. The transaction, valued at $10.4 million, was
completed through the issuance of 1,294,625 warrants which are convertible into
an equal number of shares of common stock of the Company upon the occurrence of
certain events.
6. MERGER AGREEMENT
On March 20, 1997, the Company entered into a definitive agreement to merge
with Carnival Air, a passenger airline headquartered in Fort Lauderdale,
Florida. Carnival Air operates a fleet of 27 aircraft. The Company will exchange
9,523,810 shares of common stock for all outstanding common shares of Carnival.
The merger is expected to be accounted for as a pooling-of-interests and close
in the second quarter of 1997. There is no assurance that the merger with
Carnival Air will be consummated.
7. INVESTMENT IN AFFILIATE
The Company's investment in affiliate, which is carried at its net
realizable value, consists of a 30% interest in Chalks Air Bridge, Inc., which
owns 100% of Flying Boat, Inc., a Delaware corporation. Flying Boat, Inc. is the
owner and operator of Pan Am Air Bridge (f/k/a Chalks International Airlines), a
historic seaplane airline operation. The Company has granted, without royalties
or fees, a license to Flying Boat, Inc. to use the Pan Am trade name, subject to
termination only upon the occurrence of specific events. In 1996, the Company
loaned $50,000 to Flying Boat, Inc.
On February 4, 1997 and May 2, 1997, the Company loaned an additional
$89,583 and $190,000, respectively, to Flying Boat, Inc. The Company is
currently negotiating to purchase the remaining 70% of Chalks Air Bridge, Inc.
8. ACCOUNTING CHANGE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 128, "Earnings per Share." The
statement is effective for financial statements for periods ending after
December 15, 1997, and changes the method in which earnings per share will be
determined. Adoption of this statement by the Company will not have a material
impact on earnings per share.
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9. SUBSEQUENT EVENTS
In March 1997, the Company agreed with Dade County, Florida and various
state and federal entities on a $7.3 million incentive package as an inducement
to locate its corporate headquarters within the County. The Company received
$5.0 million in cash in the form of a "bridge loan" from Dade County in April
1997.
In April 1997, the Company reached an agreement to purchase one B727-200
aircraft and related spare parts from Carnival Air for approximately $5.0
million. On April 21, 1997, the Company paid to a third party $1.911 million on
behalf of Carnival Air relative to this purchase agreement.
In May 1997, the Company reached an agreement in principle for the sale of
another series of the Company's preferred stock for expected net cash proceeds
of approximately $14 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company began flight operations on September 26, 1996 with two leased
A300 wide-body aircraft providing daily round trip flights between New York, New
York and Miami, Florida and New York, New York and Los Angeles, California. The
Company has continued to expand its operations and as of April 6, 1997, provides
services to six destinations (including San Juan, Puerto Rico, Santo Domingo,
Dominican Republic, and Chicago, Illinois) with 22 daily flights utilizing four
leased A300 aircraft operated by Pan Am and three B727 aircraft wet-leased from
a third party airline operator. From its inception until it commenced flight
operations, the Company's activities were limited to start-up activities.
The Company began scheduled flight operations as a development stage
enterprise organized to operate a low-fare, full-service airline. As of December
31, 1996, the Company had emerged from a development stage company to that of a
full service domestic airline.
RESULTS OF OPERATIONS
Since the Company commenced airline operations on September 26, 1996,
management does not believe that a discussion of the results for comparative
prior year periods would be meaningful as it relates to the new operating
entity. Consequently, the following is a summary of selected financial and
operating data for the quarters ended March 31, 1997, and December 31, 1996,
respectively, which management believes reflects the airline's performance for
those periods of operations.
QUARTER ENDED QUARTER ENDED
MARCH 31, 1997 DECEMBER 31, 1996
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Operating Revenues $21,772,800 $10,242,900
Total Expenses $36,329,400 $24,980,500
Net Loss $14,556,600 $14,737,600
Revenue Passengers Carried 190,967 86,444
Revenue Passenger Miles (RPMs) 264,003,000 120,164,000
Available Seat Miles (ASMs) 393,302,000 256,922,000
Yield Per RPM 8.1/cents/ 8.3/cents/
Load Factor 67.1% 46.8%
Revenue Per ASM 5.54/cents/ 3.99/cents/
Cost Per ASM 9.28/cents/ 9.33/cents/
REVENUES
GENERAL. Airline revenue is primarily a function of passenger load factors
and fares charged by the airline. The passenger load factor represents the
percentage of available seats occupied by revenue paying passengers and is
calculated by dividing revenue passenger miles flown by total available seat
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miles. Revenue passenger miles are the total miles flown by revenue passengers
during the period. Available seat miles are the product of total seats available
for sale during the period multiplied by the total flight miles operated during
the period.
The Company anticipates that its business will follow the traditional
seasonal trends of the domestic United States airline industry, with traffic and
revenues typically higher during the winter, summer and late fall periods when
business travel is supplemented by discretionary leisure travel.
In addition to passenger revenue, the Company generates revenue from the
shipment of general freight and mail. The Company also generates revenue from
the sale of in-flight services such as liquor and movie head-sets.
PASSENGER REVENUE. Passenger revenues totaled $21,479,054 for the three
months ended March 31, 1997 compared to $10,063,971 for the three months ended
December 31, 1996, or an increase of 113.4%. The number of revenue passengers
carried was 190,967 for the three months ended March 31, 1997 compared to 86,444
for the three months ended December 31, 1996, or an increase of 120.9%. The
Company had an average of 6 aircraft in service during the three months ended
March 31, 1997 compared to an average of 3.2 aircraft during the three months
ended December 31, 1996 for an increase in ASMs of 136,380,000 or 53.1%.
Other revenues, consisting primarily of sales from freight and mail service
and liquor sales and headset rentals, totaled $293,714 and $178,889 for the
three months ended March 31, 1997 and December 31, 1996, respectively,
representing 1.3% and 1.7% of total operating revenues, respectively.
OPERATING EXPENSES
Operating expenses include those related to flying operations, such as
aircraft fuel and rent, aircraft maintenance, ground handling and landing fees,
advertising, wages and related costs, administrative costs, and depreciation and
amortization. Total operating expenses for the three months ended March 31, 1997
were $36,567,869 as compared to $25,541,080 for the three months ended December
31, 1996.
Aircraft fuel expense includes the direct product cost of fuel and
associated taxes. Aircraft fuel costs of $5,968,189 for 7,777,563 gallons
consumed resulting in an average fuel cost of 76.7/cent/ per gallon and
represented 16.3% of total operating expenses for the three months ended March
31, 1997, as compared to $3,906,800 for 4,681,684 gallons consumed resulting in
an average fuel cost of 83.5/cent/ per gallon and represented 15.3% of total
operating expenses for the three months ended December 31, 1996. Fuel prices are
subject to change weekly as the Company does not maintain inventories of its
own. In addition, fuel prices may be volatile subject to demand based upon a
number of factors outside the control of the Company. Any increase in the price
of fuel which could not be offset through increased fares could have a material
adverse impact upon the financial results of the Company.
Aircraft rentals totaling $5,975,231, or 16.3% of total operating expenses
for the three months ended March 31, 1997, as compared to $2,195,700 or 8.6% of
total operating expenses for the three months ended December 31, 1996, include
lease payments relating to A300 aircraft operated by the Company and the
wet-leasing of B727 aircraft operated by third parties. The wet-leasing
arrangement was necessary as a result of the delayed delivery of the Company's
planned additional A300 aircraft. The wet-leasing of aircraft results in higher
expenses to the Company than operations of its own aircraft;
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accordingly, the financial results for the quarter have been negatively impacted
by these increased operating costs. Due to the late delivery of leased aircraft
to the Company, the Company anticipates the continued wet-leasing of a number of
aircraft through the first half of 1997.
Wages, salaries and related costs totaling $3,862,625 represented 10.6% of
total operating expenses for the three months ended March 31, 1997, as compared
to $4,257,000 representing 16.7% of total operating expenses for the three
months ended December 31, 1996. The majority of employees are salaried,
including pilots and flight attendants. As crew utilization increases with the
addition of A300 aircraft, the direct operating cost per block hour should
decrease as a result of this salary structure. There were 514 employees as of
March 31, 1997, an increase of 32% over the December 31, 1996 base.
Maintenance reserves, material and repairs totaling $3,798,305, representing
10.4% of total operating expenses for the three months ended March 31, 1997, as
compared to $3,276,100, representing 12.8% of total operating expenses for the
three months ended December 31, 1996, are comprised substantially of airframe
and engine overhaul reserves which are paid to the lessors of the A300 aircraft.
Ground handling and landing fees amounting to $2,613,383, or 7.1% of total
operating expenses for the three months ended March 31, 1997, as compared to
$2,041,300 or 8.0% of total operating expenses for the three months ended
December 31, 1996, primarily relate to passenger handling costs, including
ticket counter, boarding gate and baggage loading. Landing fees are principally
based upon the number of aircraft departures.
Advertising amounted to $2,380,572, or 6.5% of total operating expenses for
the three months ended March 31, 1997, as compared to $2,264,600 or 8.9% of
total operating expenses for the three months ended December 31, 1996. The 1997
costs relate to promoting the commencement of service and expansion into two new
markets, Chicago Midway Airport on March 1, 1997 and Santo Domingo, Dominican
Republic on April 6, 1997.
All other operating costs totaling $11,969,564, or 32.7% of total operating
expenses for the three months ended March 31, 1997, as compared to $7,599,600,
or 29.8% of total operating expenses for the three months ended December 31,
1996, are of a nature normally incurred by an airline and are typical within the
industry, such as reservations and sales expenses, passenger meals, traffic
commissions, insurance, professional and technical fees, and facilities rent.
LIQUIDITY AND CAPITAL RESOURCES
Since the commencement of its airline operations, the Company has incurred
substantial losses amounting to $42.1 million through March 31, 1997.
During the first quarter of 1997, the Company experienced operating losses
amounting to $14.6 million. Management believes the principal demand on the
Company's resources from these losses resulted primarily from the following
factors: (1) the expected losses associated with flying operations during the
first quarter with a limited fleet of aircraft and need to establish the
Company's presence in the markets served; (2) a low level of advance bookings at
the beginning of the first quarter which caused the Company to use lower
yielding promotional fares to build traffic; and (3) the delinquent delivery of
A300 aircraft which caused the Company to cover its pre-committed schedule with
wet-leased aircraft from third party airline operators at operating costs
greater than had the Company been able to operate such service on its own
behalf. Aircraft deliveries continue to hamper operations, and the Company
anticipates that it will be required to wet lease aircraft through the first
half of 1997.
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During the first quarter of 1997, net cash utilized by operating
activities was approximately $11.1 million as compared to approximately $6.5
million for the three months ended December 31, 1996. Cash has continued to
deteriorate, declining to $8.4 million in cash and cash equivalents at March 31,
1997, compared to $15.0 million at December 31, 1996. The Company had working
capital of $8.5 million on March 31, 1997. Working capital at December 31, 1996,
totaled $7.9 million.
Subsequent to March 31, 1997, the Company has continued to experience
substantial operating losses. Due to short-term liquidity requirements, the
Company has arranged for additional sources of capital as follows: (i) in March
1997, the Company completed the sale of a new series of convertible preferred
stock for net cash proceeds of approximately $14.4 million, of which $5.0
million in cash was received in March 1997 and the balance was received in April
1997; (ii) in March 1997, the Company agreed with Dade County, Florida and
various state and federal entities on a $7.3 million incentive package as an
inducement to locate its corporate headquarters within the County; the Company
received $5.0 million in cash in the form of a "bridge loan" from Dade County in
April 1997; and (iii) in May 1997, the Company reached an agreement in principle
for the sale of additional convertible preferred stock for expected net cash
proceeds of approximately $14 million.
The Company's principal investing activity during the first quarter of
fiscal 1997 was the purchase of the Doral property for $10.4 million through the
issuance of common stock warrants.
The Company's principal financing activities during the first quarter of
1997 were: (a) completed the sale of a new series of convertible preferred
stock for $25 million with net cash proceeds of $14.4 million received through
April 1997 with the balance of $10 million to be provided upon the closing of
the Carnival Air merger; (b) the issuance of 1,294,625 warrants for the
Company's common stock valued at $10,357,000 used for the purchase of its Doral
property; (c ) the issuance of 297,419 shares of the Company's common stock
valued at $1.05 million in exchange for cash and aircraft parts; and (d) the
issuance of 45,000 shares of the Company's common stock valued at $324,500 in
satisfaction of a debt to a certain vendor.
Since the inception of the Company's flight operations on September 26,
1996, it has not generated sufficient liquidity from operations to sustain its
working capital needs. The continuance of the Company's operations is dependent,
among other things, upon obtaining sufficient additional financing to fulfill
its cash flow requirements, growth in the Company's revenue base and,
ultimately, the attainment of sustained profitable operations. Management has
been and continues to take action that it believes will reduce its operating
losses, including the following measures: (1) renegotiation of economic terms
under its wet lease agreements; (2) continued refinement of purchasing
strategies to reduce the unit cost of its larger operating expenditures such as
fuel, insurance, support services and passenger services; (3) additional
refinement of the Company's yield management system to improve revenue; and (4)
continued service expansion combined with the Carnival Air merger to provide
added economies of scale to the Company's fixed operating expense base. Although
management has undertaken action designed to meet these requirements as
discussed above, no assurance can be made that such objectives will be met or
achieved by the Company.
The continuance of the Company's operations is dependent, among other
things, upon obtaining sufficient additional financing to fulfill its cash flow
requirements, growth in the Company's revenue base and, ultimately, the
attainment of sustained profitable operations. Although management has
undertaken action designed to meet these requirements as discussed above, no
assurance can be made that such objectives will be met or achieved by the
Company. The Company's prospects, therefore, must
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<PAGE>
be evaluated in light of the risks and expenses normally encountered by a new
entrant carrier with limited resources in the highly competitive airline
industry.
In the event that the Merger with Carnival Air is consummated, Pan Am will
require additional capital to fund both its operating losses and the significant
operating losses of Carnival Air. Carnival Air has experienced significant
losses in its last fiscal year and expects such losses to continue for the
foreseeable future. Carnival Air's losses have created an immediate liquidity
problem for the airline and it has been forced to defer payments on aircraft
leases, aircraft and engine overhauls and other operating expenditures. Carnival
Air's trade payables at April 30, 1997 are estimated at $50 million, of which,
approximately $10 to $15 million could be considered past due. Carnival Air does
not believe that it can effectively manage its debts beyond their existing
levels. Accordingly, Carnival Air will require external financing to fund its
current and future operating losses. There is no assurance that Pan Am's funds
will be sufficient to fund the combined operating losses of Pan Am and Carnival
Air and Pan Am will likely be required to seek additional sources of capital to
fund these losses. As contemplated in the Merger, the primary shareholder of
Carnival Air is required to contribute $30.0 million in cash to Carnival Air,
which will be used to retire an existing line of credit which is guaranteed by
such shareholder. Pan Am will seek to renegotiate or replace the credit facility
with a view to making available additional proceeds for general operating
purposes. Further, Pan Am is currently in negotiations with certain institutions
to provide substantial financing for the combined companies to fund operations
in the near term and to assist towards achieving profitable operations. However,
at this juncture, no assurances can be given that any additional financing, if
available, will be sufficient to cover the liquidity needs of the combined
operations. To the extent such capital is not available, Pan Am will be forced
to reduce or discontinue some or all of its combined operations with Carnival
Air. Although the Carnival Air Merger will put significant financial pressure on
the Company, Pan Am's management believes that certain cost benefits, synergies
and enhanced revenues, particularly branding the operations with the Pan Am
name, will result from this Merger and the combined companies' operating
performance will improve. No assurance can be made that such benefits, synergies
or enhanced revenues will result following the Merger.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
Except for historical information contained herein, the matters discussed in
this report are forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, including but not limited
to, economic, competitive and other factors affecting the Company's operations,
markets, expansion strategies, available financing, and other factors discussed
elsewhere in this report and the documents filed by the Company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control. Acrual results could differ materially from the
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this report
will, in fact, occur.
SUBSEQUENT EVENTS
In April 1997, the Company reached an agreement to purchase one B727-200
aircraft and related spare parts from Carnival Air for approximately $5.0
million. On April 21, 1997, the Company paid to a third party $1.911 million on
behalf of Carnival Air relative to this purchase agreement.
In April 1997, Pan Am finalized a lease agreement with ING Lease on an
additional A300 aircraft, the fourth aircraft to be leased from ING. The
aircraft should begin revenue service in June 1997. Concurrent with this lease,
the Company terminated the contract with First Security Bank dated September 27,
1996 for an A300 aircraft.
In May 1997, the Company reached an agreement in principle for the sale of
another series of the Company's preferred stock for expected net cash proceeds
of approximately $14 million.
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<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Pan Am is presently involved in litigation in the United States
District Court, Southern District of New York, with Eclipse Holdings,
Inc. ("Eclipse"). Such litigation commenced on April 20, 1995 and is
captioned: PAN AMERICAN WORLD AIRWAYS, INC. V. ECLIPSE HOLDINGS,
INC., DAVID LOCKWOOD, DAVID SCOTT AND RICHARD BARTEL, 95 Civ 2763
(LMM). Eclipse had initially submitted the winning bid in bankruptcy
court to purchase the Pan Am Intellectual Property, but was unable to
secure financing for its bid and subsequently assigned its rights to
purchase the Pan Am Intellectual Property to Pan Am. Pan Am has an
action against Eclipse seeking to compel Eclipse to execute and
deliver the assignment documentation in order to register the Pan Am
Intellectual Property in certain foreign countries. Pursuant to such
action, Eclipse was compelled to execute such assignment
documentation. Eclipse has appealed such order. Additionally, Eclipse
has filed an action against Pan Am challenging Pan Am's ownership of
the Pan Am Intellectual Property. Management believes the suit will
be resolved in Pan Am's favor. However, the loss by Pan Am of the Pan
Am Intellectual Property would have a material adverse effect on Pan
Am.
ITEM 2. CHANGES IN SECURITIES
In March 1997, the Company authorized the issuance of 250,000 shares
of a "Series A Convertible Preferred Stock". As of March 31, 1997,
the Company had issued 150,000 shares of the Preferred Stock. See
Exhibit 3.1 for a description of the terms of the Preferred Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None to be reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Documents filed with this report:
1. Financial Statements. The financial statements filed as a
part of this report are listed in Item 1, "Financial
Statements and Supplementary Data," herein.
2. Financial Statement Schedules. There are no financial
statement schedules filed as part of this report, since
the required information is included in the financial
statements, including notes thereto, or the circumstances
requiring inclusion of such schedules are not present.
3. Exhibits. The following exhibits are filed herewith or
incorporated by reference as indicated. Exhibit numbers
refer to Item 601 of Regulation S-K. As used in the list
of Exhibits below, "Registrant" refers to the Company.
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
3.1 Articles of Amendment to the Articles of Incorporation
of Pan Am
10.1 Lease Agreement relating to Aircraft A300-B4-203
#259 between EAL (DELAWARE) VIII Corp., as Lessor,
and Pan American World Airways, Inc., as Lessee
27 Financial Data Schedule
(a) Current reports on Form 8-K:
The Company has not filed any reports on Form 8-K for the
quarter ended March 31, 1997.
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<PAGE>
In accordance with the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PAN AM CORPORATION
Date: May 15, 1997 By: /s/JOHN J. OGILBY, JR.
------------------------------
John J. Ogilby, Jr., Chief
Financial Officer and General
Counsel (Principal Financial
Officer)
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<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
- -------
3.1 Articles of Amendment of the Articles of Incorporation of Pan Am
10.1 Lease Agreement relating to Aircraft A300-B4-203 #259 between
EAL (DELAWARE) VIII Corp., as Lessor, and Pan American World
Airways, Inc., as Lessee
27 Financial Data Schedule
EXHIBIT 3.1
STATE OF FLORIDA
[GRAPHIC]
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on April 10, 1997, to Articles of Incorporation for PAN AM CORPORATION, a
Florida corporation, as shown by the records of this office.
I further certify the document was electronically received under FAX audit
number H97000005861. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P93000068674.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Tenth day of April, 1997
Authentication Code: 197A00018081-041097-P93000068674-1/1
[SEAL) /s/ SANDRA B. MORTHAM
---------------------
SANDRA B. MORTHAM
SECRETARY OF STATE
<PAGE>
ARTICLED OF AMENDMENT
The undersigned, being the President and Chief Executive Officer of Pan Am
Corporation (the "Company"), does hereby file these Articles of Amendment to the
Company's Amended and Restated Articles of Incorporation pursuant to Sections
607.1006 and 607.0602 of the Florida Business Corporation Act.
I. The name of the Company is Pan Am Corporation.
II. Article III of the Company's Articles of Incorporation shall be amended by
adding the following after the existing provisions of such articles:
Section 1. Designation, Amount, Par Value, and Rank. A series of preferred
stock shall be designated as Series A Convertible Preferred Stock (the
"Preferred Stock"), and the number of shares so designated shall be 250,000.
Each share of Preferred Stock shall have $0.0001 par value. Each share of
Preferred Stock shall have a stated value of $100.00 per share (the "Stated
Value"). The Preferred Stock should rank prior to all classes or series of
equity securities of the Company, including the Common Stock. The Preferred
Stock is subject to and limited by the Convertible Preferred Stock Purchase
Agreement, the terms contained herein, and the Warrant attached hereto as an
Exhibit.
Section 2. Dividend.
(a) Holders of Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors out of shares of Common Stock legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) equal to 8% per annum,
payable, in shares of Preferred Stock, in arrears on the Conversion Date (as
defined in Section 5(a) hereof) unless adjusted as per the Reset Option
provision contained in Section 5(c) (ii). Dividends on the Preferred Stock shall
accrue daily commencing on the Original Issue Date (as defined in Section 6) and
shall be deemed to accrue whether or not earned or declared and whether or not
there are profits, surplus or other funds of the Company legally available for
the payment of dividends. The party that holds the Preferred Stock on an
applicable record date for any dividend payment will be entitled to receive such
dividend payment and any other accrued and unpaid dividends which accrued prior
to such dividend payment date, without regard to any sale or disposition of such
Preferred Stock subsequent to the
<PAGE>
applicable record date but prior to the applicable dividend payment date. Except
as otherwise provided herein, if at any time the Company pays less than the
total amount of dividends then accrued to any class of Preferred Stock, such
payment shall be distributed ratably among the holders of such class based upon
the number of shares held by each holder.
Section 3. Voting Rights. Except as otherwise provided herein and as
otherwise provided by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the of the holders of a majority of
the shares of the Preferred Stock then outstanding, (i) alter or change
adversely the powers, preferences or rights given to the Preferred Stock or (ii)
authorize, create, issue or increase any class of stock ranking as to dividends
or distribution of assets upon a Liquidation (as defined below) senior to or
PARI PASSU with the Preferred Stock.
Section 4. Liquidation. Upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary (a "Liquidation"), the holders of
shares of Preferred Stock shall be entitled to receive out of the assets of the
Company, whether such assets are capital or surplus, for each share of Preferred
Stock an amount equal to the Stated Value, plus an amount equal to accrued but
unpaid dividends per share, whether declared or not, but without interest,
before any distribution or payment shall be made to the holders of any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed shall be distributed among the
holders of Preferred Stock ratably in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid in
full. A sale, conveyance or disposition of all or substantially all of the
assets of the Company or the transactions in which more than 50% of the voting
power of the Company is disposed of shall be deemed a Liquidation; provided that
a consolidation or merger of the Company with or into any other Company or
Companies shall not be treated as a Liquidation, but instead shall be subject to
the provisions of Section 5. The Company shall mail written notice of any such
liquidation, not less than 60 days prior to the payment date stated therein, to
each record holder of Preferred Stock as shown on the record books of the
Company.
Section 5. Conversion.
(a) Each share of Preferred Stock shall be convertible into validly issued,
fully paid and non-assessable shares of
2
<PAGE>
Common Stock free and clear of all liens and charges and not subject to any
preemptive rights at the Conversion Ratio at the option of the holder in whole
or in part at any time after the expiration of the later to occur of (i) 90 days
after the Original Issue Date and (ii) the date that the Commission declares
effective under the Securities Act the registration statement contemplated by
the Convertible Preferred Stock Purchase Agreement, dated the Original Issue
Date (the "Purchase Agreement"), by and between the Company and the original
holder of Preferred Stock relating to the Preferred Stock and the shares of
Common Stock into which the Preferred Stock is convertible in accordance with
the terms thereof (the "Conversion Date"). Any conversion under this Section
5(a) shall be of a minimum amount of at least 1000 shares of Preferred Stock.
The holder shall effect conversions by surrendering to the Company the form of
conversion notice attached hereto as Exhibit A (the "Holder Conversion Notice")
in the manner set forth in Section 5(i) and simultaneously therewith or as soon
as practicable thereafter the certificate or certificates representing the
shares of Preferred Stock to be converted. Each Holder Conversion Notice shall
specify the number of shares of Preferred Stock to be converted and the date on
which such conversion is to be effected, which date may not be prior to the date
the Holder delivers such Notice by facsimile (the "Holder Conversion Date").
Each Holder Conversion Notice, once given, shall be irrevocable. If the holder
is converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the holder with the Holder Conversion
Notice, the Company shall promptly deliver to the holder a certificate for such
number of shares as have not been converted.
On the expiration of three years after the Original Issue Date, each share
of Preferred Stock shall be manditorily converted into shares of Common Stock at
the Conversion Ratio.
If on the Conversion Date applicable to any conversion under this Section
5(a), the Conversion Price (as defined in Section 5(c) (i)) then in effect is
such that the aggregate number of shares of the Common Stock that would then be
issuable upon conversion of the Preferred Stock then outstanding, together with
accrued and unpaid interest thereon, when combined with any shares of Common
Stock previously issued upon conversion of any Preferred Stock, would equal or
exceed 20% of the Common Stock outstanding, excluding options or warrants to
acquire shares of Common Stock, but including all securities, rights or
obligations convertible into or exchangeable for shares of Common Stock (the
"Issuable Maximum"), then the Company shall be obligated to either (a) subject
to the immediately following sentence, as promptly as practicable, but in no
event later than 90 days from the date of the Company's receipt of the Holder
3
<PAGE>
Conversion Notice that would, if all Preferred Stock were converted into shares
of Common Stock, result in issuing Common Stock in excess of the Issuable
Maximum, convene a meeting of the holders of the Common Stock and use its
reasonable best efforts to obtain the Stockholder Approval (as defined below),
or (b) effect the conversion of only such portion of Preferred Stock subject to
such conversion as is represented by the Conversion Percentage (as defined in
the next sentences), and the remaining portion of such Preferred Stock shall be
subject to a mandatory repurchase at a price equal to the Per Share Market Value
times the number of shares of Common Stock applicable under the conversion in
Section 5(a). If the Company fails for any reason to obtain the Stockholder
Approval within the time period set forth in paragraph (a) of the immediately
prior sentence, the Company shall be obligated to convert and repay the
Preferred Stock in accordance with paragraph (b) of the immediately prior
sentence. "Stockholder Approval" , means the approval by a majority of the total
votes cast on the proposal, in person or by proxy, at a meeting of the
stockholders of the Company held in accordance with the Company's articles of
incorporation and by-laws or other incorporating documents, of the issuance by
the Company of shares equaling or exceeding 20% or more of the Common Stock
outstanding as a consequence of the conversion of Preferred Stock into Common
Stock at a price less than the greater of the book or market value as and to the
extent required under the By-laws of the American Stock Exchange (or any
successor or replacement provision thereof).
The "Conversion Percentage" shall be a fraction, the numerator of which is
the "Allowable Conversion Maximum" (as defined in the next sentence) and the
denominator of which is the amount of Common Stock issuable upon conversion of
Preferred Stock outstanding prior to such conversion. The Allowable Conversion
Maximum at any time shall be the difference between the Issuable Maximum and the
total number of shares of Common Stock previously issued upon conversion of
Preferred Stock. In the event of any stock split, stock dividend,
re-capitalization, reorganization or other similar action or event, appropriate
adjustment shall be made to the Issuable Maximum and the Allowable Conversion
Maximum.
(b) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the holder (i) a certificate or certificates which shall
be free of restrictive legends and trading restrictions, representing the number
of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock and (ii) one or more certificates representing the number of
shares of Preferred Stock not converted; provided, however that the Company
shall not be obligated to issue certificates evidencing the shares of Common
4
<PAGE>
Stock issuable upon conversion of any shares of Preferred Stock until
certificates evidencing such shares of Preferred Stock are either delivered for
conversion to the Company or any transfer agent for the Preferred Stock or
Common Stock, or the holder notifies the Company that such certificates have
been lost, stolen or destroyed and provides a bond (for other adequate security
reasonable acceptable to the Company) satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. The Company
shall, upon request of the holder, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section 5(b) electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If such
certificate or certificates are not delivered by the date required under this
Section 5(b), the holder shall be entitled by written notice to the Company at
any time on or before such holder's receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Preferred Stock
tendered for conversion
(c) (i) The conversion price ("Conversion Price") for each share of Preferred
Stock in effect on any Conversion Date shall be the lesser of X ("Fixed Price")
OR Y ("Floating Price"): where X is the greater of (a) [$F] or (b) [ C ] / [ ( (
C/ F ]/plus/1.40 ) / 2 ] (where C - the average Per Share Market Value for the
twenty (20) Trading Days immediately preceding the Holder Conversion Date (the
"Valuation Period")) and F = $8.50, subject to the Reset Option as defined below
in Section 5(c)(ii); and Y = 97% average Per Share Market Value for the
Valuation Period, subject to an additional 1% discount per month to a minimum of
80% of the average Per Share Market Value for the Valuation Period (I.E., 96% at
31 days, and an additional 1% for each of the following 16 months), provided,
however, if the registration statement to be filed by the Company in accordance
with this Agreement is not declared effective by the Commission for any reason
by the Effectiveness Date (as defined in the Purchase Agreement, then for each
of the first two months after such Effectiveness Date that such registration
statement shall not have been so declared effective, the Floating Price and the
Fixed Price as computed above shall be decreased by 2% (I.E. 2% after one month
and 4% after two months) and for each of the subsequent four months after such
Effectiveness Date that such registration statement shall not have been so
declared effective, the Floating Price and the Fixed Price as computed above
shall be further decreased by 1% per month (i.e. A total reduction of 5% after
three months, 6% after four months, etc.), provided however that the Floating
Price shall never be less than 80% of the average Per Share Market Value for the
Valuation
5
<PAGE>
Period; and further provided, that if the registration statement is not declared
effective by the end of six months from the Effectiveness Date, then the Company
shall effect a Company Redemption as defined in Section 5(c)(iii).
(ii) The Holder has a one time right to request a reset of F ("Reset
Option") should the Per Share Market Value for any (5) consecutive Trading Days
trade at less then 50% of F prior to such reset (a "Reset Period"). In order to
exercise its Reset Option, Holder shall give notice of such to the Company
within ten days of any such Reset Period. The Company, upon such notice, shall
have the option of a) resetting F as requested or b) to cause the dividend set
forth in Section 2 accruing from and after such reset request to be increased by
an additional three percent (3%).
(iii) The preferred Stock, in whole or in part, shall be redeemable,
superseding any prior Holder Conversion Notice, at the option of the Company
("Company Redemption") upon the payment to the Holder of both A) a cash payment
equal to the Per Share Market Value on the date of the Company Redemption Notice
(the "Company Redemption Date") times the greater of a) the shares of Common
Stock that would be provided if such date were a Conversion Date under a
Conversion Price equal to 80% of the Average Per Share Market Value for the
Valuation Period or b) the shares of Common Stock that would be provided if such
date were a Conversion Date under a Conversion Price equal to the Per Share
Market Value on the Company Redemption Date and B) warrants to purchase Common
Stock with an exercise price equal to the Fixed Price in an amount equal to the
value of the Preferred Stock redeemed, with a term expiring on March 18, 2000,
in the form of warrant attached hereto as Exhibit D ("Warrant Issuable Upon
Company Redemption"). The Company shall effect such redemption by delivering to
the Holders of such shares of Preferred Stock to be redeemed a written notice in
the form attached hereto as Exhibit B ("Company Redemption Notice"), which
Company Redemption Notice, once given, shall be irrevocable. Each Company
Redemption Notice shall specify the number of shares of Preferred Stock to be
redeemed and the date on which Preferred Stock pursuant to the Company
Redemption, the holders of the Preferred Stock shall surrender the certificates
representing such shares at the office of the Company or of any transfer agent
for the Preferred Stock or Common Stock. If the Company is redeeming less than
all shares of the Preferred Stock, the Company shall, upon redeeming of such
shares of Preferred Stock subject to such Company Redemption and receipt of the
certificate or certificates representing such shares of Preferred Stock deliver
to the holders a certificate for such number of
6
<PAGE>
shares of Preferred Stock as have not been redeemed.
(iv) If the Company, at any time while any shares of Preferred Stock are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions payable in shares of its capital stock (whether payable in shares
of its Common Stock or of capital stock of any class), (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Conversion Price designated in Section 5(c)(i) as X and, if any of
the aforementioned events occurred during a Valuation Period, the Per Share
Market Value with respect to the days within such Valuation Period occurring
prior to the date of such event, shall be multiplied by a fraction of which the
numberator shall be the number of shares of Common Stock outstanding before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
5(c)(iv) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall be come effective immediately after the effective date in the case of
a subdivision, combination or re-classification.
(v) If the Company, at any time while any shares of Preferred Stock are
outstanding, shall issue rights or warrants to all holders of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Per Share Market Value of Common Stock at the record
date mentioned below, the Conversion Price designated in Section 5(c)(i) as X
and, if any of the aforementioned events occurred during a Valuation Period, the
Per Share Market Value with respect to the days within such Valuation Period
occurring prior to the date of such event, shall be multiplied by a fraction, of
which the denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase
7
<PAGE>
Common Stock the issuance of which resulted in an adjustment in the Conversion
Price designated in Section 5(c)(i) pursuant to this Section 5(c)(v), if any
such right or warrant shall expire and shall not have been exercised, the
Conversion Price designated in Section 5(c)(i) shall immediately upon
such expiration be re-computed and effective immediately upon such expiration be
be increased to the price which it would have been (but reflecting any other
adjustments in the Conversion Price made pursuant to the provisions of this
Section 5 after the issuance of such rights or warrants) had the adjustment of
the Conversion Price made upon the issuance of such rights or warrants been made
on the basis of offering for subscription or purchase only that number of shares
of Common Stock actually purchased upon the exercise of such rights or warrants
actually exercised.
(vi) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to holders
of Preferred Stock) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Section 5(c)(v) above) then in each such case the Conversion Price,
designated as X and if any of the aforementioned events occurred during a
Valuation Period, the Per Share Market Value with respect to the days within
such Valuation Period occurring prior to the date of such event, at which each
share of Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the demoninator shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however that in the event of a distribution exceeding
fifty percent (50%) of the net assets of the Company, such fair market value
shall be determined by a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial statements
of the Company) (an "Appraiser") selected in good faith by the holders of a
majority in interest of the shares of Preferred Stock; and provided, further
that the Company, after receipt of the determination by such Appraiser shall
have the right to select an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be
8
<PAGE>
described in a statement provided to all holders of Preferred Stock of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such Adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vii) All calculations under this Section 5 shall be make to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Conversion Price is adjusted pursuant to Section
5(c)(iv), (v), or (vi), the Company shall promptly mail to each holder of
Preferred Stock, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(ix) In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, the holders of the Preferred Stock then outstanding shall have
the right thereafter to convert such shares only into the shares of stock and
other securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the holders of the Preferred Stock shall be
entitled upon such event to receive such amount of securities or property as the
shares of the Common Stock of the Company into which such shares of the
Preferred Stock could have been converted immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange would
have been entitled. The terms of any such consolidation, merger, sale, transfer
or share exchange shall include such terms so as to continue to give to the
holder of Preferred Stock the right to receive the securities or property set
forth in this Section 5(d)(vii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassification, consolidations, mergers, sales,
transfers or share exchanges.
(x) If:
a. the Company shall declare a dividend (or any other distribution) on
its Common Stock; or
b. the Company shall declare a special non-
9
<PAGE>
recurring cash dividend on or a redemption of its Common Stock; or
c. the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
d. the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock of the
Company (other than a subdivision or combination of the outstanding
shares of Common Stock), any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all
of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property;
or
e. the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding-up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the holders of Preferred Stock at their last addresses as shall appear upon the
stock books of the Company, at least 10 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution,, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be
10
<PAGE>
specified in such notice.
(d) If at any time conditions shall arise by reason of action taken by the
Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the holders of Preferred Stock (different than or
distinguished from the effect generally on rights of holders of any class of the
Company's capital stock) or if at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, the Company shall
mail a written notice briefly describing the action contemplated and the
material adverse effects of such action on the rights of the holders of
Preferred Stock at least 10 calendar days prior to the effective date of such
action, and an Appraiser selected by the holders of majority in interest of the
Preferred Stock shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 5), of the
Conversion Price (including, if necessary, any adjustment as to the securities
into which shares of Preferred Stock may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of shares of Preferred Stock; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case the adjustment shall be
equal to the average of the adjustments recommended by each such Appraiser. The
Board of Directors shall make the adjustment recommended forthwith upon the
receipt of such opinion or opinions or the taking of any such action
contemplated, as the case may be; provided, however, that no such adjustment of
the Conversion Price shall be made which in the opinion of the Appraiser(s)
giving the aforesaid opinion or opinions would result in an increase of the
Conversion Price to more than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Preferred Stock, such number of shares of Common Stock
as shall be issuable (taking into account the adjustments and restrictions of
Section 5(c) and Section 5(d) hereof) upon the conversion of all outstanding
shares of Preferred Stock. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly authorized,
issued and fully paid and non-assessable.
(f) Upon a conversion or redemption of any shares of Preferred Stock
hereunder the Company shall not be required to
11
<PAGE>
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on conversion
of Preferred Stock shall be made without charge to the holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the holder of such shares of Preferred Stock so converted and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
(h) Shares of Preferred Stock converted into Common Stock shall be canceled
and shall have the status of authorized but unissued shares of preferred stock.
(i) Each Holder Conversion Notice shall be given by facsimile and by mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at the facsimile telephone number and address of the principal place
of business of the Company. Each Company Redemption Notice shall be given by
mail, postage prepaid, addressed to the attention of [ ] of the Holder at the
facsimile telephone number and address on the records of the Company. Any such
notice shall be deemed given and effective and the person in whose name the
certificates for shares of Common Stock shall be issued upon conversion shall be
deemed to have become the holder of record of such shares of Common Stock upon
the earliest to occur of (i)(a) if such Conversion Notice is delivered via
facsimile at the facsimile telephone number specified in this Section 5(i) prior
to 4:30 p.m. (Eastern Standard Time) on any date, such date (or, in the case of
a Company Conversion Notice, the next Trading Day) or such later date as is
specified in the Conversion Notice, and (b) if such Conversion Notice is
delivered via facsimile at the facsimile telephone number specified in this
Section 5(i) after 4:30 p.m. (Eastern Standard Time) on any date, the next date
(or, in the case of a Company Conversion Notice, the next Trading Day after such
next day) or such later date as is specified in the Conversion Notice, (ii) five
days after deposit in the United
12
<PAGE>
States mails or (iii) upon actual receipt by the party to whom such notice is
required to be given.
Section 6. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Commission" means the Securities and Exchange Commission
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, $00001 par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the numerator
is Stated Value plus accrued but unpaid dividends, and of which the denominator
is the Conversion Price at such time
"Junior Securities" means the Common Stock and any other equity securities
of the Company ranking junior to the Company's Series A Cumulative Convertible
Preferred Stock, either as to dividends or as upon liquidation, dissolution or
winding up.
""Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issues to evidence such Preferred Stock.
"NASD" shall mean the National Association of Securities Dealers.
"Per Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on The American Stock Exchange
or other stock exchange on which the Common Stock has been listed or if there is
no such price on such date, then the closing bid price on such exchange on the
date nearest preceding such date, or (b) if the Common Stock is not listed on
The American Stock Exchange or any stock exchange, the closing bid for a share
of Common Stock in the over-the-counter market, as reported by the NASD at the
close of business on such date, or (c) if the Common Stock is not quoted on the
NASD, the closing bid price for a share of Common Stock in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), or (d)
if the Common Stock is no longer publicly traded, the fair market value of a
share of Common Stock as determined by an Appraiser (as defined in Section
13
<PAGE>
5(c)(vi) above) selected in good faith by the holders of a majority in interest
of the shares of the Preferred Stock; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Appraiser.
"Person" means a corporation, as association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original holders of the Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) day on which the Common Stock is traded on The
American Stock Exchange or principal stock exchange on which the Common Stock
has been listed, or (b) if the Common Stock is not listed on The American Stock
Exchange or any stock exchange, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the NASD, or (c) if the Common Stock is
not quoted by the NASD, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices).
III. The foregoing amendment was adopted by the Board of Directors on March 28,
1997. A vote of shareholders was not needed for the adoption of the
Articles of Amendment.
In witness whereof, the undersigned President and Chief Executive Office of the
Company has executed these Articles of Amendment on March ___, 1997.
Pan Am Corporation
By:
--------------------
Martin R. Shugrue
President
14
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in order to Convert shares of Preferred
Stock)
The undersigned hereby irrevocably elects to convert the number
of shares of Series A Convertible Preferred Stock indicated
below, into shares of Common Stock, no par value per share (the
"Common Stock"), of Pan Am Corporation (the "Company") according
to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates
and opinions as reasonable requested by the Company in accordance
therewith. No fee will be charged to the Holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations:
-----------------------------
Date to Effect Conversion
-----------------------------
Number of shares of Preferred
Stock to be Converted
-----------------------------
Applicable Conversion Price
-----------------------------
Signature
-----------------------------
Name:
-----------------------------
Address:
<PAGE>
EXHIBIT B
COMPANY REDEMPTION NOTICE
To be Executed by the Company in order to redeem shares of Preferred Stock)
The undersigned hereby in the name and on behalf of Pan Am
Corporation (The "Company") hereby notifies the addressee hereof
that the Company hereby elects to exercise its rights to redeem
_________________ shares of Series A Convertible Preferred Stock
indicated below, into shares of Common Stock, $0.0001 par value
per share (the "Common Stock"), of (the Company) according to the
conditions hereof, as of the date written below. If shares
are to be issued in the name of a person other than the addressee,
the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions
as reasonable requested by the addressee in accordance therewith.
No fee will be charged to the Holder for any redemption. The
addressee should surrender the shares of Preferred Stock to _____.
Redemption calculations: -----------------------------
Date to Effect Conversion
-----------------------------
Number of shares of Preferred
Stock to be Redeemed
-----------------------------
Applicable Conversion Price
-----------------------------
Signature
-----------------------------
Name:
-----------------------------
Address:
EXHIBIT 10.1
LEASE AGREEMENT
RELATING TO
ONE (1) AIRBUS A300B4-200
AIRCRAFT BEARING MANUFACTURER'S
SERIAL NUMBER 259 AND
TWO GENERAL ELECTRIC CF6-50C2 ENGINES
between
EAL (DELAWARE) VIII CORP.
AS LESSOR
and
PAN AMERICAN WORLD AIRWAYS, INC.
AS LESSEE
Dated as of February 17, 1997
This Lease Agreement may be executed in several counterparts. To the extent, if
any, that this Lease Agreement constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in this Lease Agreement may be created or
perfected through the transfer or possession of any counterpart other than the
original executed counterpart which is identified as the counterpart containing
receipt therefor executed by Lessor on the signature page of this Lease
Agreement.
<PAGE>
CONTENTS
CLAUSE NUMBER PAGE NUMBER
CLAUSE 1. DEFINITIONS AND INTERPRETATION.................................... 1
CLAUSE 2. AGREEMENT TO LEASE................................................ 13
2.1 Agreement to Lease................................................ 13
2.2 (i) Delivery................................................... 14
(ii) Inspection and Demonstration Flight........................ 14
(iii) Delivery Condition......................................... 15
(iv) Acceptance of Delivery..................................... 18
(v) Exclusion of Liability..................................... 18
(vi) Casualty to the Aircraft Preceding Delivery................ 19
CLAUSE 3. LEASE TERM........................................................ 19
3.1 Lease Term......................................................... 19
CLAUSE 4. BASIC RENT........................................................ 19
4.1 Basic Rent........................................................ 19
4.2 [This Clause is reserved]......................................... 20
4.3 [This Clause is reserved]......................................... 20
CLAUSE 5. MAINTENANCE AND OTHER PAYMENTS.................................... 20
5.1 Maintenance Reserve Accounts...................................... 20
5.2 Constitution of Maintenance Payments.............................. 21
5.3 Adjustment to Maintenance Payments................................ 23
5.4 (i) Conditions Precedent to Reimbursement for Eligible Claims.. 24
(ii) Credits and Payments from Reserve Accounts................. 25
(iii) Foreign Object Damage Generated Shop Visit................. 28
CLAUSE 6. PAYMENTS.......................................................... 29
6.1 Payment to Lessor................................................. 29
6.2 Withholding Taxes................................................. 29
6.3 Default Interest.................................................. 29
6.4 Business Day Convention........................................... 29
6.5 Absolute Obligation to Make Payments.............................. 30
6.6 Application of Payments........................................... 30
CLAUSE 7. CONDITIONS PRECEDENT.............................................. 31
7.1 Conditions Precedent to the Execution of This Agreement........... 31
7.2 Conditions Precedent.............................................. 31
CLAUSE 8. REPRESENTATIONS AND WARRANTIES.................................... 34
8.1 (i) Warranties and Disclaimer of Warranties....................... 34
i
<PAGE>
(ii) Responsibility to Determine Condition of Aircraft, Obtaining
Benefit of Warranties....................................... 36
8.2 Representations and Warranties of Lessee......................... 36
8.3 Covenants of Lessee.............................................. 38
8.4 Representations and Warranties of Lessor......................... 41
8.5 Notice of Breach of Representation, Warranty or Covenant......... 42
8.6 Survival of Representations, etc................................. 42
CLAUSE 9. LIENS............................................................ 42
9.1 Lessee Not to Create Liens....................................... 42
9.2 Lessee to Discharge Liens........................................ 43
CLAUSE 10. INSURANCE........................................................ 43
10.1 Aviation Liability and Property Damage Insurance................. 43
10.2 Insurance Against Loss of or Damage to the Aircraft.............. 46
10.4 Lessee to Pursue Claims.......................................... 50
10.5 Change in Insurance Practice..................................... 51
10.6 Application of Proceeds Arising on Event of Loss................. 51
10.7 Application of Proceeds Arising Other Than on an Event of Loss... 51
10.8 Retention of Proceeds by Lessor Following Default................ 52
10.9 Lessor and Lessee May Additionally Insure........................ 52
10.10 Compliance with Legal Requirements as to Insurance............... 52
10.11 Lessor Entitled to Provide Insurances in Default by Lessee....... 52
10.12 Negotiations for Renewal......................................... 53
10.13 (i) Information................................................ 53
(ii) Notification of Claim Events............................... 54
(iii) Provision of Insurance Certificate and Broker's
Undertaking................................................ 54
10.14 Lessee Not to Prejudice Insurance................................ 54
10.15 Currency......................................................... 55
CLAUSE 11. EVENT OF LOSS.................................................... 55
11.1 Event of Loss With Respect to Aircraft............................ 55
11.2 Event of Loss with Respect to Engine.............................. 56
11.3 Transfer of Title to Replaced Engine to Lessee.................... 57
CLAUSE 12. REGISTRATION.................................................... 58
12.1 Registration...................................................... 58
CLAUSE 13. MAINTENANCE, REPORTING, REMOVAL AND REPLACEMENT,
ALTERATIONS, POSSESSION, OPERATION, ETC......................... 58
13.1 Maintenance....................................................... 58
(i) General Obligations........................................... 58
(ii) Independent Maintenance Contractor................................ 59
(iii) Maintenance Program............................................... 59
(iv) Specific Obligations.............................................. 59
ii
<PAGE>
13.2 Reporting Requirements and Provision of Information.............. 61
13.3 Removal of Engines............................................... 61
13.4 Replacement of Parts............................................. 62
(i) Lessee's Obligation to Replace Parts....................... 62
(ii) Condition of Replacement Parts............................. 62
(iii) Title to Replacement and Replaced Parts.................... 62
13.5 Replacement Engines.............................................. 63
13.6 Alterations...................................................... 64
13.7 Liability for Cost of Alterations; AD Cost Sharing............... 65
13.8 Possession of Aircraft; Sublease of Aircraft..................... 67
13.9 Delivery of Airframe or Engines to Manufacturer or Repairer;
Pooling Arrangements............................................. 69
(i) Delivery for Service or Repair............................. 70
(ii) Pooling of Engines......................................... 70
(iii) Pooling of Parts........................................... 70
13.10 Operation........................................................ 71
13.11 Nameplate........................................................ 71
13.12 Lessee's Liability as to Costs of Use and Operation.............. 72
13.13 Entitlement to Enforce Warranties................................ 72
CLAUSE 14. REGISTRATION OF AIRCRAFT......................................... 73
CLAUSE 15. RETURN OF AIRCRAFT.............................................. 73
15.1 Redelivery....................................................... 74
15.3 General Condition................................................ 75
15.4 Removal of Insignia; Transfer of Warranties, etc................. 76
15.5 Fuel and Oil..................................................... 76
15.6 Return Acceptance Certificate.................................... 77
15.7 Indemnities and Insurance........................................ 77
15.8 Airport and Navigation Charges................................... 77
15.9 Rectification of Re-delivery Condition........................... 77
15.10 Export and De-registration of Aircraft........................... 78
CLAUSE 16. INDEMNIFICATION.................................................. 78
16.1 General Indemnity................................................ 78
16.2 Tax Indemnity.................................................... 80
(i) Withholding Taxes................................................ 80
(ii) General Tax Indemnity............................................ 81
(iii) Exceptions to Indemnity.......................................... 82
(iv) After-Tax Basis.................................................. 83
(v) Timing of Payment................................................ 83
(vi) Contests......................................................... 83
(vii) Refunds.......................................................... 84
(viii) Cooperation in Filing Tax Returns................................ 85
iii
<PAGE>
CLAUSE 17. EVENTS OF DEFAULT................................................ 85
17.1 Events of Default................................................. 85
17.2 Action on Occurrence of Event of Default.......................... 89
CLAUSE 18. ASSIGNMENT....................................................... 92
18.1 Benefit of Agreement.............................................. 92
18.2 Assignment by Lessee.............................................. 93
18.3 Assignment by Lessor.............................................. 93
CLAUSE 19. FURTHER ASSURANCES............................................... 95
19.1 Further Assurances................................................ 95
19.2 Perfection of Lessor's etc. Interests............................. 95
.
CLAUSE 20. PROTECTION OF LESSOR'S INTERESTS................................. 95
CLAUSE 21. COSTS AND EXPENSES............................................... 96
21.1 Preparation and Negotiation of Lease Documents.................... 96
21.2 Enforcement and Preservation of Rights............................ 96
21.3 Non-delivery due to Event of Loss................................. 96
CLAUSE 22. INSPECTION....................................................... 96
CLAUSE 23. NOTICES AND LANGUAGE............................................. 97
23.1 Notices........................................................... 97
CLAUSE 24. LESSOR'S RIGHTS TO PERFORM FOR LESSEE............................ 99
CLAUSE 25. APPLICABLE LAW AND JURISDICTION.................................. 99
25.1 GOVERNING LAW..................................................... 99
25.2 Submission to Jurisdiction........................................ 99
CLAUSE 26. ALTERATIONS TO AGREEMENT......................................... 100
26.1 Entire Agreement.................................................. 100
26.2 Variation Only in Writing......................................... 101
26.3 English Language.................................................. 101
CLAUSE 27. CURRENCY INDEMNITY............................................... 101
CLAUSE 28. QUIET ENJOYMENT OF AIRCRAFT...................................... 101
CLAUSE 29. SEVERABILITY..................................................... 102
CLAUSE 30. SECURITY DEPOSIT................................................. 102
iv
<PAGE>
CLAUSE 31. MISCELLANEOUS.................................................... 103
31.1 Recordation and Filing........................................... 103
31.2 No Brokers....................................................... 104
31.3 Agreements Relating to Section 1110.............................. 104
31.4 Execution and Counterparts....................................... 105
SCHEDULES
A. ADDITIONAL DELIVERY CONDITIONS
B. FORM OF LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE
C. FORM OF LESSEE'S CORPORATE CERTIFICATE
D. TECHNICAL DATA AND MANUALS LIST
E-1 LOOSE EQUIPMENT LIST
E-2 EMERGENCY EQUIPMENT LIST
E-3 AVIONICS EQUIPMENT LIST
F. REDELIVERY CONDITION
G. FORM OF MONTHLY STATUS REPORT
H. FORM OF RETURN ACCEPTANCE CERTIFICATE
I. FORM OF POWER OF ATTORNEY
J. CERTAIN HARD TIME CONTROLLED ITEMS
v
<PAGE>
THIS LEASE AGREEMENT is made as of the 17th day of February, 1997.
BETWEEN:
(A) EAL (DELAWARE) VIII CORP., a Delaware corporation (hereinafter referred
to as "Lessor"); and
(B) PAN AMERICAN WORLD AIRWAYS, INC., a corporation organized and existing
under the laws of the State of Florida, having its principal office at
9300 N.W. 36th Street, Miami, Florida (hereinafter referred to as
"Lessee").
R E C I T A L :
WHEREAS, Lessee and ING executed the Letter of Agreement, dated January
22, 1997, pursuant to which Lessee and ING set forth the principal terms
pursuant to which Lessee would lease one Airbus A300B4-200 aircraft from Lessor;
and
WHEREAS, Lessor desires to lease to Lessee and Lessee desires to lease
from Lessor the Aircraft (as defined below) under this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
AGREEMENT:
CLAUSE 1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement the following terms shall, except where the context
otherwise requires, have the following meanings:
"AD Cost" shall have the meaning specified in Clause 13.7 of this Agreement.
<PAGE>
"ADDITIONAL NAMED INSURED" shall have the meaning specified in Clause 10.1(a) of
this Agreement.
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by or under common control with such person.
For purposes of this definition, "control" means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise and "controlling," "controlled by" and "under common control with"
have correlative meanings.
"AIRCRAFT" means the Airframe together with (i) the two (2) Engines, whether or
not any of such initial or substituted Engines may from time to time no longer
be installed on the Airframe or may be installed on any other aircraft so long
as title thereto shall remain vested in Lessor in accordance with the terms of
this Agreement, (ii) all Parts and all components thereof, (iii) all ancillary
equipment or devices furnished with the Aircraft (including Schedules A, B, D
and E) and (iv) all substitutions, replacements and renewals of any and all
thereof.
"AIRCRAFT DOCUMENTATION" shall mean all historical records referred to in this
Agreement, including Schedules A, B, D and E, delivered with the Aircraft for
work accomplished prior to the Delivery Date and current records for work
accomplished subsequent to the Delivery Date, including, but not limited to, all
documents, manuals, data, overhaul records, life limited part traceability, log
books, original Aircraft and Engine delivery documents, serviceable parts tags,
FAA forms, modification records, inspection records, any and all other
documentation pertaining to the Aircraft, Engine or Parts.
"AIRFRAME" means (i) the Airbus A300B4-200 airframe bearing Manufacturer's
Serial Number 259 further described in this Agreement, including Schedules A, B,
D and E, and in the Lease Supplement and Acceptance Certificate executed
pursuant hereto on the Delivery Date and (ii) any and all Parts (except the
Engines or engines from time to time installed thereon) so long as the same
shall be incorporated or installed in or attached to such airframe, or so long
as title thereto shall
-2-
<PAGE>
remain vested in Lessor in accordance with the terms of Clause 13.4, after
removal from such airframe.
"APU" means the Garret model TSCP 700-4 auxiliary power unit.
"AVIALL" means AVIALL Limited trading as AVIALL Caledonian Engine Services
(Greenwich Caledonian), Monument Crescent, Shaw Farm Industrial Estate,
Prestwick International Airport, Prestwick, Ayrshire, Scotland KA9 2RX.
"AVIALL Engine Maintenance and Pooling Contract" means the CF6-50 Maintenance
and Pool Agreement, dated June 7, 1996, entered into between Lessee, ING
Aviation Lease B.V. and AVIALL, as amended from time to time. For the avoidance
of doubt, the parties hereto expressly agree that in case of any conflict
between the terms of the AVIALL Engine Maintenance and Pooling Contract and the
terms of this Agreement, the latter shall prevail.
"AVIONICS EQUIPMENT LIST" means the avionics equipment list set forth in
Schedule E-3 hereto.
"BASIC RENT" shall have the meaning set forth in Clause 4.
"BUSINESS DAY" means a day (other than a Saturday, Sunday or holiday scheduled
by law) on which banks are open for business in Miami, Florida; New York, New
York; and Amsterdam, The Netherlands.
"CERTIFICATED AIR CARRIER" means any corporation domiciled in the United States
of America that is a "citizen of the United States" (as defined in Section 40102
of the Federal Aviation Act), and holding a Certificate issued under Chapter 447
of Title 49, U.S. Code issued by the United States Department of Transportation
or any predecessor or successor agency thereto, or, in the event such
Certificates shall no longer be issued, any corporation domiciled in the United
States of America and legally and regularly engaged in the business of
transporting for hire passengers or cargo by air predominantly to, from or
between points within the United States of America, and, in either event,
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operating commercial jet aircraft, which also is certificated so as to fall
within the purview of Section 1110 or any analogous statute.
"CLAIMS" shall have the meaning specified in Clause 16 of this Agreement.
"CYCLE" means with respect to the Aircraft, an Engine or other engine, one
take-off and landing of the Aircraft or (as the case may be), Airframe or other
airframe on which such Engine or other engine is installed.
"DEBT INSTRUMENT" shall have the meaning specified in Clause 17.1 of this
Agreement.
"DEFAULT" means an Event of Default or an event which, with the giving of notice
or the lapse of time or both, would or could become an Event of Default.
"DELIVERY" means the delivery of the Aircraft by Lessor to Lessee and the
acceptance by Lessee hereunder on the Delivery Date. The Aircraft shall be
tendered for delivery no later than April 15, 1997 or such earlier date in the
event the Aircraft meets the required delivery conditions.
"DELIVERY DATE" means the date on which Lessee accepts delivery of the Aircraft
from Lessor, which shall be the date of the Lease Supplement and Acceptance
Certificate.
"DELIVERY LOCATION" shall have the meaning specified in Clause 2.2(i) of this
Agreement.
"DOLLARS" or "$" or "USD$" means the lawful currency of the United States of
America.
"ELIGIBLE CLAIM" means a claim submitted by Lessee for payment or reimbursement
of Lessee for labor, parts and materials costs paid by Lessee in performing, in
relation to the Aircraft in accordance with the Maintenance Program, any or all
of the maintenance processes referred to in subdivisions (i) through (vi) of
Clause 5.1, except to the extent that such claim relates to any remedial action
necessitated by foreign object or other accidental damage to the Aircraft,
negligent or other improper
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maintenance, repair, modification, alteration, use or operation of the Aircraft,
or an Inherent Defect or any cost which is reimbursable from insurance or
warranty claims after due diligence.
"EMERGENCY EQUIPMENT LIST" means the emergency equipment list set forth in
Schedule E-2 hereto.
"ENGINE" means each of the two (2) General Electric CF6-50C2 aircraft engines
bearing the manufacturer's serial numbers specified in the Lease Supplement and
Acceptance Certificate and further described in this Agreement, including
Schedules A, B and D, which are initially installed on the Airframe when
delivered and leased hereunder (or in lieu of any such engine, a Replacement
Engine subsequently substituted therefor pursuant to Clause 11.2), whether or
not from time to time no longer installed on the Airframe or installed on any
other airframe or aircraft so long as title thereto shall remain vested in
Lessor in accordance with the terms of this Agreement, together in each case
with any and all Parts incorporated or installed in, or attached to, such engine
(or Replacement Engine) when delivered and leased hereunder or at any time
thereafter, or after removal therefrom any and all Parts removed therefrom so
long as title thereto shall remain vested in Lessor in accordance with the terms
of Clause 13.4. The term "Engine" means, as of any date of determination, if the
context so requires, all Engines then delivered and leased hereunder.
Notwithstanding the foregoing, Lessor may, prior to the Delivery Date,
substitute any General Electric CF6-50C2 aircraft engine for any engine that is
identified by serial number in this Lease, so long as (i) Lessor shall furnish
Lessee with notice of such substitution immediately upon becoming aware thereof;
(ii) such substitute engine is airworthy and is accompanied by all relevant
Aircraft Documentation relating to engines; (iii) Lessor shall make available to
Lessee all related Aircraft Documentation; and (iv) any such substitute engine
shall comply with the requirements of Schedule A applicable to "Engines"; and,
upon such substitution, such replacement engine shall constitute an "Engine"
hereunder.
"EVENT OF DEFAULT" means the occurrence of any of the events specified in Clause
17.1.
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"EVENT OF LOSS" means, with respect to the Aircraft or the Airframe or any
Engine (the "PROPERTY"), any of the following events with respect to the
Property: (i) loss of the Property or the use thereof due to hijacking, theft,
disappearance, destruction, damage beyond repair or rendition of such property
permanently unfit for normal use for any reason whatsoever (in the case of
hijacking, theft or disappearance, an Event of Loss shall be deemed to have
occurred on the expiration of a period of 30 consecutive days during which
Lessee or the lawful possessor of the Property continuously loses possession or
use thereof); (ii) any damage to such Property which renders such property
uneconomical to repair or results in an insurance settlement with respect to
such Property on the basis of an actual total loss or constructive total loss;
(iii) the condemnation or taking of, or requisition of title to or use of, such
Property or the confiscation or seizure of such Property by any governmental
body; (iv) the prohibition of the use of the Property by Lessee for a period in
excess of 60 days (or such longer period as may be agreed by Lessor) as a result
of any rule, regulation, order or other action by any governmental body; and (v)
any other case which by subsequent agreement the parties hereto may deem to be
an "Event of Loss" subject, with respect to the Event of Loss described in this
clause (v), to the insurers' consent thereto.
"EXPIRATION DATE" means the sixth anniversary of the Delivery Date.
"FAA" means the Federal Aviation Administration of the United States of America
or its successor agency from time to time charged with the administration or
enforcement of United States aviation law.
"FAR" means the United States Federal Aviation Regulations.
"FAR PART 121" means Part 121-Operations: Certification and Operations:
Domestic, Flag, and Supplemental Air Carriers and Commercial Operators of Large
Aircraft, of the regulations of the FAA, 14 C.F.R. ss.ss. 121 et seq., as
amended and in effect from time to time.
"FEDERAL AVIATION ACT" or "ACT" means Subtitle VII, Part A of Title 49 of the
United States Code.
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"FLIGHT HOUR" means, with respect to the Airframe, each hour or part thereof
which elapses from takeoff to touchdown and, with respect to each Engine, each
hour or part thereof which elapses from takeoff to touchdown of the Airframe or
of any other airframe on which such Engine is then installed (whether such
Engine is installed on the Airframe or another airframe), in each case as
recorded in the Aircraft or other aircraft log book or in any other document
recording flight time accepted by the FAA.
"GAAP" means generally accepted accounting principles, as in effect in the
United States, consistently applied from period to period.
"INDEMNITEE" or "INDEMNITEES" means each of Lessor, ING and their respective
successors, assigns, agents, directors and employees.
"INDEPENDENT MAINTENANCE CONTRACTOR" shall mean any person approved by the FAA
and Lessor (which shall be confirmed in writing) to perform maintenance on the
Aircraft in accordance with this Lease.
"ING" means ING Lease International Equipment Management B.V., ING Lease
(Nederland) B.V., a Netherlands corporation or such other subsidiary, Affiliate,
associated company, owner trust or assignee.
"INHERENT DEFECT" means any defect in the Aircraft or any part thereof arising
out of a fault or error in the design, manufacture or construction thereof.
"LAW" means and includes (i) any statute, decree, constitution, regulation,
order or any directive of any government entity; (ii) any treaty, pact, compact
or other agreement to which any government entity is a signatory or party; and
(iii) any amendment or revision of any thereof.
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"LEASE", "THIS LEASE", "THIS AGREEMENT", "HEREIN", "HEREUNDER", "HEREBY" or
other like words mean this Lease Agreement, as it may be supplemented from time
to time or amended pursuant to the applicable provisions hereof.
"LEASE DOCUMENTS" means this Agreement, the Lease Supplement and Acceptance
Certificate, the Other Leases and all other documents, instruments and
agreements required hereunder or thereunder.
"LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE" means the Lease Supplement and
Acceptance Certificate to be executed and delivered by Lessee and countersigned
by Lessor on the Delivery Date pursuant to Clause 2.2, substantially in the form
of Schedule B hereto.
"LEASE TERM" means the term of leasing of the Aircraft hereunder commencing on
the Delivery Date and terminating on the Expiration Date.
"LESSOR LIEN" means any Lien created over the Aircraft by Lessor or exercised,
asserted or claimed against the Aircraft or any part thereof in respect of a
debt, liability or other obligation (whether financial or otherwise) of Lessor
(other than (i) a debt, liability or other obligation arising from the operation
of the Aircraft or any part thereof by Lessee, and (ii) any such Lien created by
or through Lessor pursuant to and in accordance with the terms of any of the
Lease Documents).
"LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease or other
security interest of any kind (including any conditional sale or other title
retention agreement).
"LOOSE EQUIPMENT LIST" means the loose equipment list set forth in Schedules E-1
and E-2 hereto.
"MPD" means the Airbus Industrie's Maintenance and Planning Document for the
Aircraft.
"MAINTENANCE MANUAL" means, for the Aircraft, any Engine or Part, the applicable
manufacturer's maintenance manual for such item.
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"MAINTENANCE PAYMENTS" means those payments required to be made by Lessee
pursuant to Clauses 5.1 and 5.2 of this Agreement.
"MAINTENANCE PROGRAM" means Lessee's FAA approved maintenance program in effect
from time to time for the Aircraft encompassing scheduled maintenance,
condition-monitored maintenance, maintenance of the Airframe, Engines and Parts
of the Aircraft as approved and accepted by Lessor or such other maintenance
program approved and accepted by Lessor (such acceptances and approvals of
Lessee's FAA approved maintenance program not to be unreasonably withheld).
"MAINTENANCE RESERVE ACCOUNT" shall have the meaning specified in Clause 5.1 of
this Agreement.
"MANUFACTURER" means Airbus Industrie.
"MONTHLY ANNIVERSARY DATE" means the date in each calendar month subsequent to
the calendar month in which the Delivery Date occurs which numerically
corresponds to the Delivery Date; PROVIDED that if no date numerically
corresponds to the Delivery Date in any calendar month, the Monthly Anniversary
Date for such month shall be the last day of such month.
"MONTHLY PERIOD" means (i) the period beginning on the Delivery Date and ending
on the first Monthly Anniversary Date and (ii) each subsequent period beginning
on a Monthly Anniversary Date and ending on the following Monthly Anniversary
Date.
"OTHER LEASES" means those Lease Agreements (as in effect from time to time,
including any interim or short term lease and any replacement thereof) entered
into between Lessor and Lessee or ING and Lessee relating to the lease of Airbus
model A300 aircraft (other than the Aircraft), as such agreements may be
supplemented, amended and otherwise in effect from time to time.
"PARTS" means all appliances, components, parts, instruments, appurtenances,
avionics, accessories, furnishings and other equipment of whatever nature (other
than complete Engines or engines) which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine.
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"PERMITTED LIEN" means any Lien of the type described in subclause (i), (ii),
(iii) and (iv) of Clause 9.1;
"PERSON" means any individual, company, partnership, joint venture, trust or
unincorporated association, or any state or government or any agency,
instrumentality or political subdivision of any state or government.
"POWER OF ATTORNEY" means the power of attorney, substantially in the form
attached hereto as SCHEDULE I, executed by Lessee and delivered to ING and to be
effective only after an Event of Default has occurred.
"REDELIVERY" means the redelivery of the Aircraft by Lessee to Lessor and the
acceptance by Lessor hereunder on the Redelivery Date.
"REDELIVERY DATE" means the date on which Lessor accepts redelivery of the
Aircraft from Lessee, which shall be the date of the Return Acceptance
Certificate executed by Lessor.
"RENT" means Basic Rent and Supplemental Rent.
"RENT PAYMENT DATE" means the Delivery Date and the date in each calendar month
subsequent to the calendar month in which the Delivery Date occurs which
numerically corresponds to the Delivery Date; PROVIDED, HOWEVER, that (i) if for
any month no date numerically corresponds with such date, then the Rent Payment
Date shall be the last day of such month and (ii) if for any month such day is
not a Business Day, then the Rent Payment Date shall be the next Business Day.
"RENT PAYMENT PERIOD" means the one-month period commencing on the Delivery Date
or any Rent Payment Date, and ending on the next succeeding Rent Payment Date
or, in the case of the last Rent Payment Period, the Expiration Date.
"REPLACED ENGINE" shall have the meaning set forth in Clause 11.3.
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"REPLACEMENT ENGINE" means a replacement engine which shall have been leased
hereunder pursuant to Clause 11.2.
"RETURN ACCEPTANCE CERTIFICATE" means the Return Acceptance Certificate to be
executed and delivered by Lessor and countersigned by Lessee on the Redelivery
Date, substantially in the form of Schedule H hereto.
"RETURN LOCATION" means Lessee's maintenance headquarters in the continental
United States or such other location as Lessor and Lessee shall mutually agree;
PROVIDED, HOWEVER, that, in connection with any return or repossession of the
Aircraft upon or following the occurrence of an Event of Default, "Return
Location" means such location within the continental United States as Lessor
shall specify to Lessee.
"REVIMA" means Associete pour la Revision a et L'Envretien du Materiel
Aeronautique.
"REVIMA APU MAINTENANCE and POOLING CONTRACT" means the contract entered into
between Lessee and Revima, dated September 6, 1996, as amended from time to
time. For the avoidance of doubt, the parties hereto expressly agree that in
case of any conflict between the terms of the Revima APU Maintenance and Pooling
Contract and the terms of this Agreement, the latter shall prevail.
"SCHEDULED DELIVERY DATE" means April 15, 1997 or such other date as Lessor and
Lessee shall mutually agree in writing.
"SECTION 1110" means Section 1110 of the U.S. Bankruptcy Code (11 U.S.C. ss.
1110), as amended and in effect from time to time.
"SECURITY AGREEMENT" means the Aircraft Security Agreement, dated as of February
15, 1990 between the Lessor, as mortgagor and ING, as mortgagee, as supplemented
and amended.
"SECURITY DEPOSIT" AND "SECURITY DEPOSITS" have the meaning specified in Clause
30.
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"STIPULATED LOSS VALUE" means $18,000,000, subject, however, to such adjustment
as may be agreed upon as a result of negotiations to occur on or about each
anniversary of the Delivery Date.
"SUPPLEMENTAL RENT" means all amounts, liabilities and obligations (other than
Basic Rent) which Lessee assumes or agrees to pay to Lessor hereunder or under
any of the Lease Documents, including payments of Stipulated Loss Value and
amounts calculated by reference thereto, Maintenance Payments and indemnity
payments.
"TAXES" means any and all present or future taxes (including, without
limitation, income, receipts, value added, turnover, property (tangible or
intangible), sales, use, excise and other taxes), levies, imposts, duties,
charges or fees, deductions or withholdings of any nature imposed, levied,
collected, withheld or assessed by any government or taxing authority.
"TECHNICAL DATA AND MANUALS LIST" means a list in the form set out in Schedule D
hereto.
"UNITED STATES AIR CARRIER" means any "air carrier" (as defined in Section
40102(2) of the Federal Aviation Act) that is certificated under Chapter 411 of
such Act and that is operating pursuant to a certificate issued under 14 C.F.R.
Part 121 (or which has like authority under any similar or successor provision).
1.2 The Schedules to this Agreement shall form an integral part hereof.
Reference herein to any agreement or other instrument shall be deemed
to include references to such agreement or other instruments as varied
or amended or supplemented or replaced from time to time. Where the
context permits, any reference to Lessee or Lessor or any other person,
company or other legal entity also include their respective successors
and permitted assigns and (where applicable) their servants and agents.
Where the context permits, words importing the singular number only
shall include the plural and vice versa, words importing any gender
shall include all other genders and words importing persons shall
include corporations, and vice versa. The headings or sub-headings of
Clauses to this Agreement and the Contents are
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inserted for convenience of reference only and shall not in any way
affect the interpretation of this Agreement.
CLAUSE 2. AGREEMENT TO LEASE
2.1 Agreement to Lease. Subject to the terms and conditions of this
Agreement, Lessor hereby agrees to lease to Lessee hereunder, and
Lessee hereby agrees to lease from Lessor hereunder, the Aircraft
during the Lease Term unless earlier terminated pursuant to Clause 11.1
or Clause 17 hereof. The right to lease the Aircraft conferred hereby
shall include the use of all Aircraft Documentation and any other
documents relating to the Aircraft delivered pursuant to this Agreement
and any other records, books, manuals, handbooks, data, drawings,
schedules and other documentation relating to the Aircraft or Airbus
A300B4-200 aircraft; provided that, throughout the Lease Term, title to
the same shall remain with Lessor except as otherwise expressly
provided for herein.
2.2 (i) DELIVERY. Except as otherwise provided herein, and subject to the
terms and conditions of this Agreement, delivery to and acceptance of
the Aircraft by Lessee under this Agreement shall take place "AS IS,
WHERE IS" and SUBJECT TO EACH AND EVERY DISCLAIMER OF WARRANTY AND
REPRESENTATION SET FORTH IN CLAUSE 8 HEREOF on or about the Scheduled
Delivery Date at Filton Airport, Bristol, United Kingdom (the "DELIVERY
LOCATION"), or such other location as Lessor and Lessee shall mutually
agree.
(ii) INSPECTION AND DEMONSTRATION FLIGHT. (a) Lessee will inform Lessor
of any specific work which will need to be done on the Aircraft in
order to be able to put the Aircraft on the Lessee's operation
specifications (i) in writing and (ii) no later than March 15, 1997.
Lessee shall be given reasonable access to the Aircraft at the
maintenance facility that performs the pre-delivery maintenance checks
(upon not less than twenty-four (24) hours notice), and Lessor has made
available for inspection the full complement of records, manuals and
other documentation as specified in the
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Schedules hereto. Lessor will give Lessee notice at least 24 hours
before the completion of the predelivery workscope and Lessee will
complete its technical inspection of the Aircraft within 48 hours after
receipt of such notice. After Lessee's inspection, Lessor and Lessee
will sign a document listing discrepancies which will be rectified at
Lessor's cost. Lessor shall cause an FAA Certificate of Airworthiness
to be placed on the Aircraft and Lessee will then technically accept
the Aircraft at the location of the maintenance facility performing the
pre-delivery maintenance work, subject to Lessor rectifying the listed
discrepancies.
(b) Prior to the delivery and acceptance, a final walk around
inspection and a systems ground check, including engine power runs (all
of which will not take longer than twenty-four (24) hours) in
accordance with the Manufacturer's Maintenance Manual, will be
performed in conjunction with a flight demonstration of the Aircraft,
not to exceed two (2) hours duration, at Lessor's cost, utilizing the
Manufacturer's standard maintenance manual procedures, all of which
will be accomplished immediately prior to delivery and acceptance. Two
(2) representatives of Lessee will be on board as observers. Lessee
shall at its own cost make available a flight crew for the
demonstration flight. Lessor, at its expense, will correct, or cause to
be corrected, all defects exceeding Manufacturer's Maintenance Manual
limitations.
(c) Lessee shall have inspectors (not exceeding the number reasonably
designated by the maintenance facility) present during the pre-delivery
work performed on the Aircraft at the designated maintenance facility.
Lessor shall permit representatives of Lessee to observe and advise
Lessor's representatives to the extent necessary and reasonably
practical with regard to the performance of any work involved with
respect to the preparation of the Aircraft for delivery.
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(iii) DELIVERY CONDITION. Except as otherwise provided herein, the
Aircraft (including its installed engines) will, at Lessor's expense,
be delivered and leased to Lessee in the configuration, status and
condition described in this Clause 2.2 and Schedules A, B, D, E-1, E-2
and E-3 hereto. The Aircraft will have installed at Lessor's cost a
current and valid FAA Certificate of Airworthiness in accordance with
FAR Part 121. The Aircraft (including its associated records, manuals
and documents) at delivery will be in compliance with all outstanding
FAR's and FAA Airworthiness Directives (including but not limited to
CPCP and SSID programs), and any other U.S. regulatory requirements
issued or published in the Federal Register which by their terms have
compliance dates prior to the Delivery Date, or within twelve (12)
months or 3325 flight hours or 1000 cycles thereafter, as applicable,
or to the limit of the next applicable inspection period if the
inspection period is less than 3325 hours, 1000 cycles or 12 months,
all in accordance with FAA compliance with each Airworthiness
Directive. Lessee will give Lessor notice prior to March 15, 1997 of
any other U.S. regulatory requirements referred to above that Lessor
must comply with. Aircraft Documents must be acceptable to and approved
by the FAA. The Aircraft will be delivered fresh out of the
Mid-D-check. This shall include the B1, B1000, C1 and 3C1 checks. The
Aircraft shall also be cleared of the applicable and required CPCP,
SSID and fleet leader tasks. Lessee will be responsible for the cost
associated with terminating CPCP, SSID and fleet leader tasks which are
not due within 3325 hours, 1000 cycles or 12 months. Bridging actions
required to make the Aircraft technically eligible for adding it to
Lessee's operations specifications will be accomplished prior to
delivery at Lessor's expense. The specific bridging program will be
agreed upon in writing (prior to February 15, 1997) between Lessor and
Lessee. Installed engines, APU and landing gear times shall be in
accordance with Schedule B hereof. The Aircraft will be airworthy and
in compliance with the manufacturer's original type certificate
specifications as revised up to the Delivery Date, including any
approved repairs or modifications, with appropriate maintenance
releases, and will be in compliance with the requirements for operation
in accordance with Lessee's FAA approved FAR Part 121 operations
specifications. The Aircraft
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will be in compliance with all outstanding FARs and Airworthiness
Directives issued and published in the Federal Register prior to the
Delivery Date by the FAA affecting A300B4-200 aircraft, engines, or
components which by their terms have compliance dates either (i) on or
prior to the Delivery Date, or (ii) within twelve months thereafter
(or, if not requiring terminating action, to the limit of the next
applicable inspection period), all in accordance with the Maintenance
Program. The Aircraft will be painted in Lessee's colors and have
installed therein a full shipset of LD-3 cargo containers, galley
catering, loose equipment and emergency equipment as set forth in
Schedules E-1 and E-2 hereto. Additionally, Lessor shall have provided
an Avionics List as set forth in Schedule E-3, which shall list all
avionics and other aircraft equipment delivered with the Aircraft. If
Lessor can not deliver one full shipset of Loose Equipment, Lessee may
(with Lessor's consent) purchase the missing Loose Equipment and will
provide Lessor with an invoice. Lessor will reimburse Lessee for the
cost associated therewith. Lessee will only be reimbursed for the
acquisition of used equipment. Lessor shall be responsible for payment
of the cost of delivering the Aircraft in the condition set forth
herein and Schedules thereto, and shall pay for any additional work
required to reregister the Aircraft in the United States.
(a) Up to the Delivery Date: -
(x) the Maintenance Program shall include a corrosion program
based on the corrosion prevention, treatment and correction
criteria ("CPCP") established by the Manufacturer as set forth in
the appropriate Airbus Maintenance and Planning Document ("MPD")
and Structural Repair Manual ("SRM"). Cleaning and treating of
minor or moderate corrosion and correction of all severe or
exfoliated corrosion deferred by the Lessor or found by the Lessee
during the Lessee's ground inspection shall be accomplished by the
Lessor in accordance with such Manuals prior to the Delivery; and
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(y) the Aircraft shall have all deferred maintenance items and
pilot log book reports or such other documents approved by the FAA
rectified on a terminating action basis, unless otherwise agreed
between Lessor and Lessee.
(b) Lessor shall permit representatives of Lessee to observe and
participate (without power to direct or control) in to the extent
necessary and reasonably practicable the performance of any work
involved with respect to the preparation of the Aircraft for Delivery.
(c) Lessor shall fuel the Aircraft (at its cost) prior to Lessee's
flight from the Delivery Location to the United States.
(iv) ACCEPTANCE OF DELIVERY. Upon completion of the (i) inspections and
acceptance flight demonstration set forth in Clause 2.2(ii); (ii) the
rectification of any deviations in the condition of the Aircraft from
those set forth in Schedules A, B, D, E-1 and E- 2 (or an agreement in
writing about the rectification of such deviations); (iii) the FAA has
issued a current and valid Certificate of Airworthiness; and (iv) the
Aircraft is technically immediately eligible for placement on Lessee's
operations specifications by the FAA and thereby immediately eligible
for operations in Lessee's scheduled revenue service, Lessee will cause
an officer or other duly authorized employee to execute a Lease
Supplement and Acceptance Certificate, substantially in the form of
Schedule B to this Agreement, to be dated the Delivery Date; PROVIDED,
HOWEVER, that Lessee shall not be required to accept the Aircraft
unless it is in the condition required under this Agreement. Lessee or
its counsel will immediately forward said Lease Supplement and
Acceptance Certificate to Crowe and Dunlevy, special FAA counsel in
Oklahoma City for filing with the FAA on the Delivery Date. Execution
and delivery of such Lease Supplement and Acceptance Certificate on
behalf of Lessee, without the necessity of any further act, shall
constitute presumptively
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conclusive evidence that the Lessee has accepted the Aircraft for
purposes of the Lease.
(v) EXCLUSION OF LIABILITY. Without prejudice to Clause 8.1, so long as
Lessor shall not have been negligent in its efforts to tender the
delivery of the Aircraft to Lessee as and when required hereby, Lessor
shall not have any responsibility or liability to Lessee for, or
arising out of, any delay in the delivery of the Aircraft or any Part
thereof or for any damage incurred in the course of delivery except
when due to the willful misconduct of Lessor; PROVIDED, HOWEVER, that
in the event the Delivery Date does not occur within forty-five (45)
days of the Scheduled Delivery Date due to the non-conformity of the
Aircraft to the delivery requirements of this Clause 2, then Lessee
shall have no further obligation hereunder to Lease the Aircraft from
Lessor or otherwise to consummate the transactions contemplated hereby,
whereupon the Down Payment shall be promptly returned by Lessor to
Lessee.
(vi) CASUALTY TO THE AIRCRAFT PRECEDING DELIVERY. In the event the
Aircraft is lost or damaged beyond economical repair prior to the
Scheduled Delivery Date, Lessor shall immediately advise Lessee in
writing and the obligation to make the Aircraft available to the Lessee
shall terminate and that portion of the Security Deposit received by
Lessor shall be promptly returned by Lessor to Lessee.
CLAUSE 3. LEASE TERM
3.1 LEASE TERM. The Lease Term hereunder shall be initially for a period of
72 months commencing on the Delivery Date.
CLAUSE 4. BASIC RENT
4.1 BASIC RENT.
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(i) During the Lease Term, Lessee shall, unless otherwise agreed in
writing, pay Basic Rent in the sum of US$139,000 in respect of each
Rent Payment Period in advance on each Rent Payment Date on which such
Rent Payment Period commences.
(ii) If Lessee shall fail to return the Aircraft to Lessor at the time
and in the condition required by this Lease (whether at the expiration
or any termination of Lessee's right to lease the Aircraft hereunder or
otherwise), then, in addition to any other right or remedy available to
Lessor in respect thereof, Lessee shall continue to pay Basic Rent,
pro-rated on a daily basis, for each day following the date on which
such return was required until such time as the Aircraft is returned to
Lessor and is in the condition required by this Lease. Lessee's
obligation under the preceding sentence shall survive the termination
or any expiration of this Lease.
4.2 [THIS CLAUSE IS RESERVED].
4.3 [THIS CLAUSE IS RESERVED].
CLAUSE 5. MAINTENANCE AND OTHER PAYMENTS
5.1 MAINTENANCE RESERVE ACCOUNTS. Six maintenance reserve accounts (each, a
"MAINTENANCE RESERVE ACCOUNT") shall be maintained by Lessor, one in
respect of each of the following maintenance processes:
(i) the Airframe "C-Check" (which expression shall, for this purpose,
include the C-1, C-2 and C-6 Checks and all phases of the 3C Check, all
routine and non-routine man hours, and all Maintenance Program
inspection items contained in such Checks);
(ii) the Airframe "D-Check" (which expression shall, for this purpose,
include routine and non-routine man hours, the 9, 10 and 15 year CPCP
inspection, and all Maintenance Program inspection items contained in
such Checks); the "D-Check"
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reserve shall also include the cost to be incurred for replacement of
the hard time controlled list set forth in Schedule J.
(iii) the Airframe "mid D-Check" (which expression shall, for this
purpose, include the C-4 and Mid-D Checks, the 2-1/2 year, 4 year and 5
year CPCP inspections and all routine and non-routine man hours, and
all Maintenance Program inspection items contained in such Checks);
(iv) the Engines (which expression shall, for this purpose, not extend
to any Engine components forming part of nose cowl and thrust reverser)
off-wing overhaul, including Life Limited Part replacement; provided
that, at all times during which the AVIALL Engine Maintenance and
Pooling Contract is in existence, no maintenance reserve account shall
be maintained by the Lessor in respect of these Engine maintenance
processes, such processes being carried out pursuant to the AVIALL
Engine Maintenance and Pooling Contract;
(v) the APU restoration; provided that, at all times during which the
Revima APU Maintenance and Pooling Contract is in existence, no
maintenance reserve account shall be maintained by the Lessor in
respect of the APU maintenance processes, such processes being carried
out pursuant to the Revima APU Maintenance and Pooling Contract; and
(vi) Landing gear overhauls.
The Maintenance Reserve Accounts are to be maintained by Lessor for its
own administrative and bookkeeping convenience and Lessee acknowledges that it
shall have no right, title or interest in such accounts, except as provided in
Clause 11.1 hereof. Notwithstanding the foregoing, the amount of Maintenance
Reserves paid by Lessee with respect to each Maintenance Reserve Account shall
be available towards the actual costs of the completion of that maintenance
task.
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5.2 Constitution of Maintenance Payments. The Maintenance Payments with
respect to the items set forth in Clause 5.1 shall be constituted as
follows:
(i) an amount equal to USD$ 125 per Airframe Flight Hour, payable
monthly for the purpose of meeting Eligible Claims in respect of the
maintenance processes referred to in Clause 5.1(i) (Airframe
"C-Check");
(ii) an amount equal to USD$ 15,000 per month payable for the purpose
of meeting Eligible Claims in respect of the maintenance processes
referred to in Clause 5.1(ii) (Airframe "D-Check");
(iii) an amount equal to USD$ 130 per Airframe Flight Hour payable
monthly for the purpose of meeting Eligible Claims in respect of the
maintenance processes referred to in Clause 5.1(iii) (Airframe "Mid
D-Check");
(iv) an amount equal to USD$ 210 per Flight Hour for each Engine
payable monthly for the purpose of meeting Eligible Claims for such
Engine in respect of the maintenance processes referred to in Clause
5.1(iv) (Engine overhaul);
(v) an amount equal to USD$ 55 per Airframe Flight Hour payable for the
purposes of meeting Eligible Claims in respect of the maintenance
processes referred to in Clause 5.1 (v) (APU restoration);
(vi) an amount equal to USD$ 6,250 per month payable for the purpose of
meeting Eligible Claims in respect of the maintenance processes
referred to in Clause 5.1(vi) (landing gear);
(vii) for so long as the AVIALL Engine Maintenance and Pooling Contract
is in effect with Lessee, an amount equal to USD$ 50 per Flight Hour
for each Engine (in addition to the payment required under clause (iv))
payable monthly for the purpose
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of meeting Eligible Claims in respect of the maintenance processes
effected under and pursuant to such contract; and
(viii) for so long as the Revima APU Maintenance and Pooling Contract
is in effect between Lessee and Revima, no payments required under
clause (v) shall be payable by Lessee in respect of the APU.
During the Lease Term, the Maintenance Payments specified in subdivisions
(ii) and (vi) of this Clause 5.2 shall be paid monthly in advance with respect
to each Rent Payment Period on the Rent Payment Date on which such Rent Payment
Period commences. The Maintenance Payments specified in subdivisions (i), (iii),
(iv), (v) and (vii) of this Clause 5.2 shall be paid monthly in arrears on the
date on which the monthly report described in Clause 13.2 is due; provided,
however, that the number of Flight Hours upon which each such payment is
calculated shall not in any case be less than 150 unless the Aircraft is
grounded solely for the performance of the maintenance described above.
ING on behalf of Lessor shall keep a record of the amounts deposited into
and withdrawn from the maintenance reserve allocations specified above, but
nothing herein shall require ING to maintain separate bank accounts for all or
any part of any such allocation or account.
In lieu of the Maintenance Payments set forth in this Clause 5.2, Lessee
may, at its option exercisable at any time during the Lease Term, furnish Lessor
with a guarantee from a guarantor acceptable to Lessor or a letter of credit on
a bank or other financial institution upon terms and conditions reasonably
acceptable to Lessor.
5.3 ADJUSTMENT TO MAINTENANCE PAYMENTS. With regard to the Maintenance
Payment set forth in subdivision (iv) of Clause 5.2 with respect to the
Engines, the following will apply: Lessee shall pay to Lessor USD$ 210
per Engine Flight Hour based on an average yearly Ambient Temperature
of equal or below 75 Degrees F and an hours/cycles ratio equal to or
higher than 3:1. Annually on the first and each subsequent anniversary
of the Delivery Date,
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(i) this average Ambient Temperature will be reconciled against average
monthly temperatures for the preceding 12-month period at the
outstation actually utilized by Lessee, by the method of adding average
Ambient Temperatures per take-off and dividing by the total number of
flights and (ii) this hours/cycles ratio will be reconciled with the
actual hours and cycles flown during the preceding 12-month period. If
the actual average Ambient Temperature so calculated exceeds 75 Degrees
F, and/or if the actual hours/cycles ratio so calculated is less than
3:1, such Maintenance Payment shall be recalculated in accordance with
Table 1 below, and Lessee shall immediately upon demand pay the
difference between the actual monies paid by Lessee for such period and
such recalculated Maintenance Payment. Lessee shall provide Lessor, on
an annual basis, with its projections of the hours/cycles ratio for the
next succeeding period of twelve months.
TABLE 1
HOURS AND CYCLES RATIO
Ambient
Temperature 1.26- 1.76- 2.26-
Deg F /less than/1.25:1 1.75:1 2.25:1 2:75:1
- --------------------------------------------------------------------------------
/less than/75 326 275 244 226
76 - 85 347 288 255 237
85 - 95 353 298 265 244
/greater than/96 359 296 269 248
- --------------------------------------------------------------------------------
Ambient
Temperature 2.76- 2.26- 3.76- 4.26- \symbol\4.76:1
Deg F 3.25:1 3.75:1 4.25:1 4.75:1 \greater than\
- --------------------------------------------------------------------------------
\less than\75 210 202 193 189 187
76-85 221 212 204 200 197
85-95 229 216 208 204 202
\greater than\96 233 221 212 206 206
- --------------------------------------------------------------------------------
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5.4 (i) Conditions Precedent to Reimbursement for Eligible Claims. Lessor's
obligation to pay or reimburse Lessee for any Eligible Claims in
respect of the maintenance processes referred to in Clause 5.2 is
subject to the satisfaction of the following conditions precedent:
(a) before any work with respect to such Eligible Claim is performed,
Lessee shall submit in writing to Lessor the proposed workscope and
estimated cost therefor; should Lessor object to the workscope, cost or
entity, then the parties shall consult as soon as possible to resolve
the issue. If the parties cannot resolve the issue as to workscope,
then such issue shall be presented to the Manufacturer or Engine
Manufacturer for its decision as to the correct workscope.
(b) if Lessor agrees that such workscope and cost are reasonable,
Lessor shall so notify Lessee thereof within 5 Business Days after
Lessor's receipt of Lessee's written submission;
(c) any work performed that is beyond the Maintenance Program shall be
at Lessee's expense and shall not be payable out of the reserves;
(d) after Lessor and Lessee agree on the reasonableness of such
workscope and cost, Lessee shall have the work with respect to such
Eligible Claim performed in accordance therewith; and
(e) following completion of the work with respect to such Eligible
Claim, Lessee shall present to Lessor all original work-sheets,
invoices, vouchers and/or receipts with respect thereto and such other
evidence of and information relating to the performance of such work as
Lessor may reasonably request.
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(ii) CREDITS AND PAYMENTS FROM RESERVE ACCOUNTS. Effective on the
Delivery Date, Lessor shall credit the Maintenance Reserve Account
maintained under clause 5.1(ii) ("D-Check") (excluding any amounts
associated with CPCP) and clause 5.1(vi) (landing gear overhauls) with
an amount based upon the Flight Hours, months or cycles, as
appropriate, accumulated on the Landing Gear (but not on any Engine or
APU, mid D-Check or C-Check) during the period from the date of the
last overhaul thereof to the Delivery Date (as determined from the
relevant logs and records of the prior operators thereof); provided,
however, that the relevant Maintenance Reserve Account shall be
credited for the Flight Hours accumulated on the hard time controlled
items listed on Schedule J during the period from the date of the last
overhaul thereof to the Delivery Date, as specified in such Schedule.
Any credit to a Maintenance Reserve Account pursuant to this clause
(ii) shall be calculated as follows:
Pre-Delivery Usage
Credit = __________________________________
Actual Time/Cycles Between Overhaul
where:
"PRE-DELIVERY USAGE" is the Flight Hours, months or cycles, as
appropriate, accumulated during the period from the date of the last
overhaul to the Delivery Date; and
"ACTUAL TIME/CYCLES BETWEEN OVERHAUL" is the aggregate number
of Flight Hours, months or cycles, as appropriate, actually
accumulated at the time of overhaul under Lessee's Maintenance
Program. The amount of such credit shall be determined by Lessor and
shall be binding and conclusive, absent manifest error.
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Within 10 Business Days after receipt of the supporting
documentation referred to in Clause 5.4(i)(e) above, Lessor will pay
the amount of such Eligible Claim to the extent of, and by making a
drawdown against, the amount then in the applicable reserve account.
In the event that the amount of such Eligible Claim exceeds the
balance then in the relevant maintenance reserve account, Lessee
shall be responsible for the payment of such excess.
In connection with Lessee's performance of a "D-Check", amounts
shall be available to Lessee in respect of Eligible Claims for such
"D-Check" from the Maintenance Reserve Account maintained under
clause 5.1(ii) ("D-Check") and clause 5.1(iii) ("Mid D-Check").
Notwithstanding anything else to the contrary contained in this
Lease, (x) in no event shall Lessor be obligated to pay any amounts
with respect to Eligible Claims (whether out of the applicable
reserve account or otherwise) so long as a Default shall have
occurred and be continuing, (y) the Maintenance Reserve Payments
constitute Supplemental Rent due from Lessee to Lessor as
compensation for wear and tear on the Aircraft and Lessee shall have
no right, claim or interest therein (except for Lessee's right to
reimbursement for Eligible Claims described above and as provided in
Clause 11.1 hereof), and (z) any amounts paid or credited to a
maintenance reserve account upon termination of this Lease for any
reason shall remain the property of the Lessor and, except as
provided in the next paragraph and in Clause 11.1 hereof, in no
event shall Lessor be obligated to return any such amounts to
Lessee.
If during the four month period prior to the date on which Lessee is
required to redeliver the Aircraft to Lessor hereunder on the
Expiration Date, Lessee shall desire or propose to perform a
"D-Check" on the Aircraft in lieu of the "C-Check" required at
re-delivery which "D-Check" is not then required or scheduled to be
performed before such re-delivery date pursuant to Lessee's
Maintenance Program, then Lessee
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shall notify Lessor of such desire and state in such notice that
such "D-Check" is not so required. Lessor shall have a period of 15
days following its receipt of such notice to object to such proposal
and to notify Lessee that such "D-Check" is not to be performed, in
which case Lessee shall not perform such "D-Check". If (i) Lessor
shall not object to Lessee's proposal to perform such D-Check, (ii)
Lessee shall duly complete such "D-Check" as proposed and in the
manner required by Lessee's Maintenance Program and the applicable
manufacturer's maintenance program prior to the required re-delivery
date, and (iii) the amount then available at the time of the
completion of the applicable maintenance check in the related
Maintenance Reserve Account for "D-Checks" exceeds the cost of such
"D-Check" that constitutes an Eligible Claim (such excess, an
"Account Excess"), then, so long as no Default shall exist, Lessor
shall remit such Account Excess to Lessee in cash promptly following
Lessee's re-delivery of the Aircraft in compliance with the terms
hereof.
If Lessor shall object to Lessee's performance of such "D-Check"
then, for purposes of determining the Account Excess (as provided
above), the cost of such "D-Check" that constitutes an "Eligible
Claim" shall be the estimated invoice amount for such "D-Check",
which estimate shall be based upon the actual cost of the next
applicable "D-Check" scheduled in 2000.
(iii) FOREIGN OBJECT DAMAGE GENERATED SHOP VISIT. For the avoidance of
doubt, any work done on an Engine during a foreign object damage
generated shop visit in accordance with the Maintenance Program for
that Engine which is not directly a result of the foreign object damage
incident but otherwise qualifies as an Eligible Claim shall be
considered an Eligible Claim. Work required in connection with foreign
object damage shall be deemed not to constitute an Eligible Claim.
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CLAUSE 6. PAYMENTS
6.1 PAYMENT TO LESSOR. Except as otherwise provided herein, all
payments to be made by Lessee hereunder shall be payable in Dollars in
immediately available funds prior to 1:00 p.m. New York time on the due
date to such account as may be specified by Lessor; provided, however,
that until Lessee has been notified by ING such payments shall be
payable according to the following payment instructions:
Northern Trust International Banking Corporation, New York, USA ABA
#026001122 For credit of: ING Bank, Amsterdam Account Number:
100628-20230 For further credit of: ING Lease International Equipment
Management B.V. Account Number: 5007.2188
or to such other account as ING shall specify by written notice to
Lessee.
6.2 WITHHOLDING TAXES. The payment of any Rent and other amounts to be paid
by Lessee hereunder shall be made free and clear of and without
deduction or withholding for or on account of any Taxes to the extent
provided in Clause 16.2(i) hereof.
6.3 DEFAULT INTEREST. Without prejudice to any other remedies of Lessor,
Lessee hereby agrees and undertakes that in the event that Lessee fails
to make any payment of Rent or any other amount due and payable
hereunder it shall on demand pay to Lessor interest thereon from and
including the due date thereof until the same shall be paid in full
(after as well as before judgment) at the rate of 1.5% per month (or,
if such rate is in excess of the maximum allowable rate permitted by
applicable law, then the maximum rate permitted by applicable law shall
apply) calculated on the basis of the actual number of days elapsed and
a month of 30 days.
6.4 BUSINESS DAY CONVENTION. Whenever any payment hereunder shall become
due on a day which is not a Business Day, the due date thereof shall be
the immediately succeeding Business Day, unless such payment becomes
due hereunder on demand by Lessor, in which
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event such due date shall be the immediately following Business Day,
and (without prejudice to Clause 6.3) the amount to be paid on such day
shall not be changed thereby.
6.5 ABSOLUTE OBLIGATION TO MAKE PAYMENTS. Lessee's obligations to pay any
Rent and all other amounts due hereunder shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation:
(i) any set-off, counterclaim, recoupment, defense or other right which
Lessee may have against Lessor or anyone else for any reason
whatsoever;
(ii) any defect in the title (except those caused by the act or
omission of Lessor), airworthiness, condition, design, operation or
fitness for use of, or any damage to or loss or destruction of, the
Aircraft;
(iii) any interruption or cessation in the use or possession of the
Aircraft by Lessee for any reason whatsoever except those caused by the
act or omission of Lessor; or
(iv) any insolvency, bankruptcy, reorganization or similar proceedings
by or against Lessee.
6.6 APPLICATION OF PAYMENTS. At any time after a Default shall have
occurred and be continuing, all payments made to Lessor under this
Agreement shall be applied first against interest after default on any
Rent or on any other amount then due and payable hereunder, and then
against such Rent and such other amount due and payable hereunder,
unless otherwise specifically provided herein.
CLAUSE 7. CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT TO THE EXECUTION OF THIS AGREEMENT. The
obligations of the parties to the execution of this Agreement are
subject to the fulfillment of those conditions in
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paragraphs (vi)(a) and (vii) of Clause 7.2 below to the reasonable
satisfaction of Lessor and those conditions in paragraph (ix) of Clause
7.2 below to the reasonable satisfaction of Lessee on or as of the date
hereof.
7.2 Conditions Precedent. The obligations of the parties to the lease of
the Aircraft on the Delivery Date hereunder are subject to the
fulfillment to the satisfaction of Lessor (in the case of paragraphs
(i)(a), (ii), (iii), (iv), (v), (vi), (vii) and (viii)) and Lessee (in
the case of paragraphs (i)(b), (v), (ix), (x), (xi), (xii) and (xiii))
on and as of the Delivery Date, in each case in its sole discretion, of
the following conditions (or waiver by Lessor or Lessee, as the case
may be, of such conditions to be met to its satisfaction):
(i) (a) all representations and warranties by Lessee set forth herein
or in any of the Lease Documents shall be true and accurate on and
as of the Delivery Date as though made on and as of the Delivery
Date; and
(b) all representations and warranties by Lessor set forth herein
or in any of the Lease Documents shall be true and accurate on and
as of the Delivery Date as though made on and as of the Delivery
Date;
(ii) no Default shall have occurred and continue to exist on the
Delivery Date;
(iii) receipt of all necessary consents, licenses, registrations,
authorizations or approvals of, and exemptions by, such governmental or
other authorities and third parties as may be necessary or advisable to
authorize the execution, delivery and performance of this Agreement by
Lessee and to permit payment and remittance of all payments to be made
to Lessor, at such places and in such manner as provided for under this
Agreement;
(iv) no material governmental action or proceeding which will have a
material adverse affect on the current business or financial condition
of Lessee shall be pending nor
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<PAGE>
shall any governmental action be threatened before any court or
governmental agency of competent jurisdiction, nor shall any order,
judgment or decree have been issued by any court or governmental
agency, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions contemplated hereby
or thereby;
(v) no Event of Loss shall have occurred in respect of the Aircraft on
or prior to the Delivery Date;
(vi) Lessor shall have received on or before the Delivery Date each of
the following, which shall be in full force and effect on the Delivery
Date:
(a) a certificate substantially in the form of Schedule C, dated
the date hereof (the content of which shall be true both on the
date hereof and on the Delivery Date) and signed by a duly
authorized officer of Lessee, and having annexed thereto the
documents referred to therein;
(b) a favorable opinion of Lessee's counsel in a form acceptable
to Lessor;
(c) the Lease Documents, duly executed;
(d) an insurance certificate signed by a firm of independent
aircraft insurance brokers, satisfactory to Lessor, as to due
compliance with the insurance required pursuant to Clause 10
with respect to the Aircraft together with a broker's letter of
undertaking as required by Clause 10.13 (iii);
(e) the Lease Supplement and Acceptance Certificate, duly
executed;
(f) evidence of required registrations, import licenses if
applicable, air operator's certificates and all other licenses,
certificates and permits required to be held
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<PAGE>
by Lessee in relation to, or in connection with the operation of
the Aircraft and evidence that the Lease Agreement has been duly
registered with the FAA;
(g) certified copies of all licenses, certificates and permits
required by Lessee to operate as an airline;
(h) the Power of Attorney, executed by Lessee in favor of ING,
pursuant to which Lessee constitutes and appoints ING as the
true and lawful agent and attorney-in-fact for Lessee for
purposes of exercising and enforcing rights and remedies
available to Lessor or ING upon and following the occurrence of
an Event of Default;
(i) the Maintenance Payments then due; and
(j) the Security Deposit required under Clause 30.
(vii) Lessee's board of directors shall have authorized the
consummation of the transactions contemplated by the Lease Documents
and such approval shall be evidenced by resolutions of such board of
directors in form and substance reasonably satisfactory to Lessor, and
such resolutions shall specifically and expressly refer to the Lease
Documents, the Lease Supplement and Acceptance Certificate and the
Power of Attorney;
(viii) Lessor shall have received such other instruments, documents,
evidence, certificates and opinions as to such other matters as it may
reasonably request and all other matters relating to the leasing of the
Aircraft and the consummation of the transactions contemplated hereby
shall be reasonably satisfactory to Lessor;
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(ix) Lessee shall have received on or before the Delivery Date a copy
of a power of attorney or certificate evidencing due authority of the
Lessor or those persons executing the Lease Documents on behalf of
Lessor for the execution, delivery and performance of this Lease and
all other documents related thereto, together with an incumbency
certificate as to the person or persons authorized to execute and
deliver such documents on behalf of Lessor, each of which shall be in
full force and effect on the Delivery Date;
(x) a favorable opinion of Lessor's counsel to the effect that Lessor
has duly executed and delivered the Lease Documents and any other lease
agreement and each such document is legally valid, binding and
enforceable;
(xi) a copy of a currently effective airworthiness certificate for the
Aircraft;
(xii) a copy of the current registration certificate for the Aircraft;
and
(xiii) an opinion, at Lessee's expense, from Crowe and Dunlevy, special
FAA counsel, to the effect that Lessor is the owner of record of the
Aircraft and the Aircraft is duly registered in the United States and
as to such other matters as may be reasonably requested by Lessee.
CLAUSE 8. REPRESENTATIONS AND WARRANTIES
8.1 (i) WARRANTIES AND DISCLAIMER OF WARRANTIES. NEITHER LESSOR NOR ING HAS
AND SHALL NOT BE DEEMED TO HAVE MADE (WHETHER BY VIRTUE OF HAVING
LEASED THE AIRCRAFT UNDER THIS LEASE, OR HAVING ACQUIRED THE AIRCRAFT,
OR HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO
ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS LEASE OR OTHERWISE),
AND EACH OF LESSOR AND ING HEREBY SPECIFICALLY DISCLAIMS, ANY
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REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE (EXCEPT
AS PROVIDED IN CLAUSE 8.4(i)), AIRWORTHINESS, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY, FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE
LIKE, OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, OR
AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, THE
ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A
COURSE OF PERFORMANCE OR DEALING OR USAGE OF TRADE), WITH RESPECT TO
THE AIRCRAFT; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND
DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR
WARRANTIES. NEITHER LESSOR NOR ING SHALL HAVE ANY RESPONSI BILITY OR
LIABILITY TO LESSEE OR ANY OTHER PERSON, WHETHER ARISING IN CONTRACT OR
TORT OUT OF ANY NEGLIGENCE OR STRICT LIABILITY OF LESSOR OR OTHERWISE,
FOR (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY ANY
INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER
CIRCUMSTANCE IN CONNECTION THEREWITH, (ii) THE USE, OPERATION OR
PERFORMANCE OF THE AIRCRAFT OR ANY RISKS RELATING THERETO, (iii) ANY
INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR
CONSEQUENTIAL DAMAGES OR (iv) THE DELIVERY, OPERATION, SERVICING,
MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT. THE
WARRANTIES AND REPRESENTATIONS OF LESSOR SET FORTH IN CLAUSE 8.4 ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESS OR
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IMPLIED, AND NEITHER LESSOR NOR ING SHALL BE DEEMED TO HAVE MADE ANY
OTHER WARRANTIES.
(ii) RESPONSIBILITY TO DETERMINE CONDITION OF AIRCRAFT, OBTAINING
BENEFIT OF WARRANTIES. It is the responsibility of Lessee to inspect
the Aircraft and to satisfy itself as to the condition, quality,
suitability and fitness of the Aircraft for Lessee's purposes before
signing and delivering the Lease Supplement and Acceptance Certificate
or accepting delivery of the Aircraft, and to examine the logs and
records and other documents referred to in Schedule D relating to the
Aircraft on the Delivery Date, and to make arrangements for the
servicing thereof and to obtain any conditions or warranties which
Lessee may require from the manufacturers or suppliers of the Aircraft
and any part thereof.
8.2 REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents and
warrants to Lessor that:
(i) Lessee is a corporation duly organized and validly existing under
the laws of the State of Florida with full power and authority to
execute, deliver, and to perform all of its obligations under each of
the Lease Documents to which it is a party;
(ii) each of the Lease Documents to which Lessee is a party has been
duly authorized, executed and delivered by Lessee, and each of the
Lease Documents to which it is a party, when duly executed and
delivered, will constitute its legally valid and binding obligations
enforceable against it in accordance with their respective terms;
(iii) neither the execution and delivery by Lessee of each of the Lease
Documents to which it is a party nor the performance by it of any of
its obligations thereunder, nor the compliance by it with the terms and
conditions thereof, will violate, conflict with or result in any breach
of any terms, conditions or provisions of, or constitute a default
under, any law, administrative regulation or court judgment or decree
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applicable to it or pursuant to which it was organized or any agreement
or instrument to which it is a party or by which it or any of its
property is bound, or result in the creation or imposition of any Lien
on any of its properties or assets (other than any Lien arising
pursuant to any of the Lease Documents to which it is a party);
(iv) neither the execution and delivery nor the performance by Lessee
of any of the Lease Documents to which it is a party requires any
consent or approval of, the giving of notice to, registration with, or
taking of any other action in respect of any governmental authority or
agency in the United States or any other jurisdiction;
(v) Lessee is not a party to any agreement or instrument or subject to
any other legal restriction which individually or in the aggregate are
likely to have a material and adverse effect on its ability to perform
its obligations under any of the Lease Documents to which it is a
party;
(vi) there are no pending or threatened actions or proceedings before
any court, governmental or administrative agency or arbitral body,
which actions or proceedings could, if adversely determined, have a
material and adverse effect on its financial condition, business or
operations or which could have a material and adverse effect on its
ability to perform its obligations under any of the Lease Documents to
which it is a party;
(vii) On the Delivery Date, Lessee will be a Certificated Air Carrier
holding all licenses, certificates and authorizations required by
applicable Law to engage in the business of regularly scheduled
carriage of persons and property within the United States;
8.3 COVENANTS OF LESSEE. Lessee covenants and agrees that:
(i) On the Delivery Date, Lessee shall be, and shall remain so long as
it shall be Lessee under this Agreement, duly qualified to operate the
Aircraft under applicable Law;
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(ii) Lessee will pay or cause to be paid all taxes, assessments and
governmental charges or levies imposed upon it, or upon its income or
profits, or upon any property belonging to it, prior to the date on
which penalties attached thereto and prior to the date on which any
lawful claim, if not paid, would become a Lien upon any of the material
property of Lessee, provided, however, that the failure to pay any such
taxes shall not be a default under this subclause (ii) if and for so
long as the amount or application of such tax is being contested in
good faith by Lessee by appropriate proceedings;
(iii) Without the prior written consent of Lessor, Lessee shall not
consolidate with, merge with or merge into any other corporation or
convey, transfer or lease substantially all of its assets as an
entirety to any other Person unless, after giving effect to such
transaction, the surviving entity has at least the same net worth and
gross assets as Lessee prior to such transaction;
(iv) Lessee will notify Lessor in writing prior to any change of its
principal place of business or chief executive office;
(v) Lessee undertakes to maintain in full force and effect all
governmental consents, licenses, authorizations, approvals,
declarations, filing and registrations obtained or effected in
connection with this Agreement and every document or instrument
contemplated hereby and to take all such additional action as may be
proper or advisable in connection hereby or therewith, including those
required to maintain in full force and effect the perfected interest of
Lessor as "owner" of the Aircraft; Lessee further undertakes to obtain
or effect any new or additional governmental consents, licenses,
authorizations, approvals, declarations, filings or registrations as
may become necessary for the performance of any of the terms and
conditions of this Agreement or any other document or instrument
contemplated hereby;
(vi) Lessee shall furnish to Lessor the following:
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(A) As soon as available but in any event within 120 days after the end
of each fiscal year of Lessee, a copy of the audited consolidated
financial statements (including a balance sheet and statements of
earnings, of changes in shareholders' equity, and of changes in
financial position on a cash flow basis) prepared as of the close of
such fiscal year in accordance with generally accepted accounting
principles as in effect in the United States ("GAAP"), together with
the report thereon of Lessee's auditor to the effect that (1) the
accounting and reporting policies followed by Lessee are appropriate
and adequate in the circumstances and have been consistently applied,
and (2) the information presented in such financial statements presents
fairly Lessee's financial position and operating results at the dates
and for periods indicated;
(B) As soon as available but in any event within 60 days after the end
of each fiscal quarter of Lessee, a copy of the unaudited consolidated
financial statements (including a balance sheet and statements of
earnings, of changes in shareholders' equity, and of changes in
financial position on a cash flow basis) prepared as of the close of
such fiscal quarter, together with a certificate from its chief
financial officer certifying that (a) such financial statements have
been prepared in accordance with GAAP, and give a true and adequate
picture of Lessee's financial position and operating results at the
dates and for the period covered thereby, (b) no Default and no Event
of Default has occurred and is continuing, and (c) Lessee is not in
default under any other lease agreement, loan agreement, promissory
note, capitalized or financing lease obligation, financial instrument
or other agreement relating to an obligation of Lessee in respect of
money borrowed or owed or payable by Lessee, except for obligations to
pay money that are being contested by Lessee in good faith and by
appropriate proceedings or procedures and with respect to which
adequate reserves have been established by Lessee (as and if required
by GAAP);
(C) Within 30 days after receipt by Lessee of a request by Lessor, or
such shorter period as may be set forth in any written request by any
government entity for information or documents, Lessee shall furnish in
writing to Lessor such information
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and documents (or copies thereof certified as correct by an authorized
officer of Lessee) regarding the Aircraft as may be reasonably
requested by Lessor or as may be required to enable Lessor or any
affiliate thereof to file any report or other document required to be
filed by it with any government entity because of its ownership or
other interest in the Aircraft, the Airframe or the Engines; and
(D) From time to time, such other information as Lessor may reasonably
request concerning the location, condition, use and operation of the
Aircraft or the financial condition of Lessee.
(vii) Lessee will furnish to ING upon execution of this Agreement true
and complete copies of the most recent financial statements of Lessee
(audited or unaudited) for its most recent fiscal year.
8.4 REPRESENTATIONS AND WARRANTIES OF LESSOR. Lessor hereby represents and
warrants to Lessee that:
(i) on the Delivery Date Lessor shall have good title to the Aircraft,
free and clear of any and all Lessor Liens other than the Security
Agreement and any other Lien arising by Lessor or ING which will not
impair Lessor's right or ability to deliver the Aircraft to Lessee
hereunder or Lessee's use and enjoyment of the Aircraft as contemplated
hereby;
(ii) Lessor is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware;
(iii) Lessor has full power and authority to carry on its business and
to execute and deliver, and to perform all of its obligations under,
each of the Lease Documents to which it is a party;
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(iv) each of the Lease Documents to which Lessor is a party has been
duly authorized by all necessary action on the part of Lessor, and each
of the Lease Documents to which it is a party, when duly executed and
delivered, will constitute its legally valid and binding obligations
enforceable in accordance with their respective terms, and will not
violate any provision of law applicable to Lessor or its articles of
incorporation or by-laws;
(v) neither the execution and delivery by Lessor of each of the Lease
Documents to which it is a party nor the performance by it of any of
its obligations thereunder, nor the compliance by it with the terms and
conditions thereof, will violate, conflict with or result in any breach
of any terms, conditions or provisions of, or constitute a default
under, any law, administrative regulation or court judgment or decree
applicable to it or pursuant to which it was organized or any agreement
or instrument to which it is a party or by which it or any of its
property is bound.
8.5 NOTICE OF BREACH OF REPRESENTATION, WARRANTY OR COVENANT. Lessor and
Lessee undertake to give notice to each other of any matter occurring
at any time which constitutes a breach of or is inconsistent with any
of its representations, warranties and covenants in Clause 8.2, 8.3 or
8.4, as the case may be, forthwith upon becoming aware of the same.
8.6 SURVIVAL OF REPRESENTATIONS, ETC. The representations, warranties,
indemnities and agree ments of Lessee and Lessor provided for in this
Agreement and Lessee's and Lessor's obligations under any and all
thereof, shall survive the delivery and leasing of the Aircraft and the
expiration or other termination of this Agreement.
CLAUSE 9. LIENS
9.1 LESSEE NOT TO CREATE LIENS. Other than as to an Engine in any situation
set forth in Clause 13.5, Lessee shall not directly or indirectly
create, incur, assume or suffer to exist any Lien
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on or with respect to the Aircraft, any Engine or any Part, title
thereto or any interest therein or in this Lease except as to the
following:
(i) the respective rights of Lessor as provided herein or in any of the
other Lease Documents;
(ii) Liens for Taxes of any kind (including fees or charges of any
airport or air navigation authority) which are either not assessed, or,
if assessed, are not yet due and payable or being contested in good
faith by appropriate proceedings, so long as such proceedings do not
involve any risk of the sale, forfeiture or loss of the Airframe, any
Engine or any interest therein or the assertion or imposition of any
Lien thereon, and, in any case, for the payment of which adequate
reserves has been provided;
(iii) materialmen's, mechanics', workmen's, repairmen's, employees' or
other like Liens arising in the ordinary course of business payment for
which is not overdue or which have been adequately bonded, is not in
default, or is being contested in good faith, so long as such
proceedings do not involve any risk of the sale, forfeiture or loss of
the Airframe, any Engine or any interest therein or the assertion or
imposition of any Lien thereon; and
(iv) Lessor Liens which result from Lessor's own acts or from claims
against Lessor not to be paid or indemnified against by Lessee
hereunder.
9.2 LESSEE TO DISCHARGE LIENS. Lessee shall duly and promptly, at its own
cost and expense, pay or cause to be paid all sums required, or take
such action as may be necessary, to discharge duly any such Lien not
excepted in Clause 9.1 if the same shall arise at any time, and shall
at its own cost and expense protect the Aircraft against distress,
execution or seizure and shall, without prejudice to other remedies
available to Lessor hereunder, indemnify Lessor against all losses,
costs, charges, damages and expenses incurred by Lessor as a result of
the failure by Lessee to perform its obligations under Clause 9.1 or
this Clause 9.2.
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CLAUSE 10. INSURANCE
10.1 AVIATION LIABILITY AND PROPERTY DAMAGE INSURANCE. On or before the
Delivery Date and throughout the term of this Agreement until such time
as physical possession and control of the Aircraft is returned to
Lessor as provided herein, Lessee will obtain or procure to be obtained
and at all times maintain or procure to be maintained in effect at its
own expense public liability (including, without limitation, third
party and passenger liability, baggage, cargo, mail, Airline General
Third Party Legal Liability, product liability and property damage
including war and allied perils to the fullest extent available)
insurance with respect to the Aircraft which is:
(i) in amounts for a combined single limit which are not less than the
greater of (x) amounts customarily carried by major or recognized
national United States airlines and (y) a combined single limit of USD$
500,000,000 for any one occur rence/aircraft;
(ii) of the type usually carried by air carriers in accordance with
sound international airline practice engaged in the same or similar
business, similarly situated, and owning or operating similar aircraft
and engines and which covers risks of the kind customarily insured
against by such air carriers; and
(iii) maintained in effect with insurers and reinsurers satisfactory to
Lessor.
PROVIDED, that such insurance or reinsurance will be on a basis which is in form
and substance substantially the same as that which was disclosed to and accepted
by Lessor prior to the Delivery Date.
Any policies of insurance procured in accordance with this Clause 10.1 and any
policies taken out in substitution or replacement for any such policies:
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(a) shall name Lessor, ING and their respective officers, directors,
employees, agents and successors (collectively, the "ADDITIONAL NAMED
INSUREDS") as an Additional Named Insured as their interests may
appear;
(b) shall provide that in respect of the interests of the Additional
Named Insureds in such policies the insurance shall not be invalidated
by any action or inaction of Lessee or any other person and shall
insure each Additional Named Insured regardless of any breach or
violation of any warranty, declarations or conditions contained in such
policies by Lessee or any other person, provided that such Additional
Named Insured has not caused, contributed to or knowingly condoned such
action or inaction;
(c) shall provide that if the insurers cancel such insurance for any
reason whatsoever, or if the same is allowed to lapse for nonpayment of
premium, or other scope of coverage thereof is changed in any way
adverse to any Additional Named Insured, such cancellation, lapse or
change shall not be effective as to any Additional Named Insured for 30
calendar days (but in respect of war and allied perils such lesser
period as may be customarily available) after written notice by such
insurers. Such 30-day period shall be deemed to commence from the date
such notice is given by the relevant insurers. No such notice, however,
is required to be given if termination is to result solely from the
normal scheduled expiration of a policy.
(d) shall waive any rights of set-off, counterclaim or other deduction
(other than in respect of unpaid premiums in respect of the Aircraft)
against each Addi tional Named Insured;
(e) shall waive any right of subrogation against any Additional Named
Insured;
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(f) shall be primary without right of contribution from any other
insurance which is carried by the Additional Named Insureds;
(g) shall expressly provide that all of the provisions thereof, except
the limits of liability, shall operate in the same manner as if there
were in respect of the Aircraft a separate policy covering each
insured;
(h) shall have a deductible of no more than $1,250 in respect of
passenger baggage and $10,000 in respect of cargo with respect to any
one claim;
(i) shall be insured/reinsured in the London, U.S. or other recognized
aviation insurance market in a manner satisfactory to Lessor; and at
all times after the Delivery Date, on a basis which is in form and
substance substantially the same as that which was disclosed to and
accepted by Lessor prior to the Delivery Date;
(j) shall be in accordance with the Airline Finance/Lease Contract
Endorsement AVN 67B (herein called "AVN 67B"); and
(k) shall otherwise be reasonably satisfactory to Lessor.
10.2 INSURANCE AGAINST LOSS OF OR DAMAGE TO THE AIRCRAFT. Lessee will at all
times maintain or procure to be maintained in effect, at its own
expense and on an agreed value basis, with insurers reasonably
satisfactory to Lessor, all-risk ground and flight aircraft hull, war
risk, confiscation and hijacking insurance covering the Aircraft
(including the Engines but only to the extent they are installed on the
Airframe) for an amount not less than the Stipulated Loss Value, and
insurance covering all risks of physical loss or damage however
occasioned in respect of Engines, engines, spare parts and equipment
forming part of the Aircraft, but which for the time being are removed
from the Aircraft, for an amount not less than their replacement cost.
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Any policies carried in accordance with this Clause 10.2 covering the
Aircraft and any policies taken out in substitution or replacement for
any such policies:
(i) shall be made payable with respect to an Event of Loss pursuant to
a loss payable clause endorsed on the relevant policies in accordance
with AVN 67B, provided that, as between Lessor and Lessee
(acknowledging that the agreement of Lessor and Lessee does not change
the terms of AVN 67B or the underwriters' obligations in respect
thereof):
(a) ING and such others (and in such order) as may be stipulated by ING
shall be the sole loss payees in the case of an Event of Loss;
(b) ING and such others (and in such order) as may be stipulated by ING
shall be the sole loss payees in the case where the amount payable by
the insurers upon any claim other than in respect of an Event of Loss
which is greater than the Permitted Deductible, and such amount shall
be applied to repair of the Aircraft after consultation by the insurers
with Lessor and Lessee; and
(c) If the amount payable by the insurers upon any claim (other than in
respect of an Event of Loss) is less than the Permitted Deductible then
(unless and until Lessor notifies the relevant insurance broker or the
insurers that a Default has occurred in which event the loss payees
shall be ING and such others (and in such order) as may be stipulated
by ING) such amount shall be applied to repair of the Aircraft after
consultation by the insurers with Lessee or, if Lessor has so notified
such broker or insurers of a Default, the Lessor or ING only;
(ii) shall name the Additional Named Insureds (to the extent they
constitute bodies corporate) as their interests may appear;
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(iii) shall provide that in respect of the interests of the Additional
Named Insureds in such policies the insurance shall not be invalidated
by any action or inaction of Lessee or any other person and shall
insure the Additional Named Insureds regardless of any breach or
violation of any warranty, declarations or conditions contained in such
policies by Lessee or any other person, provided that such Additional
Named Insured has not caused, contributed to or knowingly condoned such
action or inaction;
(iv) shall provide that if the insurers cancel such insurance for any
reason whatsoever, or if the same is allowed to lapse for nonpayment of
premium, or the scope of coverage thereof is changed in any way adverse
to any Additional Named Insured, such cancellation, lapse or change
shall not be effective as to each Additional Named Insured for 30
calendar days (but in respect of war and allied perils such lesser
period as may be customarily available) after written notice by such
insurers. Such 30-day period shall be deemed to commence from the date
such notice is given by the relevant insurers. No such notice, however,
is required to be given if termination is to result solely from the
normal scheduled expiration of a policy;
(v) shall waive any rights of set-off, counterclaim or other deduction
(other than in respect of unpaid premiums in respect of the Aircraft)
against each Additional Named Insured;
(vi) shall waive any right of subrogation against any Additional Named
Insured;
(vii) shall be primary without right of contribution from any other
insurance which is carried by the Additional Named Insureds; insofar as
such other insurance is additional (and not identical) to the insurance
required hereby;
(viii) shall have a deductible (including any loss retention or
self-insurance arrangement) of no more than USD$ 250,000 (the
"PERMITTED DEDUCTIBLE") in respect of any one claim but no deductible
in respect of a claim for an Event of Loss constituting a total
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loss, constructive total loss or agreed total loss under the relevant
policy, and no deductible in respect of any claim under any war risks
policy; however, until such time, and for so long thereafter, as Lessee
shall operate 10 or more wide body aircraft (including the Aircraft) in
its regularly scheduled flight operations, the deductible hereinabove
described may at Lessee's option be $500,000 in respect of any one
claim (other than in respect of an Event of Loss);
(ix) shall provide that all payments shall be made in Dollars and shall
not provide for any right of insurers to replace the insured equipment
(the Aircraft) in the event of an Event of Loss;
(x) shall contain a 50%/50% clause provision in the form of Lloyd's
Form AVS 103, or equivalent language; and
(xi) shall be insured/reinsured in the London, U.S. or other
internationally recognized aviation reinsurance market in a manner
satisfactory to Lessor and on a basis substantially the same as that
disclosed to and accepted by the Lessor prior to the Delivery, which
reinsurance shall include (among, other things) a "cut through clause"
that is reasonably satisfactory to Lessor; and
(xii) shall include war risk, confiscation or hijacking insurance,
which shall include:
(a) war, invasion, acts of foreign enemies, hostilities (whether war be
declared or not), civil war, rebellion, revolution, insurrection,
martial law, military or usurped power, or attempts at usurpation of
power;
(b) confiscation, requisition, detention (including by the country of
registration of the Aircraft in favor of Lessor), hijacking, strikes,
riots, malicious damage and civil commotion;
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(c) any other risks excluded as per Hi-Jacking and Other Perils
Exclusion Clause (Aviation) - AVN 48B from the All Risk Hull Insurance
described above (other than paragraph (b) of AVN 48B) by any exclusion
therein of these and/or similar risks; and
(d) such other perils which in accordance with the market practice from
time to time are customarily insured.
(e) shall be in accordance with AVN67B; and
(f) shall otherwise be reasonably satisfactory to Lessor.
10.3 AVN 67B. Lessee shall be entitled to maintain insurance in respect of
the Aircraft for the purposes of this Agreement which incorporates the
terms and conditions of AVN 67B (as defined above) into such insurance.
In that event, to the extent that any provision of AVN 67B conflicts
with or is otherwise inconsistent with the requirements of this
Agreement relating to insurance, then (so long as it shall be generally
industry practice to insure aircraft financed or leased on the basis of
AVN67B) such conflicting or inconsistent provision of AVN67B shall
prevail and such endorsement shall be deemed to satisfy the
requirements of this Agreement; PROVIDED, HOWEVER, that the parties
agree that the terms of AVN 67B constitute part of the insurance
contracts between Lessee and its underwriters and shall not affect any
agreement between Lessor and Lessee in this Agreement relating to such
parties' agreement as to the retention or application of any insurance
proceeds.
10.4 LESSEE TO PURSUE CLAIMS. After an Event of Loss in relation to the
Aircraft shall have occurred, Lessee shall diligently pursue or cause
to be pursued, in concert with Lessor and ING, any and all claims
against the insurers in respect of the insurance (including any
required re-insurance) with respect to the Aircraft, subject to
consultation with Lessor and ING and such other persons as may be
stipulated by Lessor and ING.
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10.5 CHANGE IN INSURANCE PRACTICE. In the event that there is a change in
the generally accepted industry-wide practice with regard to the
insurance of aircraft (whether relating to all or any of the types of
insurance required to be effected under the foregoing provisions of
this Clause 10) such that Lessor shall be of the reasonable opinion
that the insurance required pursuant to the provisions of this Clause
10 is insufficient to protect the interests of Lessor or ING, the
insurance requirements set forth in this Clause 10 shall, if specified
by Lessor, be varied so as to include such additional or varied
requirements as may be necessary to ensure that the insurance as so
varied shall provide substantially the same protection to Lessor and
ING as it would have done if such change in the generally accepted
industry-wide practice had not occurred.
10.6 APPLICATION OF PROCEEDS ARISING ON EVENT OF LOSS. As between Lessor and
Lessee it is agreed that all insurance payments or any other sums
received as the result of the occurrence of an Event of Loss with
respect to the Aircraft or the Airframe shall be applied to the benefit
of Lessor and ING and such other persons having an interest in the
Aircraft as may be stipulated by Lessor and any excess shall be applied
in reduction of Lessee's obligation to pay the amounts required to be
paid by Lessee pursuant to Clause 11.1, if not already paid by Lessee,
or, if already paid by Lessee, shall be applied to reimburse Lessee for
its payment of such amount.
10.7 APPLICATION OF PROCEEDS ARISING OTHER THAN ON AN EVENT OF LOSS. The
insurance payments for any property damage loss to the Airframe or any
Engine not constituting an Event of Loss, or to any Part, will be
deposited with Lessor and applied in payment of repairs or for
replacement property, and Lessee shall furnish Lessor with reasonably
satisfactory evidence that the repairs or replacement property that
Lessee is required to perform or obtain in accordance with the terms of
Clause 13 have already been paid for or obtained by Lessee. Upon
receipt of such evidence of repair or replacement, Lessor shall
promptly pay or reimburse Lessee for the amount of such insurance
payment received by Lessor with respect to such loss.
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10.8 RETENTION OF PROCEEDS BY LESSOR FOLLOWING DEFAULT. As between Lessor
and Lessee, any amount referred to in Clause 10.6 or 10.7 which is
otherwise payable to Lessee shall not be paid to Lessee, or, if it has
been previously paid to Lessee, shall be delivered by Lessee to Lessor
for retention or application by Lessor if at the time of such payment a
Default or Event of Default shall have occurred and be continuing. In
either case, all such amounts shall be held by Lessor as security for
the obligations of Lessee or, at the option of Lessor, applied by
Lessor toward payment of any of Lessee's obligations at the time due
hereunder. At such time as there shall not be continuing any such
Default or Event of Default, all such amounts at the time held by
Lessor in excess of the amount, if any, which Lessor has elected for
application as provided above shall be paid to Lessee.
10.9 LESSOR AND LESSEE MAY ADDITIONALLY INSURE. Each of Lessor, ING and
Lessee may carry at its own expense additional insurance with respect
to its own interests in the Aircraft provided that such insurance does
not adversely affect the coverage required to be maintained hereunder
by Lessee or the cost thereof, or shall have the effect of suspending,
impairing, defeating or 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.
Any insurance payments received from policies maintained by Lessor or
ING shall be retained by Lessor or ING without reducing or otherwise
affecting Lessee's obligations hereunder.
10.10 COMPLIANCE WITH LEGAL REQUIREMENTS AS TO INSURANCE. Throughout the term
of this Agreement Lessee shall comply with all legal requirements as to
the insurance of the Aircraft which may from time be imposed by the
laws of the State of Registration and of any other jurisdiction to,
from or over which the Aircraft shall be flown insofar as they affect
or concern the operation of the Aircraft.
10.11 LESSOR ENTITLED TO PROVIDE INSURANCES IN DEFAULT BY LESSEE. If the
insurance (including any required re-insurance) required under this
Clause 10 is not kept in full force and effect Lessor or ING without
prejudice to any other rights it may have on the occurrence of a
Default shall
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be entitled (but not bound) at any time to provide such insurance and
in such event Lessee shall, upon demand, reimburse Lessor for the cost
thereof together with interest thereon at the rate specified in Clause
6.3 from the date of the occurrence of a Default until payment on the
occurrence of a Default Lessor or ING shall be entitled to require the
Aircraft to remain at an airport or, as the case may be, to proceed to
and remain at an airport designated by Lessor or ING until the
insurance required under this Clause 10 is in full force and effect.
Such provision of insurance by Lessor shall not affect Lessor's right
to treat such failure by Lessee as a Default.
10.12 NEGOTIATIONS FOR RENEWAL. Lessee shall begin final negotiations for the
renewal of each required policy prior to its expiry. Prior to expiry of
any required policy, Lessee shall provide Lessor with written
confirmation of completion or renewal of such policy, with
certification thereof to be issued by the relevant insurance broker
within seven (7) Business Days thereafter.
10.13 (i) INFORMATION. In addition to the information provided pursuant to
Clause 10.12 and without prejudice thereto, Lessee shall furnish to
Lessor:
(a) on request and pursuant to a written confidentiality agreement,
certified copies of all documents constituting, evidencing or
regulating the terms of any required policy;
(b) on request, evidence of payment by or, at the direction of
Lessee, each sum payable under or in connection with any required
policy; and
(c) on request, such evidence as Lessor may require of Lessee's
compliance with its obligations under this Clause 10.
(ii) NOTIFICATION OF CLAIM EVENTS. Lessee shall forthwith notify Lessor
of any event (including but not limited to an Event of Loss) which will
or may give rise to a claim
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under any required policy in excess of USD$ 50,000 and shall not
(without the prior written consent of Lessor) settle or permit the
settlement of any claim arising under a required policy unless it
arises under a direct damage policy and is for less than USD$250,000.
(iii) Provision of Insurance Certificate and Broker's Undertaking.
Lessee shall before the Delivery Date, at its own cost and expense,
cause the relevant insurance and reinsurance broker or, if appropriate,
the relevant insurers to issue (a) a certificate of insurance or
reinsurance, as the case may be, confirming the procurement and effect
of the policies required by this Clause 10, and (b) a written
undertaking in favor of Lessor in form and substance acceptable to
Lessor, in which (among other things) such broker confirms that (a) it
has read the provisions of this Clause 10, that the terms of Lessee's
insurance policies comply with the requirements of this Clause 10, and
(b) that such broker will notify the Additional Named Insureds of any
cancellation, termination or material change in any such policy at
least 30 days from the date of notice from the insurers (other than in
the case of war risks coverage, in which case such prior notice shall
be given in accordance with industry standard practice relating to
notice of change in war risks cover); and (c) that the broker is
authorized to issue certificates of insurance; and (d) that coverages
are in full force; and (e) that premium is paid.
10.14 LESSEE NOT TO PREJUDICE INSURANCE. Without prejudice to Clause 13.10,
Lessee shall not:
(i) do or omit to do or permit to be done or left undone anything
whereby any required policy would or might be expected to be rendered
in whole or in part invalid or unenforceable; or
(ii) cause or permit the Aircraft or any part thereof to be employed in
any place or in any manner or for any purpose inconsistent with the
terms of any required policy; or
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(iii) create or permit to exist any Lien (save only as may be created
by Lessor or by Lessee in favor of Lessor) over the insurances taken
out in respect of the Aircraft, or its interests therein.
10.15 CURRENCY. All insurance pursuant to this Agreement will be payable in
Dollars except as may be otherwise agreed by the Lessor; provided,
however, that the insurance as to liability claims will be payable in
the settlement currency agreed in any action relating to such claim.
CLAUSE 11. EVENT OF LOSS
11.1 Event of Loss With Respect to Aircraft. Upon the occurrence of an Event
of Loss with res pect to the Aircraft, Lessee shall forthwith (and, in
any event, within two (2) Business Days after such occurrence) give
Lessor written notice of such Event of Loss and shall pay to Lessor on
the sixtieth (60th) day following the occurrence of such Event of Loss
or, if the insurance or other proceeds have been paid for such Event of
Loss before such 60th day, upon receipt of such proceeds, the
Stipulated Loss Value and all other sums (if any) then due and payable
hereunder by Lessee to Lessor; provided further that during the period
from the occurrence of such an Event of Loss and ending on the date
that Lessee complies with its obligations under this Clause 11.1 the
Lease Term shall continue and, therefore, the Aircraft shall be deemed
to be continued to be leased by Lessor to Lessee hereunder and Lessee
shall continue to pay Rent in accordance with Clause 4.
At such time as Lessor shall have been paid the Stipulated Loss Value
and all other sums (if any) then due and payable by Lessee to Lessor as
required under this Clause 11.1, Lessee shall be immediately entitled
to receive and Lessor shall pay to Lessee fifty percent (50%) of the
amount in the Maintenance Reserve Accounts in respect of the
maintenance processes referred to in subdivisions (i), (ii), (iii) and
(vi) of Clause 5.1. Any such payment shall be limited to amounts
actually contributed by Lessee and paid into such Maintenance Reserve
Accounts and Lessor shall transfer to Lessee or to Lessee's designee,
on an "as-is, where-is" basis but otherwise without recourse or
warranty except that such title shall be free and clear
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of all Lessor Liens, all of such rights, title and interest as Lessor
may have in and to the Aircraft, as well as all of Lessor's right,
title and interest in and to any Engine constituting part of the
Aircraft but not installed thereon at the time of loss, free and clear
of Lessor Liens, and Lessor shall, at Lessee's expense, execute and
deliver such bills of sale and other docu ments and instruments as
Lessee shall reasonably request to evidence (on the public record or
otherwise) such transfer and the vesting of such right, title and
interest in and to the Aircraft in Lessee. On compliance by Lessor of
its obligations under this Clause 11.1 the Lease Term shall be deemed
to terminate and Lessee shall thereupon no longer be obliged to pay
Rent in respect of the Aircraft pursuant to Clause 4.
11.2 EVENT OF LOSS WITH RESPECT TO ENGINE. Upon the occurrence (or deemed
occurrence pursuant hereto) 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 or Airframe Lessee shall give or
cause to be given to Lessor written notice promptly after becoming
aware thereof and shall, within thirty (30) days after the occurrence
of such Event of Loss, convey or cause to be conveyed to Lessor or its
designee, as replacement for such Engine, full title, free and clear of
all Liens other than Permitted Liens, an engine of the same or an
improved model and suitable for use on the Aircraft or Airframe, but
having a value and utility at least equal to, and being in as good
operating condition as, including the same or fewer hours or Cycles (or
an equivalent combination of hours and Cycles) accumulated on such
engine, the Engine with respect to which such Event of Loss occurred
(assuming that such Engine was in the condition and repair required by
the terms hereof immediately prior to the occurrence of such Event of
Loss). Prior to or at the time of any such conveyance, Lessee at its
own expense, will:
(i) furnish Lessor with such bills of sale and other documents and
instruments as Lessor shall reasonably request to evidence (on the
public record or otherwise) the interest of Lessor in such Replacement
Engine;
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(ii) execute a supplement to this Lease confirming that such
Replacement Engine is subject to this Lease;
(iii) furnish Lessor with a favorable opinion of Lessee's counsel to
the effect that good and marketable title to such Replacement Engine
has been vested in Lessor; and
(iv) furnish Lessor with a certificate of an aircraft engineer (who may
be an employee of Lessee) certifying that such Replacement Engine has a
value and utility at least equal to, and is in as good operating
condition, including no greater number of hours or Cycles accumulated
on such Engine, as the Engine so replaced assuming such Engine was in
the condition and repair required by the terms hereof immediately prior
to the occurrence of such Event of Loss.
Lessee shall, in addition to other liabilities arising in connection hereunder,
reimburse Lessor for any legal fees and disbursements incurred by Lessor in
analyzing, monitoring and enforcing Lessor's rights and remedies in connection
with such Event of Loss.
For all purposes hereof such Replacement Engine shall, after such transfer, be
deemed part of the property leased hereunder and shall be deemed an Engine as
defined herein.
11.3 TRANSFER OF TITLE TO REPLACED ENGINE TO LESSEE. Upon full compliance by
Lessee with the terms of Clause 11.2, Lessor shall, without further
act, be deemed to have transferred to Lessee or to Lessee's designee,
title to the Engine with respect to which the Event of Loss has
occurred (the "REPLACED ENGINE"), on an "AS IS, WHERE IS" basis but
otherwise without recourse or warranty except that such title shall be
free and clear of Lessor Liens. At Lessee's request and expense, Lessor
shall execute and deliver such bills of sale and other documents and
instruments as Lessee shall reasonably request to evidence (on the
public record or otherwise) such transfer and the vesting of such
right, title and interest in and to such Replaced Engine in Lessee.
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CLAUSE 12. REGISTRATION
12.1 REGISTRATION. Lessee, at its sole cost and expense, shall (i) not take
or permit any action inconsistent with the Aircraft remaining duly
certified as to airworthiness at all times after the Delivery Date in
accordance with the laws of the United States; (ii) not take or permit
any action inconsistent with the continued registration of the Aircraft
at all times after the Delivery Date in the name of the Lessor as sole
owner thereof, (iii) cause this Lease to be duly filed and registered
with the FAA and with all other applicable governmental authorities
that may be necessary or advisable in order to protect and maintain the
rights and interests of Lessor hereunder and in the Aircraft, and (iv)
not register or allow the Aircraft to be registered in any other way or
manner under the laws of any other country. Lessee shall not take or
permit any action which would not maintain in full force and effect all
certifications and registrations referred to in Clauses 12.1(i), (ii)
and (iii) throughout the Lease Term.
CLAUSE 13. MAINTENANCE, REPORTING, REMOVAL AND REPLACEMENT,
ALTERATIONS, POSSESSION, OPERATION, ETC.
13.1 MAINTENANCE.
(i) GENERAL OBLIGATIONS. During the Lease Term and until the Aircraft
is returned to Lessor in accordance with the terms of this Agreement,
Lessee alone has the obligation, at its sole expense, to maintain and
repair or cause an Independent Maintenance Contractor to maintain and
repair the Airframe, Engines and all of the Parts in accordance with
(a) the Maintenance Program; (b) the rules and regulations of the FAA;
(c) the requirement to maintain a full certificate of airworthiness
from the FAA for the Aircraft; to maintain the eligibility of the
Aircraft at all times during the Lease Term and upon return of the
Aircraft to Lessor in accordance herewith for issue of a certificate of
airworthiness for passenger category aircraft issued by the FAA and (d)
(if applicable) in the same manner and with the same care as used by
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the Lessee with respect to similar aircraft and engines operated by the
Lessee and without in any way discriminating against the Aircraft.
(ii) INDEPENDENT MAINTENANCE CONTRACTOR. The obligations of Lessee to
maintain the aircraft contained in this Clause 13.1 shall be performed
by either Lessee or by an Independent Maintenance Contractor retained
at Lessee's sole expense.
(iii) MAINTENANCE PROGRAM. Lessor and Lessee hereby agree that the
Aircraft will be maintained in accordance with an FAA approved
maintenance program.
(iv) SPECIFIC OBLIGATIONS. Without limitation to Clause 13.1(i), Lessee
agrees that its maintenance and repair obligations hereunder will
include (but will not be limited to) each of the following specific
items:
(a) performance in accordance with the Maintenance Program of all
routine and non-routine maintenance work, including on-line
maintenance on the Aircraft;
(b) incorporation in the Aircraft (including the Engines and all
Parts) of all airworthiness directives of the FAA issued during the
Lease Term and requiring compliance or terminating action prior to
the first anniversary following the Expiration Date;
(c) without prejudice to Clause 13.1(iv)(b), incorporation in the
Aircraft of all service bulletins of the Manufacturer, the Engine
manufacturer and other vendors which the Lessee schedules to adopt
during the Lease Term for the rest of its aircraft fleet. The
Lessee agrees not to discriminate against the Aircraft vis-a-vis
the rest of the Lessee's fleet in service bulletin compliance or
other maintenance matters;
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(d) incorporation in the maintenance schedule for the Aircraft of a
full corrosion control program, SSID and sampling programs or any
other maintenance program, as required by the Manufacturer and
mandated by the FAA; and
(e) proper maintenance of all Aircraft Documentation, including
recording the number of Block Hours, Flight Hours and Cycles the
Aircraft and Engines operate and all maintenance and repairs
performed thereon. Hard copies of such Aircraft Documentation shall
be maintained in English.
Promptly, and in any event before April 1, 1997, Lessee shall cause
the Engines to be subjected to the Aviall Engine Maintenance and
Pooling Contract (the "ENGINE POOL") and Lessor shall be
responsible for the cost of phasing the Engines into the Engine
Pool. During the Lease Term, Lessee may propose to Lessor that the
Engines be subjected to an alternative maintenance and pooling
contract throughout the remaining Lease Term and if such
alternative contract is acceptable to Lessor (which will be
confirmed in writing), Lessee may, at its own cost and expense,
cause the Engines to be subjected to such alternative contract.
13.2 REPORTING REQUIREMENTS AND PROVISION OF INFORMATION. Commencing with a
report furnished not later than the 10th Business Day following the end
of each calendar month, Lessee shall furnish to ING a report in the
form of Schedule G, which shall include for such calendar month (i) the
hours/cycles accumulated on the Airframe, (ii) the hours/cycles
accumulated on each Engine (and its location by airframe or storage or
maintenance facility), and (iii) on a quarterly basis, a list of those
service bulletins, airworthiness directives and engineering
modifications incorporated on the Aircraft during the preceding
quarter.
Furthermore, during the term of this Agreement, Lessee shall also
furnish to Lessor such additional information obtained from records
Lessee customarily maintains concerning the location, condition, use
and operation of the Aircraft as Lessor may reasonably request from
time to time.
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13.3 REMOVAL OF ENGINES. If an Engine is removed for testing, service,
repair, maintenance, overhaul work, alterations or modifications, title
to such Engine will at all times remain vested in Lessor.
Lessee will be entitled (but only for reasons of maintenance or repair)
to remove any of the Engines from the Aircraft and install another
engine or engines on the Aircraft, provided that Lessee complies with
each of the following obligations:
(i) Lessee may only install CF6-50C2 engines on the Aircraft;
(ii) the insurance requirements set forth in Clause 10 are in place in
respect of such removed Engine;
(iii) Lessee shall ensure that the identification plates referred to in
Clause 13.11 are not removed from such removed Engine upon such Engine
being detached from the Aircraft; and
(iv) title to such removed Engine remains with Lessor free from all
Liens (except Permitted Liens) regardless of the location of the Engine
or its attachment to or detachment from the Aircraft.
13.4 REPLACEMENT OF PARTS.
(i) LESSEE'S OBLIGATION TO REPLACE PARTS. Lessee, at its own cost and
expense, shall promptly replace or cause to be replaced by the
Independent Maintenance Contractor all Parts which may from time to
time be incorporated or installed in or attached to the Airframe or any
Engine and 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, Lessee
may, at its own
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cost and expense, remove in the ordinary course of maintenance,
service, repair, overhaul or testing, any Parts, whether or not worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided that, with
respect to any installed part with respect to which title is not vested
in Lessor at the time of installation (as hereinbelow provided), Lessee
shall, at its own cost and expense, replace such parts as promptly as
possible in the manner contemplated by clauses (ii) and (iii) below.
(ii) CONDITION OF REPLACEMENT PARTS. 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.
(iii) TITLE TO REPLACEMENT AND REPLACED PARTS. All Parts at any time
removed from the Airframe or any Engine shall remain the property of
Lessor, no matter where located, until such time as such Parts shall be
replaced by parts which are owned by Lessee free and clear of any Liens
and which have been incorporated or installed in or attached to the
Airframe or such Engine and which meet the requirements for replacement
Parts specified above. Immediately upon any replacement Parts becoming
incorporated or installed in or attached to the Airframe or such Engine
as above provided, without further act:
(a) title to the replaced or removed Parts shall thereupon vest in
Lessee, free and clear of all Lessor Liens, and shall no longer be
deemed Parts hereunder;
(b) title to such replacement or installed Parts shall thereupon vest
in Lessor; and
(c) such replacement Parts shall become subject to this Agreement and
be deemed part of the Airframe or such Engine for all purposes hereof
to the
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same extent as the Parts originally incorporated or installed in or
attached to the Airframe or such Engine.
13.5 REPLACEMENT ENGINES. Lessee shall be entitled (subject to Clause 13.3),
so long as no Default shall have occurred and be continuing, to install
any engine on the Airframe or any part on the Airframe or any Engine by
way of substitution, replacement, renewal or mandatory modification
(notwithstanding that such installation is not in accordance with
Clause 13.3) in circumstances where:
(i) there shall not have been available to Lessee at the time and in
the place that such engine or other part was required to be installed
on the Airframe or, as the case may be, any Engine, a substitute or
replacement engine or part complying with the requirements of Clause
13.3; and
(ii) it would have resulted in an unreasonable disruption of the
operation of the Aircraft or the business of Lessee as an airline or
would have grounded the Aircraft if Lessee had deferred such
installation until such time as an engine or part complying with the
requirements of Clause 13.3 became available for installation in the
Aircraft.
In the case of either (i) or (ii) above, as soon as practicable after
installation of the same on the Airframe or, as the case may be, such
Engine, Lessee shall remove any such engine or part not complying with
the requirements of Clause 13.3 and replace or substitute the same with
an engine or part complying with the requirements of Clause 13.3. If,
notwithstanding the foregoing, any replacement engine or part is owned
by Lessor such replacement engine or part and the Engine or the Part
replaced thereby shall be and remain the property of Lessor. Lessee
shall assist Lessor in all reasonable respects to preserve, store,
overhaul or dispose of such replaced Parts, all as may be reasonably
directed by Lessor.
13.6 ALTERATIONS. Lessee, at its own cost and expense:
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(i) may make or cause to be made such alterations and modifications in
and additions to the Airframe or any Engine as Lessee may reasonably
deem desirable in the furtherance of any recommendations from time to
time of the Manufacturer and the engine manufacturer and the standards
of the FAA, or to comply with any law, rule, directive, bulletin,
regulation or order of any governmental entity, and
(ii) may from time to time make such alterations and modifications in
and additions to the Airframe or any Engine as Lessee may deem
desirable in the proper conduct of its business; provided, however,
that no such alteration, modification or addition shall diminish the
value or utility of the Airframe or such Engine, or impair the
condition or airworthiness thereof, below the value, utility, condition
and airworthiness thereof immediately prior to such alteration,
modification or addition assuming the Airframe or such Engine was then
of the value or utility and in the condition and airworthiness required
to be maintained by the terms of this Agreement provided further that
no such alteration, modification, or addition with an estimated cost in
excess of $25,000 shall be made pursuant to this Clause 13.6(ii)
without the prior written consent of Lessor.
(iii) Notwithstanding the foregoing, Lessee may, at its sole cost and
expense modify the interior layout of the Aircraft; provided, however,
that such modification has, in the opinion of the Lessor, no material
adverse effect on the value of the Aircraft.
Except as otherwise provided in this Clause 13.6, title to all Parts
incorporated or installed in or attached or added to the Airframe or
such Engine as the result of such alteration, modification or addition
shall, without further act, vest in Lessor. Upon transfer of title to
Lessor of the installed Parts title to all Parts replaced or removed
from the Airframe or such Engine as the result of such alteration,
modification or addition shall vest in Lessee, free and clear of all
Lessor Liens, and shall no longer be deemed Parts hereunder.
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Nothing herein shall permit Lessee to (and Lessee shall not) make any
modification or alteration that shall require the permanent removal of
any Part that is not replaced with a replacement part (with title
vested in Lessor as provided above).
13.7 LIABILITY FOR COST OF ALTERATIONS; AD COST SHARING.
(i) As used in this Clause, the following terms have the respective
meanings set forth below:
"APPLICABLE REMAINING LEASE PERIOD" means the number of days
remaining in the Lease Term.
"AD CALCULATION PERIOD" means with respect to any airworthiness
directive or mandatory service bulletin with respect to which the
cost of compliance is less than $250,000 the AD Calculation Period
will be with 1,825 days. In case the costs of compliance exceed
US$250,000 the AD Calculation Period will be 2,920 days.
"THRESHOLD AMOUNT" means US$62,000.
(ii) Lessor shall in no event bear any liability or cost for any
alteration, modification, addition, or for any grounding or suspension
of certification of the Aircraft or for loss of revenue; provided,
however, that if the total cost (including material and labor) of
compliance with any single airworthiness directive or mandatory service
bulletin, which, in either case, is issued during the Lease Term and
requires terminating action either (i) during the Lease Term or (ii)
during the one-year period immediately following expiration of the
Lease Term (such cost, the "AD Cost") exceeds the Threshold Amount,
then (a) Lessee shall furnish Lessor with an estimate of the work and
such costs relating thereto required to comply therewith, and (b)
Lessee and Lessor shall share such AD Cost in the following manner:
Lessee shall bear and pay
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the Threshold Amount of such AD Cost. Lessee shall bear and pay the
amount of such AD Cost in excess of the Threshold Amount calculated as
follows:
(1) Amount of such AD Cost in excess of the Threshold Amount
divided by the lesser of (x) the AD Calculation Period or (y) the
useful life of the alteration, modification or addition in question
(if specified in the airworthiness directive or mandatory service
bulletin in question), expressed in days
multiplied by
(2) the Applicable Remaining Lease Period after the date of
completion of work to comply with such airworthiness directive or
service bulletin;
PROVIDED, HOWEVER, that in no event shall Lessee be required to pay
more than 100% of such excess.
Lessee shall bear and pay the aggregate AD Cost described above, and,
within 15 days following Lessor's receipt from Lessee of appropriate
invoices for the work relating thereto, Lessor shall reimburse Lessee
for Lessor's share of the AD Cost. Lessee shall give Lessor prior
written notice of any such airworthiness directive or mandatory service
bulletin before commencing any alteration, modification or addition of
or to the Aircraft with respect thereto. Any work that is performed by
Lessee with respect to any such airworthiness directive or mandatory
service bulletin shall be billed at Lessee's true out-of-pocket cost
and without any mark-up in the cost of labor or materials.
13.8 POSSESSION OF AIRCRAFT; SUBLEASE OF AIRCRAFT. Lessee shall not (save as
otherwise expressly provided in this Clause 13.8 or in Clause 13.9
below), without the prior written consent of
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Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Airframe or any Engine or install any
Engine, or permit any Engine to be installed, on any airframe other
than the Airframe. With respect to any transfer of possession pursuant
to this Clause 13.8:
(i) Lessee shall remain primarily liable hereunder for the performance
of all of the terms of this Lease to the same extent as if such
transfer had not occurred, and no sublease or other relinquishment of
possession of the Aircraft shall in any way discharge or diminish any
of Lessee's obligations to Lessor under this Lease or any of Lessor's
rights hereunder and such rights shall continue as if such sublease or
transfer had not occurred;
(ii) The term of any sublease (including, without limitation, any
option of the sublessee to renew or extend the sublease) or pooling
arrangement shall not continue beyond the end of the Lease Term;
(iii) any sublease permitted by this Clause 13.8 shall in addition
expressly provide that (v) such sublease is subject and subordinate to
all of the terms of this Lease and all rights of Lessor under this
Lease, including without limitation, Lessor's rights to repossession
pursuant to Clause 17 and to void such sublessee's right to possession
upon such repossession, whether or not any default has occurred or
exists under such sublease, (w) such sublessee consents to the security
assignment by Lessee to Lessor of all of Lessee's right, title and
interest in such sublease for purposes of securing Lessee's obligations
hereunder and such sublessee, upon receipt of a written notice from
Lessor that an Event of Default has occurred and is continuing, will
make all payments under such sublease to, and, if this Lease has been
declared in default pursuant to Clause 17 hereof, will return the
Aircraft only to, Lessor, or as directed by Lessor, for so long as such
Event of Default shall continue, (x) the maintenance, operation and
insurance provisions of such sublease shall be substantially the same
as the provisions of this Lease (whether by requiring such obligations
to be
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performed by such sublessee, by Lessee or by both), (y) the Aircraft
shall not be operated or used other than as provided in this Lease, (z)
the Lessor may void or terminate such sublease following an Event of
Default hereunder and (zz) such sublease shall be governed by New York
law;
(iv) prior to the commencement of any sublease, Lessee shall give
Lessor written notice of the proposed sublease of the Aircraft, which
notice shall include the identity of the sublessee, the term and rental
rate of the sublease and a copy of such sublease;
(v) any such sublease shall expressly prohibit any assignment, further
sublease of the Aircraft and any of the rights under such sublease; and
(vi) any consent by Lessor to any sublease pursuant to this Clause 13.8
may be revoked by Lessor if the executed sublease contains terms which
have not been expressly approved by Lessor, and in the event that
Lessor's consent is revoked pursuant to this Clause 13.8(vi), the
sublease shall automatically be terminated.
At least ten days prior to entering into any sublease of the Aircraft
to a sublessee, Lessee shall execute and deliver to Lessor an
assignment of and grant of a security interest in all of Lessee's
right, title and interest in such sublease, which assignment shall be
in form and substance reasonably satisfactory to Lessor. In connection
with such a sublease of the Aircraft, Lessee shall provide to Lessor,
at Lessee's or sublessee's expense and on or before commencement of
such sublease, a legal opinion from counsel to the sublessee in form
and substance reasonably satisfactory to Lessor, as to the due
execution and delivery and enforceability of such sublease and as to
such other matters as Lessor may reasonably request. Any monies
received by Lessor pursuant to the exercise of its rights under the
assignment of any sublease shall be held by Lessor as additional
security for the performance by Lessee of its obligations under this
Lease and, to the extent not applied against amounts due and owing by
Lessee hereunder and the exercise of remedies hereunder, shall be
returned to Lessee at such time as no Event of Default shall be
continuing.
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13.9 DELIVERY OF AIRFRAME OR ENGINES TO MANUFACTURER OR REPAIRER; POOLING
ARRANGEMENTS. Notwithstanding Clause 13.8, so long as no Default shall
have occurred and be continuing, Lessee may, without the prior written
consent of Lessor:
(i) DELIVERY FOR SERVICE OR REPAIR. Deliver possession of the Airframe
or any Engine to the manufacturer thereof for testing or other similar
purposes or to any organization for service, repair, maintenance or
overhaul work on the Airframe, such Engine or any part thereof or for
alterations or modifications in or additions to the Airframe or such
Engine to the extent required or permitted by the terms of Clause 13.6;
(ii) POOLING OF ENGINES. Subject any Engine to normal interchange or
pooling agreements or arrangements in each case customary in the
airline industry and entered into by Lessee in the ordinary course of
its business with an air carrier approved by Lessor; provided that if
any interest of Lessee or Lessor in or to any such Engine shall be
divested under any such agreement or arrangement, such divestiture
shall be deemed to be an Event of Loss with respect to such Engine and
Lessee shall comply with Clause 11.2 in respect thereof;
(iii) POOLING OF PARTS. Subject any part removed from the Airframe or
an Engine as provided herein to a normal pooling arrangement customary
in the airline industry entered into in the ordinary course of Lessee's
business with an air carrier approved by Lessor, provided the part
replacing such removed Part shall be incorporated or installed in or
attached to the Airframe or Engine in accordance with Clause 13.4 as
promptly as possible after the removal of such removed Part. In
addition, any replacement part when incorporated or installed in or
attached to the Airframe or any Engine in accordance with Clause 13.4
may be owned by an air carrier approved by Lessor subject to such a
normal pooling arrangement, provided Lessee, at its expense, as
promptly thereafter as possible either (a) causes title to such
replacement part to vest in Lessor in accordance with Clause 13.4 by
Lessee acquiring title thereto for the
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benefit of, and transferring such title to, Lessor free and clear of
all Liens, or (b) replaces such replacement part by incorporating or
installing in or attaching to the Airframe or Engine a further
replacement part owned by Lessee free and clear of all Liens and
causing title to such further replacement part to vest in the Lessor in
accordance with Clause 13.4.
No pooling agreement, sublease or other relinquishment of possession of
the Aircraft or any Engine shall in any way discharge or diminish any
of Lessee's obligations to Lessor hereunder.
13.10 OPERATION. In addition to the undertakings set out in Clause 10.14,
Lessee hereby undertakes:
(i) neither to operate nor to use the Aircraft at any time that the
full amount of insurance required by the terms of Clause 10 shall not
be in effect;
(ii) not to operate, use, keep or locate nor to permit the operation,
use, keeping or location of the Aircraft or any part thereof (i) for
any purpose, in any manner or in any place not covered by the
insurances required pursuant to Clause 10, or (ii) in any recognized or
threatened area of hostilities unless fully covered to Lessor's
reasonable satisfaction by war risk insurance; provided, however, that
the Aircraft or any Engine located in an area at the time it becomes a
recognized or threatened area of hostility may be flown from and
through such area to an area outside such area of recognized or
threatened hostility;
(iii) that the Aircraft shall not be maintained, used or operated in
violation of any mandatory law, rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign), or in violation of any airworthiness certificate, license or
registration relating to the Aircraft issued by any such authority.
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13.11 NAMEPLATE. Lessee agrees to affix and maintain in the cockpit of the
Airframe in a prominent place, and on each Engine next to the engine
data plate, a metal nameplate having dimensions of not less than four
and a half inches by three inches bearing the inscription "This
Aircraft/Engine is owned by EAL (DELAWARE) VIII CORP. and leased to PAN
AMERICAN WORLD AIRWAYS, INC. AND IS SUBJECT TO A MORTGAGE TO ING LEASE
(NEDERLAND) B.V.-AMSTERDAM, THE NETHERLANDS."
Except as provided above, Lessee shall not allow the name or other
indication of any person, association or corporation to be placed on
the Aircraft or any Engine which name or other indication could be
interpreted as a claim of ownership or other interest therein.
13.12 LESSEE'S LIABILITY AS TO COSTS OF USE AND OPERATION. Save as otherwise
expressly provided herein, Lessee shall pay all costs, expenses, fees
and charges incurred in connection with the use, operation,
maintenance, repair and insurance of the Aircraft or any Engine,
including but not limited to repairs, maintenance, storage, transport,
housing, servicing and all airport and airspace use fees, taxes and
charges.
13.13 ENTITLEMENT TO ENFORCE WARRANTIES. So long as no Default shall have
occurred and be continuing, Lessee shall have the benefit of and shall
be entitled to enforce, either in its own name or in the name of Lessor
(at the cost of Lessee and in respect to which enforcement Lessee
hereby indemnifies Lessor) for the use and benefit of Lessee, any and
all dealer's, manufacturer's or subcontractor's warranties, if any, in
respect of the Aircraft or such Engine, to the extent such warranties
are assignable, and, so far as it is reasonably able, Lessor agrees to
do, execute and deliver such further acts, deeds, matters or things as
may be necessary to enable Lessee to obtain customary warranty services
furnished for the Aircraft or such Engine by such dealer, manufacturer
or subcontractor. Lessee shall at all times promptly and effectively
enforce its and Lessor's rights under any warranty hereinabove
mentioned.
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CLAUSE 14. REGISTRATION OF AIRCRAFT
Lessor shall prior to Delivery of the Aircraft hereunder cause the
Aircraft to be duly registered (if previously registered in a foreign
country) in the name of Lessor with the FAA in accordance with all
applicable laws of the United States.
CLAUSE 15. RETURN OF AIRCRAFT
15.1 REDELIVERY. Except as otherwise provided herein, at the expiration of
the Lease Term or upon the sooner termination of this Agreement, Lessee
shall return the Aircraft to Lessor at the Return Location by
delivering the same to Lessor together with the items identified in the
Technical Data and Manuals List attached hereto as Schedule D, the
Loose Equipment List attached hereto as Schedule E-1, the Emergency
Equipment List attached hereto as Schedule E-2 and the Avionics
Equipment List attached hereto as Schedule E-3 at the Return Location.
At the time of return to Lessor, the Aircraft shall be fully equipped
with Engines or (subject to Clause 15.3) other engines owned by Lessee
(and complying with Clause 15.3) properly installed thereon and shall
comply in all respects with the Redelivery Conditions stated in
Schedule F hereto.
Lessee shall bear all costs arising from the transport of the Aircraft
to the Return Location, including the costs of flight crews, fuel,
insurance, landing charges, navigational charges, engine and
maintenance costs.
If Lessee shall fail to return the Aircraft to Lessor at the time and
in the condition required by this Lease (whether at the expiration or
any termination of Lessee's right to lease the Aircraft hereunder or
otherwise), then, in addition to any other right or remedy available to
Lessor in respect thereof, Lessee shall continue to maintain and insure
the Aircraft as provided in this Agreement until such time as the
Aircraft is returned to Lessor and is in the condition required by this
Lease. Lessee's obligation under the preceding sentence shall survive
the termination or any expiration of this Lease.
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15.2 ENGINE CONDITION. In the event any engine not owned by Lessor shall be
delivered with the Airframe, such engine shall be satisfactory to
Lessor, free and clear of Liens, suitable for use on such Airframe and
shall have the value and utility at least equal to, and be in as good
operating condition (including no greater number of Flight Hours or
Cycles accumulated on such engine) as the Engine that should have been
returned, assuming such Engine which should have been returned was in
the condition and repair as required by the terms hereof immediately
prior to such required return. At its own expense and concurrently with
such delivery, Lessee shall furnish Lessor with a bill of sale, in form
and substance satisfactory to Lessor, for each such engine and with
evidence of Lessee's title to such engine (including, if requested, an
opinion of Lessee's counsel) and shall take such other action as Lessor
may reasonably request in order that title to such engine shall be duly
and properly vested in Lessor. Upon full compliance with this Clause
15.2 and passage of title to such engine to Lessor, such engine shall
be an Engine for all purposes of this Agreement and Lessor will
transfer to Lessee all right, title and interest that Lessor may have
in an Engine constituting part of the Aircraft so returned but not
installed on such Aircraft at the time of such return, without any
representation, warranty or recourse of any kind whatsoever, express or
implied, except a warranty that such Engine is free and clear of Lessor
Liens; provided, however, that if Lessor requires in its absolute
discretion, Lessee shall redeliver to Lessor any Engine not installed
on the Aircraft at the time of redelivery hereunder notwithstanding any
of the foregoing and in such circumstances Lessee shall not (if it has
not already done so) be required to transfer to Lessor or other
designee of Lessor right, title and interest in and to the engine then
installed on the Airframe which shall remain vested in Lessee and
Lessor shall not be required to transfer any right, title or interest
in or to the Engine not so installed on the Airframe to Lessee as
otherwise required by this Clause 15.2.
15.3 GENERAL CONDITION. The Aircraft when delivered to Lessor shall (without
prejudice to paragraph 2 of Schedule F) be clean by international
commercial airline operating standards, and (save as otherwise provided
in Clause 15.2) shall have installed thereon all Engines, equipment,
accessories or parts installed thereon at the commencement of the Lease
Term therefor or improvements thereto made in accordance with the
provisions of this Agreement.
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The Aircraft shall be in the same condition as when delivered to
Lessee, ordinary wear and tear (subject to the obligations set forth in
Clauses 5 and 13 and alterations and modifications properly made and
documented by Lessee as permitted under this Agreement) excepted.
Without prejudice to paragraph 4 of Schedule F, should Lessee be
granted any variances or extensions from the FAA with respect to any
airworthiness directives applicable to Lessee or should the FAA
approved maintenance program for Lessee permit carry-over or deferral
of maintenance items, performance of which, but for such deferral or
carry-over, would have otherwise been required thereby, Lessee shall
perform or cause to be performed, at Lessee's expense (subject to
Clause 13), all such items and airworthiness directives prior to return
of the Aircraft to Lessor. Without prejudice to paragraph 10 of
Schedule F, there shall be no untreated or uncorrected corrosion as
determined by the pre-delivery inspection by Lessor, including
corrosion within the fuel tanks.
Without prejudice to Schedule F, a borescope inspection, engine power
runs and systems functional checks shall be performed at Lessee's
expense immediately prior to return of the Aircraft to Lessor, and
Lessee shall provide evidence satisfactory to Lessor reflecting the
correction of any non-compliance found during such inspection with the
Maintenance Program.
Lessor shall be given access to the Aircraft at the maintenance
facility that performs the re- delivery maintenance. Lessee will make
available for inspection at least 60 days prior to the redelivery date
the full complement of records, manuals and other documentation as
specified in Schedule D.
Immediately prior to the re-delivery and acceptance, a final walk
around inspection and a systems ground check, including engine power
runs in accordance with the Manufacturer's maintenance manual, will be
performed in conjunction with a flight demonstration of the Aircraft,
at Lessee's cost, utilizing the manufacturer's standard maintenance
manual procedures. Two (2) representatives of Lessor will be on board
as observers. Lessee, at its
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expense, will correct, or cause to be corrected, all defects exceeding
Manufacturer's maintenance manual limitations.
Lessor shall be entitled to have inspectors present during the
re-delivery work performed on the Aircraft at the designated
maintenance facility. If Lessor determines that repairs are required to
cause the Aircraft to comply with the return requirements provided
herein, such repairs shall be performed at an FAA approved facility in
the United States at Lessee's sole cost and expense. Lessee and Lessor
shall use commercially reasonable efforts to combine such inspection
flight with the ferry flight to a secondary location.
15.4 REMOVAL OF INSIGNIA; TRANSFER OF WARRANTIES, ETC. At the time of such
return, Lessee shall at its own expense (a) remove all names, insignia
and other indications of Lessee from the exterior and interior of the
Aircraft and (b) transfer to Lessor to the extent transferable all
warranties and indemnifications obtained by Lessee with respect to the
Aircraft together with all documents relative thereto which may be
required to effect such transfer.
15.5 FUEL AND OIL. Upon the return of the Aircraft, either at the end of the
Lease Term, pursuant to Clause 17 or pursuant to any other termination
of this Agreement, each fuel tank and oil tank shall contain the same
quantity of fuel or oil as was contained in the fuel and oil tanks when
the Aircraft was delivered to Lessee, or, in the case of differences in
any such qualities, an appropriate adjustment will be made by payment
according to the then current market price of fuel or oil, as the case
may be.
15.6 RETURN ACCEPTANCE CERTIFICATE. Upon return of the Aircraft in
accordance with the terms of this Agreement, Lessee will prepare and
execute two (2) Return Acceptance Certificates substantially in the
form of Schedule H and Lessor will countersign and return one such
Return Acceptance Certificate to Lessee.
15.7 INDEMNITIES AND INSURANCE. The insurance and indemnities requirements
set forth in Clauses 10 and 16 will apply to Lessor's representatives
during return of the Aircraft,
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including the ground inspection, inspection flight and demonstration
flight. With respect to the inspection flight and demonstration flight,
Lessee shall assure that Lessor's representatives will receive the same
protection as Lessee on Lessee's Aviation and Airline General Third
Party Liability Insurance.
15.8 AIRPORT AND NAVIGATION CHARGES. Lessee will ensure that at return of
the Aircraft any and all airport, navigation and other charges which
give rise or may if unpaid give rise to any Lien, right of detention,
right of sale or other Lien in relation to the Airframe, Engine or any
Part, whether incurred in respect of the Aircraft or any other aircraft
operated by Lessee, have been paid and discharged in full (whether or
not due) and will at Lessor's request produce evidence thereof
satisfactory to Lessor.
15.9 RECTIFICATION OF RE-DELIVERY CONDITION. To the extent that, at the time
of redelivery, the condition of the Aircraft or records does not comply
with the provisions hereof, Lessee at its own expense shall cause such
rectification to be carried out as soon as possible. In the event that
such rectification extends beyond the end of the Lease Term, the Lease
Term shall, at the option of Lessor, be extended and the provisions of
this Agreement, including the requirement to pay Rent during the period
the Lease Term is so extended (prorated on a daily basis), shall remain
in force until such rectification has been accomplished; provided
however, that Lessor shall have the right, after the date on which the
Lease Term would otherwise have ended but for this Clause 15.9, to take
possession of the Aircraft and demand compensation for costs incurred
by Lessor in connection with such repossession and all necessary
repairs.
15.10 EXPORT AND DE-REGISTRATION OF AIRCRAFT. Lessee will, at Lessor's cost,
(i) assist in obtaining a Certificate of Airworthiness for Export and
all other authorizations and approvals for export of the Aircraft from
the United States to any country designated by Lessor (and Lessee and
Lessor shall, 90 days in advance of the date of any re-delivery, work
together to determine the workscope required therefor), (ii) assist
with de-registration of the Aircraft from the records of the FAA, (iii)
assist Lessor or its designee(s) in securing such new
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registration of the Aircraft as may be determined by Lessor, which
assistance shall include, without limitation, preparation or provision
of documents necessary or desirable to be obtained from Lessee in
connection with such new registration, and (iv) perform any other acts
reasonably required by Lessor in connection with the foregoing.
CLAUSE 16. INDEMNIFICATION
16.1 GENERAL INDEMNITY. Subject only to the limitations described in the
last paragraph of this Clause 16.1, Lessee agrees to indemnify,
reimburse and hold harmless each Indemnitee from and against any and
all claims, damages, losses, liabilities, demands, suits, judgments,
causes of action, legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any reasonable attorney's
fees and other reasonable costs and expenses in connection herewith or
therewith, including any of the foregoing arising or imposed with or
without Lessor's fault or negligence (whether passive or active) or
under the doctrine of strict liability (any and all of which are
hereafter referred to as "Claims") which in any way may result from,
pertain to or arise in any manner out of, or are in any manner related
to (i) the Aircraft, this Agreement or any other Lease Document, any
interest herein or any document executed in connection herewith or
therewith, or the breach of any representation, warranty or covenant
made by Lessee hereunder or under any other such document, or (ii) the
condition, manufacture, re-delivery, lease, acceptance, rejection,
possession, return, disposition, maintenance, repair, use or operation
of the Aircraft either in the air or on the ground at any time after
the Delivery Date and before the Redelivery of the Aircraft to Lessor
as and when required hereby, or (iii) any defect in the Aircraft
(whether or not discovered or discoverable by Lessee or Lessor) arising
from the material or any articles used therein or from the design,
testing or use thereof or from any maintenance, service, repair,
overhaul or testing of the Aircraft, whether or not the Aircraft is in
the possession of Lessee, and regardless of where the Aircraft may then
be located, or (iv) any transaction, approval or document contemplated
by this Agreement or any Lease Document or given or entered into in
connection herewith or therewith, (v) any payments required under any
Lease Document, or (vi) otherwise in connection with the transactions
contemplated by the Lease Documents; provided, however,
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that Lessee shall be subrogated to all rights and remedies which Lessor
may have against the Manufacturer of the Aircraft and its
subcontractors as to any such Claims, but only to the extent that
Lessee satisfies its indemnification to Lessor with respect to such
Claims. Lessee shall not be required to pay or discharge any Claim
brought by a third party so long as the validity or the amount thereof
shall be diligently contested in good faith and on reasonable grounds
by Lessee, at no cost or expense to Lessor.
Lessee hereby waives, and releases each Indemnitee from, any Claims
(whether existing now or hereafter arising) for or on account of or
arising or in any way connected with injury to or death of personnel of
Lessee or loss or damage to property of Lessee or the loss of use of
any property which may result from or arise in any manner out of or in
relation to the ownership, leasing, condition, use or operation of the
Aircraft, either in the air or on the ground, or which may be caused by
any defect in the Aircraft from the material or any article used
therein or from the design or testing thereof, or use thereof, or from
any maintenance, service, repair, overhaul or testing of the Aircraft
regardless of when such defect may be discovered, whether or not the
Aircraft is at the time in the possession of Lessee, and regardless of
the location of the Aircraft at any such time.
The indemnities contained in this Clause 16.1 shall continue in full
force and effect notwithstanding the expiration or other termination of
this Lease and are expressly made for the benefit of and shall be
enforceable by each Indemnitee; provided, however, that Lessee shall
not be obligated to pay any indemnity pursuant to this Clause 16.1 with
respect to any amount to the extent that such amount arises out of or
is measured by acts, failures to act, events or periods of time (or any
combination of the foregoing) that occur after the Aircraft has been
redelivered to Lessor pursuant to Clause 15 hereof (under circumstances
not involving a repossession pursuant to Clause 17.2 hereof) and is no
longer subject to this Agreement and all obligations of Lessee under
this Agreement have been discharged (other than obligations which by
their express terms survive the expiration of the Lease Term) unless
any such act or event shall itself result from or be attributable to an
act or omission
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of Lessee which occurred prior to the redelivery of the Aircraft and
the discharge of Lessee's obligations under this Agreement.
Notwithstanding the foregoing provisions of this Clause 16.1, Lessee
shall not be obligated to make any payment by way of indemnity to any
Indemnitee (i) in respect of any Claims to the extent such Claims
result from the willful misconduct or gross negligence of any
Indemnitee; or (ii) any Claim arising out of the period before delivery
of the Aircraft to Lessee except to the extent relating to a matter
required to be corrected by Lessee hereunder; or (iii) to the extent
such Claims are for Taxes (whether or not Lessee is required to
indemnify against such Taxes pursuant to Clause 16.2)
16.2 TAX INDEMNITY.
(i) WITHHOLDING TAXES. All payments required to be made by Lessee under
this Lease shall be made free and clear of, and without deduction for
or on account of, any present or future Taxes of any nature whatsoever
now or hereafter imposed by any governmental entity or taxing authority
in any jurisdiction. If any Taxes are required to be withheld or
deducted from any such payments, Lessee shall (i) within the period for
payment permitted by applicable Law pay to the appropriate government
entity or taxing authority the full amount of such Taxes (and any
additional Taxes in respect of the payment required under clause (ii)
hereof) and make such reports and filings in connection therewith at
the time and in the manner required by applicable Law, and (ii) pay to
Lessor an additional amount which (after deduction of all Taxes of any
nature incurred by reason of the payment or receipt of such additional
amount) will be sufficient to yield to the relevant Indemnitee the full
amount which would have been received by such Indemnitee had no
deduction or withholding been made.
(ii) GENERAL TAX INDEMNITY. In addition, except as set forth in Clause
16.2(iii), Lessee agrees for the express benefit of each Indemnitee to
pay promptly when due, and to indemnify and hold harmless such
Indemnitee from, all Taxes (whether imposed
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upon such Indemnitee, the Aircraft, the Airframe, the Engines or
otherwise), by any government entity or taxing authority in any
jurisdiction or by any international taxing authority, upon or with
respect to, based upon or measured by any of the following:
(a) the Aircraft, the Airframe, any Engine or any Part thereof, or
interest therein, this Lease or any of the other Lease Documents or any
interest therein; the importation, exportation, condition, ownership,
delivery, redelivery, failure to redeliver, acceptance, possession,
repossession, return, use, performance, operation, control, settlement
of any insurance or other claim, leasing, subleasing, financing,
mortgaging, Liens, rental, retirement, abandonment, preparation,
installation, modification, repair, testing, maintenance, replacement,
transportation, storage, location, condition, registration,
re-registration, deregistration, and the sale, transfer of title or
other application or disposition of the Aircraft, the Airframe, any
Engine or any Part thereof or any interest therein; or the rentals,
receipts or earnings arising therefrom (including without limitation
the Rent) and any other amounts paid or payable with respect thereto;
(b) the Lease or the other Lease Documents; or
(c) otherwise with respect to or in connection with the transactions
contemplated by the Lease and other Lease Documents.
(iii) EXCEPTIONS TO INDEMNITY. The indemnity provided for in Clause
16.2(ii) does not extend to any of the following Taxes:
(a) Taxes on, based on, or measured by the net income, profit,
capital gain, capital or net worth of any Indemnitee in any
jurisdiction in which such Indemnitee is incorporated or has its
principal place of business or is subject to such Taxes solely as a
result of transactions or activities unrelated to the transactions
contemplated by
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the Lease Documents (except that there shall not be excluded any
increase in such Taxes resulting directly from the presence of the
Lessee in the relevant taxing jurisdiction or the presence,
registration, use or operation of the Aircraft in whole or in part
in such jurisdiction);
(b) Taxes (1) imposed as a result of a voluntary or involuntary
transfer or other disposition of the Aircraft or this Lease or any
other Lease Document or any interest in any of the foregoing by
Lessor or any other Indemnitee other than a transfer or disposition
in connection with an exercise of remedies following an Event of
Default, or (2) to the extent such Taxes exceed the amount of taxes
which would have been payable had there not been such a transfer or
disposition;
(c) Taxes to the extent attributable to events or circumstances
occurring or arising after return of the Aircraft to Lessor in
accordance with this Lease, excluding any period in which the
Lessor is exercising remedies pursuant to Clause 17.2 hereof; or
(d) Taxes resulting solely as a direct result of any gross
negligence or willful misconduct of the relevant Indemnitee or any
breach by such Indemnitee of its obligations hereunder or under any
other Lease Document or the breach or accuracy of any
representation, covenant, or warranty given by such Indemnitee
herein or therein.
(iv) AFTER-TAX BASIS. The amount which Lessee is required to pay or
indemnify against with respect to any amounts required to be paid or
indemnified against under Clause 16.1 or this Clause 16.2 shall include
an additional amount necessary to hold the recipient of the payment or
indemnity harmless on an after-tax basis from all Taxes (whether or not
such Taxes are excluded under Clause 16.2(iii)) required to be paid or
credited by such recipient with respect to such payment or indemnity,
so as to restore the recipient on an after-tax basis to the same
position such recipient would have been in had such amounts not been
incurred or payable.
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(v) TIMING OF PAYMENT. Any amount due and payable to the relevant
Indemnitee pursuant to Clause 16.2(ii) shall be paid within 10 days
after receipt of a written demand therefor from such Indemnitee
accompanied by a written statement describing in reasonable detail the
basis for such indemnity and the computation of the amount so payable;
provided, however, that such amount need not be paid by Lessee prior to
the later of (a) five days prior to the date the applicable Tax is
payable to the appropriate government entity or taxing authority or (b)
in the case of amounts which are being contested by Lessee in good
faith or by Lessor pursuant to Clause 16.2(vi) the date such contest is
finally resolved.
(vi) CONTESTS. If written claim is made against an Indemnitee for Taxes
with respect to which Lessee is or may be liable for a payment or
indemnity hereunder, such Indemnitee will promptly give Lessee notice
in writing of such claim; provided, however, that such Indemnitee's
failure to give notice will not relieve Lessee of its obligations
hereunder, except to the extent the failure to give such notice
precludes a contest of such claim in the manner contemplated herein. So
long as (a) a contest of such Taxes does not involve any danger of the
sale, forfeiture or loss of the Aircraft or any interest therein, (b)
Lessee has provided the relevant Indemnitee with an opinion of
independent tax counsel acceptable to such Indemnitee that a
meritorious basis exists for contesting such claim, (c) Lessee has made
adequate reserves for such Taxes or, if required by the relevant
Indemnitee, an adequate bond has been posted by Lessee, and (d) Lessee
has acknowledged in writing its obligation to indemnify for such Taxes,
then such Indemnitee at Lessee's written request will in good faith,
with due diligence and at Lessee's sole cost and expense, contest (or,
if permitted by Law, permit Lessee to contest in the name of such
Indemnitee) the validity, applicability or amount of such Taxes. If
such contest is to be initiated by the payment of, and the claiming of
a refund for, any Taxes, Lessee shall advance to the relevant
Indemnitee sufficient funds (on an interest-free basis) to make such
pay ments and shall indemnify such Indemnitee for any tax consequences
resulting from such advance of funds. Although the relevant Indemnitee
may consult in good faith
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with Lessee concerning the conduct of any contest, such Indemnitee
shall control the conduct of all proceedings relating to any such
contest which is brought by or on behalf of such Indemnitee. Any
contest initiated hereunder may be settled or discontinued at any time
provided that the relevant Indemnitee shall have waived any right to
indemnification for the Taxes being contested.
(vii) REFUNDS. Upon receipt by the relevant Indemnitee of a refund of
all or any part of any Taxes (including any deductions or withholdings
referred to in Clause 16.2(i)) which Lessee has paid, such Indemnitee
will pay to Lessee the net amount of such Taxes refunded, together with
any interest receive by such Indemnitee with respect thereto; provided,
however, that no amount shall be payable to the Lessee hereunder if a
Default or an Event of Default shall have occurred and be continuing or
prior to the time that Lessee shall have paid to the relevant
Indemnitee all amounts then due and owing to such Tax Indemnitee under
this Clause 16.
(viii) COOPERATION IN FILING TAX RETURNS. In case any report or return
is required with respect to any Taxes which are subject to
indemnification by Lessee under this Clause 16.2, Lessee will either
make such report or return in such manner as will show the respective
interests of Lessor and ING in the Aircraft, and send a copy of such
report or return to Lessor, or will notify the Lessor of such
requirement and make such report or return in such manner as shall be
reasonably satisfactory to the Lessor or ING.
CLAUSE 17. EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. Any one or more of the following shall constitute an
Event of Default hereunder:
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(i) Lessee shall fail to accept delivery of the Aircraft hereunder (as
contemplated by Clause 2.2(iv) above) on the Scheduled Delivery Date,
if tendered by or on behalf of Lessor to Lessee in the delivery
condition required hereby;
(ii) Lessee shall fail to make any payment hereunder of any Rent or
Supplemental Rent within five Business (5) Days of its due date; or
(iii) Lessee shall fail to carry and maintain insurance as required
under the provisions of Clause 10 of this Agreement; or
(iv) Lessee shall (A) create Liens or fail to discharge Liens as set
forth in Clause 9 of this Agreement, or (B) fail or return the Aircraft
upon the Expiration Date or any earlier termination of this Lease; or
(v) Lessee shall fail to perform or observe in any material respect any
other obligation, covenant, undertaking, condition or agreement to be
performed or observed by it under any of the Lease Documents and such
failure continues without remedy for a period of thirty (30) days from
the earlier to occur of the date of Lessor's written notice thereof or
the date on which Lessee otherwise first has knowledge thereof; or
(vi) any material representation or warranty made by Lessee in any of
the Lease Documents or in any document or certificate furnished by
Lessee in connection therewith or pursuant thereto shall at any time
prove to have been false at the time made and such condition shall
continue unremedied for a period of thirty (30) days from the earlier
to occur of the date of Lessor's written notice thereof or the date on
which Lessee otherwise first has knowledge thereof; or
(vii) Lessee shall consent to the appointment of a receiver, trustee or
liquidator of itself or a substantial part of its assets, or Lessee
shall admit in writing its inability to pay
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its debts generally as they come due or makes a general assignment for
the benefit of creditors; or
(viii) Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition seeking reorganization or relief from creditors in a
proceeding under any bankruptcy laws (as now or hereafter in effect) or
an answer admitting the material allegations of a petition filed
against Lessee in any such proceedings, or Lessee shall by voluntary
petition, answer, or consent seek relief under the provisions of any
bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or provides for an agreement, composition,
extension or adjustment with its creditors; or
(ix) an order, judgment or decree is entered by any court, with or
without the consent of Lessee, appointing a receiver, trustee or
liquidator for Lessee of all or any substantial part of its property,
or all or any substantial part of the property if Lessee is
sequestered, and any such order, judgment or decree of appointment or
sequestration remains in effect, undismissed, unstayed or unvacated for
a period of sixty (60) days after the date of entry thereof; or
(x) a petition (other than a petition which Lessee demonstrates to the
reasonable satisfaction of Lessor has been presented or filed on any
vexatious or frivolous grounds provided such petition is discharged
within fourteen days of such presentation or filing) against Lessee in
a proceeding under any bankruptcy, insolvency or other similar laws (as
now or hereafter in effect) shall be filed, 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
(xi) a final judgment or judgments for the payment of money not covered
by insurance in excess of $250,000 shall be rendered against Lessee and
the same shall remain
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undischarged for a period of ninety (90) days during which execution
thereof shall not be effectively stayed by agreement of the parties
involved, stayed by court order or adequately bonded; or
(xii) attachments or other Liens shall be issued or entered against
substantially all of the property of Lessee and shall remain
undischarged or unbonded for sixty (60) days except for security
interests created in connection with monies borrowed or obligations
agreed to by Lessee in the ordinary course of its business; or
(xiii) failure by Lessee to perform any term, condition or covenant of
any bond, note, debenture, loan agreement, indenture, guaranty, trust
agreement, mortgage or other instrument or agreement in any material
respect in connection with the borrowing of money or the obtaining of
advances or credit to which the Borrower is a party or by which it is
bound, or by which any of its properties or assets may be affected (a
"Debt Instrument"), so that, as a result of any such failure to perform
(regardless of the satisfaction of any requirement for the giving of
appropriate notice thereof or the lapse of time), the indebtedness
included therein or secured or covered thereby may be declared due and
payable prior to the date on which such indebtedness would otherwise
become due and payable; or any indebtedness included in any Debt
Instrument or secured or covered thereby is not paid when due,
provided, however, that the failure to pay any such indebtedness shall
not be an Event of Default under this subclause (xi) if and for so long
as such indebtedness is contested in good faith by Lessee by
appropriate proceedings; or
(xiv) Lessee shall default in the payment or performance of any
obligation under any loan agreement, conditional sale agreement or
lease agreement relating to the use, operation or financing of any
aircraft in Lessee's fleet, and such default shall entitle the lender,
mortgagee, seller or lessor thereunder to exercise remedies in respect
thereof and such lender, mortgagee, seller or lessor has commenced the
exercise of remedies or declared such obligation to be in default;
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(xv) Lessee voluntarily suspends all or substantially all of its
airline operations, or Lessee's certificate issued to it by the U.S.
Department of Transportation under the Federal Aviation Act is
suspended, canceled or revoked, or Lessee shall otherwise at any time
cease to be a Certificated Air Carrier or the franchises, concessions,
permits, rights or privileges required for the conduct of the business
and operations of Lessee shall be revoked, canceled or otherwise
terminated or the free and continued use and exercise thereof curtailed
or prevented, and as a result of any of the foregoing the predominant
business activity of Lessee shall cease to be that of a commercial
airline; or
(xvi) any of the Lease Documents becomes null and void or invalid or
unenforceable, for any reason as a result of any action or inaction of
Lessee; or
(xvii) an "Event of Default" (as defined in any Other Lease) shall
occur.
17.2 ACTION ON OCCURRENCE OF EVENT OF DEFAULT. 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 by written notice to
Lessee this Lease Agreement to be in default and at any time
thereafter, so long as any such Event of Default shall not have been
remedied, Lessor may do one or more of the following with respect to
all or any part of the Aircraft as Lessor in its sole discretion shall
elect, to the extent available and permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in
effect; provided, however, that nothing herein shall impair or limit
any right or remedy otherwise available hereunder or at law in
connection with any Event of Default:
(i) terminate Lessee's rights to the use and possession of the
Aircraft hereunder and, upon the written demand of Lessor and at
Lessee's expense, cause Lessee to return promptly, and Lessee shall
return promptly, all or any part of the Aircraft as Lessor may so
demand, to Lessor, or to the location directed by Lessor, in the
manner and condition required by, and otherwise in accordance with
all the provisions of, Clause
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15 as if such Aircraft was being returned at the end of the Lease Term
(including, without limitation, the items identified in the Technical
Data and Manuals List attached hereto as Schedule D all fully updated
and supplemented as required hereby), or, at its option and to the
extent permitted by applicable law, enter upon the premises where all
or any part of the Aircraft is located and take immediate possession of
and remove the same by summary proceedings or otherwise (and, at
Lessor's option, store the same at Lessee's premises until disposal
thereof by Lessor); provided, however, that Lessor shall return to
Lessee all personal property of Lessee which was on board the Aircraft
promptly following the time Lessor re-takes possession of the Aircraft.
(ii) sell all or any part of the Aircraft at public or private sale, as
Lessor may determine, or otherwise dispose of, hold, use, operate or
lease to others, as Lessor, in its sole discretion, may determine, all
free and clear of any rights of Lessee, except as hereinafter set forth
in this Clause 17;
(iii) effect the immediate cancellation or termination of the U.S.
registration of the Aircraft, and, in connection therewith, prepare,
execute, deliver (in Lessor's own name or in the name of Lessee
pursuant to the power of attorney hereinbelow or elsewhere set forth)
and file with the FAA, any request, consent or other instrument
necessary or advisable in order to effect such cancellation,
termination or de-registration;
(iv) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under Clause 17.2(i) or 17.2(ii)
above with respect to the Aircraft, the Airframe or any Engine, Lessor,
by written notice to Lessee specifying a payment date which shall be
the Rent Payment Date not earlier than ten days from the date on which
such notice is received by Lessee, may demand that the Lessee pay to
Lessor, and Lessee shall pay Lessor, on the payment date so specified,
any unpaid Basic Rent and Maintenance Payments due on any date prior to
the payment date so specified;
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(v) in the event that Lessor shall have sold the Aircraft, Airframe or
any Engine pursuant to Clause 17.2(ii) above, Lessor, in lieu of
exercising its rights under Clause 17.2(iv) above with respect to such
Aircraft, Airframe or any Engine, may, if it shall so elect, demand
that Lessee pay Lessor, and Lessee shall pay to Lessor, on the date of
such sale, as liquidated damages for loss of a bargain and not as a
penalty, all Basic Rent and Maintenance Payments with respect to the
Aircraft which would have been payable for the Lease Term if no Event
of Default had occurred;
(vi) liquidate or draw upon the Security Deposit and any other cash,
securities, letter of credit or other right or property held hereunder
or under any Other Lease as collateral for Lessee's performance
hereunder or thereunder, and apply any or all of the proceeds thereof
to the satisfaction of Lessee's obligations or liabilities hereunder;
and/or
(vii) notwithstanding any provision in this Lease to the contrary,
Lessor may rescind or terminate this Lease Agreement as to the
Aircraft, Airframe or any Engine and/or may exercise any other right or
remedy which may be available to it under applicable law or proceed by
appropriate court action to enforce the terms hereof or to recover
damages for breach hereof.
In addition, Lessee shall be liable, except as otherwise provided above and
without duplication of amounts payable hereunder, for any and all unpaid Rent
due hereunder before, after or during the exercise of any of the foregoing
remedies, and for all reasonable and actual legal fees and other costs and
expenses incurred by Lessor in connection with the enforcement hereof, the
return of the Airframe or any Engine in accordance with the terms of Clause 15
or in placing such Airframe or Engine in the condition and airworthiness
required by such Clause. Without limiting the foregoing, if an Event of Default
occurs, then Lessee shall, in addition to other liabilities arising in
connection therewith, reimburse Lessor for any legal fees and disbursements
incurred by Lessor in analyzing, monitoring and enforcing Lessor's rights and
remedies in connection with such Event of Default.
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Lessee hereby constitutes and appoints each of Lessor and ING as the true and
lawful agent and attorney-in-fact for Lessee (with full power of substitution)
in the name, place and stead of, and at the expense of, Lessee, in connection
with the enforcement of the rights, powers, privileges and remedies provided for
in this Clause or otherwise available to Lessor or ING hereunder, at law or in
equity, in connection with, upon or following the occurrence of an Event of
Default (i) to collect, receive, pay, disburse, enforce and apply, any monies,
collateral, assets or property held or available hereunder or in respect hereof,
or under any other Lease Document or in respect thereof, (ii) to effect any
grant, conveyance, lease or other transfer or application of any collateral,
assets or property, (iii) to effect the cancellation and de-registration of the
Aircraft from the Aircraft Registry of the FAA or any other civil aviation
authority on which the Aircraft may at any time be registered during the Lease
Term; (iv) to export and remove from the United States of America the Aircraft
and all related or installed aircraft engines, parts and equipment and all
related maintenance, repair, overhaul and operating records, logs, books and
other data; (v) to negotiate, complete, execute, deliver, present, file and
record any agreement, demand, request, consent, document or instrument referred
to, contemplated by or otherwise incident to the de-registration, repossession,
removal and export of the Aircraft or the exercise of any other right, power,
privilege or remedy under this Lease or available to either Lessor or ING at law
or in equity; and (vi) to take any other action incidental to, or in furtherance
of, the exercise of any right, power, privilege or remedy available to Lessor or
ING hereunder or at law or in equity; PROVIDED, HOWEVER, that nothing herein
shall relieve Lessee of any obligation to execute, deliver or do, and Lessee
shall execute, deliver and do, any of the foregoing documents or acts at upon
the demand of Lessor or ING to do so.
Except as otherwise expressly provided above, no remedy referred to in this
Clause 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 subsequent Event of Default.
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CLAUSE 18. ASSIGNMENT
18.1 BENEFIT OF AGREEMENT. The terms and provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
18.2 ASSIGNMENT BY LESSEE. Lessee shall not, without the prior written
consent of Lessor, assign any of its rights or obligations hereunder.
18.3 ASSIGNMENT BY LESSOR.
(i) Lessor may, at Lessor's sole expense, having given prior written
notice to Lessee, assign all or part of its rights hereunder without
the prior written consent of Lessee; PROVIDED, HOWEVER, that any such
assignment shall not affect Lessee's rights, powers, obligations,
privileges, options and benefits available to Lessee hereunder and
shall not invalidate the U.S. Registration of the Aircraft and shall
not have a material adverse effect upon Lessee's quiet enjoyment and
use of the Aircraft during the Lease Term.
(ii) Lessee hereby acknowledges and consents to the Security Agreement
and to the creation of the security interest evidenced thereby.
Pursuant to the Security Agreement, ING has succeeded to, and has the
exclusive right to exercise, all rights, powers, privileges, options
and other benefits available to the Lessor hereunder, including all
rights to make and to give any demands, waivers and agreements under
any such Lease, to make determinations, to give and receive notices and
other communications, to take such action upon the occurrence of an
Event of Default hereunder, including all rights to exercise remedies,
to assert powers and privileges, and to make demands in connection
herewith. Lessee will furnish to ING counterparts of all writings of
any kind required to be delivered hereunder by Lessee to Lessor and
until Lessee has been notified by ING that the lien of the Security
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Agreement on the Aircraft has been released (x) Lessee shall make all
payments of Basic Rent and Supplemental Rent, Monthly Maintenance
Reserve Payments and the Security Deposit and all other amounts payable
hereunder, to ING as specified in Clause 6.1 and (y) ING shall be
entitled to the exclusion of the Lessor to succeed to and exercise all
of the rights, remedies, powers and privileges of the Lessor under this
Lease and, in this respect, the Lessee shall not, and shall not be
required to, recognize the exercise of any such right, remedy, power or
privilege by the Lessor, as applicable. In furtherance thereof, the
Lessee and the Lessor also agree that, with respect to any
instructions, directions, consents, waivers and other communications
that the Lessor is entitled to deliver to the Lessee under this Lease,
the Lessee shall only accept, and shall only act (or refrain from
acting) in accordance with, such instructions, directions, consents,
waivers and other communications that are given by ING until Lessee has
been otherwise notified by ING. Each payment made by Lessee pursuant to
the second preceding sentence shall, to the extent actually received by
ING, be deemed, as between Lessor and Lessee, to satisfy Lessee's
obligations hereunder to make such payments. This Lease shall be
subject and subordinate to the Security Agreement, but neither Lessor
nor any Person deriving from Lessor shall in the absence of an Event of
Default, take any action contrary to Lessee's rights under this Lease,
including, without limitation, the right to use and possession of the
Aircraft, except in accordance with the provisions of this Lease. The
Lessee also acknowledges that any obligations which the Lessor shall
have under this Lease shall be non-recourse to the Lessor and that for
satisfaction thereof, Lessee shall look only to Lessor's interest in
the Aircraft and/or ING. To the extent that ING satisfies any such
obligation, such amount shall, to the extent permitted by the Security
Agreement and applicable law be added to the amounts secured by the
Security Agreement.
(iii) In the event this Lease is assigned, sold, encumbered or
re-encumbered by Lessor, any assignee, transferee or mortgagee shall
agree as a condition precedent thereto not to disturb or otherwise
interfere with the quiet enjoyment by Lessee of the Aircraft
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so long as no Event of Default shall have occurred and be continuing,
and Lessee shall have received confirmation in writing, reasonably
acceptable to Lessee, that such transferee accepts all responsibilities
of Lessor under this Lease, including but not limited to, confirmation
of Lessee's right to quiet enjoyment and use of the Aircraft during the
Lease Term.
CLAUSE 19. FURTHER ASSURANCES
19.1 FURTHER ASSURANCES. Lessee shall cause to be done, executed,
acknowledged and delivered all and every such further acts, conveyances
and assurances as Lessor shall reasonably require for accomplishing the
purposes of each of the Lease Documents to which Lessor or ING is a
party, and shall promptly furnish to Lessor such information as may be
reasonably required by Lessor to enable Lessor timely to file any
reports required to be filed by it with any governmental authority
because of Lessor's ownership of the Aircraft.
19.2 PERFECTION OF LESSOR'S ETC. INTERESTS. Lessee shall, at its own
expense, take such steps as are reasonably requested by Lessor which
are necessary or appropriate to perfect or keep perfected the interests
of Lessor created or intended to be created under this Agreement and
any other document with respect to the Aircraft.
CLAUSE 20. PROTECTION OF LESSOR'S INTERESTS
If the rights of Lessor and such other persons as Lessor may specify in
the Aircraft shall be in danger, or shall be attacked directly or
indirectly, or if any legal proceedings are instituted against Lessee,
Lessor, or such other persons as Lessor may specify with respect
thereto, Lessee shall promptly give written notice thereof (to the
extent known to it) to Lessor so that all steps deemed by Lessor to be
necessary or appropriate for the defense and protection of each of
their respective rights in the Aircraft can be taken. All reasonable
costs in connection with the foregoing will be borne by Lessor or any
such other person (as the case may be),
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unless the foregoing results from the act or omission of Lessee or from
a breach of the terms of this Agreement by Lessee in which event such
costs shall be borne by Lessee.
CLAUSE 21. COSTS AND EXPENSES
21.1 PREPARATION AND NEGOTIATION OF LEASE DOCUMENTS. Except as otherwise
provided herein, each of Lessor and Lessee will be responsible for its
own costs and expenses incurred in connection with the preparation,
negotiation and execution of each of the Lease Documents, including
without limitation, the fees, expenses and disbursements of legal
counsel to such party.
21.2 ENFORCEMENT AND PRESERVATION OF RIGHTS. Lessee agrees to pay within 30
days of Lessor's first written demand all of the costs and expenses
incurred by Lessor or on its behalf incidental to the enforcement,
protection or preservation of any right or claim of Lessor under each
of the Lease Documents to which it is a party.
21.3 NON-DELIVERY DUE TO EVENT OF LOSS. In the event the Aircraft shall not
have been delivered on the Delivery Date by reason of its loss or
destruction, Lessor's commitment to lease the Aircraft hereunder shall
automatically terminate on and as of the date of such loss or
destruction.
CLAUSE 22. INSPECTION
Lessee shall arrange that, at all reasonable times during the Lease
Term, Lessor or ING or, in either case, its authorized representatives
may, during the normal business hours of Lessee inspect the Aircraft or
any part thereof and the logs, books and other records maintained
Lessee relative thereto; provided, however, that no such inspection
shall interfere with Lessee's quiet, peaceful use and enjoyment
thereof.
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In addition, Lessee shall give Lessor not less than five days' prior
notice of the performance of any "C-Check" or "D-Check" of the Airframe
so that Lessor can arrange to have a representative present during such
checks.
Notwithstanding the foregoing, Lessor shall have no duty to make any
such inspection, and Lessor shall not incur any liability, obligation
or other detriment by reason of not making any such inspection.
CLAUSE 23. NOTICES AND LANGUAGE
23.1 NOTICES. All notices, requests, demands or other communications to or
upon any party hereto shall be made in writing in English and shall be
deemed to have been duly given or made:
(a) if delivered by hand, at the time of delivery to a duly
authorized person;
(b) if made by letter, seven (7) days after having been deposited
in the mail, registered airmail postage prepaid;
(c) if given by telex, when sent with confirmed answerback (if
received during the business hours of the recipient, otherwise by
9:30 a.m. on the next Business Day);
(d) if given by facsimile, when transmitted and receipt of same has
been confirmed by telephone or facsimile machine printed
confirmation;
(e) if given by international courier, two (2) Business Days after
having been sent.
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Such notices, requests, demands or other communications shall be
dispatched to or given at:
(i) If to Lessee:
Pan American World Airways, Inc.
Address: 9300 N.W. 36th Street
Miami, Florida 33178
Telephone: (305) 873-2625
Facsimile: (305) 873-7158
(ii) If to Lessor:
EAL (Delaware) VIII Corp.
1105 North Market Street
P.O. Box 8985
Wilmington, Delaware 19899
with a copy to:
ING Lease (Nederland) B.V.
Address:
Karspeldreef 14
P.O. Box 1971
1101 CK Amsterdam-Zuidoost,
The Netherlands
Telephone: +31-20-652-5701
Facsimile: +31-20-652-5704
with a copy of all notices relating to delivery, maintenance or return
delivery matters with respect to the Aircraft to:
American Aviation Services, Inc.
911 N.W. 209th Avenue
Pembroke Pines, Florida 33029
Telephone: 954-450-7050
Facsimile: 954-450-7070
or such other addresses or number as Lessor or Lessee may specify in
writing to the other.
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CLAUSE 24. LESSOR'S RIGHTS TO PERFORM FOR LESSEE
If Lessee fails to perform any of its obligations contained herein,
Lessor may perform or discharge such obligation, and the amount of the
reasonable expenses of Lessor incurred in connection with such
performance of or compliance shall be payable to Lessor by Lessee upon
demand.
CLAUSE 25. APPLICABLE LAW AND JURISDICTION
25.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT CLAUSE
30 (SECURITY DEPOSIT) SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF FLORIDA.
25.2 SUBMISSION TO JURISDICTION. Lessee irrevocably consents that any legal
action or proceeding against it under, arising out of or in any manner
in connection herewith or any other Lease Document may be brought in
any court of the State of New York or in the United States District
Court for the Southern District of New York. Lessee, by the execution
and delivery of this Lease, expressly and irrevocably assents and
submits to the personal jurisdiction of any of such courts in any such
action or proceeding. Lessee further irrevocably consents to the
service of any complaint, summons, notice or other process relating to
any such action or proceeding by delivery thereof to it by hand or by
registered or certified mail, return receipt requested, in the manner
provided for in Clause 23 hereof. Lessee hereby expressly and
irrevocably waives any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper
venue or forum non conveniens or any similar basis. Nothing in this
Paragraph shall affect or impair in any manner or to any extent the
right of Lessor or ING to commence legal proceedings or otherwise
proceed against the Lessee in any jurisdiction or to serve process in
any manner permitted by law. LESSEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON
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OR ARISING OUT OF THIS AGREEMENT. THIS WAIVER IS IRREVOCABLE, AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.
Lessee hereby irrevocably designates, appoints and empowers CT Corporation, the
present address of which is 1633 Broadway, New York, New York 10019, as its
authorized agent to receive, for and on behalf of Lessee and its property,
service of process, when and as any legal actions or proceedings may be brought
in the courts of the United States of America for the Southern District of New
York, and such service of process shall be deemed completed upon the date of
delivery thereof to such agent, whether or not such agent gives notice thereof
to Lessee, or upon the earliest of any other date permitted by applicable law. A
copy of such process served on the agent so designated above will be forwarded
promptly by Lessor to Lessee, at its address referred to in Clause 23, but the
failure to receive such copy shall not affect in any way the service of process
on such agent as agent. Lessee agrees that it will, at all times during the
Lease Term, continuously maintain an agent to receive service of process on
behalf of itself and its properties with respect to this Agreement, and in the
event that, for any reason, the agent named above or its successor shall no
longer serve as agent of Lessee, to receive service of process in the State of
New York on its behalf, it shall promptly appoint a successor so to serve and
shall advise Lessor, thereof. Nothing herein, however, shall limit the right of
the parties to serve process in any other manner permitted by applicable law.
CLAUSE 26. ALTERATIONS TO AGREEMENT
26.1 ENTIRE AGREEMENT. This Agreement, together with the other Lease
Documents, contains the entire agreement between the parties as of the
date hereof and supersedes any previous understanding, commitment,
agreement or representation whatsoever, oral or written.
26.2 VARIATION ONLY IN WRITING. This Agreement shall not be varied except by
an instrument in writing of even date herewith or subsequent hereto
executed by both parties by their respective duly authorized
representatives.
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26.3 ENGLISH LANGUAGE. In the event that this Agreement is translated into
any language other than English, the English version of this Agreement
shall be controlling.
CLAUSE 27. CURRENCY INDEMNITY
All amounts to be paid hereunder to Lessor or Lessee shall be paid in
Dollars, in immediately available funds. Lessee acknowledges that the
specification of Dollars in this transaction is of the essence and that
Dollars shall be the currency of account in any and all events. The
obligations of Lessee or Lessor hereunder, to Lessor or Lessee,
respectively, shall not be discharged by an amount paid in another
currency, whether pursuant to a judgment or otherwise, to the extent
that the amount so paid on prompt conversion to Dollars under normal
banking procedures does not yield the amount of Dollars owing to
Lessor. In the event that any payment by Lessee or Lessor,
respectively, whether pursuant to judgment or otherwise to Lessor or
Lessee, respectively, upon conversion does not yield such amount of
Dollars, Lessor or Lessee, as the case may be, shall have a separate
cause of action against Lessee or Lessor, as the case may be, for the
additional amount necessary to yield the amount of Dollars due and
owing to Lessor or Lessee, as the case may be.
CLAUSE 28. QUIET ENJOYMENT OF AIRCRAFT
Lessor hereby covenants that, so long as no Default and no Event of
Default shall have occurred and so long as this Agreement shall not
have been otherwise breached by Lessee, Lessor shall not disturb or
interfere with Lessee's quiet and peaceful use and enjoyment of the
Aircraft and all revenues, profits and income related thereto in
accordance with the terms hereof without interference by Lessor or by
any person claiming by or through Lessor.
CLAUSE 29. SEVERABILITY
Should any one or more provisions of this Agreement be determined to be
illegal or unenforceable by a court of any jurisdiction, such
provisions shall, as to such jurisdiction,
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be ineffective to the extent of such illegality or enforceability,
without invalidating the remaining provisions hereof; provided,
however, that validity or enforceability of such provisions in any
other jurisdiction shall not be affected. Lessee agrees, as to any such
jurisdiction, to replace any provision of this Agreement which is so
determined to be illegal or unenforceable by a valid provision which
has as nearly as possible the same effect.
CLAUSE 30. SECURITY DEPOSIT
Lessee shall provide Lessor with a security deposit in the aggregate
amount of USD$ 139,000 (the "SECURITY DEPOSIT") to be paid as set forth
herein as security for the timely and faithful performance by Lessee of
all of Lessee's obligations under this Lease. Prior to the execution of
this Agreement, Lessee shall have provided to Lessor a good faith cash
deposit in the amount of USD$ 50,000. Upon the execution and delivery
by Lessor and Lessee of this Agreement, Lessee shall provide to Lessor
an additional cash deposit of USD$ 89,000. Lessee hereby creates and
grants to Lessor and to ING a lien on and security interest in all
monies, securities, accounts, and investments from time to time
comprising the Security Deposit, as security for the full and timely
payment and performance of its obligations hereunder and under the
other Lease Documents and the Other Leases. Lessee agrees to execute
and file with the appropriate governmental entities any and all
documents necessary or reasonably requested by Lessor to evidence and
perfect such security assignment in favor of Lessor. If Lessee fails to
pay Rent hereunder when due or to pay any other sums due or to perform
any of the other terms and provisions of this Lease, any other Lease
Document or any Other Lease, or is otherwise in default hereunder or
thereunder, in addition to all other rights Lessor or ING shall have
hereunder or under applicable law, Lessor or ING may use, apply or
retain all of any portion of the Security Deposit in partial payment
for sums due to Lessor or ING by Lessee, to compensate Lessor or ING
for any sums it may in its discretion advance as a result of a default
by Lessee or to apply toward losses or expenses Lessor or ING may
suffer or incur as a result of Lessee's default hereunder or otherwise
in satisfaction of Lessee's obligations. If Lessor or ING uses or
applies all of any portion of such Security Deposit, such application
shall not be deemed a cure of any Defaults, and
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Lessee shall within five (5) days after written demand therefor provide
ING with an additional cash deposit in an amount sufficient to restore
the Security Deposit to USD$ 139,000 and otherwise issued on such terms
as are approved by Lessor and failure of Lessee to do so shall be a
material breach of this Lease by Lessee. Provided no Default shall have
occurred, such Security Deposit, less only those costs directly
incurred by Lessor in connection with the termination of the Lease or
return of the Aircraft, which cost by the terms hereof are the
obligation of Lessee or for the account of Lessee, shall be terminated
and released by Lessor upon Lessee's return of the Aircraft at the end
of the Lease Term in compliance with Clause 15 hereof. Lessee shall not
be entitled to any interest earned on any Security Deposit.
CLAUSE 31. MISCELLANEOUS
31.1 RECORDATION AND FILING. Forthwith upon the execution and delivery of
this Lease and each Lease Supplement from time to time required by the
terms hereof and upon the execution and delivery of any amendment or
other supplement to this Lease, Lessee will cause this Lease and such
Lease Supplement and Acceptance Certificate or amendment or other
supplement to be duly filed and recorded, and maintained of record, in
accordance with the applicable laws of the government of registry of
the Aircraft. In addition, Lessee will promptly and duly execute and
deliver to Lessor such further documents and take such further action
as Lessor may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and to
establish and protect the rights and remedies created or intended to be
created in favor of Lessor hereunder, including, without limitation, if
requested by Lessor, at the expense of Lessee to the extent resulting
from Lessee's act or omission, the execution and delivery of
supplements or amendments hereto, each in recordable form, and all
financing statements and continuation statements, and all similar
notices required by applicable law at all times to be kept recorded and
filed in such manner and such places as the Lessor may reasonably
request.
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31.2 NO BROKERS. Each of Lessor and Lessee represents that it has not
retained any broker or finder in connection with the transactions
contemplated by the Lease Documents.
31.3 AGREEMENTS RELATING TO SECTION 1110.
(i) Lessee represents and warrants that, on the Delivery Date,
Lessee will be an "air carrier" within the meaning of the Federal
Aviation Act, operating under valid and subsisting certificates
issued by the U.S. Secretary of Transportation under Chapter 447,
Title 49, U.S. Code, and that Lessee is and on the Delivery Date
will be a "citizen of the United States" as defined in Section
40102(15) of the Federal Aviation Act. Lessee represents that, on
the Delivery Date, it will be, and covenants that thereafter it
shall maintain its status at all times as, a Certificated Air
Carrier, including, without limitation, maintaining its status as
holder of a valid and subsisting certificate, issued under Chapter
447 of Title 49, U.S. Code, within the purview of, and entitling
Lessor to the benefits and protection of, Section 1110.
(ii) The parties agree that Lessor and ING shall at all times be
entitled to the benefits and protections of Section 1110, and
Lessee shall take such actions and effect such filings as may be
necessary to enable Lessor and ING to continue to be entitled to
such benefits and protections at all times from the Delivery Date
until such time as the Aircraft is returned to Lessor or ING in
compliance with the return conditions herein and this Lease is
terminated.
(iii) It is expressly agreed that the title of Lessor to, and the
interest of Lessor and ING in, the Aircraft, and any right of
Lessor and/or ING to take possession of the Aircraft in compliance
with the provisions of this Lease, shall not be affected by
Sections 362 and 363 of the federal Bankruptcy Code.
(iv) Lessee acknowledges that this Clause is of fundamental
importance to the transactions contemplated hereby and that neither
Lessor nor ING would have
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entered into this Lease but for the rights intended to be conveyed
to Lessor and ING by this Clause and the protection and benefits of
Section 1110.
31.4 EXECUTION AND COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts which, taken together, shall
constitute one and the same instrument. This Agreement shall be deemed
executed and delivered by Lessee and Lessor when the signature page
hereof is executed and delivered by facsimile by each party to the
other party or to its counsel or delivered by hand; PROVIDED that if
delivered by facsimile, each party shall within two Business Days,
deliver an originally executed copy hereof by courier.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF the duly authorized representatives of the parties hereto
have executed this Agreement as of the date and year first above written.
PAN AMERICAN WORLD AIRWAYS, INC.,
LESSEE
By_________________________
Name:______________________
Title:_____________________
EAL (DELAWARE) VIII CORP.,
LESSOR
By_________________________
Name:______________________
Title:_____________________
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This original counterpart has been received by Lessor.
_____________, 1997
EAL (DELAWARE) VIII CORP.
By:__________________________
Name:________________________
Title:_______________________
<PAGE>
SCHEDULE A
ADDITIONAL DELIVERY CONDITIONS
In addition to the specifications as to the condition of the Aircraft
upon Delivery to the Lessee contained in Clause 2.2(iii) of the Lease Agreement,
the condition of the Aircraft upon Delivery to the Lessee shall include the
following:
1. The Airframe, Engines, APU and landing gears shall have the
respective serial numbers, hours and cycles as are set forth in
paragraph 4 of Schedule B attached to this Lease; PROVIDED, HOWEVER,
that Lessor may, prior to the Delivery Date, substitute any other
General Electric CF6-50C2 aircraft engine for any such identified
Engine or any Garret model TSCP 700-4 (or any fully interchangeable APU
equivalent) auxiliary power unit for the APU so identified, so long as,
in either case, (i) Lessor shall furnish Lessee with notice of such
substitution immediately upon becoming aware thereof; (ii) such
substituted engine or auxiliary power unit is airworthy, serviceable,
fully operational, supplied from the Aviall Engine Pool and accompanied
by all relevant Aircraft Documentation relating to engines or auxiliary
power units, as the case may be; (iii) Lessor shall make available to
Lessee all related Aircraft Documentation; and (iv) any such substitute
engine or auxiliary power unit shall comply with the requirements of
Schedule A applicable to "Engines" or the "APU"; and, upon such
substitution, such substituted engine or auxiliary power unit shall
constitute an "Engine" or the "APU" hereunder. In the event of any such
substitution, Lessor shall immediately notify Lessee thereof and shall
promptly inform Lessee of the serial number, hours and cycle
information relating to such substitution. The Aircraft shall be
airworthy and in good operating condition by international commercial
airline standards (normal wear and tear excepted) for the check level
accomplished and with all systems fully operational, including Category
III operating equipment installed (but not certified).
2. The Aircraft interior configuration shall be 24/233 (total 257) per
Lessee drawing to be provided at least 30 days prior to the Scheduled
Delivery Date. Lessor will be responsible for modifying G2 and G4
galleys to accept Lessee serving carts. As alternate (i) if Lessee
A-1
<PAGE>
provides a shipset of galleys G1-G5 including all associated parts
required for installation, Lessor will install Lessee's galley shipsets
in lieu of galleys G1-G4 currently installed or (ii) if Lessee will
deliver a G5 galley Lessor will modify the G2 and G4 galley and will
install the G5 galley. In case Lessee provides galleys Lessee will be
responsible for providing ovens, coffee makers and catering equipment
for such galleys. Lessee will inform Lessor in writing no later than
February 15, 1997 whether it will be able to deliver alternate galleys.
If no notice has been received the Aircraft will be delivered in 24/233
configuration as described above. All galleys and associated parts
required for installation will be delivered to the maintenance facility
performing the pre delivery workscope by March 1, 1997. In case ovens
and coffeemakers are provided by Lessee off-units from Lessor's galleys
will be exchanged for the units provided by Lessee.
3. [Intentionally Omitted.]
4. The Airframe, Engines and installed components shall be in
compliance with all FAR's, Airworthiness Directives and FAA mandated
engine manufacturers service bulletins. The Aircraft shall have all
deferred maintenance items, pilot logbooks, MEL/CDL and other such
deferred items rectified on a terminating action basis, unless
otherwise agreed between Lessor and Lessee.
5. All required time controlled and life limited components including
(but not limited to) checks, overhauls, inspections, actions and hard
time components shall be cleared for one CCheck cycle, which is to be
one year or 3,325 hours or 1,000 cycles (except the engines), unless
otherwise agreed between Lessor and Lessee. Landing Gear shall have
minimum two years remaining to shop overhaul.
6. The Aircraft shall be equipped with two General Electric CF6-50C2
engines with short nozzle thrust reversers. The Aircraft shall have
slat notch modification in conjunction with the short nozzle.
A-2
<PAGE>
7. Each Engine shall have completed at Lessor's sole expense a hot and
cold section borescope inspection of the Engines in accordance with the
Engine Manufacturer's Maintenance Manual. Each such borescope shall be
conducted after completion of an MPA (maximum power assurance) run
observed by a Lessee representative. The borescope shall be videotaped
and Lessee's representative shall be given the opportunity to view the
borescope.
8. Each Engine shall be within the Manufacturer's specified limits
without waiver or exemptions and no Engine shall be "under watch" or
have any overservice limit extensions.
9. The APU will be delivered in "as is where is" condition and will be
provided on "return conditions". The Revima APU Maintenance and Pooling
Contract will be amended to reflect the incorporation of this APU.
10. Lessor shall provide at its cost one set, or such number of sets as
mutually agreed upon by Lessor and Lessee, of all technical documents
relating to the Aircraft as listed in Schedule D. All airframe, engine
and component records shall be as required by FAR Part 121.380 and
shall be provided with the Aircraft. Lessor shall be responsible for
insuring that all records shall be acceptable to the FAA for
importation into the United States (if the Aircraft were previously
operated abroad), and Lessor shall provide any other document required
in order for the Aircraft to meet FAR Part 121 as such FAR Part 121
relates to the Aircraft.
11. The Aircraft shall be free of hydraulic, pneumatic, water, fuel and
waste system leaks in accordance with the Manufacturer's Maintenance
Manual. This is to be demonstrated by filling the tanks and reservoirs
to capacity as per the then-current procedure under the Manufacturer's
Maintenance Manual and performance of a functional and leak check of
all related systems. All repairs will be per the Manufacturer's
Maintenance Manual.
12. All floor, cargo and compartment panels shall be in good condition
by international airlines operating standards for aircraft fresh from a
Mid-D Check. All repairs to floor, cargo, ceiling
A-3
<PAGE>
and sidewalls shall be in accordance with the manufacturer's
maintenance procedures, and will be permanent repairs.
13. All cargo compartments and the currently installed associated
semi-automatic cargo loading systems shall be clean and in good
operating condition by airline standards. All repairs will be permanent
and in accordance with the manufacturer's standards, re-worked to
"Mid-D" Check standards.
14. Tires will have at least 3/16" of tread remaining and brakes will
have a minimum of 3/8" pin. Each Aircraft shall have Bendix brakes
installed.
15. The following Interior Reconfiguration work shall have been
completed in accordance with EA 2520-01485 Rev. B (the "EA"), or as
mutually agreed, at delivery.
(a) All lavatories shall be in good operating condition. The trim
and decor finish shall be in good condition, re-worked to "Mid-D
check standards.
(b) All carpeting, drapes and seat fabrics shall be the new Lessee
image decor similar to Aircraft A300B4 MSN 216 (N861PA).
(c) New Lessee interior decor, including vertical surfaces, floor
boards, tray tables, PSU's and PCU's shall be in like new
condition. All sidewalls, ceilings, bins and window shades shall be
painted or recovered per the EA. All surfaces shall meet the
requirements to match the decor described in the EA. Reading lights
shall be inspected and properly adjusted. Doors, door liners and
slide packs shall be in good condition.
(d) All seat cushions shall be new or freshly cleaned and seat back
cushions shall be in good condition.
A-4
<PAGE>
(e) All seat covers and other fabrics shall be delivered with
documentation certifying the retained flammability and fire
blocking characteristics.
(f) All seat belts will be teardrop buckle with blue straps (Am
Safe); the flight attendant belts will be inertial reel attach.
(g) All cabin windows shall be in good condition by either complete
window replacement or polishing to acceptable Mid "D" standards.
(h) Emergency aisle path lighting shall be Bruce Industries seat
mounted system.
(i) First class seats shall be Weber; coach seats shall be Burns or
Weber or other seats if agreed, all with underseat life vests.
(j) The Aircraft shall be wired to accept SONY Transcom video
entertainment systems with single-gun projection system and Hi 8
VCR tape recorder.
16. The galleys and associated inserts shall be reworked to "Mid-D"
check standards and the galleys shall have a certificate of sanitary
construction issued by U.S. Public Health Department. Lessee shall be
responsible for the timely request to the appropriate government agency
for such certificate.
17. The cockpit shall be painted as required to meet "Mid-D" standards,
and seats and all other items reworked to "Mid-D" check standards.
18. All FAA required interior and exterior markings and placards shall
be current, in place and legible. All placards shall be FAA approved.
Drawings of such interior and exterior markings and placards will be
provided to Lessor by Lessee.
A-5
<PAGE>
19. Fuselage shall be free of major dents, corrosion and abrasions or
any loose, pulled or missing rivets. External patches shall be of a
type consistent with the structural repair manual. Each repair shall
have proper documentation or structural repair manual reference and/or
FAA approved engineering repair drawings (including all approved data)
as applicable. A scratch and dent skin mapping shall be provided, by
Lessor, which shall be kept current by Lessee.
20. All doors including cargo doors and service doors shall be free
moving, correctly rigged and fitted with serviceable seals in
accordance with the Manufacturer's Maintenance Manual.
21. All leading edges shall be serviceable and clean in accordance with
the Manufacturer's Maintenance Manual. Any repairs to the leading edges
shall be in accordance with the Manufacturer's Maintenance Manual and
Structural Repair Manual.
22. All control surfaces shall be clean by airline standards and free
of delamination in accordance with the Manufacturer's Maintenance
Manual and Structural Repair Manual.
23. All cowlings and fairings shall be clean by airline standards and
tightly fitted in accordance with the Manufacturer's Maintenance Manual
limits.
24. All fuel tanks shall be free of contaminants.
25. The Aircraft shall be sanded or stripped and painted in Lessee's
colors based upon drawings and color specifications to be approved by
Lessee, with all FAA required decals and placards per the latest Airbus
paint drawings for Lessee A300s, which will be provided by Lessee to
Lessor not later than March 1, 1997.
26. Loose equipment shall be delivered with the Aircraft, including
galley catering equipment and LD3 containers delivered at place agreed
upon as specified in Schedule E-1.
A-6
<PAGE>
27. The avionics and cockpit arrangement will be standard to the Lessee
configuration, which will include a Honeywell dual GPS auto pilot
coupled navigation systems, Collins/Bendix radio altimeter and
Sundstrand GPWS system, Bendix TCAS, dual Bendix RDR 4B weather radar
systems with predictive windshear, and dual HF radio system. All
instruments shall be calibrated in U.S. units of measure.
28. Standard emergency equipment including FAA approved smoke detectors
and escape slide rafts shall be installed per Lessee's emergency
equipment drawing number 2560DD8833 and shall not require replacement
within one year following Delivery Date (excluding seat belt extension
pouch, resuscitator, demo equipment pouch, medical kits and emergency
cards and wheelchairs).
29. The Aircraft shall have been maintained in accordance with the
Manufacturer's maintenance and corrosion control program. The bridging
package shall be agreed upon between Lessor and Lessee prior to
February 15, 1997.
30. The Engines and APU shall be serviced to Lessee servicing
standards; the gears shall be serviced with 5606 hydraulic fluid; and
hydraulics shall be serviced with HY-Jet IV, unless otherwise specified
by Lessee before March 15, 1997.
31. The Aircraft will be weighed prior to delivery and have a current
weight and balance report in form acceptable to the FAA.
32. The Aircraft will have door slide and slide rafts delivered in all
eight (8) Aircraft positions. The Aircraft will have slide-rafts
installed at all applicable door positions. All slide-rafts and slides
shall have at least one (1) calendar year time remaining to next
overhaul.
33. The Aircraft will have center bins installed in all zones.
A-7
<PAGE>
34. [Intentionally Omitted.]
35. Logo lights will be installed and activated.
36. Flight guidance control system shall be delivered as currently
installed. ING to provide list of flight guidance components at least
30 days prior to delivery.
37. Lessor shall deactivate the wing ventilation system.
38. Lessor shall ensure the evacuation signal panel is installed and
operational.
39. The vertical speed indicator shall be compatible with Bendix TCAS
and RDR-4B weather radar system. The TCAS warnings shall be displayed
on the weather radar indicators.
40. A detailed inspection of all floor panels will be performed. All
panels not meeting the maintenance manual limits will be replaced.
A-8
<PAGE>
SCHEDULE B
FORM OF LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE, dated [ ], 1997, between
EAL (DELAWARE) VIII CORP., a Delaware corporation ("LESSOR"), and PAN AMERICAN
WORLD AIRWAYS, INC., a Florida corporation ("LESSEE").
R E C I T A L S:
A. Lessor and Lessee have entered into that certain Lease Agreement
dated as of February 17, 1997 (the "LEASE AGREEMENT") (the defined terms therein
being hereinafter used with the same meaning), relating to the lease of one
Airbus A300B4-200 aircraft described below.
B. The Lease Agreement provides for the execution and delivery by
Lessee of a Lease Supplement and Acceptance Certificate, substantially in the
form hereof, as a condition to Lessor's obligation to deliver the Aircraft.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease
Agreement, and Lessee hereby accepts and leases from Lessor under the Lease
Agreement, the following described airframe, engines and equipment:
AIRFRAME
One Airbus Model A300B4-200 airframe consisting of the following:
One airframe bearing FAA Registration Mark N865PA and Manufacturer's
Serial Number 259;
ENGINES
Two General Electric CF6-50C2 aircraft engines bearing Manufacturer's
Serial Numbers _______ and _______ (each having 750 or more rated
takeoff horsepower or the equivalent thereof);
together in each case with all parts, accessories, components, modules,
appliances and other items of equipment installed on or attached to the
above-described airframe and engines (such airframe, engines, parts,
accessories, components, modules, appliances and other items of equipment are
referred to collectively herein as the "AIRCRAFT").
<PAGE>
2. The Delivery Date of the Aircraft is the date of this Lease
Supplement and Acceptance Certificate, as set forth in the opening paragraph
hereof.
3. The Airframe, Engines and Parts have the following Hours/Cycles:
(a) Airframe:
Total hours: [__] Total Landings: [__]
[__] hours/[__] Cycles since last "C-1 Check"
[__] hours/[__] Cycles since last "C-2 Check"
[__] hours/[__] Cycles since last "Mid-D Check"
[__] hours/[__] Cycles since last "D Check"
(b) Engines:
SERIAL TOTAL TOTAL HOURS/CYCLES
POSITION NO. HOURS SINCE LAST SHOP VISIT
-------- ------ ----- ---------------------
No. 1 [__] [__] [____]/[____]
No. 2 [__] [__] [____]/[____]
CYCLES REMAINING TO NEXT
LIFE LIMITED PART REMOVAL
MSN
MSN
(c) APU: MSN
Total hours
Total Cycles
Time Since Last Shop Visit
Attached to this Lease Supplement and Acceptance Certificate as
Annex 1 is the APU Main Parts with Serial Number and Life Limited
Parts disk status sheet.
(d) Landing Gears:
SERIAL TOTAL CYCLES
POSITION NO. HOURS/CYCLES SINCE LAST OVERHAUL
-------- ------ ------------ -------------------
Nose [_____/_____] [__]
Right Main [_____/_____] [__]
Left Main [_____/_____] [__]
B-2
<PAGE>
(e) Fuel on board: _____ pounds
4. Lessee hereby confirms to Lessor that:
(a) Lessee has on the date hereof received from Lessor possession of
the Aircraft and all Technical Data and Manuals relating thereto specified in
SCHEDULE D to the Lease Agreement, all Loose Equipment specified in SCHEDULE E-1
to the Lease Agreement, all Emergency Equipment specified in SCHEDULE E-2 to the
Lease Agreement and all Avionics Equipment specified in SCHEDULE E-3 to the
Lease Agreement.
(b) The Aircraft conforms with the description and is in the condition
and equipped as required at Delivery by the Lease Agreement. The execution and
delivery of this Lease Supplement and Acceptance Certificate by Lessee shall
constitute presumptively conclusive evidence that the Lessee has accepted the
Aircraft for the purposes of the Lease, that as between Lessor and Lessee, the
Aircraft is satisfactory in all respects, and that the Aircraft complies with
the requirements of the Lease, except for those discrepancies, if any, described
in a written instrument signed by a representative of Lessee and by a
representative of Lessor on the date of this Lease Supplement and Acceptance
Certificate.
(c) The Aircraft is in all technical respects acceptable to and
accepted by the undersigned on behalf of Lessee without further inspection
and/or acceptance flights and the Aircraft is hereby unconditionally accepted by
Lessee for lease under the Lease Agreement; provided, however, that such
acceptance by Lessee is based upon certain statements of Lessor, including
information contained in the manuals and log books relating to the Aircraft
maintained by Lessor or its agents, and by this acceptance Lessee does not waive
any right or remedy it may have if such information is later discovered to have
been inaccurate or incomplete.
(d) All representations and warranties of Lessee set forth in the Lease
Agreement or any of the other Lease Documents are true and complete on the date
hereof to the same extent and with the same effect as if made again on and as of
the date hereof. Lessee has complied with and performed all of the agreements
and obligations of Lessee that are required to be complied with and performed on
or prior to the date hereof. Without limiting the generality of the foregoing,
Lessee has effected the insurance and re-insurance policies required by the
Lease Agreement.
(e) No Default and no Event of Default has occurred and is continuing
under the Lease Agreement.
(f) All necessary consents, licenses, authorizations or approvals of,
and exemptions by, such governmental or other authorities as may be necessary or
advisable to authorize the execution, delivery and performance of the Lease
Agreement by Lessee and to permit payment and remittance of all payments to be
made to Lessor in such currency or currencies, at such time, at such places and
in such manner as provided for under the Lease Agreement have been obtained and
are in full force and effect.
B-3
<PAGE>
(g) No material adverse change has occurred with respect to Lessee or
its financial condition, business, affairs, operations or prospects since the
date of the most recent audited financial information of Lessee delivered to
Lessor.
[The remainder of this page is intentionally left blank.]
B-4
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the
parties hereto have executed this Lease Supplement and Acceptance Certificate as
of the day and year first above written.
EAL (DELAWARE) VIII CORP., Lessor
By __________________________________
Name: _______________________________
Title: ______________________________
PAN AMERICAN WORLD AIRWAYS, INC.,
Lessee
By __________________________________
Name: _______________________________
Title: ______________________________
B-5
<PAGE>
ANNEX 1
APU MAIN PARTS WITH SERIAL NUMBER
AND LIFE LIMITED PARTS
B-6
<PAGE>
SCHEDULE C
LESSEE'S CORPORATE CERTIFICATE
In connection with the Lease Agreement, dated as of February 17, 1997
(the "LEASE AGREEMENT"), between EAL (DELAWARE) VIII CORP. ("LESSOR") and PAN
AMERICAN WORLD AIRWAYS, INC. ("LESSEE"), the undersigned hereby certifies to
Lessor, its successors and assigns, as follows:
(a) Attached hereto as ANNEX 1 is a true, complete and correct copy of
the charter documents and the current by-laws of Lessee, each as amended to and
in effect on the date hereof.
(b) Attached hereto as ANNEX 2 is a true, complete and correct copy of
all resolutions of the board of directors of Lessee, pursuant to which each
officer executing a Lease Document on behalf of Lessee is authorized to enter
into the transactions contemplated by the Lease to execute the Lease Agreement
and other documents contemplated by the Lease Agreement, including the Lease
Supplement and Acceptance Certificate and the Power of Attorney; such
resolutions were duly adopted by such board of directors at a meeting at which a
quorum was present and acted throughout; and such resolutions are unamended and
remain in full force and effect.
IN WITNESS WHEREOF, this Certificate has been duly executed this ____
day of _________, 1997 as of the day by an officer of Lessee, thereunto duly
authorized.
PAN AMERICAN WORLD AIRWAYS, INC., Lessee
By ____________________________
Name: ________________________
Title: Corporate Secretary
C-1
<PAGE>
SCHEDULE D
TECHNICAL DATA AND MANUALS LIST
The manuals and Aircraft (including Engine) records and historical documents set
forth below are to be delivered prior to the Scheduled Delivery Date in a
current, up-to-date status, except for film cartridge manuals, which will be in
the status received by Lessor from the immediately preceding operator.
1. AIRCRAFT DOCUMENTS
1.1 C of A for Export delivered by manufacturer/country of origin (if
available)
1.2 Current C of A
1.3 Certificate of DeRegistration (previous and current)
1.4 Weight and Balance manual
1.5 Manufacturers delivery inventory of readiness log.
1.6 Letter detailing that aircraft was maintained according to an approved
maintenance program
1.7 Certificate of Sanitation (if applicable certificate will be applied
for by Lessee)
1.8 List of SB's accomplished on the Aircraft (as provided by the previous
operators)
2. ENGINE STATUS AND TECHNICAL RECORDS
2.1 Engines last overhaul/Shop reports
2.2 Engines LLP records (traceability to birth or to Continental or
acceptable to the FAA)
2.3 Engines AD & SB status
2.4 Engines components list
2.5 Engine logbooks or acceptable records
D-1
<PAGE>
2.6 Engines last month trend monitoring sheets (if available)
3. AUXILIARY POWER UNIT STATUS AND TECHNICAL RECORDS
3.1 APU last overhaul/Shop report
3.2 APU LLP records (traceability to birth or to Continental)
3.3 APU components list
3.4 APU AD & SB status
3.5 APU logbook or acceptable records
4. LANDING GEAR STATUS AND TECHNICAL RECORDS
4.1 Landing gear last overhaul report
4.2 Landing Gear Components records
4.3 Landing gear records (traceability to birth or to Continental)
4.4 Landing gear to have data plates affixed
5. AIRCRAFT ENGINEERING DATA AND TECHNICAL RECORDS DOCUMENTS
5.1 Approved interior configuration drawing will be
provided by Lessee
5.2 List and copy of Supplemental Type Certifications (STC)
5.3 Airworthiness Directives (AD) current and repetitive Inspection list
5.4 Airworthiness Directives (AD) compliance sheets and
alternate means of compliance sheets
5.5 Rotable Hard Time Components current inventory list
5.6 Maintenance Program status report of routine inspections
5.7 List of major repairs and alterations; with repair certifications data
acceptable to the FAA
5.8 Time Controlled Components list (HT) with last accomplishment data,
including serviceable tags
D-2
<PAGE>
5.9 FAA 121 Certificate of Conformity for interior with FAR 121.312 (with
Burn Certificate)
5.10 Copy of Maintenance and Inspection Manual (Procedure)
5.11 Last Hydraulic System Oil analysis report
5.12 Aircraft Reliability Program (engines, airframe and components) if
available
5.13 "C" & "D" checks worksheets, tally lists and release certificates
5.14 Emergency Equipment Drawing and location drawings
5.15 Corrosion Prevention and Control Program (CPCP) status and previous
program including all findings records
5.16 Aging Aircraft Program status and previous program including all
findings records
5.17 SSID status and previous program including all findings records
5.18 Fleet Leader Program (Sampling) status and previous program including
all findings records
5.19 Letter of QA inspector detailing procedures of computerized records
syst.
5.20 Letter of QA inspector that all "RECORDS" data are within accomplished
5.21 Letter detailing any major INCIDENTS/ACCIDENTS with certification data
5.22 Flight Recorder calibration sheet and parameter check results
5.23 Last calibration check Altimeters, Airspeed incl. and ATC Transponder
test
5.24 Status of (SB's, EA, EO) as provided by previous operator information
must include method of compliance, date of accomplishment and
signature of person accomplishing work
5.25 Worksheets for last check accomplished
5.26 Last year's Log Book pages
5.27 Avionics equipment list
5.28 Continental DUJX list
6. WEIGHT AND BALANCE DATA
6.1 Last Weight and Balance report
D-3
<PAGE>
6.2 Weight and Balance current status and current equipment listing
7. [INTENTIONALLY OMITTED.]
8. GENERAL INFORMATION
8.1 Dents and Patches List
8.2 Cross-reference from Continental part nos. to Manufacturer's part nos.
(Lessor's best efforts to deliver).
9. AIRCRAFT MANUALS
9.1 FAA Approved Aircraft Flight Manual (AFM)
9.2 Quick Reference Handbook
9.3 Minimum Equipment List (MMEL) Manufacturer
9.4 Weight & Balance Control and Loading Manual
9.5 Illustrated Parts Catalog (IPC) EAL microfilm
9.6 Aircraft Maintenance Manual (AMM) microfilm
9.7 Aircraft Wiring Manual (AWM) microfilm
9.8 Aircraft Schematics Manual (ASM) microfilm (as provided from previous
operator)
9.9 Aircraft Wiring List (AWL) microfilm number (as provided from previous
operator)
9.10 Powerplant Illustration Parts Catalog (IPC) microfilm (as provided
from previous operator)
9.11 Powerplant Maintenance Manual (MM) microfilm (as provided from
operator)
9.12 Component Maintenance & Overhaul Manual (Lessee will get manual from
Manufacturer and ING will reimburse for costs associated therewith)
9.13 Interior Furnishings (Continental tapes)
9.14 Temporary Revisions for microfilms
D-4
<PAGE>
9.15 Fault Isolation Manual/FRM (FIM) (if available)
9.16 R.T.O.L.W. Charts A300B4
9.17 Electrical load analysis manual (if available to Lessor with
reasonable efforts)
D-5
<PAGE>
SCHEDULE E-1
LOOSE EQUIPMENT LIST
Ovens
Oven Inserts
Oven Racks
M/S Trolleys
Ice Drawers
Soda Drawers
Plastic Drawer (Yellow, Blue)
Food Containers
Waste Containers
LD3 Containers
<PAGE>
SCHEDULE E-2 - EMERGENCY EQUIPMENT LIST
- --------------------------------------------------------------------------------
QTY LOCATION
--- --------
COCKPIT
-------
First Aid Kit 1 Cockpit
Fire Axe 1 F/E Station
Smoke Goggles 5 Crew Seats
Fire Extinguisher (Kidde 1211) 1 Cockpit
Life Jackets 5 Crew Seats
Smokehood 1 Cockpit
Portable 02 Bottle & Full Face Mask 1 Cockpit
Landing Gear Pins 3 Cockpit
AVIONIC COMPARTMENT
-------------------
Fire Extinguisher (Kidde 1211) 1 Avionic Comp.
CABIN
-----
First Aid Kits 2 First Bin LH/RH
First Aid Kits 2 Last Bin LH/RH
Emergency Automatic Radio Beacons 2 First/Last Bin RH
Hand Megaphones 2 First/Last Bin RH
Fire Extinguishers (Kidde 1211) 4 1L, 2L, 3L, 4L
Fire Extinguishers H20 3 1R, 2R, 4R
Smokehoods (PBE) 4 1L, 2L, 3L, 4L
Portable 02 Bottles and Masks 9 Att. 1L, 1R, 2L, 2R, 3L, 4L,
4R
P.S.U.'s Tools 6 Att. 4R
- --------------------------------------------------------------------------------
E-2-1
<PAGE>
- --------------------------------------------------------------------------------
Seatbelts Extension Pouch 1 First Bin LH
Emergency Portable Flashlights 9 Att. 1L, 1R, 2L, 2R, 3L,
3R, 4L, 4R
Safety Strap Flags 8 1L, 1R, 2L, 2R, 3L, 3R, 4L,
4R
Safety Pins 8 1L, 1R, 2L, 2R, 3L, 3R, 4L,
4R
Cockpit Door Key 1 Galley 1
Seatbelts Pax 254 Each Seat
Life Jackets Crew 9 Crew Seats
Life Jackets Pax 254 Each Seat
Life Jackets Spare (Adults) 24 Fwd Bin, 3R, Aft Bins
- --------------------------------------------------------------------------------
E-2-2
<PAGE>
SCHEDULE E-3
AVIONICS EQUIPMENT LIST
- --------------------------------------------------------------------------------
ITEM NO. DESCRIPTION
-------- -----------
1 SRS computer
2 GPWS computer
3 Altitude sw unit
4 Instrument comparitor
5 Compass coupler #1
6 Compass coupler #2
7 Compass sw unit
8 VOR adaptor
9 ILS # 1
10 ILS # 2
11 VOR # 1
12 VOR # 2
13 Pitch compensation comp # 1
14 Pitch compensation comp # 2
15 Autothrottle computer
16 Longitudinal computer # 1
17 Longitudinal computer # 2
18 Lateral computer # 1
19 Lateral computer # 2
20 Logic computer # 1
21 Logic computer # 2
22 Pitch trim computer # 1
23 Pitch trim computer # 2
24 A/S yaw computer # 1
25 A/S yaw computer # 2
- --------------------------------------------------------------------------------
E-3-1
<PAGE>
- --------------------------------------------------------------------------------
ITEM NO. DESCRIPTION
-------- -----------
26 AFCS computer # 1
27 AFCS computer # 2
28 ADC computer # 1
29 ADC computer # 2
30 Artificial feel computer # 1
31 Artificial feel computer # 2
32 ATC computer # 1
33 ATC computer # 2
34 VHF # 1
35 VHF # 2
36 DME # 1
37 DME # 2
38 Gyro # 1
39 Gyro # 2
40 Gyro # 3
41 Pneumatic system controller # 1
42 Pneumatic system controller # 2
42 APU pack temp controller
44 Windshield temp controller # 1
45 Windshield temp controller # 2
46 Windshield temp controller # 3
47 Windshield temp controller # 4
48 N-1 Limit computer
49 Fuel electric unit
50 AVM
51 Flap/Slat assy # 1
52 Flap/Slat assy # 2
- --------------------------------------------------------------------------------
E-3-2
<PAGE>
- --------------------------------------------------------------------------------
ITEM NO. DESCRIPTION
-------- -----------
53 Low speed allerons
54 Anti-skid control box
55 Proximity sw
56 Time base unit
57 External power control unit
58 HF Transceiver # 1
59 HF Transceiver # 2
60 Public address # 1
61 Public address # 2
62 Annunciator light dimmer
63 FDAU
64 Master warning computer
65 Audio warning computer
66 Smoke detector unit
67 Radar transceiver # 1
68 Radar transceiver # 2
69 DFDR
70 Radio altimeter # 1
71 Radio altimeter # 2
72 ADF Receiver # 1
73 ADF Receiver # 2
74 Selcal
75 TCAS (Traffic Collission Avoidance System)
76 Predictive Windshear
77 GPS (Global Positioning System)
- --------------------------------------------------------------------------------
E-3-3
<PAGE>
SCHEDULE F
REDELIVERY CONDITION
(i) Except as otherwise provided herein, the Aircraft (including its
installed engines) will, at Lessee's expense, be redelivered to Lessor
in the configuration, status and condition described in this Schedule
F. The Aircraft will have installed at Lessee's cost a current and
valid FAA Certificate of Airworthiness in accordance with FAR Part 121.
The Aircraft (including its associated records, manuals and documents)
at delivery will be in compliance with all outstanding FAR's and FAA
Airworthiness Directives (including but not limited to CPCP, SSID and
fleet leader programs), and any other U.S. regulatory requirements
issued or published in the Federal Register which by their terms have
compliance dates prior to the Redelivery Date, or within twelve (12)
months or 3325 flight hours or 1000 cycles thereafter, as applicable,
or to the limit of the next applicable inspection period if the
inspection period is less than 3325 hours, 1000 cycles or 12 months,
all in accordance with FAA compliance with each Airworthiness
Directive. Aircraft Documentation must be acceptable to and approved by
the FAA. The Aircraft will be redelivered fresh out of the applicable
required C-check's. This shall include the B-check. The Aircraft shall
also be cleared of the applicable and required CPCP, SSID and fleet
leader tasks. A specific bridging program will be agreed upon in
writing between Lessor and Lessee. The Aircraft will be in compliance
with the manufacturer's original type certificate specifications as
revised up to the Redelivery Date, including any approved repairs or
modifications, with appropriate FAA approved maintenance releases, and
will be in compliance with the requirements for operation in accordance
with Lessee's FAA approved FAR Part 121 operations specifications. The
Aircraft will be painted white and have installed therein a full
shipset of LD-3 cargo containers, galley catering, emergency and other
loose equipment per Schedule E-1 and E-2.
(ii) Lessee will be responsible for payment of the cost of redelivering
the Aircraft as outlined herein.
In addition to the general requirements as to the condition of the
Aircraft upon Redelivery to Lessor set forth above, the condition of the
Aircraft upon Redelivery to the Lessor shall specifically include the following:
1. The Aircraft shall be in good operating condition by international
commercial airline standards (normal wear and tear excepted) for the
check level accomplished, and with all systems fully operational,
including Category III operating equipment installed (but not
certified).
2. The Aircraft interior configuration shall be the same as at the
Delivery Date, unless otherwise agreed between Lessor and Lessee in
writing.
F-1
<PAGE>
3. [Intentionally Omitted].
4. The Airframe, Engines and installed components shall be in
compliance with all FAR's, Airworthiness Directives and FAA mandated
engine manufacturers service bulletins. The Aircraft shall have all
deferred maintenance items, pilot logbooks, MEL/CDL and other such
deferred items rectified on a terminating action basis, unless
otherwise agreed between Lessor and Lessee.
5. All required time controlled and life limited components including
(but not limited to) checks, overhauls, inspections, actions and hard
time components shall be cleared for one C-Check interval, as
applicable, which is to be one year or 3,325 hours or 1,000 cycles
(except the engines), unless otherwise agreed between Lessor and
Lessee. Landing gear shall have a minimum two years remaining to shop
overhaul.
6. The Aircraft shall be equipped with two General Electric CF6-50C2
engines with short nozzle thrust reversers in a condition suitable for
operation within the Manufacturer's Maintenance Manual limits. The
Aircraft shall have slat notch modification in conjunction with the
short nozzle. The Engines have been maintained to an AVIALL build
standard pursuant to the AVIALL Engine Maintenance and Pooling Contract
or an equivalent standard to be agreed upon by Lessor and Lessee.
7. Each Engine shall have completed, at Lessee's sole expense, a hot
and cold section borescope inspection of the Engines in accordance with
the Maintenance Manual. Each such borescope shall be conducted after
completion of an MPA (maximum power assurance) run observed by a Lessor
representative. The borescope shall be videotaped and Lessor's
representative shall be given the opportunity to view the borescope.
8. Each Engine shall be within the Manufacturer's specified limits
without waiver or exemptions and no Engine shall be "under watch" or
have any overservice limit extensions.
9. The APU will be re-delivered in serviceable condition. The condition
of the APU on the Expiration Date shall be compared with its condition
on the Delivery Date and (a) if the number of Airframe Flight Hours
since restoration as at the Expiration Date is greater than the number
of Airframe Flight Hours since restoration as at the Delivery Date,
Lessee shall pay compensation to Lessor at the rate of US$55 multiplied
by the difference in Airframe Flight Hours resulting from such
comparison; or (b) if the number of Airframe Flight Hours since
restoration as at the Expiration Date is less than the number of
Airframe Flight Hours since restoration as at the Delivery Date, Lessor
shall pay compensation to Lessee at the rate of US$55 multiplied by the
difference in Airframe Flight Hours resulting from such comparison.
F-2
<PAGE>
In addition to the above adjustment, an additional adjustment of the
ATSCP-700 life limited parts shall take place according to the
following formula:
7 CSNn termination - CSNn start
[ ] _______________________ x P (LLPn) termination
n = 1 0.9 x ULn termination
CSNn termination = cycles since new of LLPn at the Expiration Date
CSNn start = cycles since new of LLPn at the Delivery Date
ULn termination = ultimate life, the theoretical maximum number
of cycles of LLPn as published in the Garrett
TSCP-700 maintenance overhaul manual in effect on
the Expiration Date
P(LLPn)termination = Garrett's list price of life limited part n
installed in the power plant, in effect at the
Expiration Date
n = all LLP's in the power plant at the Expiration
Date
7 = number of LLP's in one power plant
If on the Expiration Date, the sum of the above formula is (a)
positive, then Lessee shall pay compensation to Lessor in the amount
defined by the above formula; or (b) negative, then Lessor shall pay
compensation to Lessee in the absolute amount defined by the above
formula.
It is a precondition to any payment by Lessor to Lessee pursuant to
this Schedule F, that (a) no Event of Default shall have occurred and
be continuing on the Expiration Date, (b) Lessee shall have returned
the Aircraft to Lessor in the manner and in the condition required by
this Lease Agreement, and (c) Lessee shall have maintained the APU in
accordance with the agreed upon Maintenance Program and otherwise in
accordance with the terms of this Lease Agreement throughout the Lease
Term.
The APU shall have been maintained in accordance with the Revima APU
Maintenance and Pooling Contract throughout the Lease Term and shall be
delivered within the parameters set forth in such Contract or shall
have been maintained to an equivalent standard to be agreed upon by
Lessor and Lessee.
10. Lessee shall provide at its cost one set, or such number of sets as
mutually agreed upon by Lessor and Lessee, of all technical documents
relating to the Aircraft as listed in Schedule D. All airframe, engine
and component records shall be as
F-3
<PAGE>
required by FAR Part 121.380 and shall be provided with the Aircraft.
Lessee shall be responsible for insuring that all records shall be
acceptable to the FAA. Lessee shall provide any other document required
in order for the Aircraft to meet FAR Part 121.
ING and Lessor shall be entitled to use (and to make available to
subsequent lessees) Lessee's Maintenance Program for the Aircraft, and
Lessee shall cooperate with ING and Lessor in connection therewith,
subject, however, to the execution by such lessee of an appropriate
indemnity in favor of Lessor and Lessee for the use of such Maintenance
Program and actions and omissions by such lessee.
11. The Aircraft shall be free of hydraulic, pneumatic, water, fuel and
waste system leaks in accordance with the Manufacturer's Maintenance
Manual. This is to be demonstrated by filling the tanks and reservoirs
to capacity as per the then-current procedure under the Manufacturer's
Maintenance Manual and performance of a functional and leak check of
all related systems. All repairs will be per the Manufacturer's
Maintenance Manual.
12. All floor, cargo and compartment panels shall be in good condition
by international airlines operating standards (normal wear and tear
excepted) for aircraft fresh from a "C" check. All repairs to floor,
cargo, ceiling and sidewalls shall be in accordance with the
Manufacturer's maintenance procedures, and will be permanent repairs
reworked to "C Check" standards.
13. All cargo compartments and the currently installed associated
semi-automatic cargo loading systems shall be clean and in good
operating condition by airline standards. All repairs will be permanent
and in accordance with manufacturer's standards, reworked to "C-Check"
standards.
14. Tires will have at least 3/16" of tread remaining and brakes will
have a minimum of 3/8" pin. The Aircraft shall have Bendix brakes
installed.
15. The following interior Reconfiguration work shall have been
completed in accordance with FA 2520-01485 Rev. B (the "EA"), or as
mutually agreed, at Redelivery.
(a) All lavatories shall be in good operating condition. The trim
and decor finish shall be in good condition, reworked to "C" check
standards.
(b) All carpeting, drapes and seat fabrics shall be in good
condition.
(c) Lessee interior decor, including vertical surfaces, floor
boards, tray tables, PSUs and PCUs shall be in a like new
condition. All sidewalls, ceilings, bins and window shades shall be
painted or recovered per the EA. All surfaces shall meet the
requirements to match the decor described in the EA. Reading
F-4
<PAGE>
lights shall be inspected and properly adjusted. Doors, door
liners, slides and slide rafts shall be in good condition.
(d) All seat cushions shall be new or freshly cleaned and seat back
cushions shall be in good condition.
(e) All seat covers and other fabrics shall be delivered with
documentation certifying the retained flammability and fire
blocking characteristics.
(f) All seat belts will be teardrop buckle with blue straps (Am
Safe); the flight attendant belts will be inertial reel attach.
(g) All cabin windows shall be in good condition by either complete
window replacement or polishing to acceptable "C" standards.
(h) Emergency aisle path lighting shall be Bruce Industries seat
mounted system.
(i) First class seats shall be Weber; coach seats shall be Burns or
Weber, all with underseat life vests.
(j) The Aircraft shall have installed SONY Transcom video
entertainment systems with single-gun projection system and Hi 8
VCR tape recorder.
16. The galleys and the associated inserts shall be reworked to "C"
check standards and the galleys shall have a certificate of sanitary
construction issued by the U.S. Public Health Department.
17. The cockpit shall be "touched up" and reworked to "C" check
standards. Seats and all other items shall be reworked to "C" check
standards.
18. All FAA required interior and exterior markings and placards shall
be current, in place and legible. All placards shall be FAA approved.
19. Fuselage shall be free of major dents, corrosion and abrasions or
any loose, pulled or missing rivets. External patches shall be of a
type consistent with the structural repair manual. Each repair shall
have proper documentation or structural repair manual reference and/or
FAA approved engineering repair drawings (as applicable). A current
scratch and dent skin mapping shall be provided by Lessee.
20. All doors including cargo doors and service doors shall be free
moving, correctly rigged and fitted with serviceable seals in
accordance with the Manufacturer's Maintenance Manual.
21. All leading edges shall be serviceable and clean in accordance with
the Manufacturer's Maintenance Manual. Any repairs to the leading edges
shall be in
F-5
<PAGE>
accordance with the Manufacturer's Maintenance Manual and Structural
Repair Manual.
22. All control surfaces shall be clean by airline standards and free
of delamination in accordance with the Manufacturer's Maintenance
Manual and Structural Repair Manual.
23. All cowlings and fairings shall be clean by airline standards and
tightly fitted in accordance with the Manufacturer's Maintenance Manual
limits.
24. All fuel tanks shall be free of contaminants.
25. The Aircraft shall be sanded or stripped and painted white, with
all FAA required decals and placards per the latest Airbus drawings.
26. One full shipset of loose equipment, as listed in Schedule E-1
shall be re-delivered to Lessor.
27. The avionics and cockpit arrangement will be standard to the Lessee
configuration, which will include, but will not be limited to, a
Honeywell dual GPS auto pilot coupled navigation systems,
Collins/Bendix radio altimeter and Sundstrand GPWS system, Bendix TCAS,
dual Bendix RDR 4B weather radar systems with predictive windshear, and
dual HF radio system. All Instruments shall be calibrated in U.S. units
of measure.
28. Standard emergency equipment including FAR approved smoke detectors
and escape slide rafts shall be installed per Lessee's emergency
equipment drawing number 2560DD8833 and shall not require replacement
within one year following the Redelivery Date.
29. The Aircraft shall have been maintained in accordance with the
Manufacturer's maintenance and corrosion control program. The bridging
package shall be agreed upon between Lessor and Lessee.
30. The Engines and APU shall be serviced to Lessee servicing
standards; the gears shall be serviced with 5606 hydraulic fluid; and
hydraulics shall be serviced with HY-Jet IV, unless otherwise specified
by Lessee reasonably in advance of redelivery.
31. The Aircraft will be weighed prior to redelivery and have a current
weight and balance report in form acceptable to the FAA.
32. The Aircraft will have door slide and sliderafts redelivered in all
eight (8) Aircraft positions. The Aircraft will have sliderafts
installed at all applicable door positions. All sliderafts and slides
shall have at least one (1) calendar year time remaining to next
overhaul.
F-6
<PAGE>
33. The Aircraft will have center bins installed in all zones.
34. [Intentionally Omitted.]
35. Logo lights will be installed and activated.
36. Flight guidance control system shall be delivered as currently
installed. Lessee to provide list of flight guidance components at
least 30 days prior to redelivery.
37. [Intentionally Omitted.]
38. Lessee shall ensure the evacuation signal panel is installed and
operational.
39. The vertical speed indicator shall be compatible with Bendix TCAS
and RDR-4B weather radar system. The TCAS warnings shall be displayed
on the weather radar indicators.
40. A detailed inspection of all floor panels will be performed. All
panels not meeting the maintenance manual limits will be replaced.
41. Lessee shall provide all technical documents relating to the
Aircraft as listed in Schedule D and received by Lessee at Delivery
including copies of all engineering orders, complete records of AD and
Service Bulletin compliance and up-to-date copies of manufacturers
manuals (including supplements) relating to the Airframe, Engines,
interior configurations, components and APU, all in compliance with FAA
regulations. All airframe, engine and component records shall be as
required by FAR Part 121.380 and shall be provided with the Aircraft.
42. The Aircraft shall be free from all Liens (except for Lessor
Liens). In the event any engine not owned by Lessor shall be delivered
with the Airframe, such engine shall be satisfactory to Lessor, free
and clear of Liens, suitable for use on such Airframe and shall have
the value and utility at least equal to, and be in as good operating
condition (including no greater number of Flight Hours or Cycles
accumulated on such engine) as the Engine that should have been
returned, assuming such Engine which should have been returned was in
the condition and repair as required by the terms of the Lease
immediately prior to such required return.
43. The Aircraft shall have installed all optional no charge vendors'
and manufacturers' service bulletin kits theretofore received by Lessee
for the Aircraft, or to the extent received but not installed, such
kits shall be furnished free of charge to Lessor at redelivery.
44. The Aircraft (other than the Engines and the APU subject to the
AVIALL Engine Maintenance and Pooling Agreement and the Revima APU
Maintenance and Pooling Contract, respectively) (or other equivalent
standard agreed upon by Lessor and
F-7
<PAGE>
Lessee) shall have been maintained until redelivery in accordance with
the Lessee's approved Maintenance Program and treated at a standard
equal to all other aircraft (if any) in Lessee's fleet.
F-8
<PAGE>
SCHEDULE G
FORM OF MONTHLY STATUS REPORT
Operator :________________ REPORTING
month :________________
A/C Type :________________
Serial number :________________
Registration :________________
AIRFRAME
Block hours/min. HRS________MIN________
Flight hours/min. HRS________MIN________
Cycles/landings :_____________________
Total Time Since New HRS________MIN________
Total Cycles Since New :_____________________
ENGINES
Airframe Registration :______________
POSITION # 1 POSITION # 2
Serial Number :_______________ :
Flight hours/min. HRS________MIN________ HRS_______MIN_______
Cycles :_____________________
__________________________
Total Time Since New HRS________MIN________ HRS_______MIN_______
Total Cycles Since New :_____________________
__________________________
Time Since Last Overhaul HRS________MIN________ HRS_______MIN_______
Cycles Since Last Overhaul :_____________________
__________________________
APU
Airframe Registration :______________
Serial number :______________
Running hours/min. HRS_________MIN________
Cycles :______________________
Total Time Since New HRS_________MIN________
<PAGE>
Total Cycles Since New :______________________
Time Since Last Overhaul HRS_________MIN________
Cycles Since Last Overhaul :______________________
NOTE: REMOVAL AND INSTALLATION OF ENGINES AND APU MUST ALSO
BE REPORTED MONTHLY BY MEANS OF THIS FORM MENTIONING
REMOVAL DATE AND HOURS AND CYCLES RUN DURING THIS MONTH.
<TABLE>
<CAPTION>
COMPONENTS
- --------------------------------------------------------------------------------
ITEM PART NO. SERIAL NO. DESCRIPTION POSITION TSO CSO DATE IN/OUT TECH LOG
- ---- -------- ---------- ----------- -------- --- --- ---- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 IN
OUT
2 IN
OUT
3 IN
OUT
4 IN
OUT
5 IN
OUT
6 IN
OUT
7 IN
OUT
8 IN
OUT
9 IN
OUT
10 IN
OUT
11 IN
OUT
12 IN
OUT
13 IN
OUT
14 IN
OUT
15 IN
OUT
- --------------------------------------------------------------------------------
</TABLE>
G-2
<PAGE>
SCHEDULE H
FORM OF RETURN ACCEPTANCE CERTIFICATE
Date____________,
1. PAN AMERICAN WORLD AIRWAYS, INC., Lessee, and EAL (DELAWARE) VIII
CORP., Lessor, have entered into that certain Lease Agreement dated as
of [ ____________ ], 1997 (the "Lease Agreement"). Words used herein
with capital letters and not otherwise defined will have the meanings
set forth in the Lease Agreement.
2. Lessor has this day of , (Time: ) at received from Lessee possession
of:
(a) One (1) Airbus A300B4-203 aircraft, bearing Manufacturer's
Serial Number ____, together with two (2) General Electric CF6-50C2
engines bearing Manufacturer's Serial Numbers [ _______ ] and [
_______ ], all Parts attached thereto and thereon in an airworthy
condition; and
(b) All Aircraft Documentation, including the usual and customary
manuals, logbooks, flight records and historical information
regarding the Aircraft, Engines and Parts, as specified in Schedule
D to the Lease Agreement.
3. Lessee represents that the Airframe, Engines and Parts have the
following hours/Cycles:
(a) Airframe:
Total hours __________ Total Landings ______ _____
hours/_____Cycles since last "D-Check" _____
hours/_____Cycles since last "Mid-D Check" _____
hours/_____Cycles since last "C-Check" _____
hours/_____Cycles since last "A-Check"
(b) Engines:
SERIAL TOTAL TOTAL HOURS/CYCLES
POSITION NO HOURS SINCE LAST SHOP VISIT
-------- ------ ----- ---------------------
(c) APU: MSN _____
Total hours _________ Total Cycles __________
H-1
<PAGE>
(d) Landing Gears:
HOURS/CYCLES SINCE LAST
SERIAL TOTAL HOURS/CYCLES OVERHAUL
POSITION NO HOURS TO NEXT SCHEDULED REMOVAL
-------- ------ ----- -------------------------
Nose
Right Main
Left Main
(e) Status of components or Parts with time/Cycle and calendar
limits:
(f) Fuel on board at return:______ pounds (_______ gallons)
4. Physical possession of the above specified Airframe, Engines, Parts
and documentation relating thereto are hereby accepted by Lessor as
being in compliance with the Redelivery Conditions specified in
Schedule F to the Lease; provided, however, that such acceptance by
Lessor is based upon certain statements of Lessee, including
information contained in the manuals and log books relating to the
Aircraft maintained by Lessee or its agents, and by this acceptance
Lessor does not waive any right or remedy it may have if such
information is later discovered to have been inaccurate or incomplete.
5. This Return Acceptance Certificate is executed and delivered by the
parties at [location].
H-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Return
Acceptance Certificate to be executed on behalf of Lessor as of the day and year
first above written.
EAL (DELAWARE) VIII CORP., LESSOR
By:________________________________
Name:______________________________
Title:_______________________________
PAN AMERICAN WORLD AIRWAYS,
INC., LESSEE
By:________________________________
Name:______________________________
Title:_______________________________
H-3
<PAGE>
SCHEDULE I
POWER OF ATTORNEY
The undersigned, PAN AMERICAN WORLD AIRWAYS, INC., a corporation with
an office located at 9300 NW 36th Street, Miami, Florida 33178 (together with
its successors and assigns, the "GRANTOR"), by this instrument, DOES HEREBY
CONSTITUTE AND APPOINT ING LEASE (NEDERLAND) B.V., a corporation existing under
the laws of the Kingdom of the Netherlands, with its principal office at
Karspeldreef 14, 1101 CK Amsterdam-Zuidoost, 1000 BZ Amsterdam, The Netherlands,
together with its successors and assigns (the "Grantee"), as the true and lawful
agent and attorney-in-fact for Grantor, with full power of substitution, to do
any of the following in connection with the following described aircraft and
related property and assets (herein collectively called the "AIRCRAFT"):
The Airbus Industrie model A300B4-200 aircraft bearing manufacturer's
serial number 259 and the two General Electric model CF6-50C2 aircraft
engines bearing manufacturer's serial numbers _______ and _______,
together with all parts, components, accessories, equipment related
thereto, and all additions thereto and replacements thereof, and all
operating, maintenance, repair and overhaul manuals, logs, records and
data;
all pursuant to the Lease Agreement, dated as of February 17, 1997 (as
supplemented, amended or otherwise in effect from time to time, the "LEASE"),
between Grantor, as lessee, and EAL (Delaware) VIII Corp., as lessor ("LESSOR"):
(i) to collect, receive, pay, disburse, enforce and apply, any monies,
collateral, assets or property held or available hereunder or in respect hereof,
or under any other Lease Document or in respect thereof, (ii) to effect any
grant, conveyance, lease or other transfer or application of any collateral,
assets or property, (iii) to effect the cancellation and de-registration of the
Aircraft from the Aircraft Registry of the United States Federal Aviation
Administration or any other civil aviation authority on which the Aircraft may
at any time be registered during the Lease Term; (iv) to export and remove from
the United States of America the Aircraft and all related or installed aircraft
engines, parts and equipment and all related maintenance, repair, overhaul and
operating records, logs, books and other data; (v) to negotiate, complete,
execute, deliver, present, file and record any agreement, demand, request,
consent, document or instrument referred to, contemplated by or otherwise
incident to the de-registration, repossession, removal and export of the
Aircraft or the exercise of any other right, power, privilege or remedy under
the Lease or available to any Grantee at law or in equity; and (vi) to take any
other action incidental to, or in furtherance of, the exercise of any right,
power, privilege or remedy available to Lessor or ING hereunder or at law or in
equity.
Each Grantee, acting either alone or with the other Grantee, is hereby
authorized and empowered to take and to perform all actions that it reasonably
deems necessary or appropriate
I-1
<PAGE>
This Power of Attorney is coupled with an interest and is not revocable
by the Grantor for any reason or under any circumstance whatsoever, and shall
not expire until the payment, performance and satisfaction in full of all of
Grantor's obligations and liabilities under the Lease, which payment,
performance and satisfaction may be evidenced only by the written instrument
signed by the Grantees acknowledging such payment, performance and satisfaction.
This Power of Attorney shall be governed and construed in accordance
with the laws of the State of New York, United States of America.
IN WITNESS WHEREOF, this Power of Attorney has been duly executed by or
on behalf of Grantor this _____ day of _______________, 1997.
PAN AMERICAN WORLD AIRWAYS, INC.
By:________________________________
Name:______________________________
Title:_______________________________
I-2
<PAGE>
SCHEDULE J
CERTAIN HARD TIME CONTROLLED ITEMS
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,414,027
<SECURITIES> 0
<RECEIVABLES> 7,760,505
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,862,753
<PP&E> 9,130,750
<DEPRECIATION> (399,998)
<TOTAL-ASSETS> 46,370,307
<CURRENT-LIABILITIES> 19,397,469
<BONDS> 0
0
15,000,000
<COMMON> 1,126
<OTHER-SE> (1,803,168)
<TOTAL-LIABILITY-AND-EQUITY> 46,370,307
<SALES> 21,772,768
<TOTAL-REVENUES> 21,772,768
<CGS> 36,567,869
<TOTAL-COSTS> 36,567,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (20,514)
<INCOME-PRETAX> (14,556,588)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,556,588)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,556,588)
<EPS-PRIMARY> (1.33)
<EPS-DILUTED> (1.33)
</TABLE>
