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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 JUNE 30, 1996
Commission File Number 0-27238
WESTERN PACIFIC AIRLINES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 86-0758778
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
2864 SOUTH CIRCLE DRIVE, SUITE 1100
COLORADO SPRINGS, COLORADO 80906
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (719) 579-7737
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 [ ]
As of August 1, 1996 there were 13,353,150 shares of Common Stock of the
registrant issued and outstanding.
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<PAGE>
WESTERN PACIFIC AIRLINES, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE NUMBER
-----------
ITEM 1. FINANCIAL INFORMATION
Balance Sheets
June 30, 1996 and December 31, 1995 3
Statements of Operations
Three Months ended June 30, 1996 and 1995 4
Six Months ended June 30, 1996 and 1995
Statements of Cash Flows
Six Months ended June 30, 1996 and 1995 5
Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 6
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
<PAGE>
<TABLE>
WESTERN PACIFIC AIRLINES, INC.
BALANCE SHEETS
<CAPTION>
JUNE 30, 1996 DEC.31, 1995
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 29,633,678 $ 49,966,697
Restricted cash and cash equivalents 11,796,902 8,350,639
Accounts receivable, net of allowance for
uncollectible accounts of $373,000 and
$350,000 at June 30, 1996 and December 31,
1995, respectively 6,599,668 5,248,621
Prepaid expenses and other 9,939,419 4,110,174
Prepaid maintenance 5,582,171 1,648,498
------------- -------------
TOTAL CURRENT ASSETS 63,551,838 69,324,629
PROPERTY AND EQUIPMENT, net 37,123,171 13,335,405
PREPAID MAINTENANCE 2,232,797 2,232,797
AIRCRAFT AND ENGINE DEPOSITS 8,920,793 5,887,188
RESTRICTED CASH AND CASH EQUIVALENTS 837,060 571,985
OTHER 448,151 267,178
------------- -------------
$ 113,113,810 $ 91,619,182
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,542,239 $ 2,206,303
Accrued expenses 9,000,352 11,018,931
Air traffic liability 18,077,886 11,137,622
Other 1,336,197 1,125,409
------------- -------------
TOTAL CURRENT LIABILITIES 31,956,674 25,488,265
LONG-TERM DEBT 15,687,877 -
OTHER LIABILITIES 1,006,758 465,418
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 13,359,819
issued and 13,354,819 outstanding at
June 30, 1996, and 13,220,913 issued and
outstanding at December 31, 1995 13,355 13,221
Deferred management fees (700,000) (900,000)
Additional paid-in capital 79,955,319 79,363,393
Treasury stock (5,000 shares) (72,777) -
Accumulated deficit (14,733,396) (12,811,115)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 64,462,501 65,665,499
------------- -------------
$ 113,113,810 $ 91,619,182
============= =============
<FN>
See accompanying notes.
</TABLE>
- 3 -
<PAGE>
<TABLE>
WESTERN PACIFIC AIRLINES, INC.
STATEMENT OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Passenger revenue $ 38,265,095 $ 7,441,221 $ 71,052,167 $ 7,441,221
Cargo and other revenue 1,048,547 170,047 1,967,078 170,047
------------- ------------- ------------- -------------
Total Operating Revenues 39,313,642 7,611,268 73,019,245 7,611,268
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Salaries, wages and benefits 7,260,083 2,883,705 14,201,260 3,809,145
Aircraft lease expense 9,114,763 2,241,533 16,871,833 2,241,533
Aircraft fuel and oil 6,804,195 1,288,204 12,676,821 1,288,204
Other rentals, landing and ground handling 4,117,919 1,507,992 8,356,576 1,584,363
Advertising expense 2,291,179 1,139,263 4,438,699 1,139,263
Insurance 1,240,203 698,203 3,018,892 698,203
Maintenance materials and repairs 2,166,612 269,056 4,041,225 269,056
Agency commissions 1,354,798 264,937 2,419,615 264,937
Depreciation and amortization 1,076,759 321,508 1,851,652 392,896
Other operating expenses 3,869,824 3,128,585 8,299,682 4,121,683
------------- ------------- ------------- -------------
Total Operating Expenses 39,296,335 13,742,986 76,176,255 15,809,283
------------- ------------- ------------- -------------
Operating Income (Loss) 17,307 (6,131,718) (3,157,010) (8,198,015)
INTEREST INCOME, NET 503,626 133,545 1,234,729 341,997
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 520,933 $ (5,998,173) $ (1,922,281) $ (7,856,018)
============= ============= ============= =============
EARNINGS (LOSS) PER SHARE
Primary $ 0.04 $ (0.58) $ (0.15) $ (0.76)
============= ============= ============= =============
Fully Diluted $ 0.04 $ (0.58) $ (0.15) $ (0.76)
============= ============= ============= =============
Weighted Average Shares Outstanding 13,248,129 10,312,000 13,248,129 10,312,000
============= ============= ============= =============
<FN>
See accompanying notes
</TABLE>
- 4 -
<PAGE>
<TABLE>
WESTERN PACIFIC AIRLINES, INC.
STATEMENT OF CASH FLOWS
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,922,281) $ (7,856,018)
Adjustments to reconcile net loss to net
cash used in operations -
Depreciation and amortization 1,851,652 392,896
Gain on asset sale/leaseback (36,942) -
Amortization of deferred management fee 200,000 -
Increase in receivables (1,351,047) (3,248,499)
Increase in prepaid expenses and other (5,829,245) (1,357,091)
Increase in prepaid maintenance (3,933,673) (246,846)
Increase in aircraft and engine deposits (3,033,605) (3,416,500)
Increase in restricted cash (3,711,339) (4,132,577)
Increase in other assets (144,031) (105,060)
Increase in accounts payable 1,335,937 8,160,845
Increase/(Decrease) in accrued expenses (2,018,579) 244,130
Increase in air traffic liability 6,940,264 5,460,692
Decrease in other liabilities (1,849) -
------------- ------------
Net cash used in operating activities (11,654,738) (6,104,028)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (25,639,419) (5,525,000)
------------- ------------
Net cash flows used in investing activities (25,639,419) (5,525,000)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 16,585,000 -
Principal payments on long-term debt (143,144) -
Sale of common stock, net of issuance costs - 7,984
Sale of preferred stock, net of issuance costs - 6,732,483
Initial public offering of common stock, net
of issuance costs (287,390) -
Sale of common stock in connection with the
ESPP, net of issuance costs 200,760 -
Exercise of stock options 678,689 -
Purchase of treasury stock (72,777) -
------------- ------------
Net cash flows provided by financing
activities 16,961,138 6,740,467
------------- ------------
DECREASE IN CASH (20,333,019) (4,888,561)
CASH, beginning of period 49,966,697 13,002,743
------------- ------------
CASH, end of period $ 29,633,678 $ 8,114,182
============= ============
<FN>
See accompanying notes.
</TABLE>
- 5 -
<PAGE>
WESTERN PACIFIC AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS
1. PREPARATION OF FINANCIAL STATEMENTS
The accompanying financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The organization and
business of the Company, accounting policies followed by the Company, and
other information are contained in the notes to the Company's audited
financial statements filed as part of the Company's December 31, 1995 Annual
Report on Form 10-K. This quarterly report should be read in conjunction with
such annual report. The results of operations for the six months ended June
30, 1996 may not necessarily be indicative of the results for the entire
fiscal year ending December 31, 1996.
2. LONG TERM DEBT
In April, 1996, the Company purchased a 1989 Boeing 737-300 aircraft for
cash and a $16.6 million note payable to a third party. The note, which
matures in April 2001, requires monthly payments of principal and interest,
which accrues annually at 10.4 percent. The note is subject to the terms of a
credit agreement, security agreement and chattel mortgage. The terms of these
agreements require the Company to deposit an amount per flight hour into a
maintenance cost reserve fund, which the Company may subsequently draw from as
actual airframe and engine overhaul expenses are incurred. The reserve fund
requirement may be eliminated in the event the Company achieves certain
tangible net worth targets or enters into acceptable Maintenance Service
Program agreements with third party maintenance providers. The Company may
prepay the note starting in April 2000, subject to certain prepayment
provisions. The note payable is collateralized by the aircraft.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company commenced operations on April 12, 1994 as a development stage
enterprise organized to operate a low-fare, medium-haul, scheduled passenger
airline from its hub at the Colorado Springs Airport. From its inception until
it commenced flight operations on April 28, 1995, the Company's activities
were limited to start-up activities, including raising capital, recruiting key
operating personnel, developing computerized passenger reservation and
information systems, negotiating airport facilities and aircraft leases,
contracting ground handling and aircraft maintenance services, conducting
pilot and flight attendant training and obtaining FAA certification. The
Company incurred approximately 75% of its development and start-up expenses
during the period from January 1, 1995 to April 27, 1995.
The Company began flight operations on April 28, 1995 with two Boeing 737-
300 aircraft and provided six daily round-trips between Colorado Springs and
five cities. During 1995, the Company continued to add aircraft and cities,
and had 12 aircraft providing 26 round-trips between Colorado Springs and 16
cities across the United States at December 31, 1995. The following chart
indicates the Company's expansion of service since December 31, 1995.
- 6 -
<PAGE>
TOTAL NUMBER
NUMBER OF ROUND
AS OF MONTH END OF AIRCRAFT TRIPS SERVICE CHANGES
- - --------------- ----------- -------- ------------------------------------
January 1996 12 26 Started one round-trip to Atlanta,
reduced one round-trip to Dallas
February 1996 12 28 Started one round-trip in each of
Nashville, San Antonio, and San Jose,
and withdrew service from Wichita
March 1996 13 28 Added an additional round-trip to
Phoenix and Las Vegas and reduced
one trip per day to each of Seattle
and San Francisco
May 1996 14 30 Started one round-trip to Portland,
and added one additional round-trip
to Newark
June 1996 16 (1) 33 Added an additional trip to San
Antonio, San Diego, and San Francisco
July 1996 17 35 Added an additional trip to Atlanta
and Seattle
August 1996 17 35 No schedule changes anticipated
(1) The Company wet leased two Boeing 727-200 aircraft for the seasonal period
covering mid-June through September 4, 1996. The Company does not foresee
extending said leases.
The Company has also announced that it will begin service to Orlando,
Florida and Ontario, California in early September, 1996.
RESULTS OF OPERATIONS
Operating Revenues
Airline revenue is primarily a function of the number of passengers flown
and the fares charged by the airline. Passenger ticket sales are recognized as
revenue when the transportation is provided. The Company's fares are generally
non-refundable and changes in travel plans may be made only prior to scheduled
departure for a $35 change fee, ($25 in 1995), plus any fare increase. Fares
for passengers who do not cancel in advance of scheduled departure and do not
take the scheduled flight are recognized as revenue when the scheduled flight
departs.
The chart presented below compares the Company's passenger load factor to
the incremental growth in capacity as measured by available seat miles (ASMS).
The airline industry is extremely seasonal, with the highest load factors
typically occurring in the summer months, and the lowest load factors
occurring during September through October and January, February, April and
May. The Company's load factor decreased 2.2 percentage points for the
quarter ended June 30, 1996 from the quarter ended March 31, 1996, primarily
due to seasonality. The Company's load factor decreased 4.1 percentage points
when comparing the quarter ended June 30, 1996 to the quarter ended June 30,
1995. This decrease can be primarily attributed to low introductory fares
that the Company offered in 1995 to stimulate passenger traffic during the
Company's initial start-up of operations and a significant increase in
capacity during the comparison period. Also, bookings during May and early
June, 1996 were somewhat affected by the ValuJet accident which occurred in
May, 1996.
<TABLE>
<CAPTION>
PASSENGER TOTAL INCREASE (DECREASE)
OPERATING PERIOD LOAD FACTOR AVAILABLE SEAT MILES IN CAPACITY)
- - ---------------- ----------- -------------------- -------------------
(000'S)
<S> <C> <C>
May 1995 60.3% 46,934 -- %
June 1995 60.7 82,720 76.2
Quarter ended September 30, 1995 67.5 320,462 147.2 <F1>
Quarter ended December 31, 1995 60.1 428,067 33.6
Quarter ended March 31, 1996 58.7 565,706 32.2
Quarter ended June 30, 1996 56.5 622,519 10.0
<FN>
<F1>
Calculated as the increase in capacity over total available seat miles for the months of
May and June 1995 combined.
</FN>
</TABLE>
- 7 -
<PAGE>
Generally, passenger revenue per revenue passenger mile (RPM) or yield, has
increased since the Company's inception due to a combination of factors
including increases in average fares and decreases in discounted introductory
fares as a percentage of total fares. However, in periods when the Company
introduces promotional fares in new markets or uses promotional fares to
stimulate additional travel in existing markets, the Company generally
experiences a decrease in passenger revenue per RPM as is reflected in the
decline in the passenger revenue per RPM during the fourth quarter of 1995.
The Company believes that the negative impact of entering new markets and the
use of discounted fares should decrease as the Company increases its overall
revenue base and customer awareness. For the quarter ended June 30, 1996, the
Company produced a yield of 10.6 cents which is a 7.4% increase in yield from
the prior quarter primarily as a result of fewer promotional fares. The
Company shows a 11.8% increase in yield when compared to the prior year's
respective quarter resulting from fewer promotional fares, larger
concentration of bookings in the higher fare categories, and the expiration of
the federal excise tax on base passenger fares.
<TABLE>
<CAPTION>
PASSENGER
PASSENGER REVENUE AVERAGE REVENUE
OPERATING PERIOD REVENUE PASSENGER MILES SEGMENT FARE PER RPM
- - ---------------- --------- --------------- ------------ ---------
(000'S) (000'S) (cents)
<S> <C> <C> <C> <C>
May 1995 $ 2,597 28,287 $ 61.81 9.18
June 1995 4,845 50,238 71.18 9.64
Quarter ended September 30,1995 21,813 216,196 75.81 10.09
Quarter ended December 31, 1995 24,126 257,091 72.36 9.38
Quarter ended March 31, 1996 32,787 332,061 80.36 9.87
Quarter ended June 30, 1996 38,265 351,547 91.89 10.60
</TABLE>
The Company's operating break-even load factor during the fourteen months
of its operations has fallen from a high of 104.8% in May 1995 to 50.9% in
June 1996. As the Company's fleet has expanded, the incremental passenger
revenue generated from the additional capacity has covered the incremental
costs of the expansion, as well as a portion of the Company's existing fixed
costs, resulting in a steady decline in the operating break-even load factor.
Additionally, the Company continues to focus on cost containment and revenue
enhancement. There can be no assurance that any incremental passenger revenue
generated in the future as the Company expands its fleet will be sufficient to
cover incremental costs or that, ultimately, as a result of these or other
factors, the Company's operating break-even load factor will continue to
decrease.
OPERATING OPERATING
COST PER BREAK-EVEN
OPERATING PERIOD ASM LOAD FACTOR
- - ---------------- --------- -----------
(cents)
May 1995 9.96 104.8%
June 1995 7.69 79.6
Quarter ended September 30,1995 6.91 67.0
Quarter ended December 31, 1995 6.59 68.4
Quarter ended March 31, 1996 6.52 64.2
Quarter ended June 30, 1996 6.31 56.4
Operating Expenses
Prior to April 28, 1995 the Company was a development stage enterprise,
therefore, flight operations during the first two quarters of 1995 consisted
of only two months, May and June. Therefore, the Company will only compare
operating costs for the quarters ended June 30, 1996 and 1995 as a year-to-
date comparison would not be meaningful.
The following table shows the components of operating cost per available
seat mile, (shown in cents):
- 8 -
<PAGE>
QUARTER ENDED QUARTER ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
(cents) (cents)
Salaries, wages and benefits 1.16 1.67
Aircraft lease expense 1.46 1.46
Aircraft fuel and oil 1.09 .96
Other rentals, landing, and ground handling fees .66 1.04
Advertising and public relations .37 .70
Insurance expense .20 .33
Maintenance materials and repairs .35 .42
Agency and cargo commissions .22 .20
Depreciation and amortization .17 .19
Other operating expenses .62 1.56
---- ----
Total 6.31 8.51
==== ====
Salaries, wages and benefits decreased by .51 cents per ASM or 31% when
comparing the quarter ended June 30, 1996 to the quarter ended June 30, 1995.
This decrease can be attributed to a 481% increase in ASMs, with only a 257%
increase in full-time equivalent personnel (FTEs).
Aircraft lease expense remained flat at 1.46 cents per ASM for both of the
quarters ended June 30, 1996 and 1995 because the average monthly lease rate
increased only nominally (4.27%), from $200,000 per month to $208,540 per
month. The Company has expanded from 5 leased aircraft (all on operating
leases) at June 30, 1995 to 16 aircraft (one purchased, two wet leased, and 13
under operating leases) at June 30, 1996. Additionally, the lease rate for
the two wet lease aircraft is based on the actual block hours of utilization,
and is inclusive of insurance and crew costs. The wet leased aircraft account
for .09 cents per ASM.
Aircraft fuel and oil expense increased by .13 cents per ASM or 13.5%
when comparing the quarter ended June 30, 1996 to the quarter ended June 30,
1995. This net increase reflects the combined effect of a 10.1 cent per
gallon or 15.6% fuel price increase, offset by a 2.0% fuel consumption
decrease. A portion of the increase in the price per gallon is due to the
assessment of a 4.3 cents per gallon federal excise tax from which the
industry was exempt during the quarter ended June 30, 1995. Said tax became
effective October 1, 1995. The decrease in fuel consumption resulted from
improved operating procedures and an increase in the overall average stage
length of 161 miles during the comparison period. The Company's average stage
length increased to 839 miles by June 30, 1996.
Other rentals, landing, airport and ground handling fees decreased by .38
cents per ASM or 36.5% when comparing the quarter ended June 30, 1996 to the
quarter ended June 30, 1995. This decrease was primarily due to a 23.7%
increase in average stage length, which increased from 678 miles for the
quarter ended June 30, 1995 to 839 miles for the quarter ended June 30, 1996.
This increase in the average stage length indicates that the increase in the
number of flights was materially less on a percentage basis than the increase
in the number of ASMs. Additionally, airport rents and fees at the Company's
hub in Colorado Springs decreased substantially because of a substantial
increase in the number of passengers enplaned. Lastly, the Company added
flight frequencies in existing markets so the increase in ASMs did not have a
corresponding increase in costs.
Advertising expense decreased by .33 cents per ASM or 47.1% when
comparing the quarter ended June 30, 1996 to the quarter ended June 30, 1995.
This decrease is due to the high level of introductory advertising needed in
the Company's first quarter of operations, in order to generate service
awareness plus the increase in the number of ASMs..
Insurance expense decreased by .13 cents per ASM or 39.4% when comparing
the quarter ended June 30, 1996 to the quarter ended June 30, 1995. This
decrease reflects an overall rate reduction achieved by the Company because of
its favorable risk experience during its initial year of service. The
Company's insurance rates for the initial policy period of March, 1995 through
March, 1996 were inordinately high due to the Company's status as a start-up
air carrier.
- 9 -
<PAGE>
Maintenance materials and repairs expense decreased by .07 cents per ASM or
16.7% when comparing the quarter ended June 30, 1996 to the quarter ended June
30, 1995. This decrease reflects a reduction in the costs associated with
inducting aircraft into the Company's fleet, because the later aircraft
additions are newer in vintage and required less maintenance program bridging
activities. Additionally, costs for the quarter ended June 30, 1995 reflect
some one-time initial consumables inventory provisioning.
Agency and cargo commissions increased by .02 cents per ASM or 10.0% when
comparing the quarter ended June 30, 1996 to the quarter ended June 30, 1995.
This increase reflects a slight increase in the percentage of sales booked
through travel agencies, resulting from the Company's continued focus on
improving travel agents' awareness and acceptance of the Company's product.
Depreciation and amortization decreased by .02 cents per ASM or 10.5% when
comparing the quarter ended June 30, 1996 to the quarter ended June 30, 1995.
This decrease is the direct result of the 480% increase in ASMs.
Other operating expenses decreased by .94 cents per ASM or 60.3% when
comparing the quarter ended June 30, 1996 to the quarter ended June 30, 1995.
Other operating expenses include telecommunication and utilities charges,
professional and consulting services, supplies and minor equipment (excluding
aircraft maintenance supplies), credit card processing fees, bad debt expense,
travel and incidental expense, and passenger reaccomodation and baggage
delivery charges. Some of these costs, such as utilities, professional fees,
and travel and incidental are fixed costs which do not vary with the number of
ASMs so the decrease in said costs results from the larger number of ASMs over
which such costs are allocated. Decreases in variable costs such as
telecommunications, supplies, credit card processing fees, etc. resulted from
the Company's continued focus on cost control and an increase in the number of
ASMs over which such costs are allocated.
BALANCE SHEET FLUCTUATION ANALYSIS
- - ----------------------------------
The Company's prepaid expenses and other current assets account increased
by $5.8 million or 142% during the six months ended June 30, 1996.
Approximately $4.0 million of said increase is the costs of capitalized "C"
level airframe maintenance checks which are being amortized over the period
expiring until the next scheduled "C" check. Additionally, over $1.6 million
of the remaining increase represents prepaid aviation insurance premiums which
are paid ratably over the policy period, but are expensed as incurred based on
revenue passenger miles flown and the number of aircraft comprising the fleet.
The Company's current and long-term prepaid maintenance account increased
by $3.9 million or 101% during the six months ended June 30, 1996. Included
in this account are aircraft maintenance reserves paid on a cost per flight
hour basis to the lessors of the Company's aircraft and engines. The combined
balance at December 31, 1995 was $3.9 million, representing 14,926 flight
hours at an average reserve rate of $260 per flight hour. The $3.9 million
increase reflects a contribution for the flight hours produced during the six
month period, net of reserves released for covered maintenance events. Said
contributions are classified as short term to coincide with the cost of
anticipated "covered maintenance events" that will occur during the balance of
1996.
The Company's property and equipment increased $23.8 million during the
six months ended June 30, 1996 primarily due to the purchase of a Boeing 737-
300 aircraft. The aircraft was financed with cash equity from the Company and
a $16.6 million note payable to a third party. The aircraft is being
depreciated for book purposes over an estimated useful life of 20 years.
The Company's air traffic liability account increased by $6.9 million or
62% during the six months ended June 30, 1996. This increase resulted
primarily from advance reservations made for summer and fall travel and the
increase in the number of flights from December 31, 1995 to June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
From the Company's inception on April 12, 1994 through June 30, 1996, the
Company's pre-operating and development costs, as well as its operating costs
since the commencement of flight operations, have been funded primarily with
the proceeds from private sales of its equity securities and from the proceeds
of its initial public offering. The Company has received net proceeds from the
sale of equity securities aggregating approximately $76.8 million.
- 10 -
<PAGE>
During the six months ended June 30, 1996, the Company's operating
activities resulted in a cash flow deficit of $11.7 million, which has been
funded primarily with proceeds from the private and public sale of the
Company's equity securities. At June 30, 1996, the Company had cash and cash
equivalents of $41.4 million, including restricted cash and cash equivalents
of $11.8 million. Working capital at June 30, 1996 was approximately $31.6
million.
Cash flow used in investing activities, consisting of capital expenditures,
totaled $25.6 million during the six months ended June 30, 1996, of which
$16.6 million related to the acquisition of a Boeing 737-300 aircraft and was
funded through a long-term note payable from a third party. Capital
expenditures consisted primarily of the aircraft purchase described above,
aircraft modifications and the acquisition of ground equipment,
telecommunications and computer equipment, software, facility leasehold
improvements, office equipment and furniture.
The Company expects to incur approximately $83.1 million for capital
expenditures over the next six months of which $64.1 million is expected to be
financed by various parties. Said expenditures cover aircraft interior
modifications and fleet induction costs, telecommunications and computer
equipment, reservation and information system improvements, facility
construction and leasehold improvements, aircraft maintenance tooling and
other equipment.
At June 30, 1996, the Company operated thirteen (13) aircraft under
operating leases with terms of either five (5) or ten (10) years.
Additionally, the Company has entered into a ten (10) year operating lease for
a fourteenth leased aircraft that was inducted into the fleet in July, 1996.
The Company's fifteenth aircraft was purchased, and is described above.
Effective June 10, 1996, the Company entered into a lease agreement with
Express One International ("Express One") for two (2) Boeing 727-200 aircraft.
Said lease covers the cost of flight crews, maintenance, and insurance for
round-trip flights on the Company's routes between Colorado Springs and
Newark, and Colorado Springs and Washington Dulles. The agreement requires
the Company to pay based on the number of block hour of aircraft utilization.
The lease expires on September 4, 1996. Also, the Company has signed letters
of intent with two separate parties for the purchase of two additional 1991
Boeing 737-300 aircraft scheduled for delivery in November, 1996 and March,
1997, respectively. The Company expects to finance these purchases through a
long-term sale leaseback arrangement or third party debt financing.
In May, 1996 the Company entered into a Letter of Intent ("LOI") with the
Boeing Company for the acquisition of up to ten (10) Boeing 737-300 and up to
ten (10) Boeing 737-700 new aircraft. Under the LOI, the 737-300 aircraft
would be delivered during the period May, 1997 to May, 1998 while the 737-700
aircraft would be delivered during the period June, 1998 to October, 1999.
The Company expects to finance said aircraft through a combination of long-
term debt, operating and financing/leveraged leases. At present, the Company
is in the process of finalizing a definitive purchase agreement with the
Boeing Company and retaining the services of a financial advisor to structure
the acquisition financing.
Additionally, the Company leases four (4) spare engines under operating
leases with terms ranging from one year to three years. Rent expense under
all operating leases is recognized on a straight-line basis over the lease
term. The amount charged to aircraft and engine lease expense was
approximately $16.9 million for the six months ended June 30, 1996. Over the
next six months, the Company expects to incur approximately $10.0 million for
aircraft maintenance reserve deposits, aircraft lease security deposits and
aircraft heavy maintenance (net of accumulated reserve deposits and lessor
contributions).
Cash flow from financing activities totaled $17.0 million during the six
months ended June 30, 1996, largely resulting from third party financing for
the aircraft purchase described above. Approximately $.2 million was
generated from the sale of Company stock pursuant to the Company's Employee
Stock Purchase Plan, and $.7 million was generated from the sale of common
stock in connection with Employee Stock Options.
In May, 1996 the Company entered into an aircraft acquisition facility
agreement with a lender, which provides for up to $20.0 million in a revolving
line of credit reserved for the acquisition of Boeing 737-300 aircraft. Said
facility is an interim financing vehicle with an initial term of one (1) year.
Advances under the facility are set at 75% to 80% of the actual aircraft
purchase price and such advances bear interest at the thirty (30) day London
Inter-Bank Offered Rate (LIBOR) plus 350 basis points. During the term the
Company makes interest only payments in arrears. At the end of the facility
term, the Company will repay all outstanding amounts owed the lender by either
- 11 -
<PAGE>
arranging for permanent financing on the aircraft covered by the facility or
fund said amounts from the Company's treasury.
Now that the Company has completed a full year of flight operations, the
Company is working diligently with its primary bank and other financial
institutions to establish working capital lines of credit and letters of
credit to supplement the Company's working capital reserves. Additionally,
the Company is diligently working with various substantial aircraft financing
sources to put in place interim and permanent aircraft financing facilities
that would be reserved for the acquisition of both new and used Boeing 737
aircraft.
On May 28, 1996, the Company was extended a $5.0 million line of credit by
a technology equipment lessor for financing the acquisition of computer
hardware and software. Said facility carries an initial term of one (1) year
and provides financing for 100% of the technology acquisition cost. As
technology purchases are made, advances under the line of credit are evidenced
by the execution of separate operating lease agreements under which the lease
rates are calculated based upon length of lease term, type of equipment
acquired, percentage of soft cost financed, and the corresponding Treasury
Note rate in effect at the time of the advance. The technology line of credit
remains in effect so long as there is not a material adverse change in the
credit rating of the Company during the twelve (12) month term of the credit
line.
Though the Company generated positive cash flows in the month of June,
1996, the Company's operations have not generated positive cash flow on a
year-to-date basis. Should positive cash flow from operations be sustained,
such funds will be available to fund ongoing operations and planned expansion.
However, if the Company does not sustain positive cash flow from operations as
expected, the Company believes that its existing working capital and its
borrowing capacity under the credit facilities described above will be
sufficient to meet its operating requirements, liquidity and capital needs for
a period of at least twelve months. Additionally, the Company will continue to
make use of lease financing, especially for the acquisition of aircraft,
telecommunications and computer equipment. Also, the Company could realize
additional capital from the sale of equity through its Employee Stock Purchase
Plan and/or the exercise of any of the Company's outstanding warrants or stock
options.
OUTLOOK: ISSUES AND UNCERTAINTIES
- - ---------------------------------
Although the Company does not provide forecasts of projected financial
performance, the business strategy employed by the Company is sound and
management is optimistic about Western Pacific's long-term prospects. The
WestPac strategy avoids some of the mistakes that caused some other start-up
airlines to fail and takes advantage of the inherent inefficiencies that
plague the older, larger carriers by operating at a lower cost structure than
the competition. However, the following issues and uncertainties, among
others, should be considered in evaluating the Company's future performance.
Consumer concern about operating safety conditions at start-up carriers.
The highly publicized safety issues that led to the Federal Aviation
Administration (FAA) grounding of ValuJet have caused some consumers to
question the operating safety of all start-up airlines. Though the Company
recently passed a rigorous National Aeronautical Safety Inspection audit
conducted by the FAA and passed an independently commissioned comprehensive
safety audit conducted by the Flight Safety Foundation, there is no assurance
that in the future the FAA will not take more restrictive actions against the
Company because of its start-up status. Such actions by the FAA could
increase operating costs and reduce future earnings potential. Additionally,
though the Company has seen very little reduction in its future reservations
from consumers concerned about the Company's operating safety, there is no
assurance that future bookings will not be affected by such concerns or
actions taken by the FAA.
Effect on traffic of a reinstatement of the 10% Federal Excise Tax. The
federal budget impasse of last year allowed a 10% federal excise tax on base
airline transportation charges to expire on January 1, 1996. It is
anticipated that this tax will be reinstated, during the second half of
calendar year 1996, though the exact date has not yet been determined. Since
January 1996, the 10% tax differential has been retained by the Company as
additional revenue, therefore the Company does not know how the reinstatement
of this tax will affect its pricing and future bookings.
Availability of aircraft. The strike at Boeing earlier this year,
coupled with the airline industry's recent record profits, has caused a
shortage in the availability of used and new 737-300's around the world.
Though the Company has entered into letters of intent for two additional
aircraft and is negotiating with Boeing for new aircraft, there is no
- 12 -
<PAGE>
assurance that the Company will be able to secure the aircraft it requires to
facilitate its expansion plans nor that such aircraft can be obtained on
financial terms acceptable to the Company.
Start-up of Mountain Air Express (MAX). The Company is in the process
of assisting in the start-up of a commuter carrier, Mountain Air Express, to
carry traffic into and out of Colorado ski markets from Colorado Springs and
other third tier travel markets. Service is scheduled to begin late in the
fourth quarter of 1996. MAX is a separate company from Western Pacific
Airlines and is in the process of raising its own capital and obtaining its
own operating certificate. Western Pacific Airlines will provide marketing,
reservation, and various administrative support services to MAX. There are no
assurances that MAX will actually begin operations, nor what effect its
operation will have on the Company.
Start-up of Thrifty Car Rental Franchise (Colorado Springs Car Rental,
Inc.). The Company has formed a wholly-owned subsidiary, Colorado Springs Car
Rental, Inc., for the purpose of operating a Thrifty car rental franchise in
Colorado Springs and Douglas County. The Company is currently in negotiations
for the franchise agreement and in organizing the operation and
capitalization. It is anticipated that this franchise will have separate
management from the Company.
Unionization of Employee Groups. The Company's mechanics voted to join the
Teamsters union in May 1996. No other work groups are currently represented by,
or have voted to be represented by, a union. While the mechanics' action has
not altered the Company's work rules or increased the Company's costs, there
can be no assurance that such action won't in the future or that other
employee groups will not vote for union representation, nor that labor costs
for those groups represented by a union will not increase.
Expansion of the Colorado Springs Airport. The city of Colorado Springs
is currently planning on building a temporary concourse at the Colorado
Springs airport, which will provide five additional gates for jet aircraft,
and eventually four gates for the commuter carrier. The construction plan has
already been approved by the Colorado Springs Airport Authority and the
Colorado Springs City Council. It is currently anticipated that the temporary
concourse will be operational by November 1996. There can be no assurance
that such expansion will be completed on schedule. Any significant delay
could have a materially adverse impact on the Company's operations and future
growth.
General State of United States Economy. The airline industry is highly
susceptible to general changes in the economic climate, particularly in the
leisure travel segment of the market. Any downturn in the economy of the
United States could have an adverse effect on the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's 1996 Annual Meeting of Stockholders held on May 31, 1996,
the stockholders took the following actions:
1. Re-elected the three persons named below as Class II members of the
Board of Directors to serve until the 1999 annual meeting of stockholders
or until their successors are duly elected and qualified:
NAME OF DIRECTOR FOR WITHHELD
------------------- ---------- --------
John S. Lancy 11,149,468 15,845
Glenn M. Stinchcomb 11,149,468 15,845
James R. Wikert 11,148,951 16,362
There were no broker non-votes on this matter.
2. Approved the Western Pacific Airlines, Inc. 1996 Restricted Stock Plan
for Non-Employee Directors by a vote of 10,742,630 for; 117,671 against;
16,900 abstained; and 288,112 broker non-votes.
3. Approved amendments to the Western Pacific Airlines, Inc. 1995 Directors'
Option Plan by a vote of 10,736,792 for, 187,756 against, 40,037 abstained
and 200,728 broker non-votes.
- 13 -
<PAGE>
4. Approved amendments to the Western Pacific Airlines, Inc. 1994 Stock Option
Plan by a vote of 10,462,783 for; 466,226 against; 35,576 abstained; and
200,728 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(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
-------- ----------------------
10.63 -- Sublease agreement dated March 18, 1996 between Registrant
and TACA International Airlines, S.A.
10.64 -- Aircraft Lease Agreement dated May 31, 1996 between
Registrant and International Lease Finance Corporation.
10.65 -- Wet Lease Agreement dated May 28, 1996 between the
Registrant and Express One.
27 -- Financial Data Schedule
- - -----------------------
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1996.
- 14 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WESTERN PACIFIC AIRLINES, INC.
By: /s/ EDWARD R. BEAUVAIS
---------------------------
Edward R. Beauvais
Chairman, President and Chief Executive Officer
Date: August 12, 1996.
By: /s/ MARTIN J. DUGAN, JR.
---------------------------
Martin J. Dugan, Jr.
Vice-President and Chief Financial Officer (Principal Financial Officer)
Date: August 12, 1996.
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 41,431
<SECURITIES> 0
<RECEIVABLES> 6,973
<ALLOWANCES> (373)
<INVENTORY> 238
<CURRENT-ASSETS> 63,552
<PP&E> 40,472
<DEPRECIATION> (3,349)
<TOTAL-ASSETS> 113,114
<CURRENT-LIABILITIES> 31,957
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 64,450
<TOTAL-LIABILITY-AND-EQUITY> 113,114
<SALES> 73,019
<TOTAL-REVENUES> 74,312
<CGS> 76,176
<TOTAL-COSTS> 76,176
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> (1,922)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,922)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,922)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO RULE 24b-2 AS INDICATED BY "[XXX]".
SUBLEASE AGREEMENT
dated as of
March 18, 1996
Between
TACA INTERNATIONAL AIRLINES, S.A.,
as Sublessor,
and
WESTERN PACIFIC AIRLINES, INC.
as Sublessee
One Used Boeing Model B737-3S3 Aircraft,
current United States Registration Mark N375TA and
Manufacturer's Serial No. 23787 with
two CFM International, Inc., Model CFM 56-3B2 Engines,
Manufacturer's Serial Nos. 721150 and 721743, Respectively
ALL THE RIGHT, TITLE AND INTEREST IN AND TO THIS SUBLEASE AGREEMENT ON THE PART
OF TACA INTERNATIONAL AIRLINES, S.A. HAS BEEN ASSIGNED TO AND IS SUBJECT TO A
SECURITY INTEREST IN FAVOR OF ING AVIATION LEASE B.V. ONLY THE ORIGINAL
COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY ING AVIATION LEASE B.V. ON
THE SIGNATURE PAGE THEREOF.
THIS IS NOT THE ORIGINAL COUNTERPART
<PAGE>
CODED FOR TABLE OF CONTENTS
EXHIBIT A AIRCRAFT DESCRIPTION
EXHIBIT B FORM OF ACCEPTANCE CERTIFICATE
EXHIBIT C FORM OF RETURN ACCEPTANCE RECEIPT
-4-
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions........................................... 1
Section 2. Sublease; Sublease Term; Delivery of
Aircraft.............................................. 7
(a) Sublease; Sublease Term.......................... 7
(b) Delays........................................... 7
(c) Condition of Aircraft at Delivery................ 7
Section 3. Security Deposit and Other Payments................... 8
(a) Security Deposit................................. 8
(b) Basic Rent....................................... 8
(c) Commission....................................... 9
(d) Supplemental Rent................................ 9
(e) Manner of Payment................................ 9
(f) Late Payments.................................... 9
(g) No Setoff, Counterclaim, etc..................... 9
Section 4. Conditions Precedent and Other
Requirements......................................... 11
(i) ................................................. 11
(a) Execution and Delivery of
Documents..................................... 11
(b) Representations, Warranties, No
Default....................................... 11
(c) Resolutions, etc................................ 11
(d) Security Deposit and Basic Rent................. 12
(e) Side Letter..................................... 12
(f) Insurance Certificate........................... 12
(g) Filings; Financing Statements................... 12
(h) Opinions of Counsel............................. 12
(i) No Event of Loss................................ 12
(j) Acceptance by Process Agent..................... 12
(k) Net Worth....................................... 12
(l) Other Documents................................. 13
(ii) ................................................ 13
(a) Delivery of Assignments of
Warranties.................................... 13
(b) Resolutions, etc................................ 13
(c) Consents to Sublease............................ 13
(d) Extension of Lease.............................. 13
(e) Certificate of No Default....................... 13
(f) Delivery of Sublease Supplement................. 13
-i-
<PAGE>
(g) Certificate of Airworthiness.................... 13
(h) Acceptance by Process Agent..................... 14
(i) Broker.......................................... 14
Section 5. Disclaimer; Manufacturer and Vendor
Warranties........................................... 14
(a) Disclaimer by Sublessor......................... 14
(b) Sublessor's Representations,
Warranties and Covenants...................... 15
(c) Manufacturer and Vendor
Warranties.................................. 16
Section 6. Maintenance; Alterations, Modifications
and Additions........................................ 16
(a) Maintenance................................. 16
(b) Maintenance Reserves........................ 19
(c) Replacement of Parts............................ 22
(d) Pooling of Parts............................ 23
(e) Alterations, Modifications and
Additions................................... 24
Section 7. Title and Registration; Liens;
Possession........................................... 25
(a) Title and Registration...................... 25
(b) Liens....................................... 26
(c) Operation, Quiet Enjoyment.................. 27
(d) Possession.................................. 27
(e) Identification Plates....................... 29
(f) Reporting Requirements...................... 29
(g) Inspections................................. 29
Section 8. Loss, Destruction, Requisition, etc.................. 30
(a) Event of Loss with Respect to the
Aircraft.................................... 30
(b) Event of Loss with Respect to an
Engine...................................... 30
(c) Application of Payments from
Governmental Authorities.................... 32
(d) Requisition of Use of the
Aircraft.................................... 32
(e) Quiet Enjoyment............................. 33
Section 9. Insurance............................................ 33
(a) Liability................................... 34
(b) Other Insurance............................. 34
(c) Terms of Insurance.......................... 35
(d) Application of Insurance.................... 37
(e) Reports..................................... 38
(f) Failure to Insure........................... 39
(g) Additional Insurance........................ 39
(h) Notice of Claims............................ 39
(i) Stipulated Loss Value....................... 39
-ii-
<PAGE>
Section 10. Return of Aircraft............................................. 40
(a) Redelivery upon Termination................. 40
(b) Condition of Aircraft-- General............. 40
(c) Condition of Airframe....................... 42
(d) Condition of Controlled
Components.................................. 43
(e) Condition of Engines........................ 43
(f) Ground Inspection by Sublessor.............. 44
(g) Operational Ground Check.................... 44
(h) Demonstration Flight........................ 44
(i) Ferry Flight................................ 45
(j) Deferred Discrepancy Correction............. 45
(k) Flight Cost................................. 45
(l) Aircraft Documentation...................... 46
(m) Service Bulletin Kits....................... 46
(n) Non-U.S. Manufactured Items................. 46
(o) Sublessee's Continuing
Obligations................................. 46
Section 11. Representations, Warranties and
Covenants of Sublessee............................... 47
Section 12. Indemnification...................................... 51
(a) General Indemnity and Expenses.............. 51
(b) General Tax Indemnity....................... 53
(c) Calculation of Tax Indemnity
Payments.................................... 56
(d) Contest; Reports............................ 57
(e) Payment..................................... 60
(f) Survival.................................... 60
Section 13. Assignment; Sublease Subject and
Subordinate.......................................... 60
(a) No Impermissible Sublease by
Sublessee................................... 60
(b) Assignment by Sublessor..................... 60
(c) Sublease Subject and Subordinate............ 61
(d) Assignments by Sublessor or
Lessor...................................... 61
Section 14. Events of Default; Remedies.......................... 62
(a) Events of Default........................... 62
(b) Remedies.................................... 64
Section 15. Notices.............................................. 67
Section 16. Governing Law and Jurisdiction....................... 68
(a) Governing Law............................... 68
(b) Jurisdiction; Service of Process............ 68
(c) Waiver of Immunity.......................... 69
-iii-
<PAGE>
Section 17. Miscellaneous........................................ 69
(a) Entire Agreement............................ 69
(b) English Language............................ 69
(c) Sublessor's Right to Perform for
Sublessee............................... 69
(d) Application of Payments During
Existence of Default.................... 69
(e) Expenses.................................... 70
(f) Further Assurances.......................... 70
(g) Judgment Currency........................... 70
(h) Invalidity of any Provision................. 70
(i) Changes in Law.............................. 71
(j) Headings.................................... 71
(k) Consent..................................... 71
(l) Third-Party Beneficiaries................... 71
(m) Counterparts................................ 71
EXHIBIT A AIRCRAFT DESCRIPTION
EXHIBIT B FORM OF ACCEPTANCE CERTIFICATE
EXHIBIT C FORM OF RETURN ACCEPTANCE RECEIPT
-iv-
<PAGE>
This SUBLEASE AGREEMENT, dated as of March 19, 1996, between TACA
INTERNATIONAL AIRLINES, S.A., a corporation organized and existing under the
laws of El Salvador with its principal place of business in San Salvador, El
Salvador, and its successors and assigns ("Sublessor"), and WESTERN PACIFIC
AIRLINES, INC., a corporation organized and existing under the laws of Delaware
with its principal place of business in Colorado Springs, Colorado
("Sublessee").
Sublessor and Lessor (such term and other capitalized terms are used as
hereinafter defined) are parties to the Lease.
Sublessee desires to sublease the Aircraft from Sublessor and Sublessor
is willing to sublease the Aircraft to Sublessee upon and subject to the terms,
conditions and covenants herein set forth.
In consideration of and subject to the mutual covenants, terms and
conditions contained in this Sublease, Sublessor and Sublessee agree as follows:
Section 1. Definitions.
(a) Unless the context otherwise requires the following terms shall
have the following meanings for all purposes of this Sublease and shall be
equally applicable both to the singular and plural forms of the terms defined.
Any agreement defined below shall include each amendment, modification and
supplement thereto and waiver thereof in effect from time to time.
"Additional Insurance" shall have the meaning ascribed to it in Section
9(f) hereof.
"Additional Insureds" shall have the meaning ascribed to it in Section
9(c) hereof.
"Aircraft" shall mean (i) the Airframe, together with two (2) Engines
initially installed on such Airframe at the Commencement Date or any Replacement
Engine substituted for any such Engine, whether or not any of said initial
Engines or Replacement Engines may from time to time no longer be installed on
such Airframe or may be installed upon another airframe and the Parts; and (ii)
the Aircraft Documentation. As the context requires, "Aircraft" shall also mean
the Airframe, any Engine (including a Replacement Engine), any Part, the
Aircraft Documentation, or any part thereof individually.
"Aircraft Documentation" shall mean all (i) log books, aircraft
records, manuals and other data or documents provided to Sublessee on or before
the Commencement Date, as evidenced by any Schedule attached to the Acceptance
Certificate as a receipt
<PAGE>
thereof; and, (ii) any other documents, drawings, or data which are required to
be maintained during the Sublease Term pursuant hereto or by the FAA or the
Maintenance Program.
"Airframe" shall mean that certain Boeing model 737-3S3 airframe
bearing manufacturer's serial number 23787.
"Airframe Reserve Amount" shall have the meaning ascribed to it in
Section 6(b).
"Agent" shall mean ING Aviation Lease, B.V., as agent for the Lenders,
its successors and assigns.
"Approved Repair Facility" shall have the meaning ascribed to it in
Section 6(a)(ii).
"Basic Rent" shall have the meaning ascribed to it in Section 3(b)
hereof.
"Credit Agreement" shall mean the Credit Agreement dated as of November
4, 1993 between First Security Bank of Utah, National Association, as owner
trustee, as borrower, Amerilease Capital Corporation, as owner participant and
guarantor and the Agent, as may be amended or supplemented from time to time.
"Commencement Date" shall mean the date upon which the Aircraft is
tendered to Sublessee in conformity with this Sublease and the Sublease
Supplement is executed and delivered.
"Cycle" shall mean any flight of the Aircraft or, in the case of an
engine not attached to an aircraft, any airframe to which an Engine is attached,
consisting of one take-off and one landing regardless of time elapsed between
take-off and landing and distance flown.
"Debt" shall mean, with respect to any Person, (a) all obligations of
such Person for borrowed money or with respect to deposits and advances of any
kind, whether evidenced by bonds, debentures, notes or other instruments, (b)
all obligations of such Person upon which interest charges at customarily paid,
(c) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person, (d) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services, (e) any lease obligation that, in accordance with
generally accepted accounting principles has been or should be capitalized on
the books of such Person, and (f) all guarantees of such Person of the debts or
obligations for borrowed money of any other Person, whether direct or indirect,
absolute, contingent or otherwise.
"Default" shall mean any event that, with the passage of time or the
giving of notice or both, would become an Event of Default.
-2-
<PAGE>
"Dollars" and "US$" shall mean lawful currency of the United States of
America.
"Engine" shall mean (i) each of the two CFM International Inc. Model
CFM 56-3B2 jet aircraft engines bearing manufacturer's serial numbers 721150 and
721734, respectively, whether or not from time to time installed on such
Airframe or installed on any other airframe, and (ii) any Replacement Engine
that may from time to time be substituted as contemplated by Section 8(b) for an
Engine subleased hereunder; together in each case with any and all Parts
incorporated or installed in or attached thereto or any and all Parts removed
therefrom so long as title thereto shall remain vested in Sublessor in
accordance with the terms of Section 6(c) after removal from any such Engine.
Except as otherwise set forth herein, at such time as a Replacement Engine shall
be so substituted and the Engine for which the substitution is made shall be
released from the Lien of the Mortgage, such replaced Engine shall cease to be
an Engine hereunder. The term "Engines" means, as of any date of determination,
all Engines then subleased hereunder. Each Engine has and any Replacement Engine
hereunder will have not less than 750 rated takeoff horsepower.
"Engine Loss Value" shall mean, in respect of each engine, [XXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX].
"Engine Reserve Amount" shall have the meaning ascribed to it in
Section 6(b) hereof.
"Event of Default" shall have the meaning ascribed to it in Section
14(a) hereof.
"Event of Loss" with respect to the Aircraft, the Airframe or any
Engine (hereinbelow referred to as "property") shall mean any of the following
events with respect to such property: (i) loss of such property or the use
thereof due to theft, disappearance, destruction, damage beyond repair or
rendition of such property permanently unfit for normal use for any reason
whatsoever; (ii) any damage to such property that results in the receipt of
insurance proceeds with respect to such property on the basis of a total loss;
(iii) the condemnation, confiscation or seizure of, or requisition of title to,
such Property by any authority, or a requisition for use of such property by any
authority other than a Government Entity of the United States of America; (iv)
as a result of any rule, regulation, order or other action by the FAA, or other
governmental body having jurisdiction thereof or any other occurrence, the use
of such property in the normal course of air transportation of persons shall
have been prohibited for a period of three consecutive months unless Sublessee,
prior to the expiration of such three-month period, shall have undertaken and
shall be diligently carrying forward all steps that are necessary or desirable
to permit the normal use of such property by Sublessee or, in any event, if such
use
-3-
<PAGE>
shall have been prohibited for a period of six consecutive months; (v) the
inability for any reason of Sublessor to obtain possession of such Aircraft
within 30 days after this Sublease shall have been declared to be in default
pursuant to Section 14, free and clear of all liens (other than Sublessor's
Liens); and (vi) in the case of an Engine, as described in clause (iii) of
Section 7(d). An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe.
"FAA" shall mean the United States Federal Aviation Administration and
any successor agency thereto.
"Federal Aviation Act" shall mean the United States Federal Aviation
Act of 1958 as amended, and the regulations promulgated thereunder.
"First Security" shall mean Lessor, in its individual capacity.
"Flight Hour" shall mean each hour or part thereof elapsing from the
moment the wheels of the Airframe (or other airframe on which an Engine is then
installed) leave the ground on takeoff until the wheels of the Airframe (or such
other airframe) touch the ground on landing following such flight. For purposes
of all calculations under this Sublease measured in Flight Hours, such hours,
including fractions thereof, shall be measured to two decimal places.
"Government Entity" means (i) any national, state or local government
of the United States of America or any other country where the Aircraft may be
flown and operated by Sublessee, (ii) any board, commission, department,
division, instrumentality, court, agency or political subdivision of any entity
described in (i) above, however constituted, and (iii) any association,
organization, or institution of which any entity described in (i) or (ii) above
it a Member or to whose jurisdiction any thereof is subject or in whose
activities any thereof is a participant.
"Indemnitee" shall have the meaning ascribed to it in Section 12(a)
hereof.
"Lease" shall mean that certain Aircraft Lease Agreement dated as of
November 4, 1993, between Lessor and Sublessor, as originally executed or as
modified, amended or supplemented pursuant to the applicable provisions hereof.
"Lenders" shall mean ING Aviation Lease, B.V. and each Person who shall
become a Lender in accordance with the provisions of the Credit Agreement.
"Lessor" shall mean First Security Bank of Utah, National Association,
not in its individual capacity but solely as owner trustee under that certain
Trust Agreement dated as of
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November 4, 1993, between First Security and the owner participant named
therein.
"Lien" shall mean any mortgage, pledge, lien, charge, encumbrance,
lease, exercise of rights, security interest or claim of any nature whatsoever.
"Maintenance Program" shall have the meaning ascribed to it in Section
6(a) hereof.
"Maintenance Reserves" shall have the meaning ascribed to it in Section
6(b) hereof.
"Manufacturer" shall mean The Boeing Company, a corporation organized
and existing under the laws of Delaware.
"Mortgage" shall mean the Mortgage and Security Agreement, dated as of
November 4, 1993, between Lessor and Agent relating to the Aircraft, as the same
may be amended, supplemented or modified from time to time.
"Parts" shall mean any and all appliances, parts, avionics,
attachments, accessions, instruments, appurtenances, accessories, furnishings
and other equipment of whatever nature (other than complete Engines or engines).
"Payment Date" shall mean the fifteenth (15) day of each consecutive
calendar month commencing with the calendar month immediately following the
Commencement Date and each consecutive calendar month thereafter during the
Sublease Term; provided however that Sublessee, on or prior to the Commencement
Date, shall pay Basic Rent in respect of the Aircraft corresponding to the first
month of the Sublease Term.
"Permitted Lien" shall have the meaning ascribed to it in Section 7(b)
hereof.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, unincorporated organization or any other juridical entity, or a
Government Entity.
"Post-Default Rate" shall mean a rate per annum equal to three percent
(3%) above the rate publicly announced from time to time by Citibank, N.A., New
York, New York (or any successor institution) as its "prime rate" (or, if no
such rate exists, any comparable reference rate established by such institution)
on the basis of the actual number of days elapsed over a 360-day year.
"Process Agent" shall have the meaning ascribed to it in Section 16(b)
hereof.
"Rent" shall mean Basic Rent and Supplemental Rent.
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"Replacement Engine" shall mean a CFM International, Inc. CFM 56-3B2
jet aircraft engine (or engine of the same manufacturer of the same or an
improved model) approved by Sublessor, that has a value, utility and thrust at
least equal to those of the Engines, together with all Parts relating to such
engine.
"Security Assignments" shall mean an instrument or instruments, in form
and substance satisfactory to Lessor and Lender, pursuant to which Sublessor
assigns to Lessor (and Lessor further assigns to Agent) all of Sublessor's right
and interest in and to this Sublease.
"Security Deposit" shall have the meaning ascribed to it in Section
3(a) hereof.
"Stipulated Loss Value" shall mean in respect of the Aircraft as of any
particular date, such amount as is set forth on Schedule 1 hereto.
"Sublease," "this Sublease Agreement," "this Sublease," "this
Agreement," "herein," "hereunder," "hereby," or other words shall mean this
Sublease as originally executed or as modified, amended or supplemented pursuant
to the applicable provisions hereof.
"Sublease Supplement" shall mean the Sublease Supplement dated as of
even date herewith, in form and substance satisfactory to Sublessor.
"Sublease Term" shall have the meaning ascribed to it in Section 2(a)
hereof.
"Sublessor Lien" shall mean any Lien arising as a result of (i) claims
against Sublessor or Lessor not related to the transactions contemplated by this
Sublease, (ii) Taxes imposed against Sublessor or Lessor that are not
indemnified against by Sublessee pursuant to Section 12(b), (iii) the Lease,
(iv) the Mortgage or (v) claims against Sublessor or Lessor arising out of the
transfer by either of them of all or any part of its interest in the Aircraft
other than by reason of the occurrence of an Event of Loss or following an Event
of Default.
"Supplemental Rent" shall mean all amounts, sums, monies, indebtedness,
liabilities and obligations (other than Basic Rent) that Sublessee assumes,
agrees or otherwise becomes liable to pay to Sublessor or others hereunder or
under any other document or agreement entered into by Sublessee and Sublessor in
connection herewith or with the transactions contemplated hereby and thereby
including, without limitation, payments of Maintenance Reserves, Stipulated Loss
Value and any interest payable with respect to payments pursuant to Section
3(e).
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"Tax" or "Taxes" shall mean any and all fees (including, without
limitation, license and registration fees), taxes (including, without
limitation, gross receipts, income, sales, rental, use, turnover, value added,
property (tangible or intangible), excise and stamp taxes, levies, imposts,
duties, charges, assessments or withholdings of any nature whatsoever, together
with any and all penalties, fines, additions to tax and interest thereon or
computed by reference thereto).
"Taxing Authority" shall have the meaning ascribed to it in Section
12(b) hereof.
Section 2. Sublease; Sublease Term; Delivery of Aircraft.
(a) Sublease; Sublease Term. Sublessor hereby subleases to Sublessee,
for a period (the "Sublease Term") commencing on the Commencement Date and
ending, unless earlier terminated pursuant to the provisions of this Sublease,
on such date as shall fall 120 consecutive calendar months following the
Commencement Date (the "Expiration Date").
(b) Delays. Sublessor will not be liable for any delay in commencement
of the Sublease which is beyond Sublessor's reasonable control, but if such
delay causes the Commencement Date of the Sublease Term of the Aircraft to be
delayed beyond March 31, 1996, either party may terminate this Sublease and
neither party shall have any further liability to the other hereunder, other
than Sublessor's obligation to return the Security Deposit (and other monies
heretofore paid by Sublessee to Sublessor) to Sublessee.
(c) Condition of Aircraft at Delivery. On the Commencement Date, the
Aircraft (i) shall be in an airworthy condition and have all systems functioning
in accordance with manufacturer's recommendations, (ii) shall have a current and
valid Certificate of Airworthiness issued by the FAA, (iii) shall be painted
white, (iv) shall be fresh from its last scheduled "C" check, other than hours
flown in respect of test and ferry flights, (v) shall be in a 136Y (136 seats,
single class cabin) configuration, and (vi) shall be in accord with the
description thereof set forth in Exhibit A hereto. Sublessee acknowledges that
it has inspected and technically accepted the Aircraft prior to the date hereof,
and Sublessee agrees to accept the Aircraft under the terms of this Sublease
when duly tendered by Sublessor in accordance herewith. Upon such tender,
Sublessee shall execute a Sublease Supplement, which will be conclusive proof as
between Sublessor and Sublessee that Sublessee has examined the Aircraft, that
the Aircraft and the Aircraft Documentation are satisfactory to Sublessee and
that Sublessee has accepted the Aircraft for all purposes hereof without any
reservations whatsoever (except as noted therein).
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Section 3. Security Deposit and Other Payments.
(a) Security Deposit. Sublessee has heretofore paid to Sublessor the
amount of [XXXXXXXXXXX] in partial fulfillment of its obligation to pay the
Security Deposit. On or prior to the Commencement Date, Sublessee shall deliver
to Sublessor the balance of the security deposit (the "Security Deposit") such
that as of the Commencement Date Sublessor shall have received the total sum of
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] (the "Security Deposit
Amount"). The Security Deposit shall be held by Sublessor during the Sublease
Term as security for the full and punctual performance by Sublessee of all of
its obligations hereunder. During the Sublease Term, the Security Deposit may be
commingled by Sublessor with other funds. Interest, if any, earned on the
Security Deposit shall be for Sublessor's sole account. Sublessor may, but shall
not be obligated to, apply the Security Deposit, in whole or in part for the
payment of any Basic Rent owing hereunder or any other amount owing from time to
time by Sublessee hereunder, or utilize the Security Deposit in whole or in part
to perform any of Sublessee's obligations hereunder or otherwise remedy any
Event of Default, without prejudice to any other remedy of Sublessor. Sublessee
shall not attempt to subject the Security Deposit to any Lien or to assign any
interest therein to any Person and, to the extent of its interest therein.
Sublessee hereby grants to Sublessor a Lien in the Security Deposit and assigns
and transfers to Sublessor any and all of Sublessee's right, title and interest
therein, as security as provided above, and Sublessor shall be entitled to the
remedy of offset against and application of the Security Deposit, without any
prior notice to or demand against Sublessee (except to the extent otherwise
required by applicable law), all of which are hereby waived. If Sublessor uses
or applies all or a portion of the Security Deposit, such application shall not
be deemed a cure of any Event of Default, until and unless Sublessee shall have
replenished the amount applied hereunder within the time period provided herein.
Sublessee shall replenish any portion or all of the Security Deposit applied by
Sublessor to satisfy, in whole or in part, any Event of Default by depositing
with Sublessor in immediately available funds an amount sufficient to restore
the Security Deposit to the Security Deposit Amount within three (3) Business
Days after Sublessor's demand therefor. Within fifteen (15) days after
redelivery of the Aircraft to Sublessor by Sublessee, and provided the Aircraft
is delivered in full conformity with the return conditions set forth in Section
10 hereof, and that Sublessee has paid in full, all amounts owing by Sublessee
hereunder and performed all of its obligations hereunder, Sublessor will return
to Sublessee the Security Deposit, without interest, less any amounts applied by
Sublessor and not replenished by Sublessee.
(b) Basic Rent. Sublessee agrees to pay Sublessor, or, for so long as
the Mortgage remains in effect, Agent, rent with respect to the aircraft,
monthly, in advance on each Payment
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Date, in the amount of [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] per
month ("Basic Rent"). All payments of Basic Rent shall be made in immediately
available funds, in Dollars by 2:00 p.m. New York time on the date when due;
provided, however, that in the event that any payment should be due on a day
that is not a Business Day, then such payment shall be made on the next
succeeding Business Day without any penalty for late payment.
(c) Commission. Sublessee shall pay to Sublessor the amount of [XX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] per month ("Commission
Payment"), monthly, in advance on or before each Payment Date during the
Sublease Term and any renewals thereof, if applicable, as payment or
reimbursement for and in respect of the commission payable to Cauff, Lippman &
Crane Aviation, Inc. as sole brokers in respect of this Sublease. Sublessor
shall pay such commission to Cauff, Lippman & Crane Aviation, Inc.
(d) Supplemental Rent. Sublessee also agrees promptly to pay to
Sublessor any and all Supplemental Rent, as the same shall become due and owing,
and in the event of any failure on the part of Sublessee to pay any Supplemental
Rent, Sublessor shall have all rights, powers and remedies provided for herein
or by law or equity or otherwise in the case of nonpayment of Basic Rent.
(e) Manner of Payment. All Basic Rent and Supplemental Rent (other than
the Security Deposit and Maintenance Reserves) required to be made to Sublessor
hereunder shall be paid (i) so long as the Mortgage remains in effect, directly
to Agent at: The Northern Trust International Banking Corp., New York, New York,
account of ING Bank, [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]; and (ii)
thereafter, to such bank accounts as Sublessor shall specify by written notice
to Sublessee. All payments of Supplemental Rent shall be made in immediately
available funds in Dollars by 2:00 p.m. New York time, on the daft when due;
provided, however, that in the event that any Payment should be due on a day
that is not a Business Day then such payment shall be made on the Business Day
next succeeding such day without any penalty for late payment.
(f) Late Payments. As to any (i) amount due under this Sublease that is
not paid when due as herein provided, or (ii) advance made by Sublessor of any
amount required to be paid by sublessee as herein provided and not so paid by
Sublessee, Sublessee shall pay to Sublessor at the time of payment thereof, as
Supplemental Rent, interest thereon at the Post-Default Rate, from either the
due date thereof (as to amounts referred to in clause (i)) or the date of the
advance by Sublessor (as to amounts referred to in clause (ii)), as the case may
be, to the date such late payment is paid in full.
(g) No Setoff, Counterclaim, etc. Notwithstanding anything to the
contrary herein and except as otherwise set forth in this
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Section 3(f), Sublessee's obligations and liabilities to pay all amounts payable
hereunder shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right that Sublessee may have against Sublessor or
any other Person for any reason whatsoever, (ii) any defect in the title caused
directly by an act or omission of Sublessee, airworthiness, condition, design,
operation or fitness for use of or any damage to or loss or destruction of, the
Aircraft, the Airframe, any Engine or any Part of any thereof or any
interruption or cessation in the use or possession of any thereof by Sublessee
for any reason whatsoever, (iii) any insolvency, bankruptcy, reorganization or
similar proceedings by or against Sublessee, (iv) the disaffirmance or rejection
of this Sublease by Sublessor or any trustee in bankruptcy (or similar party)
provided that there shall have been no change materially adverse to the
Sublessee in any of the terms or conditions of this Sublease in connection with
applicable bankruptcy proceedings, (v) claims against the Manufacturer or
manufacturers of the Aircraft, the Airframe, any Engine, Part or component
thereof, (vi) enforceability or lack of enforceability of any of the terms or
conditions of this Sublease, (vii) breach by Sublessor of any warranty, express
or implied, with regard to the Aircraft, the Airframe, any Engine any Part of
any thereof, including, without limitation, merchantability or fitness for any
purpose or use relating to or otherwise made or alleged to be made by Sublessor
to Sublessee or any of it agents, representatives or employees with regard to
the Aircraft, the Airframe, any Engine or any Part of any thereof, (viii) any
right, claim, demand, bill, action or suit whatsoever by or against or on the
part of Sublessee against Sublessor, including, without limitation, whether
arising out of legal action or otherwise (x) at law or in equity, (y) whether
affirmative, negative or defensive in nature for or on account of the legality,
enforceability, validity or other infirmity as to (A) any of the terms or
conditions of this Sublease, (B) any express or implied warranty as to the
Aircraft, the Airframe, any Engine or any Part of any thereof or (C) arising out
of or as a result of any contract, agreement, assignment or transaction between
Sublessor and Sublessee whether direct or indirect, written or oral, (ix) any
interruption or cessation in the use or possession of the Aircraft by or
availability of the Aircraft to Sublessee for any reason whatsoever whether
arising out of relating to an act or omission of Sublessee; or (x) any other
circumstances, happening or event whatsoever, whether or not similar to any of
the foregoing which but for this provision might have the effect of terminating
this sublease, it being the intention of the Sublessor and Sublessee that all
Rent and other amounts payable by Sublessee hereunder shall be payable in all
events unless the obligation to pay the same shall be terminated pursuant to the
express provisions of this Sublease. Sublessee hereby waives, to the fullest
extent permitted by applicable law any and all rights it may now have or that at
any time hereafter may be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Sublease except in accordance with
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the express terms hereof. Notwithstanding anything contained in this Section
3(f) in the event that as a result of a breach by Sublessor or anyone claiming
by through or under Sublessor of its covenant of quiet enjoyment (including any
defect in title not caused by an act or omission of Sublessee which defect in
title shall have caused the Aircraft to be deregistered under the Federal
Aviation Act), Sublessee shall be deprived of possession or use of the Aircraft
under and in accordance with this Sublease, Sublessee shall not be required to
pay Basic Rent and Maintenance Reserves in respect of such period of
non-possession of or inability to use the Aircraft. Each payment of Rent made by
Sublessee shall be final as to Sublessor and Sublessee, and Sublessee will not
seek to recover all or any part of any such payment of Rent from Sublessor or
its successors or assigns for any reason whatsoever.
Nothing in this Section 3(f) or elsewhere in this Sublease shall be
construed to limit Sublessee's right to seek a recovery of any payment of Rent
or any other amount which is not due and payable hereunder, or to limit
Sublessee's rights and remedies to pursue, in a court of law or otherwise, any
claim it may have against Sublessor on account of any failure of Sublessor to
perform its obligations hereunder or in connection herewith.
Section 4. Conditions Precedent and Other Requirements.
(i) The obligation of Sublessor to sublease the Aircraft to Sublessee
on the terms and conditions herein set forth is subject to the satisfaction, on
or before the Commencement Date, of each of the following conditions:
(a) Execution and Delivery of Documents. Sublessee shall have duly
executed and delivered to Sublessor (i) this Sublease, (ii) an Acceptance
Certificate in the form of Exhibit B hereto covering the Aircraft and effective
as of the Commencement Date, (iii) the Sublease Supplement, and (iv) a consent
or consents to the Security Assignments in form and substance satisfactory to
Lessor and Agent.
(b) Representations, Warranties, No Default. (i) All of the
representations and warranties of Sublessee contained in this Sublease shall be
true and correct on and as of the Commencement Date as though made on such date
or, if they relate solely to an earlier date, as of such date and (ii) no
Default or Event of Default shall have occurred and be continuing or would
result from Sublessee's execution, delivery and performance of this Sublease,
and Sublessor shall have received an Officer's Certificate in form and substance
satisfactory to it, to the effect of each of the foregoing.
(c) Resolutions, etc. Sublessor shall have received, in form and
substance satisfactory to its (i) certificate of the Secretary or an Assistant
Secretary of Sublessee with respect to the resolutions of the Board of Directors
of Sublessee
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authorizing the execution, delivery and performance by Sublessee of this
Sublease and all other documents and certificates contemplated hereby to be
executed on behalf of Sublessee, and the authority and signatures of the persons
authorized to execute and deliver such documents on behalf of Sublessee; and
(ii) such other documents and evidence with respect to Sublessee as Sublessor
may reasonably request in order to establish the consummation of the
transactions contemplated by this Sublease, the taking of all proceedings in
connection therewith and compliance with the conditions set forth in this
Section 4.
(d) Security Deposit and Basic Rent. On or before the Commencement Date
(i) Sublessor shall have received immediately available funds in the amount of
the balance of the Security Deposit Amount and (ii) Agent shall have received
the first Basic Rent payment.
(e) Side Letter. On or before the Commencement Date, Sublessor shall
have received all amounts due to it under that certain side letter dated as of
even date herewith.
(f) Insurance Certificate. Sublessor shall have received, on or prior
to the Commencement Date, in form and substance satisfactory to it and to Agent,
an insurer's or broker's certificate as to the due compliance by Sublessee with
the insurance provisions of Section 9.
(g) Filings; Financing Statements. Sublessor shall have received
evidence satisfactory to it that this Sublease and the Security Assignments
shall each have been duly filed for recordation with the FAA pursuant to the
Federal Aviation Act. If requested by Sublessor, Sublessee shall have executed
(as debtor) and delivered to Sublessor one or more precautionary Uniform
Commercial Code financing statements for filing in such places in the United
States as, in the Sublessor's opinion, are necessary or desirable.
(h) Opinions of Counsel. Sublessor shall have received a favorable
opinion or opinions addressed to Sublessor and Lessor from Winthrop, Stimson,
Putnam & Roberts and Sparks, Dix, counsel for Sublessee, dated as of the
Commencement Date.
(i) No Event of Loss. No Event of Loss shall have occurred with respect
to the Aircraft or any Engine.
(j) Acceptance by Process Agent. CT Corporation System shall have
accepted its appointment as Process Agent on behalf of Sublessee by one or more
instruments in writing delivered to Sublessor.
(k) Net Worth. On and as of the Commencement Date Sublessee shall have
a net worth of not less than U.S.$50,000,000, as determined in accordance with
generally accepted accounting principles.
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(l) Other Documents. Sublessor shall have received such other documents
and matters incident to foregoing as Sublessor, Lessor or Agent may reasonably
request and such other agreements as Sublessor, Lessor or Agent may reasonably
request, as each deems necessary or desirable to consummate the transactions
contemplated hereby.
(ii) The obligation of Sublessee to sublease the Aircraft from
Sublessor pursuant hereto is subject to the satisfaction, on or before the
commencement date, of each of the following conditions:
(a) Delivery of Assignments of Warranties. Sublessee shall have
received from Sublessor Assignments of Warranties in form and substance
reasonably acceptable to Sublessee, duly accepted by the Manufacturers of the
Airframe and the Engine.
(b) Resolutions, etc. Sublessee shall have received, in form and
substance reasonably satisfactory to it: (i) a certificate of the Secretary or
an Assistant Secretary of Sublessor, in the form attached as part of Exhibit D
hereto, with respect to the resolutions of the Board of Directors of Sublessor
authorizing the execution, delivery and performance by Sublessor of this
Sublease and all other documents and certificates contemplated hereby to be
executed on behalf of Sublessor, and the authority and signatures of the persons
authorized to execute and deliver such documents on behalf of Sublessor; and
(ii) such other documents and evidence with respect to Sublessor as Sublessee
may reasonably request in order to establish the consummation of the
transactions contemplated by this Sublease, the taking of all proceedings in
connection therewith and compliance with the conditions set forth in this
Section 4.
(c) Consents to Sublease. Sublessee shall have received the written
consents of Lessor and Agent to this Sublease.
(d) Extension of Lease. Sublessee shall have received a copy of that
certain Amendment to Lease dated on or prior to the date hereof pursuant to
which the terms of the Lease shall have been extended such that it shall be at
least coterminous herewith.
(e) Certificate of No Default. Sublessee shall have received a
certificate of a duly authorized officer of Sublessor to the effect that no
Default or Event of Default, as defined therein, has occurred and is continuing
under the Lease or the Mortgage.
(f) Delivery of Sublease Supplement. Sublessor shall have delivered to
Sublessee the Sublease Supplement.
(g) Certificate of Airworthiness. The Certificate of Airworthiness for
the Aircraft shall not have been withdrawn.
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(h) Acceptance by Process Agent. Greenberg, Traurig et al. shall have
accepted its appointment as Process Agent on behalf of Sublessor.
(i) Broker. Sublessee shall have received a letter from Cauff, Lippman
& Crane Aviation, Inc., addressed to and in form and substance satisfactory to
it, to the effect that Cauff, Lippman & Crane Aviation will not seek to recover
any amounts in respect of the Aircraft, Engines or Parts from Sublessee.
Section 5. Disclaimer; Manufacturer and Vendor Warranties.
(a) Disclaimer by Sublessor. PRIOR TO THE EXECUTION OF THIS SUBLEASE,
SUBLESSEE HAS SELECTED THE TYPE OF AIRCRAFT, AIRFRAME, ENGINES AND PARTS. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 5(B) BELOW, NEITHER SUBLESSOR,
LESSOR, AGENT, ANY LENDER NOR ANY SUCCESSOR IN INTEREST TO EITHER HAS MADE NOR
SHALL BE DEEMED TO HAVE MADE AND ACCORDINGLY MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING THE CONDITION OF THE AIRCRAFT,
AIRFRAME, ENGINES AND PARTS, THEIR MERCHANTABILITY OR THEIR FITNESS FOR ANY
PARTICULAR PURPOSE, AND SUBLESSOR (FOR ITSELF, LESSOR, AGENT AND ANY LENDERS)
EXPRESSLY DISCLAIMS THE SAME AND AS RESPECTS SUBLESSOR. SUBLESSEE LEASES THE
AIRCRAFT, AIRFRAME, ENGINES AND PARTS "AS IS" AND "WHERE IS". EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN SECTION 5(B) BELOW, SUBLESSOR HEREBY EXPRESSLY
DISCLAIMS ANY WARRANTY EITHER EXPRESS OR IMPLIED (WHETHER STATUTORY OR
OTHERWISE) RELATING TO THE CAPACITY, AGE, QUALITY, DESCRIPTION, STATE,
CONDITION, DESIGN, CONSTRUCTION, USE, OPERATION, OR PERFORMANCE OF THE AIRCRAFT
OR THE SUITABILITY OF THE AIRCRAFT OR ITS FITNESS FOR ANY PARTICULAR PURPOSE OR
AS TO ITS AIRWORTHINESS. SUBLESSOR, LESSOR, AGENT AND ANY LENDER SHALL HAVE NO
LIABILITY TO SUBLESSEE FOR ANY CLAIM, LOSS OR DAMAGE WHATSOEVER INCLUDING, BUT
NOT LIMITED TO, INCIDENTAL OR CONSEQUENTIAL DAMAGES, CAUSED OR ALLEGED TO BE
CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR AIRFRAME, ANY OF THE ENGINES OR
PARTS, OR BY ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY
INCIDENT WHATSOEVER IN CONNECTION THEREWITH ARISING IN STRICT LIABILITY,
NEGLIGENCE, GROSS NEGLIGENCE OR OTHERWISE, OR IN ANY ACTION RELATED TO OR
ARISING OUT OF THIS SUBLEASE OR ANY OTHER DOCUMENT AND WHETHER INVOLVING
PERSONAL INJURY, PROPERTY DAMAGE OR OTHERWISE, EXCEPT AS EXPRESSLY PROVIDED IN
SECTION 5(b) BELOW, SUBLESSEE HEREBY WAIVES AS BETWEEN ITSELF, SUBLESSOR AND ANY
PERSON CLAIMING BY, THROUGH OR UNDER SUBLESSOR, LESSOR, AGENT AND ANY LENDER,
ALL ITS RIGHTS, EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE), AGAINST
SUBLESSOR OR ANY OTHER SUCH PERSON IN AND TO THE AIRCRAFT RELATING TO THE
CAPACITY, AGE, QUALITY, DESCRIPTION, STATE, CONDITION, DESIGN, CONSTRUCTION,
USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT AND THE LEASING THEREOF BY
SUBLESSOR TO SUBLESSEE, OR TO THE MERCHANTABILITY OR SUITABILITY OF THE AIRCRAFT
OR ITS FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO ITS AIRWORTHINESS. In
particular and without prejudice to the generality of the foregoing, neither
Sublessor nor any such other Person shall be
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under any liability whatsoever and howsoever arising, whether in contract or
tort or both, in respect of any loss, liability, damage or delay of or to or in
connection with any of the Aircraft or any Person or property whatsoever,
whether on board the Aircraft or elsewhere, irrespective of whether such loss,
damage or delay shall arise (x) from the unairworthiness of the Aircraft, or (y)
from any action or omission of Sublessor or any other such Person (other than
any action or omission that constitutes willful misconduct or gross negligence
of Sublessor).
(b) Sublessor's Representations, Warranties and Covenants.
Notwithstanding and as the sole exception to Section 5(a), Sublessor represents
and warrants that (1) it is a Sociedad anonima, duly formed and validly existing
under the laws of El Salvador and has legal right to own its properties and to
carry on its business as presently conducted and to perform its obligations
under this Sublease, (ii) unless a Default or an Event of Default shall have
occurred and be continuing neither Sublessor or Lessor nor anyone claiming by,
under or through Sublessor or Lessor shall take any actions inconsistent with
Sublessee's right of quiet enjoyment, (iii) the Aircraft and the Aircraft
Records have been maintained in accordance with TACA's FAA approved maintenance
program during the period that such Aircraft has been leased to Sublessor, (iv)
Sublessor shall indemnify and hold Sublessee harmless from any claims or damages
arising out of that certain prior Letter of Intent by and between Sublessor and
Transbrasil S.A. Linhas Aereas concerning the Aircraft; (v) holds all material
licenses, certificates and permits necessary for the conduct of its business as
now conducted; (vi) the execution, delivery and performance of this Sublease has
been duly authorized by all necessary corporate action of Sublessor, and does
not and will not (a) result in the violation of the provisions of the charter
documents or bylaws of Sublessor as in effect on the date hereof, (b) require
stockholder approval or approval or consent of any trustee or holders of any
indebtedness of Sublessor, except such approvals which have been obtained and
are in full force and effect, (c) contravene any law, rule or regulation or any
order of any Government Entity binding on Sublessor, and (d) conflict with or
result in a breach of any terms or provisions of or constitute a default under,
or result in or require the creation or imposition of any Lien upon any material
property or assets of Sublessor under, any indenture, mortgage or other
agreement or instrument as in effect on the date hereof to which Sublessor is a
party or by which it or any of its property is bound, or any applicable law,
rule or regulation, judgment, order or decree of any Government Entity or court
having jurisdiction over Sublessor or any of its properties; (vii) this Sublease
constitutes the legal, valid and binding obligation of Sublessor, enforceable
against Sublessor in accordance with its terms except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and, to the extent that certain
remedies require or may require enforcement by a court of equity, by such
principles of equity
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(regardless of whether such enforceability is considered in a proceeding at law
or in equity) as a court having jurisdiction may impose; (viii) at least fifty
percent (50%) of the issued and outstanding shares, representing 50% or more in
value of Sublessor, are owned by residents of El Salvador; and (viii) no Default
or Event of Default as defined therein has occurred and is continuing under the
Lease or the Mortgage.
(c) Manufacturer and Vendor Warranties. Sublessor hereby assigns to
Sublessee for the duration of the Sublease Term (so long as no Event of Default
shall have occurred and be continuing) all assignable warranties, if any, given
by the Manufacturer and other vendors with respect to the Aircraft and Engines
and shall obtain Manufacturer's consent to such Assignment. Sublessee will
diligently and promptly pursue any valid claims it may have under such
warranties and will provide notice of the same to Sublessor. To the extent that
any warranty given by the Manufacturer or others with respect to the Aircraft or
Engines is not assignable or otherwise made available to Sublessee, Sublessor
agrees, at its option, either (i) to authorize Sublessee to take such action to
enforce such warranty in the name of Sublessor as Sublessee sees fit or (ii) to
exert reasonable efforts at Sublessee's request and expense (and subject to
Sublessee making adequate provision to the satisfaction of Sublessor with
respect to such expense) to enforce any such warranties for the benefit of
Sublessee. Effective on the return of the Aircraft or the termination of this
Sublease, whichever is earlier, Sublessee hereby assigns any remaining
warranties, and any claims thereunder, to Sublessor or its designee. Upon
exercise by Sublessor or any Party claiming by, through or under Sublessor of
any remedies in respect of an Event of Default, and at the latest, upon
expiration of the Sublease Term, the benefit of all warranties referred to
herein shall immediately revert and be deemed to have been reassigned by
Sublessee to Sublessor.
Section 6. Maintenance; Alterations, Modifications and
Additions.
(a) Maintenance.
(i) So long as Sublessor has not committed a breach of its
covenant of quiet enjoyment which shall have the effect of depriving
Sublessee of the use or possession of the Aircraft, during the Sublease
Term and until the Aircraft is returned to Sublessor, Sublessee shall,
at its sole cost and expense, service, inspect, test, maintain,
overhaul and repair the Aircraft, the Engines and all of the Parts in
accordance with Sublessee's FAA approved airworthiness maintenance and
inspection program, a copy of which has been or will be delivered to
Sublessor on or prior to the Commencement Date (the "Maintenance
Program") and in Conformity with the rules and regulations of the FAA,
(A) so as to keep the Aircraft in as good condition (operating and
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otherwise), appearance and repair as when delivered to Sublessee
hereunder, ordinary wear and tear excepted and otherwise to enable the
airworthiness certification of the Aircraft to be maintained in good
standing at all times under applicable law, and to be and remain
registered in the United States pursuant to the Federal Aviation Act,
and (B) in the same manner and with the same care as used by Sublessee
with respect to similar aircraft and engines owned or operated by
Sublessee (it being the intention of the parties hereto that Sublessee
shall not discriminate against the Aircraft in respect of any
maintenance matters). Sublessee shall be authorized to amend its
Maintenance Program; provided, however, that notwithstanding such
amendment, the Maintenance Program shall, it all times during the
Sublease Term, be in full conformity with the requirements set forth
above and, further provided, that Sublessee shall have obtained
Sublessor's prior written consent to any material amendment or change
in or to the Maintenance Program. All service, inspection, maintenance,
modification, repair and overhaul shall be performed or caused to be
performed by Sublessee in accordance with all applicable FAA
requirements and under the Maintenance Program, and shall be
accomplished in accordance with all applicable service, inspection,
maintenance, modification, repair and overhaul manuals and bulletins
published by the Manufacturer or the manufacturers of the Engines or
engines, equipment, accessories or Parts installed on the Aircraft.
Without limiting the generality of the foregoing or the obligations of
Sublessee hereunder, Sublessee agrees that such maintenance and repairs
will include but will not be limited to each of the following:
(A) to perform in accordance with the
Maintenance Program all routine and non-routine
maintenance work;
(B) to comply on a terminating basis with
all outstanding mandatory orders, airworthiness directives and
instructions issued by the FAA affecting the Aircraft that
have an effective date for compliance prior to, or sooner than
one hundred eighty (180) days after, the return date of the
Aircraft;
(C) to incorporate in the Aircraft all
service bulletins of the Manufacturer, the Engine manufacturer
and other vendors which Sublessee schedules to incorporate
during the Sublease Term on aircraft or engines in its Boeing
737 fleet;
(D) to incorporate in to maintenance
schedule for the Aircraft a corrosion control program as
recommended by Manufacturer and the FAA and to carry out such
work as may be required to comply therewith, including
periodic inspections of fuel tanks, periodic
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inspection and clean-up under galleys and lavatories, the
cleaning and treating of all mild and moderate corrosion and
the correcting of all severe and exfoliated corrosion in
accordance with the recommendations of the Manufacturer; and
(E) to maintain, in the English language (1)
the Aircraft Documentation and (2) any other records, logs or
other documents, information or materials relating to the
service, inspection, testing, maintenance, modification,
overhaul and repair of the Aircraft, any Engine and any Part
which are required by the FAA or by applicable law, all of
which shall at all times be kept current and up-to-date, shall
conform with the laws of any Government Entity having
jurisdiction and with normal practices of commercial air
carriers, shall disclose the location of any Engine or Part
not installed on the Airframe and shall be made available for
review by Sublessor on reasonable notice.
(ii) Sublessee shall have designated persons in its employment
authorized by the FAA to perform service, inspection, modifications
repair and alterations of the Aircraft, and to return the Aircraft to
Sublessee's revenue service after such performance has been
accomplished by Sublessee or shall have the same performed on its
behalf by an FAA approved repair and overhaul station in conformity
with FAR 145 ("Approved Repair Facility"). For purposes hereof,
Sublessor acknowledges that Sublessee's maintenance and repairs in
connection with "C" checks and "D" checks (or the equivalent thereof)
are being Performed by Tramco, Inc. of Seattle, Washington. In the
event Sublessee has a third party accomplish, on a continuous basis,
some or all of the maintenance requirements under the Maintenance
Program (excluding "A," preflight and transit checks) such maintenance
by said third party must be accomplished in accordance with the
provisions of this Section 6(a). Sublessor shall be entitled and
Sublessee shall ensure that Sublessor is permitted to reasonably visit
the facilities of any such third party maintenance performer to inspect
the maintenance work performed on and the maintenance records of the
Aircraft including any Engine or Part.
(iii) Sublessor may request that Sublessee accomplish changes
desired by Sublessor to the Aircraft during Sublessee's layup of the
Aircraft for maintenance under the Maintenance Program in those
circumstances where such changes are not required under this Section
6(c). No such request shall be unreasonably denied by Sublessee
provided that no such changes shall require Sublessee to keep the
Aircraft out of service for any longer period than the period which
Sublessee's maintenance of the Aircraft was scheduled to require. With
respect to such requested changes, Sublessor, at its expense, shall
provide retrofit
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kits of parts and installation instructions to Sublessee. Sublessor
shall, within thirty (30) days (or such earlier period as may be
required by any Authorized Repair Facility performing the requested
change(s)) of receipt of an invoice detailing the same, pay all costs
thereof which costs shall have been agreed upon prior to performance of
the requested changes.
(iv) Sublessee shall give Sublessor not less than thirty (30)
days' prior written notice of the anticipated date, location and
Approved Repair Facility in respect of any "C" check or "D" check (or
its equivalent) to be performed on the Aircraft.
(v) Repairs will be accomplished as follows: (A) any repair to
the Aircraft shall be accomplished pursuant to the appropriate
manufacturer's repair manual instructions under an FFA approved
program; and (B) any material repair to the Aircraft that is not
covered by appropriate manufacturer's repair manual instructions shall
be subject to Sublessor's prior written approval and shall be made
under an FAA approved program.
(vi) Notwithstanding anything to the contrary contained herein
and provided that the same shall not violate the terms of or conflict
with any lease, sublease, credit or security agreement to which such
engine, an aircraft engine that is not an Engine, but that is installed
on the Airframe, shall be maintained in accordance with this Section
6(a).
(b) Maintenance Reserves.
(i) Sublessee shall pay Sublessor, as Supplemental Rent for
the use of the Aircraft during the Sublease Term, within fifteen (15)
days following the last day of each calendar month during the Sublease
Term and on the redelivery date, the following sums ("Maintenance
Reserves"): (A) with respect to each Engine, the amount (the "Engine
Reserve Amount") determined by multiplying the number of Flight Hours
of operation of such Engine during the immediately preceding month
(irrespective of whether such Engine is installed on the Airframe or
any other airframe) times [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(of which [XXXXXXXXXXXXXXXXXXXXXXXXXX] shall be for restoration shop
visits (the "Shop Visit Portion") and [XXXXXXXXXXXXXXXXXXXXXX] shall be
towards the cost of life-limited parts (the "LLP Portion")), and (B)
with respect to the Airframe, the amount (the "Airframe Reserve
Amount") determined by multiplying the number of Flight Hours of
operation of the Airframe during such month times [XXXXXXXXXXXXXXX
XXXXXXXXX]. It is the intent of the parties hereto that the Aircraft
and Engines be operated during the Sublease Term at an average
Hour/Cycle ratio (the "Ratio")
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greater than [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]. In the
event that during any calendar quarter during the Sublease Term, the
average of the Ratios corresponding to each month during such calendar
quarter shall be less (as determined in increments of one tenth of an
hour, any measurement being rounded up to the next tenth of an hour if
equal to or greater than fifty one hundredths of an hour or rounded
down to the lower one tenth of an hour if less than fifty one
hundredths of an hour) than [X] Hours to each Cycle [XXXXX], the LLP
Portion of the Engine Reserve Amount in respect of the next succeeding
calendar quarter shall be increased in inverse proportion to the
decrease in Ratio as evidenced by the average of the Ratios
corresponding to each month during such calendar quarter. In the event
that during any calendar quarter the average of the Ratios
corresponding to each month during such calendar quarter shall be
greater (as determined in increments of one tenth of an hour, any
measurement being rounded up to the next tenth of an hour if equal to
or greater than fifty one hundredths of an hour or rounded down to the
lower one tenth of an hour if less than fifty one hundredths of an
hour) than the [XXXXXXXXXXXXXXXXXXXXXXXXXXXX], the amount of the LLP
Portion of the Engine Reserve Amount shall be decreased in inverse
proportion to the increase in the Ratio. Any excess Maintenance
Reserves remaining at the expiration of the Sublease Term or earlier
termination of this Sublease shall be retained by Sublessor.
(ii) Sublessee shall be entitled to reimbursement from the
Shop Visit Portion of the Engine Reserve Amount held for an Engine for
Sublessee's actual costs (without mark-up) incurred with respect to
heavy maintenance of such Engine requiring a shop visit, excluding any
costs associated with replacement of life limited parts and the cost of
any repairs or maintenance required due to accidents, abuse, misuse,
mishandling, faulty maintenance, foreign object damage, elective part
replacement or any insured event. Such reimbursement shall be made
within ten (10) Business Days after presentation to Sublessor of
appropriate written evidence of such expenses (which shall include a
copy of an invoice from an FAA-approved maintenance facility indicating
that the maintenance has been completed and identifying those engine
maintenance tasks accomplished and the labor and material breakdown
thereof, and a receipt from the maintenance facility for payment of the
invoice, or at least such amount thereof as shall exceed the portion of
the Maintenance Reserves available to Sublessee hereunder); provided,
that (A) the amount reimbursed to Sublessee shall not exceed the amount
of the Maintenance Reserves paid by Sublessee (and not previously
disbursed) allocable to the Shop Visit Portion of the Engine Reserve
Amount for the Engine requiring a shop visit, and (B) in no event shall
Sublessee be entitled to reimbursement for any expenses related to
removal or installation of any Engine for
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<PAGE>
maintenance or any other shipping or transportation expenses. To the
extent that any amount reimbursable hereunder has not been paid by
Sublessee, such amount shall be paid directly to the maintenance
facility which performed the services for which reimbursement is
sought.
(iii) Sublessee shall be entitled to reimbursement from the
LLP Portion of the Engine Reserve Amount (i) for the full replacement
cost of life limited parts having a remaining life of up to and
including [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] Cycles. Upon
reimbursement of such replacement costs, Sublessee shall deliver the
removed life limited parts to Sublessor at the overhaul facility and
cause title thereto to vest in Sublessor free and clear of all Liens
other than Sublessor Liens, and (ii) of such portion of the replacement
cost of life limited parts having a remaining life in excess of [XX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] Cycles as corresponds to the utilized
(non-remaining) portion of the life of such life limited parts as
compared to the total life thereof when new, as expressed in Cycles.
With respect to such life limited parts having a remaining life in
excess of [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] Cycles, title to such
life limited parts shall be deemed to vest in Sublessee upon
installation of replacement parts on an Engine. Such reimbursement
shall be made within ten (10) Business Days after presentation to
Sublessor of appropriate written evidence of such costs (which shall
include a copy of an invoice from an FAA-approved supplier of such life
limited parts, identifying those purchased and receipt of payment
therefor or at least payment for such portion as shall exceed the LLP
Portion of the Engine Reserve Amount available to Sublessee hereunder
and of the Approved Repair Facility indicating that such life limited
parts have been installed on an Engine; provided, that (A) the amount
reimbursed to Sublessee shall not exceed the amount of the Maintenance
Reserves paid by Sublessee (and not previously disbursed) allocable to
the LLP Portion of the Engine Reserve Amount for the Engine requiring a
shop visit, and (B) in no event shall Sublessee be entitled to
reimbursement for any expenses related to removal, shipping or
transportation expenses. To the extent that any amount reimbursable
hereunder has not been paid by Sublessee, such amount shall be paid
directly to the supplier of the life limited part(s) for which
reimbursement is sought.
(iv) Sublessee shall be entitled to reimbursement from the
Airframe Reserve Amount for the costs incurred pursuant to a full
structural and systems "D" check (or its equivalent) to occur during
the Sublease Term. Such reimbursement shall be made within ten (10)
Business Days after presentation to Sublessor of appropriate written
evidence of such expenses (which shall include a copy of an invoice
from an FAA-approved maintenance facility indicating that the "D" check
(or its equivalent) has been completed
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and identifying those maintenance tasks accomplished and the labor and
material breakdown thereof, and a receipt from the maintenance facility
for payment of the invoice, or at least such amount thereof as shall
exceed the portion of the Maintenance Reserves available to Sublessee
from the Airframe Reserve Amount hereunder); provided, that (A) the
amount reimbursed to Sublessee shall not exceed the amount of the
Maintenance Reserves paid by Sublessee (and not previously disbursed)
allocable to the Airframe Reserve Amount, and (B) in no event shall
Sublessee be entitled to reimbursement for any expenses related to
removal, shipping or transportation expenses. To the extent that any
amount reimbursable hereunder has not been paid by Sublessee, such
amount shall be paid directly to the maintenance facility which
performed the "D" check for which reimbursement is sought.
(v) In respect of any maintenance work to be performed or
replacement of life limited parts for which reimbursement from the
applicable portion of the Maintenance Reserves will be requested,
Sublessee, prior to the performance of such maintenance or replacement
of life limited parts, shall deliver to Sublessor a detailed work scope
to be performed with an estimate of all costs to be incurred in
connection with such maintenance and/or replacement of life limited
parts, including, without limitation, the estimated cost of labor,
materials and parts for which reimbursement is available under this
Section 6(b).
(vi) Provided that no breach by Sublessor of Sublessor's
covenant of quiet enjoyment depriving Sublessee of its use or
possession of the Aircraft has occurred and is continuing, nothing
therein shall modify, limit or otherwise affect Sublessee's obligation
to maintain and repair the Aircraft in accordance with the terms of
this sublease and, except as specifically provided herein, any and all
maintenance and repairs on or to the aircraft shall be at sublessee's
sole cost and expense.
(c) Replacement of Parts. Sublessee, at its own cost and expense
(except as otherwise expressly provided herein), will promptly replace all Parts
that may from time to time be incorporated or installed in or attached to the
Aircraft or any Engine and that may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever, except as otherwise provided
in Section 6(e). In addition, Sublessee may, at its own cost and expense, remove
in the ordinary course of maintenance, service, repair, overhaul or testing, any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use; provided that
Sublessee, except as otherwise provided in Section 6(e), will, at its own cost
and expense, replace such Parts as promptly as possible.
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All replacement Parts shall (i) be free and clear of all Liens (except Permitted
Liens, as hereinafter defined, and except for pooling arrangements to the extent
permitted by Section 6(d)), (ii) be in airworthy and good operating condition
and of at least equivalent model and modification status and 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) and
(iii) if applicable, have a current "serviceable tag" of the manufacturer or
maintenance facility providing such items to Sublessee, indicating that such
Parts are new, serviceable or overhauled. All Parts at any time removed from the
Aircraft or any Engine shall remain subject to this Sublease, no matter where
located, until such time as such Parts shall be replaced by Parts that have been
incorporated or installed in or attached to the Aircraft or such Engine and that
meet the requirements for replaced Parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Aircraft or any Engine as above provided, without further act, (i) title to the
replaced Part shall thereupon vest in Sublessee, free and clear of Sublessor's
Liens and all rights of Sublessor, Agent and the Lenders and shall no longer be
deemed a Part hereunder provided, however, that in the case of any Part that is
replaced by a replacement Part subject to a pooling arrangement, title to such
replaced Part shall not vest in Sublessee until Sublessee has complied with the
provisions of Section 6(d), (ii) title to such replacement Part shall vest in
Sublessor and such replacement Part shall thereupon become subject to this
Sublease (subject only to a pooling arrangement to the extent permitted by
Section 6(d)) and (iii) such replacement Part shall be deemed part of the
Aircraft or such Engine for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to the Aircraft or such
Engine.
Notwithstanding the provisions of this Section 6(c), provided that no
Event of Default has occurred and is continuing, Sublessee may install any
engine or part on the Aircraft by way of temporary replacement if: (i) there is
not available to Sublessee at the time and in the place that an engine or part
is required to be installed on the Aircraft, a Replacement Engine or, as the
case may be, Part complying with the requirements of Section 6(c); (ii) it would
result in an unreasonable disruption of the operation of the Aircraft and/or the
business of Sublessee to ground the Aircraft until an Engine or Part, as the
case may be, complying with Section 6(c) becomes available for installation on
the Aircraft; and (iii) as soon as practicable after installation of the same on
the Aircraft but, in any event, no later than the date of the next major
maintenance check (except as such time may be extended pursuant to Section
8(b)), Sublessee removes any such engine or part and replaces it with an Engine
or Part, as the case may be, complying with Section 6(c).
(d) Pooling of Parts. Any Part (other than Engines) removed from the
Aircraft as provided in Section 6(c) may be
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subjected by Sublessee to a normal pooling arrangement customary in the airline
industry entered into in the ordinary course of Sublessee's business with
financially and operationally responsible air carriers; provided no Default of
Event of Default shall have occurred and be continuing and further provided that
the Part replacing such removed Part shall be incorporated or installed in or
attached to the Aircraft in accordance with Section 6(c) after the removal of
such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to the Aircraft in accordance with Section 6(c) may be
owned by a financially and operationally responsible air carrier subject to such
a normal pooling arrangement; provided that Sublessee, at its expense, either
(i) causes such replacement Part to become subject to this Sublease in
accordance with Section 6(c) by Sublessee acquiring title thereto for the
benefit of Sublessor free and clear of all Liens other than Permitted Liens or
(ii) replaces such replacement Part by incorporating or installing in or
attaching to the Aircraft a further replacement Part owned by Sublessee free and
clear of all Liens other than Permitted Liens and by causing such further
replacement Part to become subject hereto in accordance with Section 6(c).
(e) Alterations, Modifications and Additions. EXCEPT FOR SUCH
ALTERNATIONS AND MODIFICATIONS TO THE AIRCRAFT AND THE ENGINES AS MAY BE
REQUIRED FROM TIME TO TIME TO MEET THE STANDARDS OF THE FAA OR OTHER
GOVERNMENTAL ENTITY HAVING JURISDICTION AND AS REQUIRED TO CONFORM TO
MANUFACTURERS' MANDATORY SERVICE BULLETINS, SUBLESSEE SHALL MAKE NO ALTERATIONS,
MODIFICATIONS OR ADDITIONS TO THE AIRCRAFT OR ANY ENGINE WITHOUT THE PRIOR
WRITTEN CONSENT OF SUBLESSOR. Sublessee, at its own expense, will make such
alterations and modifications to the Aircraft and the Engines as may be required
from time to time to meet the standards of the FAA or other Governmental Entity
having jurisdiction and as required to conform to Manufacturers' mandatory
service bulletins, and shall notify Sublessor of the nature and schedule for
making such changes and, upon submission of the Monthly Report for the month
during which competition of the same shall have occurred, of completion thereof.
Unless expressly required by the FAA or Manufacturer's mandatory service
bulletins, no alteration, modification or addition shall diminish the value or
utility of the Aircraft 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
Aircraft 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 Sublease), it
being understood that any such alteration, modification or addition that
adversely affects interchangeability of Parts shall be deemed to diminish the
value of the Aircraft. Promptly upon request therefor, Sublessee shall provide
to Sublessor copies of all drawings and data with respect to any proposed
alteration, modification or addition not mandated by the FAA. Sublessor may
impose as a condition to its consent
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to all or any part of such proposed alteration, modification or addition that,
prior to the return of the Aircraft to Sublessor in accordance with Section 10,
such alteration, modification or addition be removed and the Aircraft returned,
all at Sublessee's expense, to the condition it was in prior to such alteration,
modification or addition, and otherwise as required by Section 10. All parts
incorporated or installed in or attached or added to the Aircraft or such Engine
as the result of such alteration, modification or addition shall, without
further act, become subject to this Sublease. Notwithstanding the foregoing
sentence of this Section 6(e), so long as no Default or Event of Default shall
have occurred and be continuing, Sublessee may remove any Part; provided that
(i) such Part is in addition to, and not in replacement of or substitution for,
any Part originally incorporated or installed in or attached to the Aircraft or
any engine at the time of delivery thereof hereunder or any Part in replacement
of, or substitution for any such Part, (ii) such Part is not required to be
incorporated or installed in or attached or added to the Aircraft or such Engine
pursuant to the terms of this Section 6(e) and (iii) such Part can be removed
from the Aircraft or such Engine without diminishing or impairing the value,
utility, condition or airworthiness required to be maintained by the terms of
this Sublease that the Aircraft or such Engine would have had at such time had
such removal not occurred. Upon the removal by Sublessee of any Part as above
provided, title thereto shall, without further act, vest in Sublessee and such
Part shall no longer be deemed part of the Aircraft or such Engine from which it
was removed. Any Part removed by Sublessee in any manner other than as above
provided prior to the return of the Aircraft or such Engine to Sublessor
hereunder shall remain the property of Sublessor.
Notwithstanding anything herein to the contrary, Sublessee shall be
permitted to install and remove, at its sole cost and expense, new galleys,
seats, video and entertainment systems and telephones, provided that Sublessee
shall store any galleys and video, entertainment and telephone systems currently
installed on the Aircraft and removed therefrom by Sublessee, in a safe manner
and at its sole cost and expense and, provided, except as otherwise agreed
between Sublessee and Sublessor, that any such equipment installed upon the
Aircraft by Sublessee is removed by Sublessee at its sole cost and expense and
Sublessee shall return the Aircraft with the Sublessor's equipment reinstalled
thereon or, if lost or damaged, with the equivalent thereof, satisfactory to
Sublessor, and further provided that Sublessee shall repair at its sole cost and
expense and to Sublessor's reasonable satisfaction, any damage to the Aircraft
caused by or in connection with such installation and removal.
Section 7. Title and Registration; Liens; Possession.
(a) Title and Registration. Sublessee acknowledges and agrees that as
between Sublessee and Sublessor, title shall at all times be and remain vested
solely and exclusively in Lessor,
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and Sublessee shall have no right, title or interest in the Aircraft except the
right to use the Aircraft as provided herein. The Aircraft has been duly
registered, and shall at all times during the Sublease Term remain duly
registered, in the name of Lessor under the laws of the United States, except as
otherwise required by the Federal Aviation Act. Sublessee, at its sole cost and
expense, shall from time to time do or cause to be done any and all acts and
things then required by law (including the Geneva Convention on International
Recognition of Rights in Aircraft, if applicable) or by practice, custom or
understanding or as Sublessor may reasonably request to protect, preserve and
perfect Sublessor's, Lessor's, Agent's and any Lender's rights and interests in
the Aircraft, the Lease and this Sublease in the United States or in any other
jurisdiction into or over which Sublessee may operate the Aircraft or to which
Sublessee is subject. Without limiting the generality of the foregoing, if at
any time any filing or recording is necessary or advisable to perfect, protect
and/or preserve the rights and interests of Sublessor, Lessor, Agent or any
Lender in the Aircraft (including Engines and Parts), the Lease or this
Sublease, Sublessee shall, at its own cost and expense, cause this Sublease, the
Lease, financing statements with respect hereto or thereto, and any and all
additional documents or instruments which shall be executed pursuant to the
terms hereof or thereof, so far as permitted by applicable law, to be kept,
filed and recorded and to be reexecuted, refiled and rerecorded at all times in
the appropriate offices pursuant or in relation to the applicable laws and
regulations of the United States, and shall furnish to Sublessor an opinion of
counsel and/or other evidence satisfactory to Sublessor of such registrations,
recordation and filings required hereunder.
(b) Liens. Sublessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Airframe or any
Engine, title thereto or any Part or interest therein or in this Sublease except
(i) the respective rights of Sublessor and Sublessee as herein provided, (ii)
the rights of others under agreements or arrangements to the extent expressly
permitted by the terms of Sections 6(d), (iii) Sublessor Liens, (iv) Liens for
Taxes either not yet due or being contested in good faith (and, in respect of
such contest, for the payment of which adequate reserves have been provided) by
appropriate proceedings diligently pursued so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Airframe or
any Engine or Part or interest therein and (v) materialmen's, mechanics',
workmen's, repairmen's, employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
or is being contested in good faith (and, in respect of such contest, for the
payment of which adequate reserves or other adequate provisions for payment by
way of security or otherwise, have been provided) by appropriate proceedings
diligently pursued so long as such proceedings do not involve any danger of the
sale, forfeiture or loss of the
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Airframe or any Engine or Part or interest therein (each of the Liens referred
to in clauses (i) to (v) being herein referred to as "Permitted Liens").
Sublessee will notify, as soon as reasonably practicable, Sublessor and shall
promptly, at its sole cost and expense, take such action as may be necessary to
discharge any such lien not excepted above if the same shall arise at any time.
Sublessee hereby further agrees that no mechanics' or similar Lien for any
labor, services or materials supplied directly by Sublessee, shall attach to or
otherwise affect the Aircraft, any Engine or any Part and Sublessee hereby
irrevocably waives disclaims and releases any such Lien.
(c) Operation, Quiet Enjoyment. Sublessee shall not operate or locate
the Aircraft, or suffer the Aircraft to be operated or located, (i) in violation
of any applicable law or the Aircraft's certificate of airworthiness, (ii) other
than on regularly scheduled or charter commercial passenger or cargo flights
between any points in the Americas except (inclusive of any landings) in Cuba
except if otherwise required to ferry the Aircraft to an Approved Repair
Facility, (iii) in any area excluded from coverage by any insurance required by
the terms of Section 9, or (iv) in any recognized or threatened area of
hostility without Sublessor's written consent and unless fully covered to
Sublessor's satisfaction by war risk, confiscation and hijacking insurance.
Sublessee shall not use the Aircraft for testing or for training of flight
crewmembers other than Sublessee's own crewmembers. Except as otherwise provided
herein, Sublessee shall pay all costs incurred in the operation of the Aircraft
during the Sublease Term, for profit or otherwise, including the costs of flight
crews, cabin personnel, fuel, oil, lubricants, maintenance, insurance, storage,
landing and navigation fees, airport charges, passenger service and any and all
other expenses of any kind or nature, directly or indirectly, in connection with
or related to the use, movement and operation of the Aircraft. Provided no
Default or Event of Default shall occur and be continuing, Sublessor shall not
take or cause or permit to be taken any action inconsistent with Sublessee's
right of quiet enjoyment of, or otherwise in any way interfere with or interrupt
the continuing use, operation and possession of the Aircraft, the Airframe or
any Engine by Sublessee.
(d) Possession. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 7(d),
SUBLESSEE SHALL HAVE NO RIGHT WHATSOEVER TO SUBLEASE THE AIRCRAFT OR ANY ENGINE
TO ANY PERSON WITHOUT HAVING OBTAINED THE PRIOR WRITTEN CONSENT OF SUBLESSOR,
LESSOR AND AGENT. Sublessor agrees that it will not unreasonably withhold its
consent to a proposed sublease by Sublessee. In addition and notwithstanding
anything in this Sublease to the contrary, Sublessee will not in any manner
without Sublessor's prior written consent deliver, transfer or relinquish
possession of the Aircraft, the Airframe or any Engine or install any Engine, or
permit any Engine to be installed, on any airframe other than the Airframe;
provided, that, so long as no Default or Event of
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Default shall have occurred and be continuing, and so long as the action to be
taken shall not deprive Lessor of its interest in the Aircraft or Lender of the
perfected first priority Lien of the Mortgage, Sublessee may, from time to time,
take any of the following actions:
(i) deliver possession of the Airframe or any Engine to the
manufacturer thereof or to any organization for testing, service,
repair, maintenance or overhaul work on the Airframe or any Engine or
any Part of any thereof or for alterations or modifications in or
additions to such Airframe or any Engine to the extent required or
permitted by the terms of Section 6(c); or
(ii) to the extent permitted by this Section 7(d), subject any
appliances, parts or other equipment owned by Lessor and removed from
the Airframe or any Engine to any pooling arrangement referred to in
Section 6(d) of the Sublease; or
(iii) install the Engines on any airframe owned or leased by
Sublessee; provided that, no lien shall attach to any such Engine by
virtue of or in connection with such installation, and the owner,
lessor, or any party having a security interest in any such airframe
grants reciprocal rights to Sublessor, Lessor and Lender; and further
provided that, Sublessee shall maintain any and all insurance required
to be maintained upon or in respect of the Engines hereunder at all
times during the Sublease Term and until redelivery of the same in the
conditions required in Section 10 hereof; or
(iv) transfer possession of the Airframe or any Engine to any
Government Entity of the United States pursuant to a sublease, a copy
of which shall be promptly furnished to Sublessor, provided that such
sublease shall (A) not extend beyond the end of the Sublease Term and
(B) Lessee shall have delivered to Sublessor signed copies of a notice
of assignment of such sublease in favor of Sublessor and each of the
Lenders under the Assignment of Claims Act of 1940, as amended (31
U.S.C. Section 3727, 41 U.S.C. Section 15) or any superseding or
successor provisions thereto, and in compliance with the applicable
provisions of 32 C.F.R. Section 7-103.8 and 41 C.F.R. Section 1-30.7,
or superseding or successor laws and regulations, and Sublessor may at
any time when a Default or Event of Default shall have occurred and
then be continuing, file such sublease and an original and three copies
of such notice of assignment with the proper contracting and disbursing
officers and otherwise comply with all applicable provisions of 32
C.F.R. Section 7-103.8 or any superseding or successor provisions
thereto.
Any "wet lease" or other similar arrangement under which Sublessee
maintains operational control of, and continues to
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maintain and insure the Aircraft, for a term not exceeding twelve (12) months
(including all extensions and renewals), shall not constitute a sublease,
transfer or relinquishment of possession for purposes of this Section 7(d).
Sublessee shall notify Sublessor concurrently with entering into any "wet lease"
with a term, including renewals of more than six (6) months.
No sublease, transfer or relinquishment of possession of the Airframe
or any Engine permitted under this Section 7(d) shall in any way discharge or
diminish any of Sublessee's obligations hereunder, or constitute a waiver of any
of Sublessor's rights and remedies hereunder. Notwithstanding any sublease,
transfer or relinquishment of possession permitted under this Section 7(d),
Sublessee shall remain primarily liable hereunder for the performance of all of
the terms of this Sublease to the same extent as if any such transfer or
relinquishment of possession had not occurred.
(e) Identification Plates. Sublessee shall at all times maintain in a
prominent position in the cockpit of the Airframe and on each Engine the
identification plates installed thereon or attached thereto. Sublessee shall
promptly replace any such identification plate that becomes illegible, lost,
damaged or destroyed for any reason.
(f) Reporting Requirements. Commencing with a report furnished fifteen
(15) days after the end of the calendar month of the Commencement Date,
Sublessee will furnish to Sublessor a Monthly Report in the form attached hereto
as Exhibit G, which report will include (i) the hours/cycles operated for the
Airframe and each of the Engines (and their location by airframe). On at least a
quarterly basis Sublessee's report will also contain a list of those service
bulletins, ADs and engineering modifications incorporated on the Aircraft. Each
Monthly Report will be furnished within fifteen (15) days after the end of each
calendar month, except that the Monthly Report pertaining to the last month (or
any portion thereof) of the Sublease Term will be furnished to Lessor on the
last day of the Sublease Term.
(g) Inspections. During the Sublease Term Sublessee shall furnish
Sublessor such information concerning the location, condition, use and operation
of the Aircraft as Sublessor may reasonably request. Sublessee shall give
Sublessor reasonable prior notice of the anticipated date of any major
maintenance checks, in order to enable Sublessor to inspect the Aircraft (should
it choose to do so) at the time and place such major checks occur. Sublessor
shall be entitled to have its technical representatives present during any major
maintenance checks. On reasonable notice, Sublessor and/or its authorized agents
or representatives shall have the right to inspect the Aircraft and Aircraft
documentation (whether in connection with scheduled major maintenance checks or
otherwise) and/or make copies of the Aircraft documentation; provided, that such
inspections do not
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unreasonably disrupt Sublessee's commercial operations or operation of the
Aircraft. Sublessor shall have no duty to make any such inspection and shall not
incur any liability or obligation by reason of making or not making any such
inspection or by reason of any reports it receives or any reviews it may make of
the Aircraft records.
Section 8. Loss, Destruction, Requisition, etc. During the
Sublease Term except as otherwise expressly provided herein, Sublessee shall
bear the entire risk of loss of or damage to the
Aircraft. Accordingly:
(a) Event of Loss with Respect to the Aircraft. Upon the occurrence of
an Event of Loss with respect to the Aircraft, Sublessee shall forthwith (and,
in any event, within seven (7) days after such occurrence) give Sublessor
written notice of such Event of Loss. On or before the earlier to occur of (x)
the actual receipt by Sublessee of any insurance proceeds in respect of such
Event of Loss and (y) the one hundred twentieth (120th) day after the date of
such Event of Loss, but in no case later than the last day of the Sublease Term,
Sublessee shall pay to Agent in immediately available funds the Stipulated Loss
Value, whereupon (1) the obligation of Sublessee to pay Basic Rent with respect
to the Aircraft for any period commencing after the date of payment of such
Stipulated Loss Value shall terminate; provided the Sublessee shall remain
liable for all payments of Basic Rent due on or before the date of such payment
of Stipulated Loss Value, (2) the Sublease Term shall end and (3) Sublessor,
after compliance by Sublessee with all of its other obligations hereunder,
including without limitation payment of Supplemental Rent then due, will cause
Lessor to transfer to Sublessee, without recourse or warranty, title to the
Aircraft free and clear of Sublessor Liens and shall cause Agent to execute and
deliver to Sublessee an appropriate instrument releasing the Aircraft from the
Lien of the Mortgage.
(b) Event of Loss with Respect to an Engine. Upon the occurrence of an
Event of Loss with respect to an Engine only, Sublessee shall give Sublessor
prompt written notice thereof and shall, as soon as practical but in any event
within one hundred twenty (120) days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the Engine with
respect to which such Event of Loss occurred, title to a Replacement Engine free
and clear of all Liens, other than Permitted Liens, and having a value, utility,
mod status at least equal to, and of the same or improved model, service
bulletin status, and maintenance status (i.e., total time, hours/cycles
remaining until next inspection, overhaul or scheduled removal) and in at least
as good operating condition as, the Engine with respect to which such Event of
Loss occurred, assuming such Engine was of the value, utility and remaining life
and 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, Sublessee, at its own expense,
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will promptly (i) furnish Lessor with a bill of sale, in form and substance
satisfactory to Lessor, with respect to such Replacement Engine; (ii) cause a
supplement hereto, in form and substance reasonably satisfactory to Sublessor,
subjecting such Replacement Engine to this Sublease, to be duly executed by
Sublessee, and recorded pursuant to the Federal Aviation Act; (iii) furnish
Sublessor, Lessor and Agent with such evidence of title to such Replacement
Engine and of compliance with the insurance provisions of Section 9 with respect
to such Replacement Engine as either of them may reasonably request; (iv)
furnish Sublessor, Lessor and Agent with an opinion of Sublessee's counsel to
the effect that title to such Replacement Engine has been duly conveyed to
Lessor free and clear of all Liens, encumbrances and rights of others (except
Permitted Liens) and is duly leased hereunder; (v) furnish Sublessor with a
certificate signed by a duly authorized financial officer or executive of
Sublessee certifying that Sublessee's representations and warranties set forth
in Section 11 are true and accurate on and as of said date as though made on and
as of said date and that upon consummation of such replacement, no Default or
Event of Default will exist hereunder; (vi) furnish Sublessor with such
documents and evidence with respect to Sublessee as Sublessor or Lessor may
reasonably request in order to establish the consummation of the transactions
contemplated by this Section 8(b), the taking of all corporate proceedings in
connection therewith and compliance with the conditions set forth in this
Section 8(b), in each case in form and substance satisfactory to such party;
(vii) furnish Sublessor with a certificate of a duly authorized officer of
Sublessee to the effect that no Event of Default has occurred and is continuing;
and (viii) furnish Sublessor with Uniform Commercial Code financing statements
covering such Replacement Engine. Upon full compliance by Sublessee with the
terms of this subparagraph (b), such Engine shall no longer be subject to the
terms of this Sublease and Sublessor will cause Lessor to transfer to Sublessee
title to the Engine with respect to which the Event of Loss occurred, without
recourse or warranty (except that the Engine is free and clear of Sublessor
Liens) and shall cause Agent and Lessor to execute and deliver to Sublessee an
instrument releasing the Engine from the Lien of the Mortgage and the Lease. For
all purposes hereof, each such Replacement Engine shall be deemed part of the
property leased hereunder, shall be deemed an "Engine" as defined herein and
shall be deemed part of the Aircraft as was the Engine replaced thereby. No
Event of Loss covered by this Section 8(b) shall result in any reduction in
Basic Rent. Notwithstanding the foregoing, if, as of the one hundred twentieth
(120th) day following the occurrence of the Event of Loss, Sublessee shall not
have furnished a Replacement Engine as required hereunder and conforming to the
requirements set forth above, at Sublessor's option (i) Sublessor shall extend
the time period within which Sublessee may perform its obligations to furnish a
Replacement Engine hereunder, or, (ii) Sublessee shall forthwith pay to
Sublessor, an amount equal to the Engine Loss Value and upon receipt of such
payment Sublessor
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shall, as soon as practicable but in any event prior to the end of Sublease
Term, convey or cause to be conveyed to Lessor, and to be leased to Sublessor
and subleased to Sublessee hereunder, a Replacement Engine complying with the
conditions of this Section 8(b). Notwithstanding the provisions of Section 6(c)
hereof any engine installed by Sublessee on the Aircraft following an Event of
Loss to an Engine may remain thereon until replaced by a Replacement Engine as
hereinafter provided.
(c) Application of Payments from Governmental Authorities. Any payments
(other than insurance proceeds the application of which is provided for in
Section 9) received at any time by Sublessor or by Sublessee from any Government
Entity or other Person with respect to an Event of Loss resulting from the
condemnation, confiscation, theft or seizure of, or requisition of title to or
use of, the Aircraft or any Engine, other than a requisition for use by a
Government Entity of the United States not constituting an Event of Loss, will
be applied as follows:
(i) if such payments are received with respect to the Airframe
or the Airframe and one or more Engines or engines installed on the
Airframe, such payment shall be paid to or retained by Sublessor and
applied in reduction of Sublessee's obligation to pay the Stipulated
Loss Value, if not already paid by Sublessee, or, if already paid by
Sublessee, shall be paid to or retained by Sublessee and applied to
reimburse Sublessee for its payment of such Stipulated Loss Value, and
the balance, if any, of such payment remaining thereafter shall be
distributed to Sublessee; and
(ii) if such payments are received with respect to an Engine,
such payments shall be held by the Sublessor until (A) replacement of
the Engine by Sublessee by a Replacement Engine at which time said
payments shall be paid to Sublessee; (B) if Sublessor shall have
elected to provide a Replacement Engine as provided in Section 9(b)
said payments shall be applied in reduction of Sublessee's obligation
to pay the Engine Loss Value, if not already paid by Sublessee; or if
already paid by Sublessee, shall be paid to Sublessee and applied to
reimburse Sublessee for its payment of such Engine Loss Value; and, (C)
the balance, if any, of such payment remaining thereafter to Sublessee.
(d) Requisition of Use of the Aircraft. In the event of the requisition
for use of the Aircraft by a Government Entity of the United States and one or
more related Engines or engines during the Sublease Term under circumstances not
constituting an Event of Loss, Sublessee shall promptly notify Sublessor of such
requisition. All of Sublessee's obligations under this Sublease with respect to
such Aircraft including, but not limited to Sublessee's obligation to pay Rent,
shall continue to the same extent as if such requisition had not occurred. In
the event of a breach of Sublessee's obligations pursuant to this Section
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8(d), all payments received by Sublessor or Sublessee from such Government
Entity for the use of such Aircraft and Engines or engines shall be paid over
to, or retained by, Sublessor to the extent of Sublessee's obligations under
this Sublease.
(e) Quiet Enjoyment. Notwithstanding the provisions of this Section 8,
if (i) Sublessee has been deprived of both use and possession of the Aircraft or
any Engine or Part thereof solely as a result of the breach by Sublessor of its
covenant of quiet enjoyment set forth herein and (ii) Sublessee shall have
provided Sublessor written notice to the effect that Sublessee has been deprived
of such use and possession and that Sublessee intends to cancel its insurance
with respect to the Aircraft or any such Engine or Part on a date specified in
such notice (which date shall not be earlier than thirty (30) days after the
date of Sublessor's receipt of such notice), then, from and after the date so
specified, but only during the period that Sublessee shall continue to be
deprived of both use and possession of the Aircraft or such Engine or Part (the
"Suspension Period"), (A) Sublessor shall bear the entire risk of loss or damage
thereof (other than loss or damage caused by an act or omission of Sublessee
during the Suspension Period), and (B) Sublessee shall be relieved of its
obligation to maintain insurance, as set forth in Section 9 hereof, with respect
thereto. In the event of an Event of Loss of the Aircraft during any such
period, the Sublease shall terminate and, upon such termination (i) the Aircraft
shall be deemed to have been redelivered to Sublessor in the condition required
as of the date on which such deprivation of use or possession first occurred,
(ii) Sublessee shall be relieved of all further obligations hereunder except
such as are expressly stated to survive the termination of this Sublease and
(iii) Sublessor, shall, return the Security Deposit to Sublessor as provided in
Section 3. In the event of an Event of Loss with respect to an Engine not
involving an Event of Loss with respect to the Airframe during any such period,
Sublessor shall at its sole cost and expense, as soon as practicable but in any
event within 120 days after the date of such Event of Loss, provide a
Replacement Engine complying with all terms of this Sublease and meeting all
conditions otherwise imposed hereunder on Sublessee in the event of an Event of
Loss with respect to an Engine. Immediately upon Sublessee being restored use
and possession of the Aircraft or any Engine or Part with respect to which the
risk of loss shall have passed from Sublessee to Sublessor in accordance with
this Section 8(e), the entire risk of loss thereof shall again be borne by
Sublessee in accordance with the terms of this Sublease.
Section 9. Insurance. Except as otherwise set forth in Section 8(e)
hereof in respect of any Suspension Period, Sublessee, at its sole cost and
expense, shall maintain or cause to be maintained throughout the Sublease Term
and until the return of the Aircraft to Sublessor in such condition as is
required under Section 10 hereof with insurers of recognized responsibility and
good repute and under policies reasonably
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satisfactory to Sublessor all such insurance as is required to be procured and
maintained pursuant to this Section 9. Such insurance shall include:
(a) Liability. Public liability (including, without limitation,
aircraft third-party, baggage, cargo, contractual and passenger legal liability
including war risks), property damage liability insurance with respect to the
Aircraft and general airline third party legal liability (including products
liability insurance) with insurers of recognized responsibility and good repute
specializing in aviation insurance in the leading international markets, in form
satisfactory to Sublessor and Lender and in amounts at least equal to the
greater of (a) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] per
occurrence subject to no deductible except deductibles as to baggage and cargo
that are standard in the airline industry in respect of carriers operating in
the countries in which Sublessee operates and (b) the amount of such insurance
carried by Sublessee applicable to other aircraft of similar type in Sublessee's
fleet.
(b) Other Insurance.
(i) all-risk (including, without limitation, ground and
flight) aircraft hull insurance with respect to the Aircraft in an
amount which shall not at any time while the Aircraft is subject to
this Sublease be less than Stipulated Loss Value;
(ii) hull war-risk insurance with respect to the Aircraft in
an amount which shall not be less than the Stipulated Loss Value of the
Aircraft; provided, further, however, that such insurance shall include
but not be limited to, coverage against (1) 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, (2) strikes, riots,
civil commotions or labor disturbances, (3) any act of one or more
persons, whether or not agents of a sovereign power, for political or
terrorist purposes and whether the loss or damage resulting therefrom
is accidental or intentional, (4) any malicious act or act of sabotage,
(5) confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition of title or use (other than requisition for
use by a Government Entity of the United States) by or under the order
of any government (whether civil, military or de facto) or any public
or local authority and (6) hijacking or any unlawful seizure or
wrongful exercise of control of the Aircraft or crew in flight
(including any attempt at such seizure or control) made by any person
or persons on board the Aircraft acting without the consent of
Sublessee;
(iii) All-risk (including, without limitation, fire, transit
and extended coverage) insurance, and war-risk insurance of the type
specified in Section 9(b)(ii) to the extent available, with respect to
each Engine when not installed on the
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Airframe in an amount not less than the Engine Loss Value of such Engine;
(iv) such other insurance as Sublessee carries in respect of
other similar aircraft in its fleet.
Notwithstanding anything in the foregoing to the contrary, no insurance
shall have a deductible in excess of [XXXXXX].
(c) Terms of Insurance.
(i) Without limiting any of Sublessee's obligations hereunder,
any policies carried in accordance with Section 9(a) of this Sublease
covering the Aircraft or the Engines and any policies taken out in
substitution or replacement for any such policies shall:
(A) insure the interests of, and name as
additional insureds, each Indemnitee (the "Additional
Insureds") and provide that the Additional Insureds bear no
liability for the payment of premiums;
(B) provide that if the insurers cancel such
insurance for any reason whatever, or the same is allowed to
lapse for nonpayment of premium, or if there is any
alteration, termination, or cancellation (whether by Sublessee
or any other Person and for whatever reason) of the insurance,
such cancellation, lapse, alteration, termination or
cancellation shall not be effective as to the Additional
Insureds for thirty (30) days (with respect to war risk
insurance seven (7) days or the maximum shorter or longer
period available in the market for any portion of the required
war risk coverage) after receipt by such Additional Insureds
of notice from such insurers thereof;
(C) provide that in respect of the interest
of Sublessor and each other Additional Insured in such
policies, such insurance shall not be invalidated by any
action or inaction of Sublessee or any other Person and shall
insure Sublessor's and the Additional Insureds' interests,
regardless of any breach or violation by Sublessee or any
other Person of any warranties declarations or conditions
contained in such policies;
(D) Shall contain a waiver by the insurers
of (i) all rights of subrogation against any and all of the
Additional Insureds and (ii) any rights of set-off,
counterclaim or any other deductions whether by attachment or
otherwise, which they may have against any Additional Insured;
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(E) shall by primary and without right of
contribution from any other insurance carried by any of the
Additional Insureds, and shall expressly provide that all of
the provisions provide that all of the provisions thereof
(except limits of liability) shall operate in the same manner
as if there were a separate policy covering each Additional
Insured; and
(F) shall, with respect to hull risk, hull
war risk and allied perils insurance, include a 50%-50%
provision.
(ii) Any policies carried in accordance with Section 9(b) of
this Sublease covering the Aircraft or the Engines and any policies
taken out in substitution or replacement for any such policies shall:
(A) insure the interests of, and name as
additional insureds, each Indemnitee (the "Additional
Insureds") and provide that the Additional Insureds bear no
liability for the payment of premiums;
(B) during any time period during which the
Mortgage shall remain in effect, be made payable in the United
States to the extent of the Stipulated Loss Value to Agent as
sole "loss payee" and thereafter to Lessor, as sole "loss
payee" (except that proceeds with respect to partial loss or
damage of less than [XXXXXX] to Sublessee subject to the last
sentence of Section 9(d));
(C) provide that if the insurers cancel such
insurance for any reason whatever, or the same is allowed to
lapse for nonpayment of premium, or if there is any
alteration, termination or cancellation (whether by Sublessee
or any other Person and for whatever reason) of the insurance,
such cancellation, lapse, alteration, termination or
cancellation shall not be effective as to the Additional
Insureds for thirty (30) days (with respect to war risk
insurance seven (7) days or the maximum shorter or longer
period available in the market for any portion of the required
war risk coverage) after receipt by such Additional Insureds
of notice from such insurers thereof;
(D) provide that in respect of the interest
of Sublessor and each other Additional Insured in such
policies, such insurance shall not be invalidated by any
action or inaction of Sublessee or any other Person and shall
insure Sublessor's and the Additional Insureds' interests,
regardless of any breach or violation by Sublessee or any
other Person of any warranties declaration or conditions
contained in such policies;
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<PAGE>
(E) shall contain a waiver by the
insurers of all rights of subrogation against any and all of
the Additional Insureds; and
(F) shall be primary and without right
of contribution form any of the Additional Insureds; and
(iii) All amounts payable under policies carried in accordance
with this Section 9 shall be paid in immediately available, freely
transferable Dollars in the United States. In the case of a lease or
contract with the United States or any Government Entity thereof in
respect of the Aircraft, a valid agreement duly assigned to Sublessor
to indemnify Sublessee against the same risks that Sublessee is
required under Section 9(b) to insure against by the United States or
such Government Entity in an amount at least equal to the Stipulated
Loss Value shall be considered adequate insurance with respect to the
Aircraft to the extent of the risks and in the amounts that are the
subject of any such agreement to indemnify.
(iv) All insurance maintained pursuant to this Section 9 shall
be (A) maintained with recognized aircraft and aviation insurance
companies in the United States or international markets that normally
participate in aviation insurance or (B) supported by 99% reinsurance
issued by recognized aircraft and aviation insurance companies in the
international markets that normally participate in international
aviation insurance. Any such reinsurance shall be with insurers, in
form and in amounts reasonably satisfactory to Sublessor and Lender and
shall be subject to "cut through" endorsements or other endorsements or
agreements satisfactory in form and substance to Sublessor and Agent
which shall provide that all payments under such reinsurance in respect
of losses shall be paid (x) in the case of insurance maintained
pursuant to Section 9(a) hereof, to the applicable Additional Insured
or (y) in the case of insurance maintained pursuant to Section 9(b)
hereof, to Agent for so long as the Mortgage shall remain in effect and
thereafter to Lessor as sole "loss payee" (except as provided in
Section 9(c)(ii)(B)) and not to any such primary insurance company.
(d) Application of Insurance. All insurance or indemnity payments
received as the result of the occurrence of an Event of Loss with respect to the
Airframe or an Engine will be applied as follows:
(i) if such payments are received with respect to the
Airframe, the Engines or engines installed thereon, such payments shall
be applied in the following order of priority: (A) to Agent, of if the
Mortgage has been discharged, to Lessor in the amount required to be
paid by Sublessee pursuant to Section 8(a), which amount shall be
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applied in reduction of Sublessee's obligation to pay such amount if
not already paid by Sublessee or, to the extent such amount has been
paid by Sublessee to Agent or Lessor, as the case may be, to Sublessee
to reimburse Sublessee for its payment thereof and (B) to Sublessee the
balance, if any, of such payment; and
(ii) if such payments are received with respect to an Engine,
such payments shall be held by the insurer until (A) replacement of the
Engine by Sublessee by a Replacement Engine at which time said payments
shall be paid to Sublessee; (B) if Sublessor shall have elected to
provide a Replacement Engine as provided in Section 9(b) said payments
shall be paid to Sublessor to be applied in reduction of Sublessee's
obligation to pay the Engine Loss Value, if not already paid by
Sublessee, or if already paid by Sublessee, shall be paid to Sublessee
and applied to reimburse Sublessee for its payment of such Engine Loss
Value; and (C) the balance of such payment, if any, to Sublessee.
The insurance payments with respect to any property damage
loss not constituting any Event of Loss with respect to the Airframe or
an Engine will be paid to Sublessor and applied by Sublessor in payment
(or to reimburse Sublessee) for repairs to or replacement of property
in accordance with the terms of Section 8 against evidence satisfactory
to Sublessor that such repairs and replacement have been made, or, if
such repairs or replacement have already been paid for by Sublessee,to
reimburse Sublessee therefor, and any balance remaining after
compliance with such Section with respect to such loss shall be paid to
Sublessee. Any amount referred to in the preceding sentence or in
paragraph (i) or (ii) of this Section 9(d) that is payable to Sublessee
shall not be paid to Sublessee if at the time of such payment an Event
of Default or Default shall have occurred and be continuing, but shall
be held by Sublessor as security for and may be applied to the
obligations of Sublessee under this Sublease and, at such time as there
shall not be continuing any such Default or Event of Default, such
amount not previously so applied shall be paid to Sublessee.
Notwithstanding the provisions of this paragraph, payments in respect
of partial losses of less than [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXX] shall be paid directly to Sublessee toward the cost of
repair or replacement of such property in conformity herewith.
(e) Reports. On or before the Commencement Date, Sublessee will furnish
or cause to be furnished to Sublessor a report signed by a firm of independent
aircraft insurance brokers, appointed by Sublessee and acceptable to Sublessor,
stating the opinion of such firm that the insurance then carried and maintained
on the Aircraft complies with the terms hereof. Sublessee will cause such firm
to advise Sublessor and each other Additional Insured in writing promptly of any
default in the
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payment of any premium, of any other act or omission on the part of Sublessee of
which such firm has knowledge that might invalidate or render unenforceable, in
whole or in part, any insurance on the Aircraft and of each claim made by
Sublessee in respect of the Aircraft. Sublessee will also cause such firm to
advise Sublessor and each other Additional Insured in writing at least thirty
(30) days prior to the expiration or termination of any insurance carried and
maintained on the Aircraft pursuant to this Section 9.
(f) Failure to Insure. In the event that Sublessee shall fail to
maintain or cause to be maintained insurance as herein provided, Sublessor may,
at its option, but without liability to Sublessee for failure to do so, provide
such insurance and, in such event, Sublessee shall, upon written demand,
reimburse Sublessor for the cost thereof as Supplemental Rent. At any time while
such failure is continuing, Sublessor may require the Aircraft to remain at any
airport or (as the case may be) proceed to and remain at any airport within the
United States as designated by Sublessor, until such failure is remedied to
Sublessor's satisfaction.
(g) Additional Insurance. Nothing contained in this Sublease shall
prevent Sublessor, Sublessee, Lessor, Agent or any Lender each at its own
expense and for its exclusive benefit, from carrying insurance covering the
Aircraft in addition to the insurance required under this Section 9 (any such
additional insurance, "Additional Insurance"); provided, however, that such
Additional Insurance shall be excess and non-contributory to the insurance
required to be procured and maintained by Sublessee hereunder. The insurance
payments for any property damage loss covered by Additional Insurance shall be
paid directly to the party carrying such Additional Insurance. Sublessee may
carry hull all risks or hull war and allied perils on the Aircraft in excess of
the Stipulated Loss Value only to the extent such excess insurance which would
be payable to Sublessee following an Event of Loss does not prejudice the
insurances required herein or the recovery by Sublessor, Lessor, Agent or any
Lender thereunder. Sublessee agrees that it will not create or permit to exist
any Liens (other than Sublessor Liens) over the insurances required hereunder,
or its interest therein, except as constituted by this Sublease.
(h) Notice of Claims. Sublessee shall give Sublessor and Lender notice
in writing of any claim or request for payment of an amount in excess of
[XXXXXX] under any physical damage insurance policy required to be maintained
hereunder promptly (but in any event within five (5) days) of the filing of such
claim or request for payment.
(i) Stipulated Loss Value. At any time following the first
anniversary of the Commencement Date, Sublessee may propose a revision
to the Stipulated Loss Value Schedule set forth as Schedule I hereof,
and, upon receipt of any such proposal,
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Sublessor and Sublessee shall negotiate in good faith a
revised Schedule I of this Sublease.
Section 10. Return of Aircraft. The provisions of this Section 10 shall
apply to any return of the Aircraft to Sublessor upon termination of this
Sublease (including, without limitation, such return resulting from an Event of
Default); provided, that if this Sublease is terminated pursuant to Section 14
and the Aircraft is repossessed by Sublessor, any action that is required to be
taken by Sublessee pursuant to this Section 10 prior to the return of the
Aircraft shall be taken immediately after the return of such Aircraft.
(a) Redelivery upon Termination. On the date of termination of this
Sublease, Sublessee shall at its sole cost and expense, return the Aircraft to
Sublessor, at Sublessor's facilities in San Salvador, El Salvador (provided that
if this Sublease shall be terminated as a result of a default by Sublessor under
the Lease or a default by Lessor under the Mortgage the Aircraft shall be
returned to a point in the United States reasonably requested by Lessor or
Agent). If there shall be any Tax imposed by a Government Entity of the United
States, imposed upon Sublessee solely by virtue of redelivery of the Aircraft to
El Salvador, Sublessee and Sublessor shall, in good faith, negotiate a
reasonable alternate redelivery location; provided, however, that no alternate
location shall be deemed reasonable if Sublessor shall incur any Taxes by virtue
of accepting redelivery and/or removing the Aircraft from such location. At the
time of return of the Aircraft to Sublessor, Sublessor and Sublessee shall
execute a Return Acceptance Receipt in substantially the form of Exhibit C
hereto.
(b) Condition of Aircraft -- General. The Aircraft at the time of its
return to Sublessor shall have been maintained and repaired in accordance with
the Maintenance Program as if such Aircraft were to be kept in further service
by Sublessee, shall be free and clear of all Liens (other than Sublessor Liens)
and shall meet the following requirements:
(i) The Aircraft shall be in good operating condition with all
of the Aircraft equipment, components and systems functioning in
accordance with Manufacturer's limitations, irrespective of deviations
or variations authorized by the Minimum Equipment List or Configuration
Deviation List prepared and authorized by the Manufacturer or
authorized by the FAA.
(ii) The interior of the Aircraft shall be in as good
condition as upon delivery (normal wear and tear excepted).
(iii) The brakes and tires shall have a remaining life at
least equal to the remaining life of the brakes and tires installed
upon the Aircraft as of March 6, 1996.
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(iv) The Aircraft shall be clean by international commercial
airline standards.
(v) The Aircraft shall have, and be in compliance with, a
current valid standard certificate of airworthiness issued by the FAA
and shall meet the requirements of FAR Part 121 as applied to
Sublessee's then current operations without any corrections, repairs,
modifications, alterations or overhauls having to be performed to meet
such standards and rules.
(vi) The Aircraft shall have had accomplished thereon, at
Sublessee's sole cost and expense, on a terminating action basis, and
be in compliance with all outstanding airworthiness directives and
mandatory service bulletins issued by the FAA affecting the Aircraft
that have an effective date for compliance prior to, or sooner than one
hundred eighty (180) days after the return date of the Aircraft. In the
event Sublessee has obtained a waiver or deviation from the FAA from
having to comply with any such FAA airworthiness directives and
mandatory service bulletins Sublessee shall, irrespective of such
waiver or deviation, comply with all such mandatory orders,
airworthiness, directives, service bulletins and instructions covered
by such waiver or deviation prior to return of the Aircraft to
Sublessor.
(vii) All outstanding pilot discrepancies and deferred
maintenance items shall have been cleared on a terminating action
basis.
(viii) The Aircraft shall have had accomplished thereon the
cleaning and treating of all mild and moderate corrosion and correcting
of all severe or exfoliated corrosion in accordance with the provisions
of the Manufacturer's Maintenance Planning Document, Corrosion
Prevention Manual or 737 Structural Repair Manual criteria, in each
case, without discrimination as between the Aircraft and Sublessee's
other Boeing 737-300 aircraft.
(ix) Except as otherwise permitted in Section 6(e) hereto, the
Aircraft shall be in the same configuration and condition with all
equipment installed therein as that in which the Aircraft was delivered
to Sublessee by Sublessor under this Sublease, excepting only ordinary
wear and tear, replacements and substitute parts and equipment as may
have been properly made by Sublessee pursuant to this Sublease.
(x) The Aircraft will be free of fuel, oil and hydraulic
leaks. Any temporary fuel leak repairs will have been replaced by
permanent repairs.
(xi) The Aircraft fluid reservoirs (including oil, hydraulic,
water and waste tanks) will be serviced to full
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in accordance with Manufacturer's instructions, and each fuel tank
shall contain at least the quantity of fuel as was contained therein
when the Aircraft was delivered to Sublessee on the Commencement Date;
or, in the case of any deficiency, Sublessee shall pay Sublessor for
such deficiency at Sublessor's then current cost of fuel.
(xii) No special or unique Manufacturer, Engine manufacturer
or FAA inspection or check requirements which are specific to the
Aircraft or Engines and have which arisen during the Sublease Term (as
opposed to all aircraft or engines of their types) will exist with
respect to the Airframe, Engines and Aircraft equipment components and
systems.
(xiii) All repairs, modifications and alterations made to the
Aircraft or the addition or removal of equipment, systems or components
will have been made in accordance with FAA approved data and properly
documented in accordance with the rules and regulations of the FAA.
(xiv) No Part or component of the Airframe shall be older than
the Airframe.
(c) Condition of Airframe. The Airframe at the time of its return to
Sublessor shall have a currently effective U.S. certificate of airworthiness,
shall meet the requirements of FAR 121 as applied to Sublessee's then current
operations, shall meet the requirements and shall have such hours and cycles
remaining under the Maintenance Program as set forth below:
(i) The Airframe shall have accomplished the next complete
structural and systems "C" check sufficient to clear the Aircraft for
[XXXXXXXXXXXXXXXX] cycles or, at least twelve (12) months of operations
determined with reference to the Maintenance Program.
(ii) The installed main landing gear and nose landing gear
shall each have at least [XXXXXXXXXXXXXXXXXXXXXXXXX] remaining before
overhaul.
(iii) Perform an internal and external corrosion inspection as
required pursuant to the pre-return "C" check as per the Maintenance
Program and CPCP and correct any discrepancies in accordance with the
recommendations of Manufacturer and the Structural Repair Manual.
(iv) Remove Sublessee's exterior markings, including all
exterior paint and decals, by scuff/sanding the paint from the Airframe
and repaint the Airframe white.
(v) Permanently repair in accordance with Manufacturer's
Structural Repair Manual damage to the Aircraft that exceeds
Manufacturer's limits and replace any
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non-flush structural patch repairs installed on the Airframe by
Sublessee, unless otherwise recommended by Manufacturer, if required by
Manufacturer's maintenance and repair guidelines with flush-type
repairs.
(d) Condition of Controlled Components. Each life-limited part or
component and aircraft hour and/or cycle controlled components of the Aircraft
and of each Engine at the time of redelivery of the Aircraft to Sublessor shall
have remaining at least [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX], whichever is more
limiting, between scheduled removals for overhaul, testing, or disassembly. All
components controlled on a calendar basis shall have remaining at least 12
months before scheduled removal for testing or overhaul. Such hour/cycle or
calendar controlled components are defined as those components controlled under
the Maintenance Program. However, if the component or part has a check interval
limit that is less than the above stated hours, cycles or calendar time limit
requirement, the check interval limit shall prevail.
(e) Condition of Engines.
(i) Each Engine at the time of return to Sublessor whether or
not installed on the Airframe shall have been maintained on an
"on-condition" program.
(ii) Each Engine shall have no more cycles or hours since the
last shop visit for full performance restoration, as described in the
Aviall Caledonian Workscope definitions, than such Engine had when
delivered.
(iii) Perform a full and complete video borescope on each
Engine and its modules in accordance with the Engine manufacturer's
maintenance manual, with Sublessor or its representatives entitled to
be present. Sublessee will provide evidence to Sublessor's satisfaction
that such inspection does not reveal any condition which would cause
the Engine or any module to be unserviceable, beyond serviceable
limits, or serviceable with limitations under the Engine manufacturer's
maintenance manual. Sublessee will correct any discrepancies in
accordance with the guidelines set out by the Engine manufacturer which
may be discovered during such inspection.
(iv) Each Engine shall have an exhaust gas temperature margin
remaining of 15 degrees or higher and shall, at a minimum, meet all the
requirements of the maximum power assurance run criteria for CFM 56-3B2
engines.
(v) The Aircraft shall be capable of certificated, full rate
performance without limitations throughout the entire operating
envelope as defined in the Manufacturer's flight manual applicable to
the Aircraft which performance compliance will be demonstrated at the
time of the demonstration flight referred to in Section 10(h) and/or by
on-wing static inspection and testing of the powerplants
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(engines, nacelles and accessories) in accordance with the maintenance
manual applicable to such Engine, at Sublessor's option.
(vi) The auxiliary power unit or units installed in the
Aircraft at the time of return to Sublessor shall have no more than [X]
Hours since the last overhaul as per the Garret Workscope definition,
shall be in good operating condition and shall have a borescope
inspection and "on- condition" check performed in accordance with the
Maintenance Program. Satisfactory evidence shall be provided to
Sublessor reflecting the correction of any discrepancies found during
such inspection or such check, as the case may be.
(f) Ground Inspection by Sublessor. The Aircraft (including the
Aircraft documentation and other related documents to be returned therewith as
provided in Section 10(l)) shall be made available to Sublessor for ground
inspection by Sublessor at Sublessee's facilities or those of its FAA approved
maintenance provider during the pre-redelivery "C" check. Such inspection shall
commence not less than seven working days prior to the date of return of the
Aircraft to Sublessor. Sublessee shall remove the Aircraft from scheduled
service and open the areas of the Aircraft as required to perform the necessary
checks as contemplated by this Sublease and shall allow Sublessor to accomplish
its inspection in order to determine that the Aircraft (including the Aircraft
documentation) and other related documents are in the condition set forth in
Section 10. During such pre-delivery "C" check, Sublessor's personnel shall have
the right to reasonably request that adjacent additional panels or areas be
opened in order to allow further inspection by Sublessor personnel. Sublessee
shall promptly correct any discrepancies from the condition required by the
provisions of Section 10 that are observed during such inspection and are
communicated by Sublessor to Sublessee.
(g) Operational Ground Check. Promptly after completion of any
corrections required under Section 10(f), Sublessee shall conduct an operations
ground check (including an engine power assurance run and a flight control
operational and rigging check) in accordance with the Manufacturer's maintenance
manual criteria for the purpose of demonstrating that each of the following
systems meet applicable manufacturer's criteria: (i) full fuel tank leak check;
(ii) altimeter calibration; (iii) ATC transponder system operational check; (iv)
audible ignition check (both systems); (v) pilot and static systems check; (vi)
hydraulic system internal leak check; and (vii) brake wear check. Promptly after
the operational ground check, Sublessee shall repair any discrepancies resulting
therefrom.
(h) Demonstration Flight. Promptly after completion of any corrections
required under Sections 10(f) and 10(g), the Aircraft shall be flown by
Sublessee, using qualified flight test
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personnel and the applicable Manufacturer's test flight document, for
approximately one and one-half hours for the purpose of demonstrating to
Sublessor the satisfactory operation of the Aircraft and its equipment. During
such test flight, command, care, custody and control of the Aircraft shall at
all times remain with Sublessee. Representatives of Sublessor may participate in
such flight as observers. A qualified pilot designated by Sublessor shall occupy
the cockpit observer's seat as an observer during such demonstration flight.
Upon completion of such demonstration flight, the representatives of Sublessee
and Sublessor participating in such demonstration shall agree in writing upon
any discrepancies in the Aircraft required to be corrected by Sublessee in order
to comply with the provisions of this Section 10 and Sublessee shall promptly
correct any such discrepancies. Subsequent to corrections of such discrepancies,
Sublessor shall inspect and technically accept the Aircraft for redelivery
subject to the requirements of this Section 10(h) and Sections 10(i) and (j)
below. If any of the discrepancies referred to in Sections 10(f) and 10(g) or
this Section 10(h) continue to persist, Sublessor may, at its option, agree to
accept redelivery of the Aircraft and apply the procedure set forth in Section
10(j) for such discrepancies.
(i) Ferry Flight. Upon completion of the demonstration flight and after
Sublessee has corrected discrepancies as required to comply with the provisions
of this Section 10, or Sublessor has agreed to apply the procedure set forth in
Section 10(j), the Aircraft shall be ferried by Sublessee to the redelivery
point set forth in Section 10(a) hereof. Upon arrival of the Aircraft at such
redelivery point, Sublessee shall correct any discrepancies arising during such
ferry flight. Sublessor's representatives may participate in such ferry flight
as non-revenue passengers and observers.
(j) Deferred Discrepancy Correction. Any discrepancies found during the
ground inspection, operational ground check, demonstration flight and ferry
flight provided for in Sections 10(f), 10(g), 10(h) and 10(i), respectively,
that were not corrected by Sublessee prior to return of the Aircraft to
Sublessor may be corrected by Sublessor or its designee after return of the
aircraft and Sublessee shall reimburse Sublessor for the expenses incurred by
Sublessor or its designee for accomplishing such discrepancy corrections.
Sublessee shall pay Sublessor for such expenses incurred within thirty (30) days
of the date of Sublessor's invoice therefor.
(k) Flight Cost. All flights pursuant to Sections 10(h) and 10(i) shall
be made at Sublessee's expense and Sublessee shall pay or reimburse Sublessor
for any costs associated with such flights including, but not limited to, costs
for fuel, oil, airport fees, insurance, takeoff/landing fees, airway
communication fees and ground handling fees.
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(l) Aircraft Documentation. Sublessee shall return to Sublessor at the
time the Aircraft is returned to Sublessor, all of the Aircraft records
documents, manuals and data provided to Sublessee by Sublessor prior to, on or
after the Commencement Date, updated and maintained by Sublessee through the
date of return of the Aircraft. In addition, Sublessee shall also provide
Sublessor at the time the Aircraft is returned to Sublessor with all records,
documents, manuals, authorizations, drawings and data, in each case in the
English language, that were developed or caused to be developed by Sublessee
and/or required by the appropriate governmental agency having jurisdiction
updated and maintained by Sublessee for the Aircraft through the date of return
of such Aircraft. Any such Aircraft documentation not already owned by
Sublessor, when delivered to Sublessor pursuant to this Section 10(l), shall
thereupon become the property of Sublessor. In the event Sublessor requires
copies of any of such Aircraft documentation prior to the return of the Aircraft
to Sublessor to enable Sublessor to plan or accomplish modifications,
recertification, sale, lease or other disposition of or utilization of the
Aircraft upon such return, Sublessee shall, promptly upon receipt of each such
Sublessor request, provide to Sublessor a reasonable number of copies of such
Aircraft documentation requested by Sublessor at Sublessor's sole cost and
expense.
(m) Service Bulletin Kits. All vendor and Manufacturer supplied
mandatory service bulletin kits delivered to Sublessee for the Aircraft but not
installed therein shall be return with the Aircraft, as part of the Aircraft at
the time of the return of the Aircraft, and shall be loaded by Sublessee on
board the Aircraft as cargo. Title to such kits shall pass to Sublessor
concurrently with the delivery of the Aircraft to Sublessor.
(n) Non-U.S. Manufactured Items. Sublessee shall provide to Sublessor
at the time of the return of the Aircraft a complete list, describing by Part
number and name, all non-United States manufactured equipment, components and
parts, if any, installed on such Aircraft by Sublessee during the Sublease Term.
Such list shall include quantity, the acquisition price and the manufacturer's
name and country in respect of each such item.
(o) Sublessee's Continuing Obligations. In the event that Sublessee
does not return the Aircraft to Sublessor upon termination of this Sublease
(including, without limitation, any termination resulting from an Event of
Default by Sublessee) and in the condition required herein for any reason, the
obligations of Sublessee under this Sublease shall continue; provided, however,
that such failure to return the Aircraft to Sublessor in such condition shall
not be the result of a breach by Sublessor of its covenant of quiet enjoyment
which has resulted in Sublessee having been deprived of use and possession of
the Aircraft immediately prior to such termination, in which case the Aircraft
shall be returned in its then condition provided that, immediately prior to such
breach by Sublessor of its covenant of
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quiet enjoyment such Aircraft shall have been in such condition as to meet the
requirements of Section 8 hereof but for such breach. Such continuation of
Sublessee's obligations shall not be considered a renewal of the terms of this
Sublease or of Sublessee's rights to use the Aircraft, an extension of the
Sublease Term or a waiver of any Default or Event of Default or any right of
Sublessor hereunder. Until such time as the Aircraft is redelivered to Sublessor
as required herein, Sublessee agrees, during the first thirty (30) days
following the termination hereof, to pay Basic Rent with interest at the Post-
Default Rate and thereafter to pay twice the amount of Basic Rent for each day
from such thirtieth (30th) day after the termination hereof until redelivery of
the Aircraft in the condition required hereunder (the monthly Basic Rent payable
being prorated based on the actual number of days in the applicable month).
Section 11. Representations, Warranties and Covenants of
Sublessee. Sublessee represents and warrants to, and covenants with Sublessor
as follows:
(a) Sublessee (i) has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, (ii) has
full corporate power and authority and legal right to own its properties and to
carry on its business as presently conducted and to perform its obligations
under this Sublease, (iii) is the holder of an air carrier certificate duly
issued pursuant to the Federal Aviation Act and such certificate is in full
force and effect, and (iv) holds all material licenses, certificates and permits
from all Government Entities of the United States and other jurisdictions
necessary for the conduct of its business as now conducted and for the operation
of the Aircraft.
(b) The execution, delivery and performance of this Sublease has been
duly authorized by all necessary corporate action of Sublessee, and does not and
will not (i) result in the violation of the provisions of the charter documents
or bylaws of Sublessee as in effect on the date hereof, (ii) require stockholder
approval or approval or consent of any trustee or holders of any indebtedness of
Sublessee, except such approvals which have been obtained and are in full force
and effect, (iii) contravene any law, rule or regulation or any order of any
Government Entity binding on Sublessee, or (iv) conflict with or result in a
breach of any terms or provisions of or constitute a default under, or result in
or require the creation or imposition of any Lien upon any material property or
assets of Sublessee under, any material indenture, mortgage or other agreement
or instrument as in effect on the date hereof to which Sublessee is a party or
by which it or any of its property is bound, or any applicable law, rule or
regulation, judgment, order or decree of any Government Entity or court having
jurisdiction over Sublessee or any of its properties.
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(c) No authorization, approval, consent, license or order of, or
registration with, or the giving of notice to, or the taking of any other action
in respect of, any Government Entity is required for the valid authorization,
execution, delivery and performance by Sublessee of this Sublease or the
consummation of any of the transactions contemplated hereby, except (i)
approvals, authorization, consents, licenses, certificates and orders of the FAA
and any other regulatory authority having jurisdiction with respect to the
ownership, use and operation of the Aircraft and the transactions contemplated
hereby, all of which have been (or on the Delivery Date will have been) duly
obtained and are (or will on the Delivery Date be) in full force and effect,
(ii) the filing of this Sublease or other necessary documentation with the civil
aviation authority of each country (other than the United States) in which the
Aircraft may be operated or located which filings have been made, or will be
made as to each such country prior to such Aircraft being operated or located in
such country and (iii) any normal periodic and other reporting requirements and
renewals and extensions of any of the foregoing, in each case to the extent
required to be given or obtained only after the Delivery Date.
(d) Except for (i) the filing and recording pursuant to the Federal
Aviation Act of this Sublease, (ii) the filing of duly executed financing
statements naming Sublessee as debtor and Sublessor as secured party (and
continuation statements with respect to such financing statements) with the
Secretary of State of the State of Colorado and, if applicable, the appropriate
filing authority in El Paso County, Colorado and (ii) the retention by Lessor of
the original counterpart of the Sublease to the extent, if any, that the
Sublease constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no further action,
including any filing or recording of any document (including any financing
statement in respect thereof under Article 9 of the Uniform Commercial Code of
any applicable jurisdiction), is necessary in order to establish and perfect
Lessor's title to the Aircraft or Lender's security interest in this Sublease as
against Sublessee and any third parties in any applicable jurisdictions in the
United States.
(e) This Sublease constitutes the legal, valid and binding obligation
of Sublessee, enforceable against Sublessee in accordance with its terms except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and, to
the extent that certain remedies require or may require enforcement by a court
of equity, by such principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity) as a court
having jurisdiction may impose.
(f) There are no suits or proceedings pending or, to Sublessee's
knowledge, threatened in any court of before any Government Entity against or
affecting Sublessee that would, if
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adversely determined, (i) prevent or adversely affect Sublessee's ability to
perform its obligations under this Sublease or (ii) materially adversely affect
the financial condition or operations of Sublessee and its consolidated
subsidiaries, taken as a whole.
(g) The chief executive office (as such term is used in Article 9 of
the Uniform Commercial Code) of Sublessee and the office where Sublessee will
keep its corporate records concerning the Aircraft is located in El Paso County,
Colorado. Sublessee will notify Sublessor thirty (30) days in advance of moving
either such office to another location.
(h) Neither Sublessee nor Sublessor has retained or employed any
broker, finder or financial advisor other than Cauff, Lippman & Crane Aviation,
Inc. to act on its behalf in connection with its lease of the Aircraft and has
not authorized any broker, finder or financial advisor retained or employed by
any other person so to act.
(i) Neither Sublessee nor any of its property has any immunity from
jurisdiction of any court located in the United States or from any legal process
in the Untied States (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise).
(j) There is no Tax, levy, impost, deduction, charge or withholding
imposed by the State of Colorado or any Taxing Authority thereof or therein
either (i) on or by virtue of the execution or delivery of this Sublease or (ii)
on any payment made or to be made by Sublessee under this Sublease.
(k) The obligations of Sublessee under this Sublease rank at least pari
passu in right of payment with all other unsecured obligations of Sublessee,
with the exception of such obligations as are mandatorily preferred by law.
(l) Sublessee will promptly give notice to Sublessor upon obtaining
actual knowledge of any Default or Event of Default; and
(m) Sublessee acknowledges that in the event Sublessee files a petition
or otherwise seeks relief under the Bankruptcy Code or an involuntary petition
is filed against Sublessee, it is the intention of Sublessor that Sublessor,
Lessor, Agent and any Lenders shall be entitled to the benefits of Title 11
U.S.C. ss. 1110 and any similar or analogous provisions of any successor statute
("Section 1110") with respect to the Aircraft, the Lease and this Sublease, and
Sublessee agrees that it shall not oppose any motion, petition or application
filed by Sublessor, Lessor, Agent or any Lender with any bankruptcy court having
jurisdiction over Sublessee whereby Sublessor, Lessor, Agent or any Lender seeks
recovery of possession of the Aircraft under Section 1110 unless Sublessee shall
have complied with the requirements of
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Section 1110 to be fulfilled in order to entitle Sublessee to continue use and
possession of the Aircraft hereunder.
(n) Without having obtained the prior written consent of Sublessor,
Sublessee will not consolidate with or merge into, sell or lease, in one
transaction or a series of transactions, all or substantially all of its assets
to another corporation or other entity unless such other corporation or
subsidiary thereof is engaged in the airline business, the net worth of the
corporation resulting from such merger or consolidation or corporation or other
entity to which such sale or lease is made would be at least equal to the net
worth of Sublessee at the date hereof, such corporation or other entity assumes
all of Sublessee's obligations under this Sublease in a manner and by documents
and agreements satisfactory to Sublessor in its sole discretion, such
corporation or other entity immediately subsequent to such merger,
consolidation, lease or sale is not in default hereunder and if Sublessor,
Lessor and Agent receive an opinion of counsel satisfactory to them as to such
assumption and documentation.
(o) Sublessee agrees to furnish to Sublessor as soon as practicable,
but in no event later than (i) sixty (60) days after the end of each of the
first three quarterly fiscal periods in each fiscal year of Sublessee, a
consolidated balance sheet of Sublessee and its subsidiaries prepared by it as
of the close of such period, together with the related consolidated statements
of income and of surplus and statements of changes in financial position for
such period (this requirement may be satisfied by delivery to Sublessor of a
copy of Sublessee's Form 10-Q), (ii) one hundred and twenty (120) days after the
close of each fiscal year of Sublessee, a consolidated balance sheet of
Sublessee and its subsidiaries as of the close of such fiscal year, together
with the related consolidated statements of income and of surplus and statements
of changes in financial position for such fiscal year, as certified by
independent public accountants, including their accompanying opinion letter
related thereto, (iii) with each such financial statement, a certificate of
Sublessee signed by a duly authorized financial officer of Sublessee, to the
effect that the signer has reviewed the relevant terms of this Sublease and has
made, or caused to be made under his supervision, a review of the transactions
and condition of Sublessee during the accounting period covered by the financial
statements and that such review had not disclosed the existence during such
accounting period, nor does the signer have knowledge of the existence as at the
date of such certificate, of any condition or event that constitutes a Default
or Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Sublessee
has taken or is taking or proposes to take with respect thereto and (iv) from
time to time, such other information as Sublessor, Lessor or Lender may
reasonably request; provided that such other information is either in the
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public domain or is provided to Lessor or Sublessor of aircraft to Sublessee or
to creditors of Sublessee.
(p) Sublessee shall, within fifteen (15) days of the end of each and
every calendar month during the Sublease Term, deliver to Sublessor a monthly
report, in such form and containing such information as set forth in Exhibit F
hereof.
(q) Sublessee shall, at the end of each calendar quarter, have a long
term debt to equity ratio of not more than [X] as determined in accordance with
generally accepted accounting principles consistently applied. For purposes
hereof, debt shall exclude all off balance sheet financing and operating leases.
(r) Sublessee shall, at the end of each calendar quarter have a ratio
of current assets to current liabilities of not less than 1:1 as determined in
accordance with generally accepted accounting principals consistently applied.
Section 12. Indemnification.
(a) General Indemnity and Expenses. Sublessee hereby assumes liability
for and hereby agrees to, indemnify, protect, save and keep harmless Sublessor,
Lessor, Agent, each Lender and their respective Affiliates, agents, officers,
directors, employees, successors and permitted assigns (each of the foregoing
and their respective Affiliates, agents, officers, directors, employees,
successors and assigns being hereinafter referred to as an "Indemnitee" and any
reference herein to an Indemnitee shall include its respective Affiliates,
agents, officers, directors, employees, successors and permitted assigns) from
and against, and on written demand to pay, or to reimburse each Indemnitee for
the payment of, as the case may be, any and all liabilities, obligations,
losses, damages, penalties, claims (including, without limitation, claims
arising out of negligence or involving strict liability in tort), suits,
actions, costs, expenses and disbursements, including without limitation legal
fees and expenses, of whatsoever kind and nature imposed on, incurred by or
asserted against any Indemnitee relating to or arising out of (A) this Sublease,
any payments made pursuant hereto or the exercise of rights or remedies
hereunder, (B) the preparation, negotiation, execution and delivery of any
amendments, modifications or waivers required by this Sublease or requested by
Sublessee (or resulting from any requests of Sublessee) hereunder, (C) the
Aircraft, each Engine and any Part thereof, whether or not arising out of the
airworthiness, delivery, nondelivery, sublease, presence, storage, modification,
substitution, replacement, alteration, maintenance, inspection, failure to
inspect, repair, release, possession, repossession after an Event of Default,
registration (unless, in respect to Sublessor, any act or omission of Sublessor
shall cause the deregistration of the Aircraft under the Federal Aviation Act),
use, operation, condition, condition upon return, return, exportation,
importation, transfer or other application or
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disposition thereof (including, in each case and without limitation, latent or
other defects, whether or not discoverable), any claim for patent, trademark or
copyright infringement arising as a result of or in connection with Sublessee's
patents, trademarks, copyrights, servicemarks or logos or those of Sublessee's
advertisers, sponsors, and others whose designs and/or logos appear on the
Aircraft, at any time, any claim based on strict or absolute liability,
statutory liability or tort and any liability for any injury to or death of any
person or loss of or damage to any property including, without limitation, any
such arising out of any test flight, demonstration flight or ferry flight
performed by Sublessee or any entity to which Sublessee may have further
subleased the Aircraft pursuant to Section 7 hereof and (D) any breach of,
noncompliance with or misrepresentation made or deemed made in, under or in
connection with this Sublease or any agreement to which Sublessee is a party
concerning the Aircraft or any warranty, certificate or agreement made or
delivered in, under or in connection therewith made or deemed to have been made
by Sublessee or anyone claiming by, through or under Sublessee; provided, that
Sublessee shall not be required to indemnify any Indemnitee hereunder (w) for
any liability attributable to acts or events which occur prior to the
Commencement Date or after the Sublease Term or the property return of the
Aircraft to Sublessor in the condition required hereunder whichever shall occur
later, (x) for liability resulting solely and directly from acts of gross
negligence or misconduct of such Indemnitee (other than gross negligence or
willful misconduct attributed to such Indemnitee solely by reason of its
interest in the Aircraft, any Engine or any Part), it being agreed that gross
negligence or willful misconduct of an Indemnitee shall not affect the rights to
be indemnified hereunder of any other Indemnitee (other than the rights of any
Indemnitee that is an Affiliate, agent, officer, director, employee or successor
of any such Indemnitee that is so grossly negligent or guilty of such
misconduct), (y) for any Taxes that Sublessee has not agreed to indemnify
against pursuant to the provisions of Section 12(b) or (z) for any liability
imposed or any Indemnitee arising as a result of a disposition of all or any
part of such Indemnitee's interest in the Aircraft, other than by reason of the
occurrence of a Default or an Event of Default and further provided that no
indemnification hereunder shall be paid by Sublessee to Indemnitees in respect
of any claim arising during any period during which Sublessee is deprived of use
and possession of the Aircraft as a result of a breach by Sublessor of its
covenant of quiet enjoyment provided that such claim is not caused by any act or
omission of Sublessee.
If any Indemnitee shall have knowledge of any claim or liability
required to be indemnified against under this Section 12(a), such Indemnitee
shall give prompt written notice thereof to Sublessee, but the failure of such
Indemnitee so to notify Sublessee shall not relieve Sublessee from any liability
that it would otherwise have to such Indemnitee hereunder except to the
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extent that Sublessee's rights respecting any defense thereto are irrevocably
and materially impaired directly and solely as a result of such failure.
Sublessee shall be obligated to such Indemnitee under this Section
12(a) irrespective of whether any Indemnitee shall also be indemnified with
respect to the same matter under any other agreement, and each Indemnitee may
proceed directly against Sublessee under this Section 12(a) without first
resorting to any such other rights of indemnification.
Any payment or indemnity pursuant to this Section 12(a) shall include
the amount, if any, necessary to hold each Indemnitee harmless on a net
after-tax basis from all Taxes required to be paid by such recipient with
respect to such payment or indemnity under laws, rules or regulations of any
Government Entity or Taxing Authority. If any Indemnitee is entitled to a
permanent tax benefit (whether by way of deduction, credit or otherwise) not
taken into account pursuant to the preceding sentence as a result of the matter
indemnified against under this Section 12(a), such Indemnitee shall promptly pay
to Sublessee, after such permanent tax benefit is realized but not before
Sublessee shall have made all payments theretofore due to such Indemnitee under
this Sublease and any other agreement in respect of the Aircraft, an amount
that, after subtraction of any further tax savings to which such Indemnitee is
entitled as a result of the payment thereof, is equal to the amount of such
permanent tax benefit; provided, however, that such Indemnitee shall not be
obligated to make any payment to Sublessee pursuant to this sentence so long as
a Default or Event of Default shall have occurred and be continuing or any Rent
or Supplemental Rent then due and owing shall not have been paid.
Upon the indefeasible payment in full of any indemnities due and owing
under this Section 12(a), Sublessee shall be subrogated to any right of the
Indemnitee in respect of the matter against which indemnity has been given.
(b) General Tax Indemnity.
(i) Sublessee agrees that each payment of Rent or any amount
payable hereunder shall be free of all withholdings of any nature
whatsoever, and in the event that any withholding is required,
Sublessee shall pay an additional amount of Rent such that after the
deduction of all amounts required to be withheld, the net amount of
Rent that is actually received by Sublessor, will equal the amount of
Rent or any such amount payable hereunder or such other amount, as the
case may be, that would be due absent such withholding,
(ii) Sublessee hereby agrees to indemnify and hold harmless
from and against, and on written demand to pay or reimburse each
Indemnitee for the payment of, as the case may be, any and all Taxes
imposed upon or asserted against any Indemnitee
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or the Aircraft, the Airframe, any Engine, or any Part thereof or
interest therein, or this Sublease, or the rentals received under this
Sublease, by any federal, state or local government or other taxing
authority in the United States, in any territory or possession thereof
or by any foreign government or any political subdivision or taxing
authority thereof or therein (the foregoing being referred to herein
individually as a "Taxing Authority" and collectively as "Taxing
Authorities") upon or with respect to (a) the acceptance, rejection,
delivery, transport, insuring, registration, deregistration,
reregistration, assembly, possession, repossession, operation, use,
presence, condition, maintenance, repair, return, abandonment,
preparation, installation, storage, redelivery, manufacture,
subleasing, modification, rebuilding, or importation of, or the
imposition of any Lien (other than a Sublessor Lien) (or the insurance
of any liability to refund or pay over any amount as a result of any
Lien (other than a Sublessor Lien)) on the Aircraft, the Airframe, any
Engine or any Part thereof or interest therein, (b) payments of Basic
Rent or Supplemental Rent, (c) the Aircraft, the Airframe, any Engine,
or any Part thereof or any interest therein or the applicability of
this Sublease to the Aircraft, the Airframe, any Engine, or any Part
thereof or any interest therein, (d) any or all of the documents and
agreements relating to the Aircraft, contemplated hereby and amendments
or supplements hereto and thereto, or the execution, delivery, filing
or recording thereof, or (e) otherwise with respect to or in connection
with the transactions effected under this Sublease and the documents
and agreements contemplated hereby including the exercise of remedies
hereunder.
(iii) The provisions of Section 12(b)(i) and (ii) shall not
apply to, and Sublessee shall have no lability to Sublessor or any
other person thereunder with respect to Taxes to the extent excluded
under any of the following provisions or any combination thereof:
(A) Taxes imposed by any country, taxing
authority or governmental subdivision thereof or therein or
any international authority except to the extent that such
Taxes would not have been due (whether or not from the same
person on whom they are actually imposed) but for the
transactions contemplated by this Agreement, provided that
the presence or activities of any person other than Sublessor
in any jurisdiction shall not be imputed for purposes of this
subparagraph (A);
(B) Taxes (I) imposed as a result of a sale,
assignment, transfer or other disposition (whether voluntary
or involuntary) (a "Transfer') (x) by Sublessor or any other
person (other than Sublessee or any affiliate or transferee
of or successor to Sublessee) of any legal or beneficial
interest in the Aircraft or in or arising under this
Agreement or (y) of any direct or indirect interest in
Sublessor or any such other person having any such legal or
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beneficial interest (any event described in (x) or (y) being
a "Sublessor Transfer") or (II) to the extent such taxes
exceed the amount of taxes that would have been imposed and
indemnified against by Sublessee had there not been a
"Sublessor Transfer," provided that the exclusion set forth
in this subparagraph (B) shall not apply to a Transfer (other
than a sale of the Aircraft or any interest therein)
resulting from the exercise of any remedies provided for in
this Agreement in connection with an Event of Default or an
Event of Loss;
(C) Taxes incurred in respect of any period
after the occurrence of any of the following events: (I) the
sale or return of the Aircraft or any part thereof or
interest therein to the extent the Taxes relate solely to
such part or interest) in accordance with the terms of this
Agreement; (II) the termination of this Agreement and the
return of the Aircraft or (III) the sale or other transfer of
the Aircraft and the return of the Aircraft (or any part
thereof or interest therein to the extent the Taxes release
solely to such part or interest) following a Total Loss with
respect to the Aircraft, provided that the exclusion set
forth in this subparagraph (C) shall not apply to Taxes to
the extent such Taxes relate to periods prior to, or events
occurring or matters arising prior to or simultaneously with,
such event;
(D) Taxes to the extent imposed as a result
of (I) the willful misconduct or gross negligence of
Sublessor, (II) the breach by Sublessor of any of its
representations, warranties or covenants contained in this
Agreement or (III) Sublessor's Liens;
(E) Taxes either not yet due or being
contested in accordance with the provisions of Section 12(d);
(F) Taxes on, based on, measured by or with
respect to the net or gross income, or net or gross receipts,
including any capital gains Taxes, minimum Taxes, Taxes on or
measured by any items of tax preference and withholding
Taxes, including Taxes imposed under Subtitle A of the
Internal Revenue Code of 1986, as amended (the "Code") or
Section 3406 of the Code or any successor provisions required
to be withheld from any payment under this Agreement),
capital, net worth, franchise, or conduct of business of
Sublessor or any other person (other than Taxes in the nature
of sales, use, rental, property, or value-added Taxes)
imposed by any federal, state or local government or taxing
authority in the United States;
(G) Taxes on, based on, measured by or with
respect to the net or gross income or net or gross receipts
(including any capital gains Taxes, minimum Taxes, Taxes on
or measured by any items of tax preference and withholding
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Taxes), capital, net worth, franchise, or conduct of business
of Sublessor or any other person (other than Taxes in the
nature of sales, use, rental, property, or value-added Taxes)
imposed by any foreign government subdivision or other
foreign taxing authority or by any territory or possession of
the United States, or by any international authority,
provided that the exclusion set forth in this subparagraph
(G) shall not exclude such Taxes if and to the extent that
such Taxes (i) would not have been imposed but for the
operation, presence or registration in such jurisdiction of
the Aircraft or any part thereof, or (ii) would have not been
imposed solely as a result of (x) the presence in such
jurisdiction of a permanent establishment or fixed place of
business of Sublessee, or any user or person in possession of
the Aircraft or any part thereof, (y) the residence,
nationality or place of management and control of Sublessee
or any user or person in possession of the Aircraft or any
part thereof, (z) the payment from such jurisdiction by
Sublessee or any user or person in possession of the Aircraft
or any part thereof of any amount due under the Lease, or
(iii) any combination of clauses (i) and (ii);
(H) Taxes that would not have been imposed
but for any failure of Lessor or Sublessor to (x) file proper
and timely reports or returns or to pay any Taxes when due,
or (y) comply with any certification, information,
documentation, reporting or other similar requirements
concerning the nationality, residence, identity or connection
with the jurisdiction imposing such Taxes, if such compliance
is required to obtain or establish relief or exemption from
or reduction in such Taxes and Lessor or Sublessor was
eligible to comply with such requirement provided, however,
that this exclusion shall not apply to any obligation to
file, pay or certify, other than an obligation imposed under
the laws of El Salvador, of which Sublessor was unaware.
(I) Taxes imposed under Section 887 of the
Code.
Notwithstanding any provision in this Section 12 to the
contrary, Sublessee shall in no event be obligated to pay any amount pursuant to
this Section 12 in excess of the Taxes Sublessee would be required by this
Section 12 to pay if (i) Sublessor were the Sublessor of the Aircraft and (ii)
no person other than the owner participant as of the date hereof pursuant to the
Trust Agreement dated as of November 4, 1993 between Lessor and such owner
participant, Sublessor, Sublessee or any sublessee or other user or person in
possession of the Aircraft or any part thereof had any interest in the Aircraft
or part thereof.
(c) Calculation of Tax Indemnity Payments.
(i) Any payment that Sublessee shall be required to make to or
for the account of any Indemnitee with respect to any
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Tax that is subject to indemnification under Section 12(b) shall
include the amount necessary to hold such Indemnitee harmless on a net
after-tax basis from he net amount of all Taxes required to be paid by
such Indemnitee as the result of such payment pursuant to the laws of
any Taxing Authority.
(ii) If Sublessor shall realize a Tax benefit as a result of
or with respect to any Taxes paid or indemnified against by Sublessee
under this Section 12 (whether by way of deduction, credit or
otherwise), Sublessor shall pay to Sublessee, promptly after
realization of such Tax benefit, an amount that, prior to the
application of any withholding tax to that payment but after
subtraction of any further Tax savings Sublessor realizes as a benefit,
provided that if any such Tax benefit is subsequently disallowed, lost
or reduced, Sublessee shall, upon written notice from Sublessor,
promptly repay the amounts paid to the Sublessee with respect to such
Tax benefit, provided further that Sublessor shall not be obligated
under this Section 12(c)(ii) to pay Sublessee any amounts with respect
to Tax benefits realized s a result of any Taxes not paid or
indemnified against by Sublessee. Notwithstanding anything to the
contrary in this Section 12, if, at the time any payments would
otherwise be due to Sublessee pursuant to this Section 12(c)(ii), an
Event of Default shall have occurred and be continuing, Sublessor shall
hold the amount of such payment as security for the obligations of the
Sublessee to Sublessor under the Sublease and at such time as there
shall not be continuing any such Event of Default, shall pay such
amount to Sublessee. Sublessor shall use reasonable efforts in good
faith in filing its Tax returns and in dealing with taxing authorities
to seek and to claim any such Tax benefit or savings and to minimize
the Taxes payable or indemnifiable by Sublessee hereunder.
(iii) At Sublessee's request, the computation by Sublessor of
any amount payable to Sublessee pursuant to this Section 12 shall be
verified by an independent accounting firm of national reputation
selected by Sublessor. The fees of such accountants shall be paid by
Sublessee unless such accountants determine that the amount payable to
Sublessee is at least 25% more, or the amount payable by Sublessee is
at least 25% less, than the amount computed by Sublessor, in which case
such fees shall be payable by Sublessor.
(d) Contest; Reports.
(i) If a claim is made in writing against Sublessor (whether
on audit or otherwise) for any Taxes that Sublessee is required to pay
or indemnify against pursuant to Section 12(b), Sublessor shall notify
Sublessee in writing within 30 Business Days of the receipt of such
claim, provided that a failure to so notify will not diminish or
relieve Sublessee or any obligations under Section 12(b), except to the
extent Sublessee is entitled
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to contest or to cause Sublessor to contest such Taxes and Sublessee's
or Sublessor's successful defense of such claim is materially
prejudiced or precluded thereby. If the amount of the claim exceeds
$25,000 and if requested by Sublessee in accordance with this Section
12(d) and in writing within 30 Business Days after receipt by Sublessee
of the notice described in the preceding sentence, Sublessor shall in
good faith and with due diligence contest (including pursuing all
administrative and judicial appeals) in the name of Sublessor or, if
permitted by law and requested by Sublessee in the name of Sublessee,
the validity, applicability or amount of such Taxes in appropriate
administrative or judicial proceedings to be determined by Sublessor,
provided that (1) prior to taking such action, Sublessee shall have
agreed to pay Sublessor all out-of-pocket costs and expenses that
Sublessor may incur in connection with contesting such claim,
including, without limitation, all reasonable legal and accountant's
fees and disbursements and costs of administrative and judicial
proceedings, and the amount of any interest or penalties that may be
attributable to and payable as a result of contesting such claim (or,
at Sublessor's request, Sublessee shall advance to Sublessor funds with
which to pay the foregoing amounts, and Sublessor's obligation to
contest any Tax shall be suspended during any period Sublessee does not
advance sufficient funds to pay such amounts as they accrue or become
payable), (2) if such contest is to be initiated by the payment of, and
the claiming of a refund for such Taxes (and any interest and penalties
that also must be paid), Sublessee shall have advanced Sublessor
sufficient funds (on an interest-free basis) to make such payment, (3)
no Event of Default has occurred and is continuing, (4) the action to
be taken will not result in a material risk of sale, forfeiture or loss
of Sublessor's title to the Aircraft (unless Sublessee provides a bond
or other security satisfactory to Sublessor), and (5) at Sublessor's
request, Sublessee shall provide to Sublessor a written opinion in form
and substance satisfactory to Sublessor of independent legal counsel
satisfactory to Sublessor that there is a reasonable basis for such
contest. Notwithstanding that the conditions set forth in clauses (1),
(2), (3), (4) and (5) above may have been satisfied, Sublessor, after
consulting in good faith with Sublessee, may elect to pursue any
contest or proceeding pursuant to the preceding sentence or elect to
discontinue (by settlement or otherwise) any such contest or proceeding
commenced pursuant to the preceding sentence, but such election shall
constitute a waiver by Sublessor of any right to payment or
indemnification pursuant to Section 12(b) with respect to the
adjustment that was the subject of such proposed contest or proceeding
(and any other adjustment the contest of which is precluded by such
failure to contest) and, if Sublessee has theretofore paid or provided
Sublessor with funds to pay any amount with respect to such adjustment,
Sublessor shall promptly repay such amount to Sublessee. If Sublessor
shall obtain a refund in whatever form of all or any part of any Taxes
that Sublessee shall have paid or reimbursed to Sublessor hereunder,
Sublessor shall, provided that no Event of Default shall have
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occurred and be continuing, pay to Sublessee an amount that is equal to
the sum of the amount of such refund or credit, plus any interest
received on such refund fairly attributable to any Taxes paid by or
with funds provided by Sublessee prior to receipt of such refund,
reduced by an Taxes incurred by Sublessor by reason of the receipt or
accrual of such refund and interest and net of any expenses described
in clause (1) of the second sentence of this Section 12(d) that have
not been previously reimbursed, and increased by any Tax benefit
realized by Sublessor as a result of any payment by Sublessor made
pursuant to this sentence, provided further that, if, at the time of
such payment an Event of Default shall have occurred and be continuing,
Sublessor shall hold the amount of such payment as security for the
obligations of Sublessee to Sublessor under the Lease, and at such time
as there shall not be continuing any such Event of Default, shall pay
such amount to the Sublessee. Sublessor hereby agrees that it will
inform Sublessee of the time and place of, and Sublessor will not
object to Sublessee's presence at any proceeding conducted pursuant to
this Section 12(d) provided that Sublessee's presence also must be
allowed by applicable law and provided further that the conditions set
forth in clauses (1), (2), (3), (4) and (5) above shall have been, and
shall continue to be, satisfied.
(ii) Sublessee shall provide Sublessor with such information
in the possession of Sublessee or otherwise reasonably available to it
as Sublessor may reasonable require to enable Sublessor to fulfill its
tax filing obligations under this Section 12 and any audit information
request arising in connection with the Taxes subject to this Section
12. Sublessor shall provide Sublessee with such information in the
possession of Sublessor or otherwise reasonable available to it as
Sublessee may reasonably request to fulfill its tax filing requirements
under this Section 12 and any audit information request arising in
connection with the Taxes subject to this Section 12. If any report or
return is required to be made with respect to any obligation of
Sublessee under this Section 12, Sublessee will make such report or
return, provided that Sublessee shall have no obligation to file any
such return or report if (A) Sublessor, after Sublessee's written
request therefor, shall have failed to furnish Sublessee with such
information as is peculiarly within the control of, or reasonably
available to Sublessor and is necessary for the filing of such report
or return, or (B) such return or report would or should have been filed
by Sublessor even if it had not entered into the Sublease.
(iii) Sublessor shall furnish from time to time to Sublessee
or to such other person as Sublessee may designate, such returns,
statements or other documentation ("Tax Forms") (including, without
limitation, if then required, information as to the ultimate beneficial
owners of Sublessor and the stock interests in Sublessee held actually
and constructively by Sublessor, if not otherwise known to Sublessee)
in such form and with such substance as are necessary or appropriate to
enable Sublessor or Sublessee, to claim an available reduction of or
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exemption from Taxes which Sublessee may be required to pay or
indemnify against hereunder, provided that Sublessee shall have
provided Sublessor with any information within the Sublessee's control
or reasonably available to Sublessee that is necessary to prepare such
return, statement or other documentation. Any such Tax Forms shall be
provided promptly after receipt of a written request therefor from the
Sublessee.
(e) Payment. Unless otherwise requested by the appropriate Indemnitee,
Sublessee shall pay when due any Tax for which it is liable pursuant to Section
12(b) directly to the appropriate Taxing Authority, or, upon written demand,
shall reimburse the appropriate Indemnitee for the payment of any such Tax made
by such Indemnitee. Within 30 days after the date of each payment by Sublessee
of any Tax referred to in the proceeding sentence, Sublessee shall furnish the
appropriate Indemnitee evidence of payment of such Tax acceptable to such
Indemnitee. Sublessee shall also cause to be furnished, promptly upon request,
such data as any Indemnitee may reasonably require from Sublessee to enable such
Indemnitee to comply with the requirements of any Taxing Authority in respect of
any tax referred to in Section 12(b).
(f) Survival. The obligations contained in this Section 12 shall
survive the termination of this Sublease, to the extent they have accrued, or
relate to events that have occurred, on or before the date of such termination;
provided that obligations arising as a result of the occurrence of a Default or
an Event of Default shall in any event, without limiting the foregoing, survive
until payment in full and performance of all obligations owing to each
Indemnitee under the foregoing agreements and all other agreements referred to
herein or contemplated hereby. The obligations of Sublessee in respect of all
such indemnities, obligations, adjustments and payments are expressly made for
the benefit of, and shall be enforceable by, each Indemnitee entitled thereto at
the option of such Indemnitee without declaring this Sublease to be in default
or taking any other action hereunder.
Section 13. Assignment; Sublease Subject and Subordinate.
(a) No Impermissible Sublease by Sublessee. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SUBLESSEE SHALL NOT ASSIGN OR OTHERWISE TRANSFER IN
ANY MANNER ANY OF ITS RIGHTS OR INTERESTS WITH RESPECT THIS SUBLEASE, THE
AIRCRAFT, ANY ENGINE OR ANY PART THEREOF.
(b) Assignment by Sublessor. Pursuant to the Security Assignments,
Sublessor's right, title and interest in and to this Sublease has been assigned
to Lessor as security for Sublessor's obligations under the Lease, and further
assigned by Lessor to Agent as security for Lessor's obligations to Agent and
the Lenders under the Credit Agreement and the Mortgage. Sublessee hereby
accepts and consents to the Security Assignments and the assignment of all of
Sublessor's right, title and interest in and
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to this Sublease to Agent pursuant to the terms thereof, including, without
limitation, the right to make all waivers and agreements, to give all notices,
consents and releases, to exercise Sublessor's rights and remedies upon an Event
of Default hereunder and take all action upon the happening of an Event of
Default hereunder or to do any and all other things whatsoever that Sublessor is
or may become entitled to do under this Sublease, all or any of which right,
remedies, obligations, benefits and interests may be reassigned or retransferred
by Agent at any time and from time to time.
(c) Sublease Subject and Subordinate. Sublessee acknowledges and agrees
that this Sublease, and Sublessee's rights hereunder, are subject and
subordinate in all respects to all the terms and conditions of the Lease and the
Mortgage and the rights and remedies of Lessor and Agent thereunder, including,
without limitation, (i) Lessor's rights to repossession of the Aircraft pursuant
to the Lease and to avoid this Sublease upon a default by Sublessor under the
Lease and (ii) Agent's rights to repossession of the Aircraft pursuant to the
Mortgage upon a default by Lessor thereunder, as the case may be.
Notwithstanding anything to the contrary herein, upon the occurrence of an event
of default entitling Lessor or Agent, as the case may be, to demand return of
the Aircraft by Sublessor under the Lease or an event of default by Lessor under
the Mortgage, Sublessee shall, if requested to do so by Lessor or Agent, as the
case may be, return the Aircraft to Agent or Lessor, as the case may be.
(d) Assignments by Sublessor or Lessor. Subject to Sublessee's rights
hereunder and at Sublessor's cost and expense, Sublessor or Lessor may at any
time and without Sublessee's consent sell, assign or transfer its rights and
interest hereunder or with respect to the Aircraft to a third party and/or grant
a Lien over the Aircraft and the benefit of this Sublease to Lender or any other
Person as security for Sublessor's or Lessor's obligations to such Person (each
such transferee, assignee or other Person, an "Assignee"). On request by
Sublessor, Sublessee will execute all such documents (such as a lease assignment
agreement) as Sublessor or Lessor may reasonably require to confirm Sublessee's
obligations under this Sublease. No sale, assignment or transfer of Sublessor's
or Lessor's interest or creation of any Lien by Sublessor or Lessor shall
adversely affect Sublessee's rights hereunder or increase Sublessee's duties,
expenses or the liabilities of Sublessee in respect of any Tax or under any of
its indemnification obligations or otherwise. Sublessee will provide all other
reasonable assistance and cooperation to Sublessor, Lessor and any Assignee in
connection with any such sale or assignment or the perfection and maintenance of
any Lien granted in connection therewith, including, at Sublessor's sole cost
and expense, making all necessary filings and registrations including filings or
registrations of mortgages, financing statements and reregistration of the
Aircraft. Upon any such assignment or
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transfer, Sublessor shall cause any Assignee to deliver to Sublessee evidence of
its corporate authority to enter into any such sale, assignment or transfer and
such Assignee shall grant to Sublessee the same covenant(s) of quiet enjoyment
as are set forth herein. Wherever the terms "Sublessor", "Lessor" or "Lender"
are used in this Sublease in relation to any of the provisions relating to
disclaimer, title and registration, indemnity and insurance, such terms shall be
construed to include each Assignee, as applicable.
Section 14. Events of Default; Remedies.
(a) Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" (whether any such event shall be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) and
each such Event of Default shall be deemed to exist and continue so long as it
shall not have been remedied:
(i) Sublessee shall fail to make any payment of Basic Rent,
Maintenance Reserves, Stipulated Loss Value or Supplemental Rent
hereunder within five (5) Business Days after the same shall have
become due and payable;
(ii) Sublessee shall fail to carry and maintain insurance on
or with respect to the Aircraft in accordance with the provisions of
Section 9 hereof or Sublessee shall fail to provide an insurer's
certificate evidencing the renewal or replacement of such policy, upon
the renewal or replacement thereof, in accordance with the terms
hereof;
(iii) any document required to be filed or recorded by
Sublessee pursuant thereto is not duly filed and recorded by Sublessee
as required to perfect and continue the perfection of the interests of
Sublessor, Lessor, and Agent in the Aircraft or the filings and
recordings provided for herein are not made by the time required; or
Sublessee shall fail to perform or observe any other covenant, term,
condition or agreement to be performed or observed by it hereunder or
under any instrument, document or agreement furnished by Sublessee to
Sublessor, or Lender in connection with the transactions referred to
herein or contemplated hereby, and such failure shall continue
unremedied for a period of thirty (30) days after written notice
thereof to Sublessee or thirty (30) days after Sublessee, assuming
exercise of reasonable diligence, should have known of such failure;
provided, however, such failure to observe any covenant, term,
condition or agreement does not pose a material danger to the
respective rights and interests of Sublessor, Lessor, Agent or any
Lender in the Aircraft and the same is of such a nature that it can be
cured; and further provided that Sublessee shall have commenced and
shall diligently pursue
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such cure, Sublessee shall have an additional thirty (30) day period
within which to cure the same;
(iv) any representation or warranty made by Sublessee herein
or in any document, or certificate furnished by Sublessee in connection
herewith shall at any time prove to have been false or incorrect or any
material respect at the time made;
(v) Sublessee shall (A) voluntarily commence any proceeding or
file any petition seeking relief under any applicable bankruptcy,
insolvency, liquidation or similar law now or hereafter in effect, (B)
consent to the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such
petition, (C) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator or similar official for itself or for
a substantial part of its property or assets, (D) file an answer
admitting the material allegations of a petition filed against it any
such proceeding, (E) make a general assignment for the benefit of
creditors, (F) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (G) take corporation
action for the purpose of effecting any of the foregoing;
(vi) an involuntary proceeding shall be commenced or for
involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of Sublessee, or of a
substantial part of the property or assets of Sublessee under any
applicable bankruptcy, insolvency, receivership or similar law, (B) the
appointment of a receiver, trustee, custodian, sequestrator or similar
official for Sublessee or for a substantial part of the property of
Sublessee or (C) the winding-up or liquidation of Sublessee; and such
proceeding or petition shall continue undismissed, unstayed or unbonded
for sixty (60) days or an order or decree approving or ordering any of
the foregoing shall continue unstayed and in effect for thirty (30)
days;
(vii) Sublessee or any subsidiary thereof, the debt of which
has been guaranteed by Sublessee thereof shall fail to pay, in
accordance with its terms and when due and payable, the principal of or
interest on any Debt the principal amount of which exceeds $2,000,000
and the maturity of any such Debt, in accordance with the provisions of
any such Debt or any contract evidencing, providing for the creation of
or concerning such Debt shall have been accelerated or any event shall
have occurred and be continuing that would permit any holder or holders
of such Debt, any trustee or agent acting on behalf of such holder or
holders or any other Persons so to accelerate such maturity;
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(viii) final judgment for the payment of money in excess of
[XXXXXX] not fully covered by insurance (or the equivalent in another
currency) shall be rendered against Sublessee and the same shall remain
undischarged for a period of thirty (30) days during which execution of
such judgment shall not be effectively stayed or bonded in a manner
satisfactory to Sublessor;
(ix) Sublessee shall fail to remain a "certificated
air-carrier" within the meaning of the Federal Aviation Act;
(x) Sublessee shall voluntarily suspend all or substantially
all of its commercial airline operations, or the franchises,
concessions, permits, rights or privileges acquired for the conduct of
the business and operations of Sublessee shall be revoked, canceled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented;
(xi) except as otherwise permitted pursuant to Section 11(n)
hereof, Sublessee shall merged with or into or consolidate with or into
or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to any Person or
fifty-one percent (51%) or more of the capital stock of Sublessee shall
be acquired in a single transaction or series of transactions, directly
or indirectly by any Person and/or its Affiliates not a shareholder of
Sublessee on the Commencement Date;
(xii) possession of the Aircraft, the Airframe or any Engine
shall be transferred to another Person, other than in accordance with
the express provisions of Section 7(d); and/or
(xiii) the Aircraft shall cease to be (or cease to be eligible
to be) registered in the United States as a result of any act or
omission of Sublessee.
(b) Remedies. Upon the occurrence of any Event of Default and at any
time thereafter so long as the same shall be continuing, Sublessor may, at its
option, declare this Sublease to be in default by notice to Sublessee; and at
any time thereafter, so long as Sublessee shall not have remedied all
outstanding Events of Default before Sublessor shall have commenced to exercise
its rights or remedies hereunder, Sublessor may exercise one or more of the
following rights and remedies with respect to all or any part of the Aircraft,
Airframe or any Engine as Sublessor in its sole discretion shall elect, to the
extent permitted by, and subject to compliance with any mandatory requirements
of, applicable law then in effect:
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(i) cause Sublessee, upon the written demand of Sublessor and
at Sublessee's expense, to return promptly, and Sublessee shall return
promptly (and in no event later than two days after such demand), all
or such part of the Aircraft, the Airframe or any Engine as Sublessor
may demand, to Sublessor or its order in the manner and condition
required by, and otherwise in accordance with all the provisions of,
Section 10 as if such Aircraft, Airframe or Engine were being returned
at the end of the Sublessee Term, or Sublessor, at its option, may
enter upon the premises where all or any part of the Aircraft, Airframe
or any Engine is located and take immediate possession of and remove
the same;
(ii) hold, use, operate, keep idle or lease to others all or
any part of the Aircraft, with or without taking possession thereof as
Sublessor in its sole discretion may determine, free and clear of any
rights of Sublessee and without any duty to account to Sublessee with
respect to such action or inaction or for any proceeds with respect
thereto, except that Sublessee's obligation to pay Basic Rent pursuant
to the Lease for any periods in respect of the Aircraft or part thereof
accruing after Sublessee shall have been deprived of possession of such
Aircraft or part thereof pursuant to this Section 14 shall be reduced
by the net proceeds, if any, received by Sublessor from leasing the
Aircraft or part thereof to any Person other than Sublessee for the
same periods or any portions thereof;
(iii) Sublessor may exercise any other right or remedy that
may be available to it under applicable law or proceeds by appropriate
court action to enforce the terms hereof or to recover damages for the
breach or to rescind this Sublease;
(iv) Sublessor may terminate this Sublease; and/or
(v) whether or not Sublessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under clause (i),
(ii), (iii) or (iv) above, Sublessor, by written notice to Sublessee
specifying a payment date not earlier than five (5) Business Days after
the date of such notice, may terminate this Sublease and demand that
Sublessee pay to Sublessor and Sublessee shall pay to Sublessor, on the
payment date specified in such notice, as liquidated damages for loss
of a bargain and not as a penalty, the sum of: (A) any unpaid Basic
Rent due under this Agreement for periods ending on or prior to the
payment date specified in such notice and any unpaid Supplemental Rents
due on or prior to such payment date, plus (B), an amount equal to the
aggregate unpaid Basic Rent which would otherwise have accrued
hereunder over the remainder of the Sublease Term but for the Event of
Default, discounted to present value as of the date specified for
payment in such
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notice, less (C), if applicable, for any period until the expiration of
the Sublease Term that Sublessor has not been able to sublease the
Aircraft but has been able, in the normal course of its operations to
use the Aircraft, the Basic Rent payable by Sublessee to Sublessor for
the lease of the Aircraft during any such period of use discounted to
present value as of the date specified for payment in such notice. The
amounts specified in such notice shall bear interest at the
Post-Default Rate from the payment date specified in such notice until
payment is made. In calculating Sublessor's damages hereunder upon an
Event of Default, all Basic Rent which would have become due during the
remainder of the Sublease Term if an Event of Default had not occurred
will be calculated on a present value basis using a discounting rate
equal to the rate of interest on United States Treasury Bills having a
maturity which will most closely approximate the period equal to the
remainder of the Sublease Term, as quoted in the Wall Street Journal on
the date of Sublessor's notice.
In addition, Sublessee shall be liable, except as otherwise provided
above, for any and all Unpaid Basic Rent and Supplemental Rent then due
hereunder before or during or after the exercise of any of the foregoing
remedies and for all legal fees and other costs and expenses incurred by
Sublessor by reason of the occurrence of any Event of Default or the exercise of
Sublessor's remedies with respect thereto, including all costs and expenses
incurred in connection with return of all or any part of the Aircraft in
accordance with Section 10 or this Section 14 or in storing or maintaining the
Aircraft or any part thereof or placing the same in the condition and
airworthiness required by Section 10.
Except as otherwise expressly provided above, no remedy referred to
herein is intended to be exclusive, but each shall be cumulative and in addition
to any other remedy referred to herein or otherwise available to Sublessor at
law or in equity, and the exercise or beginning of exercise by Sublessor or any
one or more of such remedies shall not preclude the simultaneous or later
exercise by Sublessor of any or all such other remedies; provided, that
Sublessor may recover only once from each element of damages sustained and,
provided further, that the preceding proviso shall not be deemed to require
proof of damages actually sustained in the case of liquidated damages provided
for herein. No express or implied waiver by Sublessor of any Default or Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. To the extent permitted by law,
Sublessee hereby waives any rights now or hereafter conferred by statute or
otherwise
(A) that may confer any right to prior
notice or judicial hearing in connection with Sublessor's
taking possession or disposing of the Aircraft including,
without limitation, any and all prior notice and hearing for
any prejudgment remedy or remedies and any such right that
Sublessee might otherwise have under applicable law,
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(B) except as provided in this Section 14,
that impose any requirements as to the time, place or terms
of lease other disposition or other requirements with respect
to the enforcement of Sublessor's rights and remedies
hereunder, (C) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or hereafter in
effect under applicable law that may have the effect of
delaying the enforcement of this Sublease or the absolute
lease or other disposition of the Aircraft, or (D) except as
otherwise provided herein, that may otherwise limit or modify
any of Sublessor's rights or remedies hereunder. The failure
or delay of Sublessor in exercising any right or remedy
granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver
of any such right or remedy upon the continuation or
reoccurrence of any such contingencies or similar
contingencies and any single or partial exercise hereunder of
any particular right or remedy of Sublessor shall not exhaust
the same or constitute a waiver of any other right provided
herein.
Notwithstanding anything contained in this Section 14 to the contrary,
Sublessor shall use reasonable efforts to mitigate damages.
Section 15. Notices. All notices required or permitted hereunder shall
be in writing and shall be delivered in person or sent by telecopier,
international courier service or letter (mailed certified and return receipt
requested), addressed to the parties as follows:
if the Sublessor: Alto Edificio Caribe, 2d Piso
San Salvador, El Salvador
Attention: President
Telecopier: (503) 98-0827
with a copy to: Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Kenneth C. Hoffman, Esq.
Telecopier: 305-579-0717
if to Sublessee: Western Pacific Airlines, Inc.
2864 S. Circle Drive, Suite 1100
Colorado Springs, Colorado 80906
Attention: Edward R. Beavais,
President & CEO
Telecopier: (719) 527-7480
with a copy to: Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Ruth Weinstein, Esq.
Telecopier: (212) 858-1500
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or at such other address as Sublessee or Sublessor shall from time to time
designate in writing to the other. In the case of a notice will be deemed
received upon actual receipt. In the case of a mailed letter, notice will be
deemed received on the tenth (10th) Business Day after deposit in the mail, with
proper postage for registered or certified first-class mail prepaid. All notices
required or permitted under the Lease shall be given in the manner set forth in
Section 18 of the Lease.
Section 16. Governing Law and Jurisdiction.
(a) Governing Law. This Sublease shall in all respects be governed by,
and construed in accordance with, the internal laws of the State of New York,
inclusive of all matters of construction, validity and performance.
(b) Jurisdiction; Service of Process. Sublessee and Sublessor hereby
irrevocably submit to the jurisdiction of any New York State or federal court
sitting in New York City in any action or proceeding arising out of or relating
to this Sublease, and hereby irrevocably agree that all claims in respect of
such action or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such federal court. Sublessee and
Sublessor hereby irrevocably waive, to the fullest extent they may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding. Sublessee hereby irrevocably appoints CT Corporation System, with an
office on the date hereof at 1633 Broadway, New York, New York 10019, and
Sublessor hereby irrevocably appoints Greenberg, Traurig, Hoffman, Lipoff, Rosen
& Quentel, 153 East 53rd Street, New York, New York 10022 (the "Process Agent"),
as their respective agents to receive on their behalf and in respect of their
proper service of copies of the summons and complaint and any other process that
may be served in any such action or proceeding. Such service may be made by
mailing or delivering a copy of such process to Sublessee or Sublessor, as the
case may be, in care of their respective Process Agents at such Process Agent's
above address, and Sublessee and Sublessor hereby irrevocable authorize and
direct their respective Process Agents to accept such service on their behalf.
As an alternative method of service, Sublessee and Sublessor also irrevocably
consent to the service of any and process in any such action or proceeding by
the mailing of copies of such process to the address specified in Section 16.
Sublessee and Sublessor agree that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Section 16(b) shall affect the right of any Person (including Lessor and Lender)
to serve legal process in any other manner permitted by law or affect the right
of any other party to bring any action or proceeding against Sublessee or
Sublessor, or their respective properties in the courts of other jurisdictions.
SUBLESSEE AND SUBLESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
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TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING
OUT OF OR RELATING TO THIS SUBLEASE.
(c) Waiver of Immunity. To the extent that Sublessor or Sublessee has
or hereafter may acquire any sovereign immunity, Sublessor and Sublessee hereby
irrevocably waive such immunity in respect of their respective obligations under
this Sublease and all other documents and agreements relating to the Aircraft
and the transactions referred to or contemplated herein.
Section 17. Miscellaneous.
(a) Entire Agreement. This Sublease constitutes the entire agreement
between the parties concerning the subject matter hereof, and supersedes all
previous proposals, agreements, understandings, negotiations and other written
and oral communications in relation hereto. NO SUBLEASE TERM OR PROVISION OF
THIS SUBLEASE MAY BE CHANGED, WAIVED, DISCHARGED OR TERMINATED, EXCEPT (i) WITH
THE PRIOR WRITTEN CONSENT OF LESSOR AND AGENT AND (ii) BY AN INSTRUMENT IN
WRITING SIGNED BY A DULY AUTHORIZED REPRESENTATIVE OF THE PARTY AGAINST WHICH
THE ENFORCEMENT OF THE CHANGE, WAIVER, DISCHARGE OR TERMINATION IS SOUGHT.
Nothing herein shall be construed as conveying to Sublessee any right, title or
interest in the Aircraft, the Airframe or any Engine or Part except as Sublessee
under this Sublease.
(b) English Language. All notices, communications, reports, opinions
and other documents given under this Sublease shall be in the English language.
(c) Sublessor's Right to Perform for Sublessee. If Sublessee fails to
make any payment of Rent or Supplemental Rent required to be made by it
hereunder or fails to perform or comply with any of its agreements contained
herein, Sublessor may itself make such payment or perform or comply with such
agreement, and the amount of any expenses of Sublessor incurred in connection
with such payment or the performance of or compliance with such agreement, as
the case may be, shall be deemed Supplemental Rent payable by Sublessee upon
demand; provided, however, that no such payment, performance or compliance by
Sublessor shall (i) be deemed to have satisfied the obligation of Sublessee to
make such payment or to perform or comply with such agreement, as the case may
be, unless and until Sublessee shall have paid all such Supplemental Rent
payable pursuant to this section by reason of such failure or (ii) be deemed a
waiver of Sublessor's rights and remedies against Sublessee hereunder.
(d) Application of Payments During Existence of Default. Any amount
referred to herein that is payable to Sublessee shall not be paid to Sublessee,
or if it has been previously paid directly to Sublessee, shall not be retained
by Sublessee, if at the time of such payment a Default or Event of Default shall
have occurred and be continuing, but shall be paid to and held by
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Sublessor as security for and may be applied to the obligations of Sublessee
under this Sublease and, at such time as Sublessor shall receive evidence in
form and substance satisfactory to it that there is not continuing any such
Default or Event of Default, all such amounts in excess of amounts so paid on
obligations of Sublessee shall be paid to Sublessee.
(e) Expenses. Whether or not the transactions contemplated hereby shall
be consummated, Sublessee agrees to reimburse Sublessor, Lessor and Agent for
their respective out-of-pocket costs and expenses, including attorneys' fees
(except for the fees of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A.), incurred in connection with the preparation, negotiation and delivery of
this Sublease, any other documents or instruments required in connection
herewith and the transactions contemplated hereby. Sublessee further agrees to
reimburse Sublessor, Lessor, Agent and any Lender for their out-of-pocket costs
and expenses, including attorneys' fees, incurred in connection with any
amendments, modifications or waivers required by this Sublease or requested by
Sublessee (or resulting from any requests of Sublessee) hereunder.
(f) Further Assurances. Sublessee will promptly and duly execute and
deliver to Sublessor such further documents and assurances and take such further
action as Sublessor may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Sublease and to establish
and protect the rights and remedies created or intended to be created in favor
of Sublessor hereunder, including, without limitation, if requested by
Sublessor, Lessor or Agent, at the expense of Sublessee, the execution and
delivery of supplements or amendments hereto, in recordable form, subjecting to
this Sublease any Replacement Engine and the recording or filing of counterparts
hereof, and all such other documents and instruments, in accordance with the
laws of such jurisdictions as Sublessor may from time to time deem advisable.
(g) Judgment Currency. The obligations of Sublessee in respect of any
sum due from it to Sublessor hereunder shall, notwithstanding any judgment in a
currency other than Dollars, be discharged only to the extent that Sublessor may
in accordance with normal banking procedures purchase, or cause to be purchased
for its account Dollars with such other currency; if the Dollars so purchased
are less than the sum originally due in Dollars, Sublessee agrees to indemnify
Sublessor against such loss, and if the Dollars so purchased exceed the sum
originally due to Sublessor in Dollars, Sublessor agrees to remit to Sublessee
such excess.
(h) Invalidity of any Provision. Any provision of this Sublease that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
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unenforceablity in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction. To the fullest extent permitted by
applicable law, Sublessee hereby waives any provision of law that renders any
provision hereof prohibited or unenforceable in any respect.
(i) Changes in Law. If there shall be any change (or such change shall
be enacted or made by notice or otherwise and shall be scheduled to become
thereafter effective) in the laws or treaties of the United States that has a
material adverse effect on the validity, legality, perfection or enforceability
of Sublessor's, Lessor's or Lender's rights or interest in the Aircraft or this
Sublease or the validity, legality, perfection, or enforceability of this
Sublease, or the perfection of the Security Assignments or the Mortgage,
Sublessor may terminate this Agreement, whereupon Sublessee shall promptly
return the Aircraft to Sublessor or its designee in the condition required
hereunder.
(j) Headings. All section and paragraph headings and captions are
purely for convenience of reference only and shall not modify, define, expand,
limit or otherwise affect any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Sublease.
(k) Consent. Whenever in this Sublease, the consent (whether or not, in
writing) of either Sublessor or Sublessee is required, such consent shall not be
unreasonably withheld or delayed.
(l) Third-Party Beneficiaries. Sublessee recognizes that this Sublease
confers certain rights and interests on the Indemnitees. Notwithstanding that
the Indemnitees are not parties to this Sublease, the Indemnitees are intended
third party beneficiaries of such rights and interests and Sublessor hereby
acknowledges that the Indemnitees may enforce such rights and interests
directly, as if they were parties to this Sublease.
(m) Counterparts. This Sublease may be executed in any number of
identical counterparts, all of which together will be deemed to be one and the
same instrument. Delivery of an executed counterpart of this Sublease by
facsimile will be deemed effective as delivery of an originally executed
counterpart. Any party delivering an executed counterpart of this Sublease by
facsimile will also deliver an originally executed counterpart; provided the
failure of any party to deliver an originally executed counterpart of this
Sublease will not affect the validity or effectiveness of this Sublease.
[CONTINUED ON SIGNATURE PAGE]
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IN WITNESS WHEREOF, Sublessor and Sublessee have each caused
this Sublease to be duly executed as of the day and year first above written.
TACA INTERNATIONAL AIRLINES, S.A.,
as Sublessor
By: _____________________________
Name:
Title:
WESTERN PACIFIC AIRLINES, INC.,
as Sublessee
By: _____________________________
Name:
Title:
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SCHEDULE 1
SUBLEASE AGREEMENT
STIPULATED LOSS VALUE
The Stipulated Loss Value as of any date shall be equal to the amount
of U.S. dollars set forth in the table below and set forth opposite such date.
Stipulated Loss Value
Stipulated
Loss Value
Lease Period Dates (In U.S. Dollars)
-----------------
March 18, 1996 - March 17, 1997 [XXXXXXXXXX]
March 18, 1997 - March 17, 1998 [XXXXXXXXXX]
March 18, 1998 - March 17, 1999 [XXXXXXXXXX]
March 18, 1999 - March 17, 2000 [XXXXXXXXXX]
March 18, 2000 - End of Lease Term [XXXXXXXXXX]
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EXHIBIT A
AIRCRAFT DESCRIPTION
One Boeing Model B737-3S3 Aircraft, United States Registration Mark N375TA and
Manufacturer's Serial No. 23787 with two CFM International, Inc. Model CFM
56-3B2 Engines, Manufacturer's Serial Nos. 721734 and 721150, respectively in a
136-seat, single class configuration.
AIRFRAME*:
Aircraft Total Time (Hours) _______
Aircraft Total Landings (Cycles) _______
Time since last "C" Check _______
Time since last "D" Check _______
ENGINES*:
Time to Next
Total Replacement of
Serial Engine Total Time Since Lowest Life
Number Cycles Time Overhaul Limited Part
------ ------ ----- ---------- --------------
721734
721150
---------------
*as of March __, 1996
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EXHIBIT B
ACCEPTANCE CERTIFICATE
WESTERN PACIFIC AIRLINES, INC., a corporation organized and existing
under the laws of ________________ with its principal place of business in
Colorado Springs, Colorado ("Sublessee") does hereby represent, acknowledge,
warrant and agree as follows:
(a) Sublease and TACA INTERNATIONAL AIRLINES, S.A. ("Sublessor") have
entered into a Sublease of Lease Agreement dated as of March __, 1996
(hereinafter referred to as the "Sublease"). Capitalized words used herein and
not otherwise defined will have the meanings set forth in the Sublease.
(b) Sublessee has this __ day of March, 1996 (Time: ___ ________), at
El Salvador International Airport, received from Sublessor possession of:
(i) One (1) Boeing 737-3S3 Aircraft bearing
Manufacturer's serial number 23787 and two (2) CFM
International, Inc. Model CFM 56-3B2 Engines, Manufacturer's
Serial Nos. 721734 and 721150 (the "Aircraft"); and
(ii) The manuals, logbooks, flight records and
historical information regarding the Aircraft, Engines and
Parts listed in Attachment 1 hereto (the "Aircraft
Documentation").
(c) Except as noted on Attachment 2 hereto, Sublessee hereby confirms
and agrees that the above described Aircraft and Aircraft Documentation have
been duly accepted by Sublessee pursuant to the terms and provisions of the
Sublease.
(d) As of the date hereof, the Aircraft and Engines had the following
hours/cycles:
AIRFRAME: Aircraft Total Time (Hours) ________
Aircraft Total Landings (Cycles) ________
Time since last "C" Check ________
Time since last "D" Check ________
Time to Next
Total Replacement of
Serial Engine Total Time Since Lowest Life
Number Cycles Time Overhaul Limited Part
------ ------ ----- ---------- --------------
721734
721150
(e) Quantity of fuel on board the Aircraft at delivery:_________.
<PAGE>
IN WITNESS WHEREOF, Sublessee has caused this Acceptance Certificate to
be executed by its duly authorized representative as of the day and year set
forth above.
WESTERN PACIFIC AIRLINES, INC.
By:____________________________
Name:
Title:
ATTACHMENTS: 1. List of Aircraft Documentation
2. List of Discrepancies
-2-
<PAGE>
ATTACHMENT 1
TO ACCEPTANCE CERTIFICATE
AIRCRAFT DOCUMENTATION
MANUALS
Name
----
FAA Approved Airplane Flight Manual
Manufacturer's Operations Manual - Volume No. ______
Quick Reference Handbook
Maintenance Manuals
Wiring Diagram Manuals
Structural Repair Manual
Illustrated Parts Catalog
Vendor Illustrated Parts Catalog
Overhaul Manuals
Vendor Overhaul Manuals
Drawings (Major Assembly and Installation)
Weight and Balance Control and Loading Manual
Weight and Balance Manuals Supplement
Actual Weight and Balance Compliance
Rigging Document
<PAGE>
AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS
-----------------------------------------
Aircraft log book (current file copies)
Aircraft Readiness Log (revised to time of return)
Maintenance Time Control Report (components, maintenance visit, special items
next, due Airframe hours and cycles)
Aircraft previous maintenance visit record including the last inspection
performed.
Airworthiness Directive Compliance Summary
Serviceable Tags for all rotable components installed (Airframe & Engines)
Ads requiring continuous surveillance
Service bulletin terminated accomplished status
Service bulletin requiring continuous surveillance summary and maintenance
control action
Airframe and component history records
FAA Form 337 for Airframe, repair/overhaul certification of last major visit
FAA Form 337 for each Engine, repair/overhaul certification of last shop visit
Engine Readiness Log for each Engine (components installed)
Summary of Service Bulletins accomplished for each Engine
Summary of AD's accomplished for each Engine
SD and AD status requiring continuous surveillance with maintenance, control
action for each engine
Engine time summary sheet including life limited items (for each Engine)
Engine log books for each Engine (current and file copies)
-2-
<PAGE>
Receipt of the foregoing documents except as noted, is hereby acknowledged.
-3-
<PAGE>
ATTACHMENT 2
TO ACCEPTANCE CERTIFICATE
DISCREPANCIES
<PAGE>
EXHIBIT C
FORM OF RETURN ACCEPTANCE RECEIPT
WESTERN PACIFIC AIRLINES, INC. ("Sublessee") and TACA INTERNATIONAL
AIRLINES, S.A. ("Sublessor") have entered into a Sublease of Lease Agreement
dated as of March __, 1996 (hereinafter referred to as "Sublease"). Capitalized
words used herein and not otherwise defined will have the meanings set forth in
the Sublease.
(a) Sublessor has this __ day of ______, _____ (Time: ___ _________),
at [return location], received from Sublease possession of:
(i) One (1) Boeing 737-3S3 Aircraft bearing
Manufacturer's serial number 23787 and two (2) CFM
International, Inc. Model CFM 56-3B2 Engines, Manufacturer
Serial Nos. 72134 and 721150 (the "Aircraft"); and
(ii) The manuals, logbooks, flight records and
historical information regarding the Aircraft, Engines and
Parts listed in Attachment 1 hereto (the "Aircraft
Documentation").
(b) Except as noted on Attachment 2 hereto, the above specified
Aircraft and Aircraft Documentation are hereby accepted by Sublessor pursuant to
the terms and provisions of the Sublease.
(c) As of the date hereof, the Aircraft and Engines had the following
hours/cycles:
AIRFRAME: Aircraft Total Time (Hours) ________
Aircraft Total Landings (Cycles) ________
Time since last "C" Check ________
Time since last "D" Check ________
Time to Next
Total Replacement of
Serial Engine Total Time Since Lowest Life
Number Cycles Time Overhaul Limited Part
------ ------ ----- ---------- --------------
721734
721150
(d) Quantity of fuel on board the Aircraft at redelivery:
- - -----------------.
<PAGE>
IN WITNESS WHEREOF, Sublessee and Sublessor have caused this Return
Acceptance Receipt to be executed by their duly authorized representatives as of
the day and year set forth above.
WESTERN PACIFIC AIRLINES, INC.
By:____________________________
Name:
Title:
TACA INTERNATIONAL AIRLINES, S.A.
By:____________________________
Name:
Title:
ATTACHMENTS: 1. List of Aircraft Documentation
2. List of Discrepancies
-2-
<PAGE>
ATTACHMENT 1
TO RETURN ACCEPTANCE RECEIPT
AIRCRAFT DOCUMENTATION
(NOTE: At time of Aircraft return list all of the records,
manuals, documents and data (by title/description,
identification number and quantity) which were provided
to Sublessee by Sublessor with delivery of the Aircraft
under the Sublease. Also list all additional
records/data developed for and returned with the
Aircraft by Sublessee.)
MANUALS
Name
----
FAA Approved Airplane Flight Manual
Manufacturer's Operations Manual - Volume No. _______
Quick Reference Handbook
Maintenance Manuals
Wiring Diagram Manuals
Structural Repair Manual
Illustrated Parts Catalog
Vendor Illustrated Parts Catalog
Overhaul Manuals
Vendor Overhaul Manuals
Drawings (Major Assembly and Installation)
Weight and Balance Contra and Loading Manual
Weight and Balance Manual Supplement
Actual Weight and Balance Compliance
Rigging Document
<PAGE>
AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS
Aircraft log book (current file copies)
Aircraft Readiness Log (revised to time of return)
Maintenance Time Control Report (components, maintenance visit, special items
next due, Airframe hours and cycles)
Aircraft previous maintenance visit record including the last inspection
performed.
Airworthiness Directive Compliance Summary
Serviceable Tags for all rotable components installed (Airframe & Engines)
Ads requiring continuous surveillance
Service bulletin terminated accomplishment status
Service bulletin requiring continuous surveillance summary and maintenance
control action
Airframe and component history records
FAA Form 337 for Airframe, repair/overhaul certificate of last shop visit
Engine Readiness Log for each Engine (component installed)
Summary of Service Bulletin's accomplished for each Engine
Summary of AD accomplished for each Engine
SB and AD status requiring continuous surveillance with maintenance, control
action of each Engine
Engine time summary sheet including life limited items (for each Engine)
Engine log books for each Engine (current and file copies)
Receipt of the foregoing documents, except as noted, in hereby acknowledged.
-2-
<PAGE>
ATTACHMENT 2
TO RETURN ACCEPTANCE RECEIPT
DISCREPANCIES
<PAGE>
EXHIBIT D
FORM OF CERTIFICATES OF Sublessee
OFFICER'S CERTIFICATE
Reference is hereby made to the Sublease of Lease Agreement dated as of
March ___, 1996, between TACA International Airlines, S.A., as Sublessor and
WESTERN PACIFIC AIRLINES, INC. (the "Sublease"). Capitalized terms used herein
shall, except as otherwise defined herein, have the respective meanings assigned
thereto or incorporated by reference to any other document in the Sublease.
Pursuant to Section 4(a) of the Sublease, in connection with the Sublease, the
undersigned hereby certifies as follows:
1. The undersigned is the duly appointed, qualified and acting
President of WESTERN PACIFIC AIRLINES, INC. (the "Sublessee"), a corporation
duly organized and existing under the laws of [Delaware], with its principal
place of business in Colorado Springs, Colorado;
2. All of the representations and warranties made by Sublessee in the
Sublease are true and accurate as of the date hereof, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case, the undersigned reaffirms that such representations and warranties are
true and accurate as of such earlier date); and
3. No Default or Event of Default has occurred and is continuing, or
will result from Sublessee's execution, delivery and performance of the
Sublease.
IN WITNESS WHEREOF, the undersigned has signed this Officer's
Certificate this ___ day __________________, 1996.
-----------------------------
Name:
Title:
-2-
<PAGE>
SECRETARY'S CERTIFICATE
Reference is hereby made to the Sublease of Lease Agreement dated as of
March ___, 1996, between TACA International Airlines, S.A., as Sublessor and
WESTERN PACIFIC AIRLINES, INC., as Sublessee, (the "Sublease"). Capitalized
terms used herein, have the respective meanings assigned thereto or incorporated
by reference to any other documents in the Sublease. In connection with the
Sublease and pursuant to Section 4(b) of the Sublease, the undersigned hereby
certifies as follows:
1. The undersigned is the duly appointed, qualified and acting
[Secretary][Assistant Secretary] of Sublessee, a corporation duly organized
under the laws of Delaware, with its principal place of business in Colorado
Springs, Colorado.
2. Attached as Annex A is a true and complete copy of the Articles of
Incorporation and the By-laws of Sublessee, as in effect on the date hereof.
3. There is no pending or contemplated proceeding for the amendment of
the Articles of Incorporation or By-laws of Sublessee.
4. Attached as Annex B is a true and complete copy of resolutions of
the Board of Directors of Sublessee, as duly adopted by the Board of Directors
in accordance with the Articles of Incorporation and By-laws of Sublessee, duly
authorizing the execution, delivery and performance by Sublessee of this
Sublease and all other agreements, documents and certificates contemplated
hereby or thereby to be executed on behalf of Sublessee, and such resolutions
have not been amended, rescinded, modified or revoked and are in full force and
effect on the date hereof.
5. Set forth below are/is the genuine signature of the Executive
President of Sublessee, who is the person duly authorized to execute and deliver
the Sublease and such other documents and instruments required to be delivered
under the Sublease, and who continues to hold his office as of the date hereof:
Name Title Signature
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Secretary's
Certificate this ___ day of _________________, 1996.
-----------------------------
Name:
Title:
The undersigned, being one of the officers referred to in the foregoing
Secretary's Certificate, does hereby certify as of the date of the foregoing
Certificate that _________________ is the [Secretary/Assistant Secretary] of
WESTERN PACIFIC AIRLINES, INC. and the signature above is his genuine signature.
-----------------------------
Name:
Title:
-2-
<PAGE>
EXHIBIT E
FORM OF OPINION OF SUBLESSEE'S COUNSEL
To Each Person Listed
on Schedule A Hereto
Gentlemen:
We have acted as counsel for WESTERN PACIFIC AIRLINES, INC., a
corporation organized and existing under the laws of _______________________
("WPA") in connection with the preparation, execution and delivery of the
Sublease of Lease Agreement dated as of March ___, 1996 (the "Sublease"),
between TACA International Airlines, S.A., as Sublessor, and WPA, as Sublessee,
relating to the lease of the Aircraft. Capitalized terms used herein and not
otherwise defined shall have the meanings defined in the Sublease.
In that connection we have examined the following: (i) the Sublease;
(ii) the Lease; (iii) the Security Subleases; (iv) the Mortgage; (v) the
Articles of Incorporation and bylaws of WPA and all amendments thereto (the
"Charter"); and (vi) such other documents, agreements and instruments as we have
deemed necessary as a basis for the opinions hereinafter expressed. We have also
examined originals or copies, certified or otherwise identified to our
satisfaction, of such other records and such other instruments and certificates
of public officials and of officers and representatives of WPA as we have deemed
necessary or appropriate as a basis for the opinions hereinafter expressed.
In arriving at the opinions expressed below, we have assumed the
genuineness of all signatures and the due authorization, execution and delivery
by the parties thereto (other than WPA) of each of the documents listed above.
In addition, we have made such investigations of law as we have deemed
appropriate for the purpose of giving the opinions expressed below.
On the basis of the foregoing, the further assumptions set forth below
and our consideration of such other matters of fact and questions of law as we
have deemed relevant in the circumstances, and subject to the limitations set
forth below, we are of the opinion that:
(1) WPA is a corporation duly organized, validly existing and in good
standing under the laws of ____________ and has the corporate power and
authority to carry on its business as presently conducted and to enter into and
perform its obligations under the Sublease, the Lease and all other documents
contemplated thereby to which it is or will become a party (collectively the
"Documents"), and holds all material licenses,
<PAGE>
certificates and permits from all Government Entities of __________________
necessary for the conduct of its business as now conducted.
(2) The execution, delivery and performance by WPA of the Documents (a)
have been duly authorized by all necessary corporate action on the part of WPA,
(b) do not require any stockholder approval, or approval or consent of any
trustee or holders of any indebtedness or obligations of WPA, (c) do not
contravene any law, rule or regulation of any Government Entity binding on WPA,
(d) do not contravene any order binding on WPA, (e) do not contravene any
provision of the Charter of WPA, and (f) do not contravene the provisions of, or
constitute a default under, or result in the creation of any lien upon any
property or assets of WPA under any indenture, mortgage, contract or other
agreement to which WPA is a party or by which it or its properties may be bound
or affected or any applicable law, rule or regulation, judgment, order or decree
of any Government Entity or court having jurisdiction over WPA or any of its
properties or assets. Each of the Documents has been duly executed and delivered
by WPA.
(3) No authorization or approval (including exchange control approval)
or other action by, and no notice to or filing with, any Governmental Entity is
required for the due execution, delivery and performance by WPA of the
Documents, but the failure so to record or file the Sublease will not affect the
enforceability of WPA's obligations under the Documents. The Documents are in
proper form for filing and recording.
(4) The Documents are the legal, valid and binding obligations of WPA
enforceable against WPA in accordance with their respective terms.
(5) The obligations of WPA under the Documents rank at least pari passu
in all respects with all other unsecured obligations of WPA and are not subject
to any law, rule or regulation of ___________ or any Governmental Entity thereof
with regard to any preference for payment of obligations or any rescheduling of
the payment of any debt or other obligations.
(6) The Lease, as assigned to WPA pursuant to the Sublease, creates a
valid leasehold interest in the Aircraft.
(7) There is no pending or, to the best of our knowledge after due
inquiry, threatened action or proceeding affecting WPA or any of its
subsidiaries before any court, governmental agency or arbitrator, or which
affects or purports to restrain the making or performance of, or affects the
legality, validity or enforceability of the Documents or the transactions
contemplated thereby.
(8) Neither WPA nor any of its property has any immunity from
jurisdiction of any court or from any legal process (whether
-2-
<PAGE>
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise).
(9) There is and will be no Tax, levy, impost, deduction, charge or
withholding imposed by any Taxing Authority of any relevant jurisdiction therein
or thereof either (i) on or by virtue of the execution or delivery of the
Documents or any other document to be furnished thereunder or in connection
therewith or (ii) on any payment made, or to be made, by WPA pursuant to any of
the Documents.
(10) It is not necessary to take any action in Colorado or under the
laws of Ecuador to perfect the interest of the Lessor in the Aircraft or the
security interests in favor of the Lender which the Mortgage or the Security
Subleases purport to create in the Aircraft, the Lease or any other portion of
the Security (as defined in the Mortgage). No person, by performing any act in
Colorado including, without limitation, the execution or recording of a bill of
sale or any security interest, can acquire any interest prior in right to the
Lessor or the interests in favor of the Lender which the Mortgage purports to
create in the Aircraft or any other portion of the Security.
(11) It is not necessary under the laws of Colorado (i) in order to
enable the Sublessor to enforce its rights under the Sublease, the Lessor to
enforce its rights under the Lease or the Lender to enforce its rights under the
Mortgage, or (ii) by reason of the execution, delivery and performance of any of
the Documents that the Sublessor, the Lessor, the Lender or any Lender should be
licensed, qualified or otherwise entitled to carry on business in Colorado.
(12) Neither Sublessor, Lessor nor Lender will be deemed to be a
resident domiciled or carrying on business or subject to taxation or other
unfavorable consequences in Colorado by reason only of the execution, delivery,
performance and/or enforcement of the Sublease or the Security Subleases.
(13) Neither WPA nor any of its subsidiaries is, to the best of our
knowledge after due inquiry, in breach of or default under any agreement to
which it is a party or which is binding on it or any of its assets.
(14) The choice of New York law set forth (a) in the Sublease, the
Lease, the Security Subleases and the Mortgage, in each case to govern such
respective document and to control the construction thereof, is in each case,
under the laws of Colorado, a valid, effective and enforceable choice of law.
(15) A judgment obtained against WPA in a court in the State of New
York pursuant to service of process in accordance with the Sublease would be
enforceable in Colorado against WPA's assets located therein, and execution
against WPA's assets in Ecuador to satisfy such a judgment could be obtained in
Ecuador.
-3-
<PAGE>
(16) WPA has legally, validly, effectively and irrevocably submitted to
the jurisdiction of any United States or state courts in New York City, New
York, and has legally, validly, effectively and irrevocably appointed CT
Corporation System as its authorized agent for the purposes described in the
Sublease.
Very truly yours,
-4-
<PAGE>
EXHIBIT F
FORM OF MONTHLY REPORT
MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT
To: TACA INTERNATIONAL AIRLINES, S.A. (the "Sublessor")
Alto Edificio Caribe, 2d. Piso
San Salvador, El Salvador
Attention: President
Telecopier: (503) 98-0827
From: WESTERN PACIFIC AIRLINES, INC. (the "Sublessee")
Re: AIRCRAFT TYPE: Boeing 737-3S3
REGISTRATION:
SERIAL NUMBER: 23787
MONTH OF ________ 19__
================================================================================
AIRCRAFT TOTAL TIME SINCE NEW HRS:
- - --------------------------------------------------------------------------------
AIRCRAFT TOTAL CYCLES SINCE NEW CYCLES:
- - --------------------------------------------------------------------------------
AIRFRAME FLIGHT HOURS DURING MONTH HRS:
- - --------------------------------------------------------------------------------
AIRFRAME BLOCK HOURS DURING MONTH HRS:
- - --------------------------------------------------------------------------------
AIRFRAME CYCLES/LANDING DURING MONTH CYCLES:
- - --------------------------------------------------------------------------------
TIME REMAINING TO D OR HEAVY MAINTENANCE
CHECK
================================================================================
Date of next scheduled "C" check: __________
<PAGE>
================================================================================
ENGINE SERIAL NUMBER ______ ENGINE SERIAL NUMBER ________
ORIGINAL POSITION _________ ORIGINAL POSITION ___________
- - --------------------------------------------------------------------------------
ACTUAL LOCATION: ACTUAL LOCATION:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
HOURS: HOURS:
- - --------------------------------------------------------------------------------
TOTAL TIME SINCE NEW TOTAL TIME SINCE NEW
- - --------------------------------------------------------------------------------
TOTAL CYCLES SINCE NEW TOTAL CYCLES SINCE
NEW
- - --------------------------------------------------------------------------------
FLIGHT HOURS FLOWN FLIGHT HOURS FLOWN
DURING MONTH DURING MONTH
- - --------------------------------------------------------------------------------
CYCLES DURING MONTH CYCLES DURING MONTH
- - --------------------------------------------------------------------------------
TIME REMAINING TO HSI TIME REMAINING TO HSI
- - --------------------------------------------------------------------------------
TIME REMAINING TO EHM TIME REMAINING TO EHM
================================================================================
NOTE: IF LESSOR OWNED ENGINE IS REMOVED OR INSTALLED ON
ANOTHER AIRCRAFT IT MUST BE REPORTED MONTHLY ON THIS
FORM.
SERVICE BULLETINS, AIRWORTHINESS DIRECTIVES, ENGINEERING MODIFICATIONS OR
CHANGES SCHEDULED OR COMPLETED (INDICATE DATE SCHEDULED FOR COMPLETION OR DATE
OF COMPLETION, AS APPLICABLE):
================================================================================
================================================================================
================================================================================
================================================================================
WARRANTY CLAIMS MADE OR SETTLED SINCE LAST REPORT (INDICATE NATURE OF CLAIM AND
SETTLEMENT, AS APPLICABLE):
================================================================================
================================================================================
================================================================================
================================================================================
-2-
<PAGE>
SUBLEASE SUPPLEMENT
SUBLEASE SUPPLEMENT, dated March 29, 1996, between: TACA
INTERNATIONAL AIRLINES, S.A. ("Sublessor") and WESTERN PACIFIC AIRLINES, INC., a
corporation formed under the laws of Delaware (together with its Sublessors and
permitted assigns, the "Sublessee").
Sublessor and Sublessee have heretofore entered into that
certain Sublease Agreement dated as of March 18, 1996 relating to one Boeing
737-3S3 aircraft (the "Sublease"). Capitalized terms used herein without
definition shall have the meanings set forth in the Sublease. The Sublease
provides for the execution and delivery of a Sublease Supplement for the purpose
of leasing the Aircraft under the Sublease as and when delivered by Sublessor to
Sublessee in accordance with the terms thereof. The Sublease relates to the
Aircraft and Engines described below.
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Sublessor and Sublessee hereby agree as
follows:
1. Sublessor hereby delivers and leases to Sublessee under the
Sublease, and Sublessee hereby accepts and leases from Sublessor under the
Sublease, the following Boeing 737-3S3 aircraft (the "Aircraft") and Engines,
all as more particularly described in the Sublease, together with the Aircraft
Documentation:
(i) Aircraft: FAA Registration No. N375TA; manufacturer's
serial no. 23787;
(ii) two (2) CFM International, Inc. Model CFM56-3B2 engines
bearing, respectively manufacturer's serial nos. 721150 and 721734
(each of which has 750 or more rated takeoff horsepower or the
equivalent of such horsepower).
2. The Commencement Date is the date of this Sublease
Supplement set forth in the opening paragraph hereof.
3. Sublessee hereby confirms to Sublessor that as between
Sublessee and Sublessor, Sublessee has accepted the Aircraft for all purposes
hereof and of the Sublease as being airworthy, in accordance with
specifications, in good working order and repair and without defect or inherent
vice in condition, design, operation or fitness for use, whether or not
discoverable by Sublessee as of the date hereof; provided that nothing contained
herein or in the Sublease shall in any way diminish or otherwise affect any
right Sublessee or Sublessor may have with respect to the Aircraft against the
Manufacturer or any subcontractor or supplier of the Manufacturer under the
Purchase Agreement or otherwise.
<PAGE>
4. Sublessee hereby confirms that on the date hereof no
Default or Event of Default has occurred and is continuing or would result from
Sublessee's execution, delivery and performance of the Sublease.
5. All the terms and provisions of the Sublease are hereby
incorporated by reference in this Sublease Supplement to the same extent as if
fully set forth herein.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this
Sublease Supplement to be duly executed on the day and year first above written.
TACA INTERNATIONAL AIRLINES, S.A.,
as Sublessor
By _______________________________
Name:
Title:
WESTERN PACIFIC AIRLINES, INC.,
as Sublessee
By________________________________
Name:
Title:
-2-
<PAGE>
-------------------------------------------------------------
ASSIGNMENT
OF
SUBLEASE AGREEMENT
Dated as of March ___, 1996
Between
TACA INTERNATIONAL AIRLINES, S.A.,
Assignor
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Trustee under
the Trust Agreement,
Assignee
Sublease Agreement, dated as of March 18, 1996, between
TACA International Airlines, S.A., as Sublessor and
Western Pacific Airlines, Inc., as Sublessee
Covering One Boeing Model 737-3S3 Aircraft,
and Two CFM International, Inc. CFM 56-3B2 Engines
-------------------------------------------------------------
<PAGE>
The right and interest of the Assignee in and to this
Assignment, dated as of the date hereof, has been assigned as security to ING
Aviation Lease B.V., as Agent for itself and each of the Lenders (the "Lenders")
under the Credit Agreement dated as of November 4, 1993, to the extent provided
in the Assignment of Security Document dated as of March __, 1996. No security
interest in and to this Assignment and the Assignment of Security Document may
be created through the transfer or possession of any counterpart other than the
original counterpart which shall be identified as the counterpart containing the
receipt therefor executed by the Lender.
THIS ASSIGNMENT OF SUBLEASE AGREEMENT dated as of March ___,
1996 between TACA International Airlines, S.A. (the "Assignor") and First
Security Bank of Utah, National Association, not in its individual capacity, but
solely as Trustee under the Trust Agreement dated as of November 4, 1993 between
itself and Amerilease Capital Corporation Ltd. (the "Assignee").
W I T N E S S E T H:
WHEREAS, the Assignor and Assignee have entered into that
certain Lease Agreement dated as of November 4, 1993 (the "Lease Agreement"),
which Lease, together with Lease Supplement No. 1 dated November 10, 1993 and
the Mortgage, were recorded by the FAA on November 12, 1993 as Conveyance No.
S091609; and
WHEREAS, the Assignor and Western Pacific Airlines, Inc.
("Western Pacific") have entered into a Sublease Agreement dated as of March 18,
1996 (the "Sublease"), pursuant to which the Assignor has agreed to sublease the
Aircraft to Western Pacific, for the period and subject to the terms and
conditions and for such value and consideration received as specified in the
Sublease; and
WHEREAS, the Assignor remains liable under the Lease Agreement
to perform all of its obligations thereunder and be governed by the terms and
conditions of such Lease Agreement; and
WHEREAS, capitalized terms used in this Assignment that are
not otherwise defined in this Assignment are used as they are defined in the
Sublease:
NOW THEREFORE, the parties hereby agree as follows:
1. Assignment of Sublease. For value received and to secure
the due and punctual payment and performance of all the Assignor's obligations
under the Lease Agreement, the Assignor hereby assigns, transfers and conveys to
the Assignee, its successors and assigns, all its right, title and interest in,
to
<PAGE>
and under (but not any of its obligations under) the Sublease, including but not
limited to:
(a) the Sublease, and all the Assignor's rights
and interests thereunder;
(b) any and all rents, insurance and condemnation
proceeds, and all other payments and other moneys due or to
become due, and any and all claims, rights, powers, remedies,
title and interest of the Assignor in and to or under or
arising out of the Sublease (including without limitation all
claims for damages or other sums arising upon sale or other
disposition of or loss of use of or requisition of title to or
use of the Aircraft and any part thereof at any time subject
to the Sublease or upon any event of default specified therein
(hereinafter referred to as a "Assignment Event of Default");
(c) all rights, powers, privileges, remedies and
other benefits of the Assignor under the Sublease and all
rights to make determinations, exercise options or elections,
give or withhold consents, waivers and approvals, give notices
and exercise remedies (including the right to declare or
exercise remedies with respect to an Assignment Event of
Default and to repossess any property), to take any other
action under or in respect of the Sublease or accept any
surrender or redelivery of the Aircraft and any part thereof,
as well as all the rights, powers and remedies on the part of
the Assignor, whether arising under the Sublease or by statute
or at law or in equity or otherwise, as a result of any
Assignment Event of Default or event that, with the giving of
notice or the lapse of time, or both, would become an
Assignment Event of Default (hereinafter referred to as a
"Assignment Default"); and
(d) all proceeds of the foregoing.
This Assignment is a present assignment and shall be
effective, and the security interest created hereby shall attach, immediately
upon execution of this Assignment; provided, however, that the Assignee shall
not be entitled to exercise, and the Assignor alone shall be entitled to
exercise, any of the rights, powers, privileges, remedies and other benefits of
the Assignor described above, unless and until an Event of Default under the
Lease Agreement or Credit Agreement shall have occurred and be continuing.
2. Performance of Assignor's Obligations. It is expressly
agreed that anything herein contained to the contrary notwithstanding (i) the
Assignor shall remain liable under the Lease Agreement to perform all of its
obligations thereunder to
-2-
<PAGE>
the same extent as if the Sublease had not been executed, (ii) neither the
Assignee nor any other party other than the Assignor shall have any obligation
or liability under the Sublease by reason of or arising out of this Assignment,
nor shall the Assignee or any such other party be required or obligated in any
manner to perform or fulfill any obligation of the Assignor under or pursuant to
the Sublease, or to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim or to
take any other action to collect or enforce the payment of any amounts to which
it or they may be entitled under the Sublease at any time or times and (iii) at
any time when an Event of Default under the Lease Agreement has occurred and is
continuing at the Assignee's option, the Assignee may, but shall be under no
obligation to, perform, or cause to be performed, all or any part of the
obligations and agreements of the Assignor under the Sublease, without releasing
the Assignor therefrom.
3. Event of Default. Upon the occurrence of an Event of
Default under the Lease Agreement or under the Credit Agreement and at any time
thereafter so long as the same shall be continuing, the Assignee may, at its
option, exercise one or more of the remedies set forth below and/or available to
it under this Assignment and the Sublease or which may be available to it under
the New York Uniform Commercial Code whether or not applicable in the relevant
jurisdiction, as the Assignee in its sole discretion may determine, which
remedies are cumulative and in addition to every other right or remedy provided
by law.
3.1 Collection of Sublease Payments. The Assignee may collect
and retain all rents, proceeds, payments and other moneys due or to become due
under the Sublease or any other property assigned thereunder and apply such
amount to the payments due under the Lease Agreement, all as the Assignee, in
its discretion, shall determine;
3.2 Maintenance of Sublease. The Assignee may assume all or
any part of the Assignor's right, title and interest in the Sublease and/or any
other property assigned thereunder and maintain the Sublease and such other
property assigned thereunder in full force and effect, with the Assignee
substituted for the Assignor thereunder, and in any such event all the right,
title and interest of the Assignor therein shall be extinguished and the
Assignee shall be entitled to collect and retain all rents and payments
thereunder; and/or
3.3 Sale. The Assignee may sell at public or private sale,
without appraisal, for such price as it may deem fair, the Sublease and all the
Assignor's right, title and interest therein, in which case the Assignee shall
give the Assignor at least 15 days' notice of the date fixed for any public sale
or of the date on or after which will occur the execution of any contract
providing for any private sale thereof, and each purchaser at any such sale
shall hold such property absolutely
-3-
<PAGE>
free from any claim or right on the part of the Assignor, the Assignor hereby
waiving and releasing (to the extent permitted by law) all rights of redemption,
stay, appraisal, reclamation and turnover that the Assignor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
4. Expenses and Fees. The Assignor shall pay to the Assignee
and its successors and assigns on demand all reasonable attorney's fees and
other reasonable expenses incurred by the Assignee in protecting its interest
granted hereunder or in exercising its rights and remedies provided hereunder.
5. Waiver, Invalidity of Remedies. The Assignor waives any
right to require the Assignee to pursue any other remedy it may have against the
Assignor. The invalidity or unenforceability of any remedy in any jurisdiction
shall not invalidate such remedy or render it unenforceable in any other
jurisdiction. The invalidity or unenforceability of any of the remedies provided
herein in any jurisdiction shall not in any way affect the right to enforcement
in such jurisdiction or elsewhere of any of the other remedies provided herein.
6. Power of Attorney. The Assignor does hereby constitute the
Assignee and its successors and assigns, the Assignor's true and lawful
attorney-in-fact, with full power (in the name of the Assignor or otherwise) and
at the expense of the Assignor but for the use and benefit of the Assignee, at
any time after an Event of Default under the Lease Agreement has occurred and
for so long as it is continuing, to enforce each and every term and provision of
the Sublease and any other property assigned thereunder, to ask, require,
demand, receive, collect, compound and give acquittance and discharge for any
and all moneys and claims for moneys due and to become due under or arising out
of the Sublease, to endorse any checks or other instruments or orders in
connection therewith, to settle, compromise, compound or adjust any such claims,
to exercise and enforce any and all claims, rights, powers or remedies of every
kind and description of the Assignor under or arising out of the Sublease, to
file, commence, prosecute, compromise and settle in the name of the Assignor,
the Assignee, or otherwise any suits, actions or proceedings at law or in equity
in any court, to collect any such moneys or to enforce any rights in respect
thereto on all other claims, rights, powers and remedies of every kind and
description of the Assignor under or arising out of the Sublease or any other
property assigned thereunder and generally to sell, assign, transfer, pledge,
make any agreement with respect to or otherwise deal with any of such claims,
rights, powers and remedies as fully and completely as though the Assignee were
the absolute owner thereof for all purposes, and at such times and in such
manner as may seem to the Assignee to be necessary or advisable or convenient or
proper in its absolute discretion.
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<PAGE>
7. Execution of Documents. The Assignor agrees that at any
time or from time to time, upon the written request of the Assignee, the
Assignor shall promptly and duly execute and deliver any and all such further
instruments, documents and financing statements and do such other acts and
things as the Assignee may deem necessary or desirable in order to obtain the
full benefits of this Assignment and the rights and powers granted herein.
8. Further Assignment. The Assignee may at any time sell,
assign, transfer or otherwise dispose of its interest in the Sublease or this
Assignment and in the property and security created thereby and hereby, but only
in accordance with the express provisions of the Lease Agreement. The Assignor
shall not assign, delegate, pledge or otherwise encumber any of its rights or
obligations hereunder.
9. Assignor's Representations and Warranties. The Assignor
represents and warrants that, as to itself, the Sublease is in full force and
effect, that the Assignor is not in default thereunder and that it has not
assigned, transferred or pledged, and hereby covenants that it will not assign,
transfer or pledge, the whole or any part of the rents, moneys, claims, rights,
powers, remedies, titles or interests hereby assigned to anyone other than the
Assignee, its successors and assigns.
10. Governing Law. This Assignment is being delivered in the
State of New York, United States of America. This Assignment, including all
matters of construction, validity and performance, shall in all respects be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made in such State by residents thereof and to be
performed entirely within such State.
11. Counterparts. This Assignment may be executed in several
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument.
12. Miscellaneous. This Assignment may not be amended,
supplemented, modified or waived without the prior written consent of the
Assignee and the Assignor. This Assignment shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and permitted
assigns. Except as otherwise provided in this Assignment, all notices hereunder
shall be in writing and shall be given in the manner and at the addresses
provided for notices under the Lease Agreement and the Sublease.
-5-
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have duly
executed this Assignment as of the date first set forth above.
TACA INTERNATIONAL AIRLINES, S.A.
By:______________________________
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely as
Trustee under the Trust Agreement
By:______________________________
Title:
-6-
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have duly
executed this Assignment as of the date first set forth above.
TACA INTERNATIONAL AIRLINES, S.A.
By:______________________________
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely as
Trustee under the Trust Agreement
By:______________________________
Title:
<PAGE>
-----------------------------------------
ASSIGNMENT
OF
SECURITY DOCUMENT
Dated as of March 29, 1996
Between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Trustee under
the Trust Agreement,
Assignor
and
ING AVIATION LEASE B.V.
Assignee
Assignment of Sublease Agreement, dated as of
March 18, 1996, between TACA International
Airlines, S.A., as Assignor, and First Security Bank of Utah,
National Association, not in its individual
capacity, but solely as Trustee under the Trust agreement,
as Assignee, Covering One Boeing Model 737-3S3 Aircraft,
and Two CFM International Inc. CFM 56-3B2 Engines
-----------------------------------------
<PAGE>
THIS ASSIGNMENT OF SECURITY DOCUMENT dated as of March 29,
1996 between First Security Bank of Utah, National Association, not in its
individual capacity, but solely as Trustee under the Trust Agreement dated as of
November 4, 1993 between itself and Amerilease Capital Corporation, Ltd. (the
"Assignor"), and ING Aviation Lease B.V. (the "Assignee") as agent for itself
and each of the Lenders under the Credit Agreement (the "Credit Agreement")
dated as of November 4, 1993.
W I T N E S S E T H :
WHEREAS, the Assignor and Assignee are parties to the
above-referenced Credit Agreement, pursuant to which the Lenders made certain
loans to the Assignor;
WHEREAS, the Assignor and TACA International Airlines, S.A.
(the "Lessee") are parties to the Lease Agreement dated as of November 4, 1993
(the "Lease), which Lease, together with Lease Supplement No. 1 dated November
10, 1993 and the Mortgage, were recorded by the FAA on November 12, 1993 as
Conveyance No.
S091609;
WHEREAS, the Lessee and Western Pacific Airlines, Inc.
("Western Pacific") have entered into a Sublease Agreement dated as of March 18,
1996 (the "Sublease"), pursuant to which the Lessee has agreed to Sublease the
Aircraft to Western Pacific for the such period, subject to such terms and
conditions, and for value and consideration received as specified in the
Sublease; and
WHEREAS, the Assignor and the Lessee have entered into an
Assignment of Sublease Agreement dated as of March 29, 1996 (the "Lessee
Assignment"), pursuant to which the Lessee has agreed to assign, transfer and
convey to the Assignor, its successors and assigns, all its right, title and
interest in, to and under the Sublease; and
WHEREAS, it is a condition to the Assignee's consent to the
transaction contemplated by the Sublease that Assignor assign to Assignee all of
its right and interest under the Sublease as further security for Assignor's
obligation to Assignee under the Credit Agreement; and
WHEREAS, capitalized terms used in this Assignment that are
not otherwise defined in this Assignment are used as they are defined in the
Credit Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
1. Assignment. For value received and to secure the due
and punctual payment and performance of all the Assignor's obligations under the
Credit Agreement and the Mortgage, the
<PAGE>
Assignor hereby assigns, transfers and conveys to the Assignee, it successors
and assigns, all its right, title and interest in, to and under (but not any of
its obligations under) the Lessee Assignment, including but not limited to:
(a) the Lessee Assignment, and all the Assignor's
rights and interests thereunder;
(b) any and all rents, insurance and condemnation
proceeds, and all other payments and other moneys due or to become due,
and any and all claims, rights, powers, remedies, title and interest of
the Assignor in and to or under or arising out of the Lessee Assignment
(including without limitation all claims for damages or other sums
arising upon sale or other disposition of or loss of use of or
requisition of title to or use of the Aircraft and any part thereof at
any time subject to the Lessee Assignment or upon any event of default
specified in the Sublease (hereinafter referred to as an "Assignment
Event of Default"));
(c) all rights, powers, privileges, remedies and
other benefits of the Assignor under the Lessee Assignment and all
right to make determinations, exercise options or elections, give or
withhold consents, waivers and approvals, give notices and exercise
remedies (including the right to declare or exercise remedies with
respect to an Assignment Event of Default and to repossess any
property), to take any other action under or in respect of the Lessee
Assignment or accept any surrender or redelivery of the Aircraft and
any part thereof, as well as all the rights, powers and remedies on the
part of the Assignor, whether arising under the Lessee Assignment or by
statute or at law or in equity or otherwise, as a result of any
Assignment Event of Default or event that, with the giving of notice or
the lapse of time, or both, would become an Assignment Event or Default
(hereinafter referred to as an "Assignment Default"); and
(d) all proceeds of the foregoing.
This assignment is a present assignment and shall be
effective, and the security interest created hereby shall attach, immediately
upon execution of this Assignment; provided however, that the Assignee shall not
be entitled to exercise, and the Assignor alone shall be entitled to exercise,
any of the rights, powers, privileges, remedies and other benefits of the
Assignor described above, unless and until an Event of Default under the Credit
Agreement or the Mortgage shall have occurred and be continuing.
2. Performance of Assignor's Obligations. It is
expressly agreed that anything herein contained to the contrary notwithstanding,
(i) the Assignor shall remain liable under the Credit Agreement and the Mortgage
to perform all of its
-2-
<PAGE>
obligations thereunder to the same extent as if the Lessee Assignment had not
been executed, (ii) neither the Assignee nor any other party other than the
Assignor shall have any obligation or liability under the Sublease or Lessee
Agreement by reason of or arising out of this Assignment, nor shall the Assignee
or any such other party be required or obligated in any manner to perform or
fulfill any obligation of the Assignor under or pursuant to the Sublease or
Lessee Agreement, or to make any payment, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or to present or file any
claim or to take any other action to collect or enforce the payment of any
amounts to which it or they may be entitled hereunder at any time or times and
(iii) at any time when an Event of Default under the Credit Agreement and the
Mortgage has occurred and is continuing, at the Assignee's option, the Assignee
may, but shall be under no obligation to, perform, or cause to be performed, all
or any part of the obligations and agreements of the Assignor under the Sublease
or the Lessee Assignment, without releasing the Assignor therefrom.
3. Event of Default. Upon the occurrence of an Event of
Default under the Credit Agreement and at any time thereafter so long as the
same shall be continuing, the Assignee may, at its option, exercise one or more
of the remedies set forth below and/or available to it under this Assignment,
the Lessee Assignment, Lease Agreement or under the Credit Agreement or the
Mortgage or which may be available to it under the New York Uniform Commercial
Code whether or not applicable in the relevant jurisdiction, as the Assignee in
its sole discretion may determine, which remedies are cumulative and in addition
to every other right or remedy provided by law.
3.1 Collection of Payments under Lessee Assignment.
The Assignee may collect and retain all rents, proceeds, payments and
other moneys due or to become due under the Lessee Assignment or any
other property assigned thereunder and apply such amount to the
payments due under the Credit Agreement, all as the Assignee, in its
discretion, shall determine;
3.2 Maintenance of Lessee Assignment. The Assignee
may assume all or any part of the Assignor's right, title and interest
in the Lessee Assignment and/or any other property assigned thereunder
and maintain the Lessee Assignment and such other property assigned
thereunder in full force and effect, with the Assignee substituted for
the Assignor thereunder, and in any such event all the right, title and
interest of the Assignor therein shall be extinguished and the Assignee
shall be entitled to collect and retain all rents and payments
thereunder; and/or
3.3 Sale. The Assignee may sell at public or private
sale, without appraisal, for such price as it may deem fair, the Lessee
Assignment and all the Assignor's
-3-
<PAGE>
right, title and interest therein, in which case the Assignee shall
give the Assignor at least 15 days' notice of the date fixed for any
public sale or the date on or after which will occur the execution of
any contract providing for any private sale thereof, and each purchaser
at any such sale shall hold such property absolutely free from any
claim or right on the part of the Assignor, the Assignor hereby waiving
and releasing (to the extent permitted by law) all rights of
redemption, stay, appraisal, reclamation and turnover that the Assignor
now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
4. Expenses and Fees. The Assignor shall pay to the
Assignee and its successors and assigns on demand all reasonable attorney's fees
and other reasonable expenses incurred by the Assignee in protecting its
interest granted hereunder or in exercising its rights and remedies provided
hereunder.
5. Waiver, Invalidity of Remedies. The Assignor waives
any right to require the Assignee to pursue any other remedy it may have against
the Assignor. The invalidity or unenforceability of any remedy in any
jurisdiction shall not invalidate such remedy or render it unenforceable in any
other jurisdiction. The invalidity or unenforceability of any of the remedies
provided herein in any jurisdiction shall not in any way affect the right to
enforcement in such jurisdiction or elsewhere of any of the other remedies
provided herein.
6. Power of Attorney. The Assignor does hereby
constitute the Assignee and its successors and assigns, the Assignor's true and
lawful attorney-in-fact, with full power (in the name of the Assignor or
otherwise) and at the expense of the Assignor but for the use and benefit of the
Assignee, at any time after an Event of Default under the Credit Assignment or
the Mortgage has occurred and for so long as it is continuing, to enforce each
and every term and provision of the Lessee Assignment and any other property
assigned thereunder, to ask, require, demand, receive, collect, compound and
give acquittance and discharge for any and all moneys and claims for moneys due
and to become due under or arising out of the Lessee Assignment, or any other
property assigned thereunder, to endorse any checks or other instruments or
orders in connection therewith, to settle, compromise, compound or adjust any
such claims, to exercise and enforce any and all claims, rights, power or
remedies of every kind and description of the Assignor under or arising out of
the Lessee Assignment, or any other property assigned thereunder, to file,
commence, prosecute, compromise and settle in the name of the Assignor, the
Assignee, or otherwise any suits, actions or proceedings at law or in equity in
any court, to collect any such moneys or to enforce any rights in respect
thereto on all other claims, rights, powers and remedies of every kind and
description of the Assignor under or arising out of the Lessee Assignment or any
other property assigned
-4-
<PAGE>
thereunder and generally to sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with any of such claims, rights, powers and
remedies as fully and completely as though the Assignee were the absolute owner
thereof for all purposes, and at such times and in such manner as may seem to
the Assignee to be necessary or advisable or convenient or proper in its
absolute discretion.
7. Execution of Documents. The Assignor agrees that at
any time or from time to time, upon the written request of the Assignee, the
Assignor shall promptly and duly execute and deliver any and all such further
instruments, documents and financing statements and do such other acts and
things as the Assignee may deem necessary or desirable in order to obtain the
full benefits of this Assignment and the rights and powers granted herein.
8. Assignment; Payments. The Assignee may at any time
sell, assign, transfer or otherwise dispose of its interest in the Lessee
Assignment or this Assignment and in the property and security created thereby
and hereby, but only in accordance with the express provisions of the Mortgage.
The Assignor shall not assign, delegate, pledge or otherwise encumber any of its
rights or obligations hereunder.
9. Assignor's Representations and Warranties. The
Assignor represents and warrants that, as to itself, the Lessee Assignment is in
full force and effect, that the Assignor is not in default thereunder and that
it has not assigned, transferred or pledged, and hereby covenants that it will
not assign, transfer or pledge, the whole or any part of the rents, moneys,
claims, rights, powers, remedies, titles or interests hereby assigned to anyone
other than the Assignee, its successors and assigns.
10. Governing Law. This Assignment is being delivered in
the State of New York, United States of America. This Assignment, including all
matters of construction, validity and performance, shall in all respects be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made in such State by residents thereof and to be
performed entirely within such State.
11. Counterparts. This Assignment may be executed in
several counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument.
12. Miscellaneous. This Assignment may not be amended,
supplemented, modified or waived without the prior written consent of the
Assignee and the Assignor. This Assignment shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and permitted
assigns. Except as otherwise provided in this Assignment, all
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<PAGE>
notices hereunder shall be in writing and shall be given in the manner and at
the addresses provided for notices under the Credit Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have duly
executed this Assignment as of the date first set forth above.
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Trustee under the Trust
Agreement
By:_________________________________
Title:
ING AVIATION LEASE B.V.
By:__________________________________
Title:
<PAGE>
AMENDMENT NO. 1 TO AIRCRAFT LEASE AGREEMENT
This AMENDMENT NO. 1 TO AIRCRAFT LEASE AGREEMENT dated as of
March 29, 1996 (the "Amendment"), is entered into between TACA INTERNATIONAL
AIRLINES, S.A. ("LESSEE") and FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
not in its individual capacity (except as otherwise specified) but solely as
trustee, under the Trust Agreement ("LESSOR").
WHEREAS, LESSOR and LESSEE are parties to that certain
Aircraft Lease Agreement dated as of November 4, 1993 (the "Lease") (capitalized
terms used herein and not otherwise defined shall have the meanings ascribed
thereto in the Lease), which, together with Lease Supplement No. 1 thereto dated
as of November 10, 1993 and the Mortgage, were recorded by the FAA on November
12, 1993 as Conveyance No. S091609;
WHEREAS, pursuant to the Lease, LESSOR has leased to LESSEE
one (1) Boeing B737-3S3 aircraft bearing manufacturer's serial number 23787 and
United States registration N375TA, equipped with two (2) CFM International, Inc.
Model CFM 56-3B2 engines bearing manufacturer's serial nos. 720890 and 721734,
respectively (the "Aircraft");
WHEREAS, LESSEE, as sublessor, and Western Pacific Airlines,
Inc., as sublessee ("Sublessee"), have entered into that certain Sublease
Agreement dated as of the date hereof (the "Sublease"), pursuant to which LESSEE
has agreed to lease the Aircraft to Sublessee for the term and on the conditions
set forth therein;
WHEREAS, LESSEE has requested that LESSOR consent to the
Sublease, and LESSOR has agreed to consent to Sublease provided that LESSOR and
LESSEE amend the lease as hereinafter set forth.
In consideration of the premises, LESSOR and LESSEE hereby
agree as follows:
1. Amendments to Section 1 of the Lease. Section 1 of
the Lease is hereby amended by the addition of the following definitions:
"Insured Value" shall mean (i) if the Sublease is in effect,
the Stipulated Loss Value, and (ii) at all times while that the
Sublease is not in effect, [XX] of the Stipulated Loss Value.
"Stipulated Loss Value" shall mean as of any particular date
(i) if the Sublease is in effect, the amount set forth in Schedule 1 to
the Sublease, and (ii) at all times that the Sublease is not in effect,
the amount set forth in Schedule 1 to the Lease with reference to such
date.
<PAGE>
"Sublease" shall mean that certain Sublease Agreement
dated as of March 18, 1996, between Lessee, as sublessor, and
Sublessee, as sublessee, as originally executed or as modified, amended
or supplemented pursuant to the applicable provisions thereof.
"Sublessee" shall mean Western Pacific Airlines,
Inc., a Delaware corporation.
2. Amendment to Section 3(a) of the Lease. Section 3(a)
of the Lease is hereby amended by deleting such section in its entirety and
substituting in its place the following:
"(a) Term. The Term shall be the period commencing on the
Delivery Date (November 10, 1993) and ending, unless earlier terminated
pursuant to the provisions of this Lease, on the later to occur of (i)
the tenth (10th) anniversary of such Delivery Date, and (ii) the date
on which the Sublease Term (as defined in the Sublease) expires or is
terminated in accordance with the provisions of the Sublease."
3. Amendment to Section 3(b) of the Lease. Section 3(b)
of the Lease is hereby amended by adding the following sentence to the end of
such section:
"At any time during the Term while the Sublease is in effect,
the Basic Rent payable by Lessee shall be increased to the
amount of "Basic Rent" actually paid by the Sublessee to
Lessee pursuant to the Lease (if such amount is higher than
the Basic Rent otherwise payable hereunder)."
4. Amendment to Section 3(c) of the Lease. Section 3(c)
of the Lease is hereby amended by adding the following sentence to the end of
such section:
"Lessee also agrees to pay to Lessor, as Supplemental Rent,
any and all amounts paid to Lessee by Sublessee as Maintenance
Reserves (as defined in the Sublease) pursuant to the
Sublease; provided, that Lessor shall return to Lessee any
amount of the Maintenance Reserves that Lessee is required to
reimburse to Sublessee, at the times required by and otherwise
in accordance with the provisions of the Sublease"
5. Amendment to Section 10(b) of the Lease. The first
sentence of Section 10(b) of the Lease is hereby amended by deleting such
sentence in its entirety and substituting in its place the following:
"Upon the occurrence of an Event of Loss with respect to an
Engine only, Lessee shall give Lessor prompt written notice
thereof and shall, within one hundred twenty (120) days after
the occurrence of such Event of
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<PAGE>
Loss, convey or cause to be conveyed to Lessor, as replacement
for the Engine with respect to which such Event of Loss
occurred, title to a Replacement Engine free and clear of all
Liens other than Permitted Liens and having a value, utility
and remaining life (determined by reference to the hours or
cycles remaining on all life-limited Parts installed in such
Replacement Engine) at least equal to, and being in as good
operating condition as, the Engine with respect to which such
Event of Loss occurred, assuming such Engine was of the value
or utility and in the condition and repair required by the
terms hereof immediately prior to the occurrence of such Event
of Loss."
6. No Further Amendments. Except as expressly modified
by this Amendment all of the terms and conditions of the lease shall remain
unchanged and in full force and effect.
7. Effectiveness; Counterparts. This Amendment shall
become binding and effective upon execution of the Amendment by the parties
hereto. This Amendment may be executed in counterparts, each of which will be
deemed to be an original and all of which together will be deemed to be one and
the same instrument. Delivery of an executed counterpart of this Amendment by
facsimile will be deemed effective as delivery of an originally executed
counterpart. Any party delivering an executed counterpart of this Amendment by
facsimile will also deliver an originally executed counterpart; provided, the
failure of any party to deliver an originally executed counterpart of this
Amendment will not affect the validity or effectiveness of this Amendment.
(Continued on Signature Page)
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<PAGE>
IN WITNESS WHEREOF, LESSOR and LESSEE have each caused this
Amendment No. 1 to Aircraft Lease Agreement to be duly executed as of the day
and year first above written.
TACA INTERNATIONAL AIRLINES, S.A.
By:________________________________
Title: Vice President Finance
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity (except as
otherwise specified) but solely as
trustee under the Trust Agreement
By:___________________________________
Title: Assistant Vice President
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<PAGE>
CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO RULE 24b-2 AS INDICATED BY "[XXX]".
================================================================================
AIRCRAFT LEASE AGREEMENT
Dated as of May 31, 1996
BETWEEN
WESTERN PACIFIC AIRLINES, INC.
as LESSEE
and
INTERNATIONAL LEASE FINANCE CORPORATION
as LESSOR
================================================================================
Aircraft Make and Model: Used Boeing 737-3Q8
Aircraft Manufacturer's Serial Number: 2299
Aircraft Registration Mark: N956WP (Formerly,
EC-FER)
Make and Model of Engines: CFM-56-3B2
Serial Numbers and Engines: 722248 and 722249
USED AIRCRAFT NO. 1
===================
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 SUMMARY OF TRANSACTION......................................... 2
1.1 Description of Aircraft ....................................... 2
1.2 Scheduled Delivery Date and Location........................... 2
1.3 Lease Term..................................................... 2
1.4 Security Deposit............................................... 2
1.5 Transaction Fee................................................ 2
1.6 Rent During Initial Lease Term................................. 2
1.7 Reserves....................................................... 2
1.8 Additional Rent for Excess Cycles.............................. 2
1.9 Country of Aircraft Registration............................... 3
1.10 Maintenance Program............................................ 3
1.11 Agreed Value of Aircraft....................................... 3
1.12 LESSOR's Bank Account.......................................... 3
ARTICLE 2 DEFINITIONS.................................................... 4
2.1 General Definitions............................................ 4
2.2 Specific Definitions........................................... 7
ARTICLE 3 PLACE AND DATE OF DELIVERY..................................... 9
3.1 Place of Delivery.............................................. 9
3.2 Scheduled Delivery Date........................................ 9
3.3 No LESSOR Liability............................................ 9
3.4 Total Loss of Aircraft Prior to Delivery....................... 9
3.5 Cancellation for Delay......................................... 9
3.6 Cancellation for Anticipated Delay............................. 9
ARTICLE 4 LEASE TERM..................................................... 11
4.1 Lease Term..................................................... 11
4.2 "Expiration Date".............................................. 11
4.3 "Termination Date"............................................. 11
4.4 Survival of Certain LESSEE Obligations........................ 12
ARTICLE 5 SECURITY DEPOSIT, TRANSACTION FEE, RENT,
RESERVES AND OTHER PAYMENTS................................... 13
5.1 Security Deposit.............................................. 13
5.2 Transaction Fee............................................... 13
5.3 Rent.......................................................... 13
5.4 Reserves...................................................... 14
5.5 Additional Rent for Excess Cycles............................. 15
5.6 LESSOR's Bank Account......................................... 15
5.7 Default Interest.............................................. 15
5.8 No Deductions or Withholdings................................. 16
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5.9 Value Added Taxes............................................. 16
5.10 Wire Transfer Disbursement Report............................. 16
5.11 Net Lease..................................................... 16
5.12 LESSOR Performance of LESSEE Obligation....................... 18
5.13 Consideration for Rent and Other Amounts...................... 18
ARTICLE 6 DELIVERY CONDITION AND INSPECTION OF
AIRCRAFT...................................................... 19
6.1 LESSEE Selection of Aircraft.................................. 19
6.2 Condition at Delivery......................................... 19
6.3 LESSEE Inspection of Aircraft at Delivery..................... 19
6.4 Delivery of Aircraft to LESSEE................................ 19
ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY
DOCUMENTARY AND OTHER REQUIREMENTS............................ 20
7.1 Pre-Delivery Requirements..................................... 20
7.2 Delivery Requirements......................................... 20
7.3 Post-Delivery Requirements.................................... 22
ARTICLE 8 DISCLAIMERS................................................... 23
8.1 "As Is, Where Is"............................................. 23
8.2 Waiver of Warranty of Description............................. 23
8.3 LESSEE Acknowledgement........................................ 23
8.4 LESSEE Waiver................................................. 23
8.5 Conclusive Proof.............................................. 24
8.6 No LESSOR Liability for Losses................................ 24
8.7 No Liability to Repair or Replace............................. 24
8.8 No Waiver..................................................... 24
ARTICLE 9 MANUFACTURERS' AND VENDORS' WARRANTIES........................ 25
9.1 Warranties.................................................... 25
9.2 Reassignment.................................................. 25
9.3 Warranty Claims............................................... 25
ARTICLE 10 OPERATION OF AIRCRAFT......................................... 26
10.1 Costs of Operation............................................ 26
10.2 Compliance with Laws.......................................... 26
10.3 Training...................................................... 26
10.4 No Violation of Insurance Policies............................ 26
10.5 Flight Charges................................................ 26
ARTICLE 11 SUBLEASES..................................................... 28
11.1 No Sublease without LESSOR Consent............................ 28
11.2 Subleasing Proposal Fee....................................... 28
11.3 Civil Reserve Air Fleet Program............................... 28
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11.4 Any Approved Sublease......................................... 28
11.5 Assignment of Sublease........................................ 29
11.6 Continued Responsibility of LESSEE............................ 29
ARTICLE 12 MAINTENANCE OF AIRCRAFT....................................... 30
12.1 General Obligation............................................ 30
12.2 Specific Obligations.......................................... 30
12.3 Replacement of Parts.......................................... 32
12.4 Removal of Engines............................................ 33
12.5 Installation of Engines on other aircraft..................... 33
12.6 Modifications................................................. 34
12.7 Pooling of Engines and Parts.................................. 35
12.8 Performance of Work by Third Parties.......................... 35
12.9 Reporting Requirements........................................ 35
12.10 Information Regarding Maintenance Program..................... 36
12.11 LESSOR Rights to Inspect Aircraft............................. 36
ARTICLE 13 USE OF RESERVES............................................... 37
13.1 Airframe Reserves............................................. 37
13.2 Engine Reserves............................................... 37
13.3 Reimbursement................................................. 37
13.4 Reimbursement Adjustment...................................... 38
13.5 Costs in Excess of Reserves................................... 38
13.6 Reimbursement after Termination Date.......................... 38
ARTICLE 14 TITLE AND REGISTRATION........................................ 39
14.1 Title to the Aircraft During Lease Term....................... 39
14.2 Registration of Aircraft...................................... 39
14.3 Filing of this Lease.......................................... 39
ARTICLE 15 IDENTIFICATION PLATES......................................... 40
ARTICLE 16 TAXES......................................................... 41
16.1 General Obligation of LESSEE.................................. 41
16.2 Exceptions to Indemnity....................................... 41
16.3 After-Tax Basis............................................... 42
16.4 Timing of Payment............................................. 42
16.5 Contests...................................................... 42
16.6 Tax Benefits.................................................. 43
16.7 Cooperation in Filing Tax Returns............................. 43
16.8 Survival of Obligations....................................... 43
ARTICLE 17 INDEMNITIES................................................... 44
17.1 General Indemnity............................................. 44
17.2 Exceptions to General Indemnities............................. 45
17.3 After-Tax Basis............................................... 45
17.4 Timing of Payment............................................. 45
17.5 Subrogation................................................... 46
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17.6 Notice........................................................ 46
17.7 Refunds....................................................... 46
17.8 Defense of Claims............................................. 46
17.9 Survival of Obligation........................................ 46
ARTICLE 18 INSURANCE..................................................... 47
18.1 Categories of Insurance....................................... 47
18.2 Insurance for Indemnities..................................... 47
18.3 Renewal....................................................... 47
18.4 Assignment of Rights by LESSOR................................ 47
18.5 Deductibles................................................... 47
18.6 Other Insurance............................................... 47
18.7 Information................................................... 48
18.8 Currency...................................................... 48
18.9 Grounding of Aircraft......................................... 48
18.10 Failure to Insure............................................. 48
18.11 Reinsurance................................................... 48
18.12 Limit on Hull in favor of LESSEE.............................. 49
ARTICLE 19 LOSS, DAMAGE AND REQUISITION.................................. 50
19.1 Definitions................................................... 50
19.2 Notice of Total Loss.......................................... 51
19.3 Total Loss of Aircraft or Airframe............................ 51
19.4 Surviving Engine(s)........................................... 52
19.5 Total Loss of Engine and not Airframe......................... 52
19.6 Other Loss or Damage.......................................... 53
19.7 Government Requisition........................................ 54
19.8 Division of Reserves.......................................... 54
ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF LESSEE..................................................... 55
20.1 Representations and Warranties................................ 55
20.2 Covenants..................................................... 57
ARTICLE 21 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF LESSOR..................................................... 58
21.1 Representations and Warranties................................ 58
21.2 Covenants..................................................... 58
ARTICLE 22 FINANCIAL AND RELATED INFORMATION............................. 60
22.1 Information about Suits....................................... 60
ARTICLE 23 RETURN OF AIRCRAFT............................................ 61
23.1 Date of Return................................................ 61
23.2 Technical Reporting........................................... 61
23.3 Return Location............................................... 61
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23.4 Aircraft Documentation Review................................. 61
23.5 Aircraft Inspection........................................... 61
23.6 Certificate of Airworthiness Matters.......................... 62
23.7 General Condition of Aircraft at Return....................... 63
23.8 Checks Prior to Return........................................ 65
23.9 Part Lives.................................................... 67
23.10 LESSEE's Continuing Obligations............................... 70
23.11 Return Acceptance Certificate................................. 71
23.12 Indemnities and Insurance..................................... 71
ARTICLE 24 ASSIGNMENT.................................................... 72
24.1 No Assignment by LESSEE....................................... 72
24.2 Sale or Assignment by LESSOR.................................. 72
24.3 LESSEE Cooperation............................................ 73
24.4 Protections................................................... 73
ARTICLE 25 DEFAULT OF LESSEE............................................. 75
25.1 LESSEE Notice to LESSOR....................................... 75
25.2 Events of Default............................................. 75
25.3 LESSOR's General Rights....................................... 76
25.4 Deregistration and Export of Aircraft......................... 77
25.5 LESSEE Liability for Damages.................................. 77
25.6 Waiver of Default............................................. 78
25.7 Present Value of Payments..................................... 78
25.8 Use of "Termination Date"..................................... 79
25.9 Mitigation of Damages......................................... 79
ARTICLE 26 NOTICES....................................................... 80
26.1 Manner of Sending Notices..................................... 80
26.2 Notice Information............................................ 80
ARTICLE 27 GOVERNING LAW AND JURISDICTION................................ 81
27.1 California Law................................................ 81
27.2 Non-Exclusive Jurisdiction in California...................... 81
27.3 Service of Process............................................ 81
27.4 Prevailing Party in Dispute................................... 81
27.5 Waiver........................................................ 81
ARTICLE 28 MISCELLANEOUS................................................. 82
28.1 Press Releases................................................ 82
28.2 Power of Attorney............................................. 82
28.3 LESSOR Performance for LESSEE................................. 82
28.4 LESSOR's Payment Obligations.................................. 82
28.5 Usury Laws.................................................... 82
28.6 Delegation by LESSOR.......................................... 82
28.7 Confidentiality............................................... 83
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28.8 Rights of Parties............................................. 83
28.9 Further Assurances............................................ 83
28.10 Use of Word "including"....................................... 83
28.11 Headings...................................................... 83
28.12 Invalidity of any Provision................................... 83
28.13 Negotiation................................................... 83
28.14 Time is of the Essence........................................ 84
28.15 Amendments in Writing......................................... 84
28.16 Counterparts.................................................. 84
28.17 Delivery of Documents by Fax.................................. 84
28.18 Entire Agreement.............................................. 84
EXHIBIT A AIRCRAFT DESCRIPTION.......................................... 86
EXHIBIT B CONDITION AT DELIVERY......................................... 87
EXHIBIT C CERTIFICATE OF INSURANCE...................................... 89
EXHIBIT D BROKERS' LETTER OF UNDERTAKING................................ 95
EXHIBIT E ESTOPPEL AND ACCEPTANCE CERTIFICATE........................... 97
EXHIBIT F OPINION OF COUNSEL............................................104
EXHIBIT G ASSIGNMENT OF RIGHTS (AIRFRAME)...............................107
EXHIBIT H ASSIGNMENT OF RIGHTS (ENGINES)................................110
EXHIBIT I RETURN ACCEPTANCE RECEIPT.....................................113
EXHIBIT J MONTHLY REPORT................................................120
EXHIBIT K AIRCRAFT DOCUMENTATION........................................123
EXHIBIT L TECHNICAL EVALUATION REPORT...................................124
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AIRCRAFT LEASE AGREEMENT
THIS AIRCRAFT LEASE AGREEMENT is made and entered into as of this 31st
day of May, 1996.
BETWEEN:
WESTERN PACIFIC AIRLINES, INC., a Delaware corporation whose address
and principal place of business is at 2864 South Circle Drive, Suite 1100,
Colorado Springs, CO 80906 ("LESSEE") and INTERNATIONAL LEASE FINANCE
CORPORATION, a California corporation whose address and principal place of
business is at 1999 Avenue of the Stars, 39th Floor, Los Angeles, California
90067 ("LESSOR").
The subject matter of this Lease is one (1) used Boeing 737- 3Q8
aircraft.
In consideration of and subject to the mutual covenants, terms and
conditions contained in this Lease, LESSOR hereby agrees to lease to LESSEE and
LESSEE hereby agrees to lease from LESSOR the Aircraft for the Lease Term and
the parties further agree as follows:
<PAGE>
ARTICLE 1 SUMMARY OF TRANSACTION
--------- ----------------------
The following is a summary of the lease transaction between LESSEE and
LESSOR. It is set forth for the convenience of the parties only and will not be
deemed in any way to amend, detract from or simplify the other provisions of
this Lease.
1.1 Description of Aircraft
One used Boeing 737-3Q8
1.2 Scheduled Delivery Date and Location
On or about June 20, 1996 at Pemco Aeroplex, Inc.'s
facility in Dothan, Alabama or such other location as
may be mutually agreed upon by LESSOR and LESSEE.
1.3 Lease Term
10 years
1.4 Security Deposit
US$ [XXXXX], payable as follows:
Received [XXXXX]
Upon execution of the Lease [XXXXX]
1.5 Transaction Fee
US$ [XXXX], payable upon execution of this Lease
1.6 Rent During Initial Lease Term
US$ [XXXXX] per month for the first four (4) months
of the Lease Term, and thereafter, US$ [XXXXX] per
month for the remainder of the Lease Term, payable in
advance
1.7 Reserves
A total of US$ [X], as follows:
Airframe Reserve: US$ [X] per airframe flight
hour
Engine Reserve: US$ [X] per engine flight hour
for each Engine
1.8 Additional Rent for Excess Cycles
US$ [X] for each cycle the aircraft operated
during a calendar year in excess of the maximum
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number of cycles which would result from an
average hour/cycle ratio of [X] hours to 1 cycle
1.9 Country of Aircraft Registration
United States
1.10 Maintenance Program
LESSEE's Maintenance Program
1.11 Agreed Value of Aircraft
US$ [XXXXXXXX] during years 1-5
US$ [XXXXXXXX] during years 6-10
1.12 LESSOR's Bank Account
International Lease Finance Corporation Account
[XXXXXXXXXXXXXXXX]
National Westminster Bank USA
SPEC Leasing Midwest
175 Water Street
New York, NY 10038
[XXXXXXXXXXXXX]
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ARTICLE 2 DEFINITIONS
--------- -----------
Except where the context otherwise requires, the following words have
the following meanings for all purposes of this Lease. The definitions are
equally applicable to the singular and plural forms of the words. Any agreement
defined below includes each amendment, modification, supplement and waiver
thereto in effect from time to time.
2.1 General Definitions.
"Aircraft" means the Airframe, the two (2) Engines, the Parts
and the Aircraft Documentation, collectively. As the context requires,
"Aircraft" may also mean the Airframe, any Engine, any Part, the Aircraft
Documentation or any part thereof individually. For example, in the context of
return to LESSOR the term "Aircraft" means the Airframe, Engines, Parts and
Aircraft Documentation collectively, yet in the context of LESSEE not creating
any Security Interests other than Permitted Liens on the Aircraft, the term
"Aircraft" means any of the Airframe, any Engine, any Part or the Aircraft
Documentation individually.
"Aircraft Documentation" means all (i) log books, Aircraft
records, manuals and other documents provided to LESSEE in connection with the
Aircraft, (ii) documents listed in the exhibit to the actual Estoppel and
Acceptance Certificate and (iii) any other documents required to be maintained
during the Lease Term by the Aviation Authority, LESSEE's Maintenance Program
and this Lease.
"Airframe" means the airframe described in Exhibit A together
with all Parts relating thereto.
"Aviation Authority" means the FAA or any Government Entity
which under the Laws of the U.S. from time to time has control over civil
aviation or the registration, airworthiness or operation of aircraft in the U.S.
If the Aircraft is registered in a country other than the U.S., "Aviation
Authority" means the agency which regulates civil aviation in such other
country.
"Aviation Documents" means any or all of the following which
at any time may be obtainable from the Aviation Authority in the State of
Registration: (i) an application for registration of the Aircraft with the
appropriate authority in the State of Registration, which will be provided by
LESSOR, (ii) the certificate of registration for the Aircraft issued by the
State of Registration, which is to be provided by LESSOR (iii) a full
certificate of airworthiness for the Aircraft specifying transport category
(passenger) to be provided by LESSOR, (iv) an air transport license, (v) an air
operator's certificate, (vi) such recordation of LESSOR's title to the Aircraft
and interest in this Lease as may be available in the State of Registration and
(vii) all such other authorizations, approvals, consents and
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certificates in the State of Registration as may be required to enable LESSEE
lawfully to operate the Aircraft.
"Business Day" means a day other than a Saturday or Sunday on
which the banks in the city where LESSOR's Bank is located and in Colorado
Springs, Colorado are open for the transaction of business of the type required
by this Lease.
"Creditor" means any lessor, owner, bank, lender, mortgagee or
other Person which is the owner of or has any interest in an aircraft engine or
aircraft operated by LESSEE.
"Creditor Agreement" means the applicable agreement between a
Creditor and LESSEE pursuant to which such Creditor owns, leases or has an
interest in either an aircraft operated by LESSEE on which an Engine may be
installed or in an aircraft engine which may be installed on the Airframe.
"Default" means any event which, upon the giving of notice,
the lapse of time and/or a relevant determination, would constitute an Event of
Default.
"Delivery" means the delivery of the Aircraft by LESSOR to
LESSEE pursuant to Articles 3 and 6.
"Delivery Date" means the date on which Delivery takes place.
"Dollars" and "$" means the lawful currency of the U.S.
"Engine" means (i) each of the engines listed on the Estoppel
and Acceptance Certificate; (ii) any replacement engine acquired by LESSOR and
leased to LESSEE pursuant to Article 19.5 following a Total Loss of an Engine;
and (iii) all Parts installed in or on any of such engines at Delivery (or
substituted, renewed or replacement Parts installed in accordance with this
Lease) so long as title thereto is or remains vested in LESSOR in accordance
with the terms of Article 12.3.
"Event of Default" means any of the events referred to in
Article 25.2.
"FAA" means the Federal Aviation Administration of the
Department of Transportation or any successor thereto under the Laws of the U.S.
"FARs" means the U.S. Federal Aviation Regulations embodied in
Title 14 of the U.S. Code of Federal Regulations, as amended from time to time,
or any successor regulations thereto.
"Government Entity" means any (i) national, state or local
government, and (ii) board, commission, department, division, instrumentality,
court, agency or political subdivision thereof.
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"Law" means any (i) statute, decree, constitution, regulation,
order or any directive of any Government Entity, (ii) treaty, pact, compact or
other agreement to which any Government Entity is a signatory or party and (iii)
judicial or administrative interpretation or application of any of the
foregoing.
"Lease" means this Aircraft Lease Agreement, together with all
Exhibits, side letters and amendments hereto.
"LESSOR's Lien" means any Security Interest arising as the
result of any act or omission of LESSOR or any Person claiming by or through
LESSOR.
"Maintenance Program" means LESSEE's maintenance program as
approved by the Aviation Authority or such other maintenance program as LESSOR
may, in its absolute discretion, accept in writing.
"Manufacturer" means Boeing Commercial Airplane Group.
"MPD" means the Maintenance Planning Document published by the
Manufacturer and applicable to the Aircraft.
"Overhaul" means the full refurbishment of the Aircraft, an
Engine, APU, landing gear, module or Part, as the case may be, in which such
equipment has been disassembled; cleaned thoroughly inspected, repaired,
reworked or had a replacement of parts; reassembled; and tested to the
tolerances and standards specified by the applicable manufacturer's overhaul
procedures manual or equivalent establishing conformity to its type design as
evidenced by a complete record of all work performed during the course of such
full refurbishment and that the Aircraft, Engine, APU, landing gear, module or
Part, as the case may be, is airworthy and released for return to service.
"Part" means any part, component, appliance, system module,
engine module, the auxiliary power unit (APU), accessory, material, instrument,
communications equipment, furnishing, LESSEE-furnished or LESSOR-purchased
equipment or other item of equipment (other than complete Engines or engines)
for the time being installed in or attached to the Airframe or any Engine or
which, having been removed from the Airframe or any Engine, remains the property
of LESSOR.
"Permitted Lien" means (i) LESSOR's Liens; (ii) Security
Interests arising in the ordinary course of LESSEE's business for Taxes either
not yet assessed or, if assessed, not yet due or being contested in good faith
in accordance with Article 16.5 or (iii) materialmen's, mechanics', workmen's,
repairmen's, employees' liens or similar Security Interests arising by operation
of Law after the Delivery Date in the ordinary course of LESSEE's business or
judgments for amounts which are either not yet due or are being contested in
good faith
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by appropriate proceedings (and for which adequate reserves have been made or,
when required in order to pursue such proceedings, an adequate bond has been
provided) so long as such proceedings do not involve any danger of sale,
forfeiture or loss of the Aircraft.
"Person" means any individual, firm, partnership, joint
venture, trust, corporation, Government Entity, committee, department, authority
or any body, incorporated or unincorporated, whether having distinct legal
personality or not.
"Prime Rate" means the rate of interest from time to time
announced by National Westminster Bank USA as its prime commercial lending rate.
"Prior Lessee" means VIVA, Vuelos Internacionales de
Vacaciones, S.A.
"Prior Lessee Lease Agreement" means the Aircraft SubLease
Agreement dated November 1, 1990 between Prior Lessee and ILFC Belgium S.A.
pursuant to which Prior Lessee is subleasing the Aircraft from ILFC Belgium
S.A., a subsidiary of LESSOR which is leasing the Aircraft from LESSOR pursuant
to the Headlease dated November 1, 1990.
"Security Interest" means any encumbrance or security
interest, however and wherever created or arising including (without prejudice
to the generality of the foregoing) any right of ownership, security, mortgage,
pledge, charge, encumbrance, lease, lien, statutory or other right in rem,
hypothecation, title retention, attachment, levy, claim or right of possession
or detention.
"State of Registration" means the U.S. or such other country
or state of registration of the Aircraft as LESSOR may, in its absolute
discretion, approve in writing.
"U.S." means the United States of America.
2.2 Specific Definitions. The following terms are defined in the
Articles referenced below:
Terms Article
----- -------
Agreed Value 19.1
Airframe Reserves 5.4.1
Default Interest 5.7
Delivery Location 3.1
Engine Reserves 5.4.1
Expenses 17.1
Expiration Date 4.2
Indemnitees 17.1
Initial Lease Term 4.1
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Lease Term 4.2
LESSOR's Assignee 24.2.2
LESSOR's Bank 5.6
Modification 12.6.1
Net Total Loss Proceeds 19.1
Operative Documents 20.1.3
Rent 5.3.1
Reserves 5.4.1
Scheduled Delivery Date 3.2
Security Deposit 5.1.1
Taxes 16.1
Termination Date 4.3
Total Loss 19.1
Total Loss Date 19.1
Total Loss Proceeds 19.1
Transaction Fee 5.2
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ARTICLE 3 PLACE AND DATE OF DELIVERY
--------- --------------------------
3.1 Place of Delivery. LESSOR will deliver the Aircraft to LESSEE
at Dothan, Alabama or such other place as may be agreed in writing between the
parties (the "Delivery Location").
3.2 Scheduled Delivery Date. As of the date of this Lease,
Delivery of the Aircraft hereunder is scheduled to occur on or about June 20,
1996. LESSOR will notify LESSEE from time to time and in a timely manner of the
exact date on which LESSOR expects Delivery to take place and will give LESSEE
at least 24 hours notice of the actual Delivery date (the "Scheduled Delivery
Date").
3.3 No LESSOR Liability. LESSOR will not be liable for any loss or
expense, or any loss of profit, arising from any delay or failure in Delivery to
LESSEE unless such delay or failure arises as a direct consequence of the
willful misconduct of LESSOR; provided, however, in the event LESSOR receives
compensation, including without limitation penalty rent, if any, from Prior
Lessee as a result of Prior Lessee's delay in returning the Aircraft, after
LESSOR has deducted a sum equal to the Rent LESSOR would have received from
LESSEE on a daily basis had the Aircraft been delivered on time, LESSOR will pay
to LESSEE any such compensation which LESSOR receives from Prior Lessee.
3.4 Total Loss of Aircraft Prior to Delivery. If a Total Loss of
the Aircraft occurs prior to Delivery, this Lease will terminate and neither
party will have any further liability to the other except that LESSOR will
return to LESSEE the Security Deposit, the Transaction Fee and any prepaid Rent.
3.5 Cancellation for Delay. If a delay, not caused by LESSEE's or
LESSOR's breach of this Lease, causes Delivery to be delayed beyond September
20, 1996, LESSEE will have the right to terminate this Lease by giving LESSOR
written notice within ten (10) Business Days after such date and this Lease will
terminate on the date of receipt of such notice. In the event of such
termination, neither party will have any further liability to the other except
that LESSOR will return to LESSEE the Security Deposit, the Transaction Fee and
any prepaid Rent. If LESSEE does not give notice of termination within such ten
(10) Business Days, LESSEE shall lose all rights to terminate under this Article
3.5, unless otherwise agreed by the parties.
3.6 Cancellation for Anticipated Delay. Promptly after LESSOR
becomes aware that in Prior Lessee's opinion a delay will cause Delivery to be
delayed beyond September 20, 1996, LESSOR will notify LESSEE. By written notice
given within ten (10) Business Days after LESSEE's receipt of such LESSOR
notice, LESSEE may by written notice to LESSOR terminate this Lease and this
Lease will terminate on the date of receipt of such notice. In the event of such
termination, neither party will have any
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further liability to the other except that LESSOR will return to LESSEE the
Security Deposit, the Transaction Fee and any prepaid Rent. If LESSEE does not
give notice of termination within such ten (10) Business Days, LESSEE shall lose
all right to terminate under Articles 3.5 and 3.6 unless otherwise agreed in
writing by the parties.
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ARTICLE 4 LEASE TERM
--------- ----------
4.1 Lease Term. The term of leasing of the Aircraft will commence
on the Delivery Date and continue for a term of ten (10) years (the "Lease
Term").
4.2 "Expiration Date". "Expiration Date" means the last day of the
Lease Term.
4.3 "Termination Date". This Lease may in fact terminate on any of
the following dates:
(a) the Expiration Date; or
(b) a date earlier than the Expiration Date, if:
(1) there is a Total Loss of the Aircraft prior
to Delivery pursuant to Article 3.4.
(2) cancellation of this Lease occurs pursuant
to Article 3.5 or 3.6.
(3) there is a Total Loss of the Aircraft,
payment is made to LESSOR in accordance with Article
19.3.
(4) this Lease is or becomes wholly or partly
invalid or unenforceable due to reasons beyond
LESSEE's and LESSOR's control and (i) LESSEE fails to
continue to perform under this Lease, (ii) after good
faith negotiation, LESSOR and LESSEE have not arrived
at a mutually acceptable alternative basis for
continuation of this Lease within fifteen (15) days
after LESSOR or LESSEE has sent a notice requiring
negotiation and (iii) LESSEE returns the Aircraft to
LESSOR in the condition required by Article 23.
(5) an Event of Default occurs and LESSOR
repossesses the Aircraft or otherwise terminates this
Lease pursuant to Article 25.3.
(c) a date later than the Expiration Date, which is the
date of return of the Aircraft in the condition required by
Article 23, if an Event of Default occurs hereunder by LESSEE
returning the Aircraft in the condition required by this Lease
after the Expiration Date.
The "Termination Date" is the date on which this Lease terminates because one of
the foregoing has occurred and LESSEE has performed all of its obligations
hereunder.
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4.4 Survival of Certain LESSEE Obligations. The obligations of
LESSEE set forth in Articles 10.5, 16 and 17 by their terms survive the
termination of this Lease. Notwithstanding the foregoing, LESSOR agrees that by
executing the Return Acceptance Receipt, LESSOR is waiving all other claims
LESSOR might otherwise have, except as may be specifically noted on the Return
Acceptance Receipt and except as to items specifically represented and warranted
by LESSEE in the Return Acceptance Receipt. For purposes of clarification,
LESSOR is not waiving any rights to indemnification in accordance with Article
10.5, 16, and 17 in the event any third party claims are made after the return
of the Aircraft relating to any action or omissions of LESSEE during the Lease
Term.
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ARTICLE 5 SECURITY DEPOSIT, TRANSACTION FEE,
--------- RENT, RESERVES AND OTHER PAYMENTS
----------------------------------
5.1 Security Deposit.
5.1.1 LESSEE will pay LESSOR a security deposit of [XXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] for its lease of the
Aircraft (the "Security Deposit"). The Security Deposit is
payable as follows (in US$):
Received [XXXXX]
Upon execution of the Lease [XXXXX]
5.1.2 The Security Deposit may be commingled with LESSOR's general
funds and any interest earned on such Security Deposit will be
for LESSOR's account. If the Security Deposit is reduced below
the required amount by application to meet LESSEE's
unperformed obligations under this Lease, LESSEE will
replenish the Security Deposit within ten (10) days after
LESSOR's demand therefor. The Security Deposit will serve as
security for the performance by LESSEE of its obligations
under this Lease and any other agreements between LESSEE and
LESSOR relating to aircraft, engines, aircraft equipment or
the extension of credit and may be applied by LESSOR upon the
occurrence of an Event of Default hereunder or of a default
(and the expiration of applicable cure periods) by LESSEE
under any such other agreements.
5.1.3 Upon termination of this Lease in accordance with Article 4.3
other than in accordance with Article 25 hereof, LESSOR will
return to LESSEE the amount of the Security Deposit then held
by LESSOR, without interest, less an amount determined by
LESSOR to be a reasonable estimate of the costs, if any, which
LESSOR will incur to remedy any unperformed obligations of
LESSEE under this Lease, if any, including the correction of
any discrepancies from the required condition of the Aircraft
on return of the Aircraft.
5.2 Transaction Fee. Upon execution of this Lease, LESSEE will pay
LESSOR a nonrefundable transaction fee of [XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX] (the "Transaction Fee").
5.3 Rent.
5.3.1 LESSEE will pay LESSOR the following amounts monthly in
advance as rent for the Aircraft ("Rent"):
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Period of Lease Term Amount of Monthly Rent
-------------------- ----------------------
Months 1-4 of the
Lease Term [XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX]
Months 5-120 of the
Lease Term [XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX]
5.3.2 The first payment of Rent during the Lease Term will be paid
no later than one (1) Business Day prior to Delivery (the
first month's Rent will be [XXXXXX] plus a per diem rental
amount necessary to cover the Rent up to the 15th day of the
following calendar month). Each subsequent payment of Rent
will be due monthly thereafter on the fifteenth (15th) day of
each month except that, if such day is not a Business Day, the
Rent will be due on the immediately preceding Business Day.
5.4 Reserves.
5.4.1 LESSEE will pay to LESSOR supplemental Rent, based on LESSEE's
use of the Aircraft during the Lease Term, the following
amounts per flight hour (individually, "Airframe Reserves" and
"Engine Reserves", and
collectively "Reserves"):
A total of US$ [X], as follows:
Airframe Reserve: US$ [X] per airframe flight
hour
Engine Reserve: US$ [X] per Engine per flight
hour (payable when the Engine
is utilized on the Aircraft or
another aircraft)
5.4.2 Such Reserves will be paid on or before the 10th day of the
calendar month next following the month in which the Delivery
Date occurs and on or before the 10th day of each succeeding
calendar month for flying performed during the calendar month
prior to payment. All Reserves for flying performed during the
month in which the Termination Date occurs will be paid on the
Termination Date, unless otherwise agreed by the parties.
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<PAGE>
5.4.3 No interest will accrue or be paid at any time to LESSEE on
such Reserves and, subject to LESSOR's obligations under
Article 13, LESSOR may commingle the Reserves with LESSOR's
general funds.
5.5 Additional Rent for Excess Cycles. If during the Lease Term,
at December 31 of any calendar year thereof, the Aircraft operated more cycles
in the preceding calendar year than the maximum number of cycles which would
result from an average hour/cycle ratio of [X] hours to 1 cycle, LESSEE will pay
LESSOR as additional Rent US$ [X] for each cycle the Aircraft actually operated
during such calendar year (or portion thereof) in excess of the number of cycles
which result from an average hour/cycle ratio of [X] hours to 1 cycle. A
calculation will be made as of December 31 each year and such additional Rent
will be due and payable by LESSEE on the date on which the next Reserve payment
is due (in accordance with Article 5.4.2) following such hour/cycle calculation
period.
Example: If the Aircraft operated [XXX] hours in a calendar year, it
would have 1,000 cycles resulting from an average hour/cycle ratio of
[X] hours to 1 cycle. If in fact the Aircraft operated [XXX] cycles in
such calendar year, the Aircraft operated [X] excess cycles in such
calendar year and LESSEE will pay LESSOR US$ [XXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX].
5.6 LESSOR's Bank Account. The Security Deposit, Transaction Fee,
Rent, Reserves and any other payment due to LESSOR under this Lease will be paid
by wire transfer of immediately available U.S. Dollar funds to LESSOR'S bank
account at:
International Lease Finance Corporation
[XXXXXXXXXXXXXXXXXXXXXXXX]
National Westminster Bank USA
SPEC Leasing Midwest
175 Water Street
New York, NY 10038
ABA# 021200339
or to such other bank account in the U.S. as LESSOR may from time to time
designate by written notice ("LESSOR's Bank").
5.7 Default Interest. If LESSOR's Bank does not receive the Rent
or any other amount on or before the date when due, LESSOR will suffer loss and
damage the exact nature and amount of which are difficult or impossible to
ascertain. LESSEE will, except in the case where the non-receipt of payment is
due to LESSOR's Bank's failure to properly credit a payment that was paid on
time by LESSEE, pay LESSOR as supplemental Rent (by way of agreed compensation
and not as a penalty) interest on any due and unpaid amounts payable by LESSEE
under this Lease. Interest will be calculated at a per annum rate (based on a
360 day year)
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<PAGE>
which is equal to [XXXXXXXXXXXXXXX] plus the Prime Rate in effect on the date on
which the amount was originally due for the period from the date the amount was
due to, but excluding, the actual date the amount is received or, in the case of
LESSOR's performance of LESSEE's obligations hereunder, from and including the
date of payment by LESSOR to but excluding the date of LESSEE's repayment to
LESSOR ("Default Interest"). Default Interest will accrue on a day-to-day basis
and be compounded monthly.
5.8 No Deductions or Withholdings. All payments by LESSEE under
this Lease, including the Security Deposit, Transaction Fee, Rent, Default
Interest, fees, indemnities or any other item, will be made in full without any
deduction or withholding whether in respect of set-off, counterclaim, duties, or
Taxes (as defined in Article 16) imposed in the State of Registration or any
jurisdiction from which such payments are made unless LESSEE is prohibited by
Law from doing so, in which event LESSEE will gross up the payment amount such
that the net payment received by LESSOR after any deduction or withholding
equals the amounts called for under this Lease.
5.9 Value Added Taxes. The Rent and other amounts payable by
LESSEE under this Lease are exclusive of any value added tax, turnover tax or
similar tax or duty. If a value added tax or any similar tax or duty is payable
in any jurisdiction in respect of any Rent or other amounts as aforesaid, LESSEE
will pay all such tax or duty and indemnify LESSOR against any claims for the
same and any related claims, losses or liabilities.
5.10 Wire Transfer Disbursement Report. At the time of each Rent or
other payment, LESSEE will complete and fax to LESSOR a wire transfer
disbursement report stating the amount of the payment being made by LESSEE and
the allocation of such payment to the Security Deposit, Rent, Reserves, Default
Interest and other charges. Notwithstanding the allocation set forth in LESSEE's
report, in the event LESSEE is in default under this Lease, LESSOR will have
complete discretion to allocate LESSEE's payments as LESSOR determines.
5.11 Net Lease.
5.11.1 This Lease is a net lease and LESSEE's obligation to pay Rent
and make other payments in accordance with this Lease will be
absolute and unconditional under any and all circumstances,
except as set forth in Article 5.11.2, and regardless of other
events, including the following:
(a) Any right of set-off, counterclaim, recoupment,
defense or other right (including any right of reimbursement)
which LESSEE may have against LESSOR, Prior Lessee,
Manufacturer, the Engine manufacturer or
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<PAGE>
any other person for any reason, including any claim LESSEE
may have for the foregoing.
(b) Unavailability or interruption in use of the Aircraft
for any reason, including a requisition thereof or any
prohibition or interference with or other restriction against
LESSEE's use, operation or possession of the Aircraft (whether
by Law or otherwise) any defect in title, airworthiness,
merchantability, fitness for any purpose, condition, design,
specification or operation of any kind or nature of the
Aircraft the ineligibility of the Aircraft for any particular
use or trade or for registration or documentation under the
Laws of any jurisdiction or Total Loss of the Aircraft.
(c) Insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership,
administration or similar proceedings by or against LESSOR,
LESSEE, Prior Lessee, Manufacturer, the Engine manufacturer or
any other Person.
(d) Invalidity or unenforceability or lack of due
authorization of or other defect in this Lease.
(e) Failure or delay on the part of any party to perform
its obligations under this Lease.
(f) Any other circumstance which but for this provision
would or might have the effect of terminating or in any other
way affecting any obligation of LESSEE hereunder.
5.11.2 Nothing in Article 5.11 will be construed to limit LESSEE's
rights and remedies in the event of LESSOR's breach of its
warranty of quiet enjoyment set forth in Article 21.2.1 or to
limit LESSEE's rights and remedies to pursue in a court of law
any claim it may have against LESSOR or any other Person. In
addition, and notwithstanding anything in Article 5.11 to the
contrary, in the event that as a result of LESSOR's breach of
its warranty of quiet enjoyment LESSEE shall be deprived of
possession or use of the Aircraft under and in accordance with
the terms of this Lease, five (5) days after LESSEE has
provided LESSOR with written notice of its loss of possession
or use, provided no payment Default has occurred and is
continuing under this Lease. LESSEE may suspend payments of
Rent to LESSOR for so long as such possession or use is
interrupted. If such deprivation continues for thirty (30)
days after such notice has been given and provided no payment
Default has occurred and is continuing under this Lease,
LESSEE may terminate this Lease and return
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<PAGE>
the Aircraft to LESSOR (or if LESSEE is not in possession of
the Aircraft, LESSEE will provide reasonable assistance in
returning the Aircraft to LESSOR). In such event, upon the
return of the Aircraft, either the Aircraft will meet the
return conditions set forth in Article 23 hereof or LESSEE
will pay to LESSOR a sum sufficient to compensate LESSOR for
the hours and cycles that LESSEE has consumed on the Aircraft
Parts, and Engines since the last time the Aircraft did meet
the return conditions relating to hours and cycles. Such
amount will be determined based upon LESSEE's cost for
Airframe, Part and Engine Overhauls at the facility where
LESSEE most recently had such work performed and the Reserves
may be drawn upon for the hours which LESSEE has used since
the last Overhauls and for the purposes and subject to the
limitations under for which Reserves are reimbursable for
meeting such return conditions and providing such
compensation.
5.12 LESSOR Performance of LESSEE Obligation. If LESSEE fails to
make any payment under this Lease to a third party in connection with the
Aircraft (except where such failure results only in a Permitted Lien or in no
Lien) or fails to perform any other obligation required under this Lease, in
either case, when due, LESSOR may (but is not required to) at its election and
without waiver of its rights perform such obligation and/or pay such amount.
Within five (5) Business Days after written notice to LESSEE of the amount paid
by LESSOR on behalf of LESSEE, LESSEE will repay such amount to LESSOR together
with Default Interest. Such payment to LESSOR will constitute additional Rent
payable by LESSEE to LESSOR hereunder. Any payment, performance or compliance by
LESSOR of a LESSEE obligation hereunder will not affect the occurrence or
continuance of a Default or Event of Default, as the case may be.
5.13 Consideration for Rent and Other Amounts. The amount of the
Rent and other payments contained herein are in consideration of LESSEE's waiver
of warranties and indemnities set forth in Articles 8 and 17, respectively, and
the other provisions of this Lease.
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<PAGE>
ARTICLE 6 DELIVERY CONDITION AND INSPECTION OF AIRCRAFT
--------- ---------------------------------------------
6.1 LESSEE Selection of Aircraft. LESSEE COVENANTS TO LESSOR THAT
LESSEE HAS USED ITS OWN JUDGMENT IN SELECTING THE AIRCRAFT AND HAS DONE SO BASED
ON ITS SIZE, DESIGN AND TYPE. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A
MANUFACTURER OF THE AIRCRAFT.
6.2 Condition at Delivery. LESSOR has advised LESSEE that at
Delivery the Aircraft will be substantially in the condition set forth in
Exhibit B. To the extent that at Delivery the Aircraft is not substantially
different than as set forth in Exhibit B, LESSEE will nonetheless accept the
Aircraft but LESSEE and LESSOR will record such discrepancies on the Estoppel
and Acceptance Certificate and the return conditions set forth in Article 23
will be deemed amended in a corresponding fashion.
6.3 LESSEE Inspection of Aircraft at Delivery. LESSEE will have
the right to conduct a full ground inspection, inspection of the Aircraft
Documentation and an acceptance flight not to exceed two hours (at LESSOR's
cost) with respect to the Aircraft prior to accepting the Aircraft, comparable
to those rights set forth in Article 23 hereof. LESSEE acknowledges that, as
between it and LESSOR, in accepting the Aircraft it is relying on its own
inspection and knowledge of the Aircraft in determining whether it meets the
requirements of this Lease.
6.4 Delivery of Aircraft to LESSEE. Subject to LESSEE having
performed all of the conditions precedent to delivery set forth herein, LESSOR
will deliver the Aircraft to LESSEE at the Delivery Location. Provided that the
Aircraft is in the condition required by Article 6.2 hereof and that LESSOR has
met its obligations under this Lease, upon the tender of the Aircraft by LESSOR
to LESSEE, LESSEE will accept the Aircraft and the date of tender by LESSOR to
LESSEE will be deemed to be the Delivery Date for all purposes under this Lease,
including, but not limited to, the commencement of LESSEE's obligation to pay
Rent hereunder.
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<PAGE>
ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY
--------- DOCUMENTARY AND OTHER REQUIREMENTS
----------------------------------------
7.1 Pre-Delivery Requirements. LESSEE will do each of the
following prior to the Scheduled Delivery Date of the Aircraft within the
timeframes set forth below:
(a) Within one (1) month after execution of this Lease,
LESSEE will deliver to LESSOR each of the following:
(1) Copies of resolutions of the Board of
Directors of LESSEE or other written evidence of
appropriate corporate action, duly certifying and
authorizing the lease of the Aircraft hereunder and
the execution, delivery and performance of this
Lease, together with an incumbency certificate as to
the person or persons authorized to execute and
deliver documents on behalf of LESSEE hereunder.
(2) A draft opinion of counsel in substantially
the form and substance of Exhibit F.
(b) At least fourteen (14) days prior to the Scheduled
Delivery Date, LESSEE will have delivered to LESSOR a draft
Certificate of Insurance and Brokers' Letter of Undertaking in
the form and substance of Exhibits C and D, respectively, from
LESSEE's insurance brokers evidencing insurance of the
Aircraft in accordance with this Lease from the Delivery Date.
(c) At least three (3) days prior to the Scheduled
Delivery Date, LESSEE will do each of the following:
(1) Provide LESSOR with a copy of such Aviation
Documents as may be available prior to the Scheduled
Delivery Date.
(2) Provide LESSOR with such other documents as
LESSOR may reasonably request sufficiently in advance
in order to permit LESSEE to comply with such
request.
(d) At least one (1) day prior to the Scheduled Delivery
Date, LESSEE will pay to LESSOR the first monthly installment
of Rent (and any stub payment) in accordance with Article
5.3.2.
7.2 Delivery Requirements. On the Delivery Date (unless agreed
otherwise below) of the Aircraft, each of the following will occur:
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<PAGE>
(a) LESSEE and LESSOR will execute and deliver to LESSOR
an Estoppel and Acceptance Certificate in the form of Exhibit
E covering the Aircraft and effective as of the Delivery Date.
Execution of such Estoppel and Acceptance Certificate will be
conclusive proof that LESSEE has, as between LESSEE and
LESSOR, unconditionally accepted the Aircraft for lease under
this Lease.
(b) LESSEE will deliver a certificate signed by an
officer of LESSEE stating all of the following:
(1) The representations and warranties contained
in Article 20 are true and accurate on and as of the
Delivery Date as though made on and as of such date
(except to the extent that such representations and
warranties relate solely to an earlier date).
(2) No Default has occurred and is continuing or
will result from LESSEE's lease of the Aircraft
hereunder.
(3) Such officer has examined the Creditor
Agreements between LESSEE and the other Creditors and
none of such Creditor Agreements contains terms which
provide or contemplate that such Creditors will
obtain any right, title or interest in an Engine
which is installed on another aircraft (or, if this
is not the case, such officer will identify in the
certificate the parties, the aircraft and the
Creditor Agreements for which this statement is
untrue).
(c) LESSEE's counsel will deliver an opinion of counsel
substantially in the form of Exhibit F.
(d) LESSOR will deliver to LESSEE an assignment of
Manufacturer and Engine manufacturer rights in the form and
substance of Exhibits G and H.
(e) LESSEE will deliver to LESSOR a copy of such Aviation
Documents that are deliverable by LESSEE as have not been
previously delivered which are available.
(f) LESSOR will deliver to LESSEE an opinion of LESSOR's
counsel as to the due execution and delivery of the Lease by
LESSOR and as to the enforceability of the Lease.
(g) Prior to Delivery, LESSOR will register the Aircraft
in the register of aircraft of the State of Registration
showing LESSOR as the owner.
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<PAGE>
(h) LESSOR will deliver to LESSEE such Aviation Documents
that are deliverable by LESSOR.
7.3 Post-Delivery Requirements.
(a) Within seven (7) days after Delivery or as soon
thereafter as such documents become available, LESSEE and
LESSOR will provide one another with copies of all Aviation
Documents not previously delivered.
(b) Within three (3) Business Days after Delivery, LESSEE
will provide LESSOR with copies of all UCC-1 financing
statements required to be filed hereunder and, as soon as
available thereafter, evidence that all such financing
statements have been duly filed.
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<PAGE>
ARTICLE 8 DISCLAIMERS
--------- -----------
LESSOR HAS COMMITTED TO LESSEE THAT ON THE DELIVERY DATE THE AIRCRAFT
WILL BE IN THE CONDITION REQUIRED BY EXHIBIT B. SUCH COMMITMENT OR COVENANT ON
THE PART OF LESSOR EXPIRES AND THE DISCLAIMERS SET FORTH IN THIS ARTICLE 8 APPLY
UPON LESSEE'S ACCEPTANCE OF THE AIRCRAFT AND EXECUTION OF THE ESTOPPEL AND
ACCEPTANCE CERTIFICATE. AFTER SUCH TIME, THEN AS BETWEEN LESSOR AND LESSEE:
8.1 "As Is, Where Is". LESSEE UNCONDITIONALLY ACKNOWLEDGES AND
AGREES THAT NEITHER LESSOR NOR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES OR
REPRESENTATIVES HAVE MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM, CONDITION,
REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED (WHETHER STATUTORY OR
OTHERWISE) AS TO (I) THE CAPACITY, AGE, AIRWORTHINESS, VALUE, QUALITY,
DURABILITY, CONFORMITY TO THE PROVISIONS OF THIS LEASE AND THE PRIOR LESSEE
LEASE AGREEMENT, DESCRIPTION, CONDITION (WHETHER OF THE AIRCRAFT, ANY ENGINE,
ANY PART THEREOF OR THE AIRCRAFT DOCUMENTATION), DESIGN, WORKMANSHIP, MATERIALS,
MANUFACTURE, CONSTRUCTION, OPERATION, DESCRIPTION, STATE, MERCHANTABILITY,
PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE (INCLUDING THE ABILITY TO
OPERATE THE AIRCRAFT OR USE THE AIRCRAFT DOCUMENTATION IN ANY OR ALL
JURISDICTIONS) OR SUITABILITY OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, KNOWN OR
UNKNOWN, APPARENT OR CONCEALED, EXTERIOR OR INTERIOR, (II) THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY
RIGHTS, (III) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE OR (IV) ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, ALL OF WHICH ARE
HEREBY EXPRESSLY EXCLUDED AND EXTINGUISHED.
8.2 Waiver of Warranty of Description. IN CONSIDERATION OF (I)
LESSEE'S RIGHTS HEREUNDER TO INSPECT THE AIRCRAFT AND (II) LESSOR'S ASSIGNMENT
TO LESSEE OF ANY EXISTING AND ASSIGNABLE WARRANTIES OF MANUFACTURER AND THE
ENGINE MANUFACTURER, LESSEE HEREBY AGREES THAT ITS ACCEPTANCE OF THE AIRCRAFT AT
DELIVERY AND ITS EXECUTION AND DELIVERY OF THE ESTOPPEL AND ACCEPTANCE
CERTIFICATE CONSTITUTE LESSEE'S WAIVER OF THE WARRANTY OF DESCRIPTION, ANY
CLAIMS LESSEE MAY HAVE AGAINST LESSOR BASED UPON THE FAILURE OF THE AIRCRAFT TO
CONFORM WITH SUCH DESCRIPTION.
8.3 LESSEE Acknowledgement. LESSEE agrees that subject to Articles
6.2 and 8.1 hereof, it is leasing the Aircraft "AS IS, WHERE IS."
8.4 LESSEE Waiver. LESSEE hereby waives as between itself and
LESSOR and agrees not to seek to establish or enforce any rights and remedies,
express or implied (whether statutory or otherwise) against LESSOR or the
Aircraft relating to any of the
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matters as to which LESSOR has made a disclaimer in Articles 8.1 or 8.2.
8.5 Conclusive Proof. DELIVERY BY LESSEE TO LESSOR OF THE ESTOPPEL
AND ACCEPTANCE CERTIFICATE WILL BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE
THAT LESSEE'S TECHNICAL EXPERTS HAVE EXAMINED AND INVESTIGATED THE AIRCRAFT AND
ENGINES AND THE AIRCRAFT AND ENGINES AND THE AIRCRAFT DOCUMENTATION ARE IN EVERY
WAY SATISFACTORY TO LESSEE.
8.6 No LESSOR Liability for Losses. LESSEE agrees that, except as
otherwise agreed in writing by LESSOR, LESSOR will not be liable to LESSEE, any
sublessee or any Person, whether in contract or tort and however arising, for
any cost, loss or damage (consequential or otherwise) arising out of the
condition of the Aircraft, whether or not due in whole or in part to an act or
omission or the active or passive negligence of LESSOR.
8.7 No Liability to Repair or Replace. LESSOR will not be liable
for any expense in repairing or replacing any item of the Aircraft or be liable
to supply another aircraft or any item in lieu of the Aircraft or any part
thereof if the same is lost, confiscated, damaged, destroyed or otherwise
rendered unfit for use.
8.8 No Waiver. Nothing in this Article 8 or elsewhere in this
Lease will be deemed to be a waiver by LESSEE of any rights it may have against
Manufacturer, the Engine manufacturer or any other Person.
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ARTICLE 9 MANUFACTURERS' AND VENDORS' WARRANTIES
--------- --------------------------------------
9.1 Warranties. Effective at Delivery, LESSOR hereby assigns to
LESSEE for the duration of the Lease Term the benefit of all warranties and
indemnities given to LESSOR by Manufacturer, the Engine manufacturer and other
vendors, repair, overhaul or service facilities with respect to the Aircraft.
9.2 Reassignment. On the Termination Date, the benefit of any
warranty assigned by LESSOR to LESSEE pursuant to Article 7.2 or 9.1 will be
reassigned automatically to LESSOR or its designee. LESSEE's rights under such
warranties (including LESSEE's claims and rights to payment thereunder) will
revert to LESSOR during any period in which an Event of Default is continuing.
LESSEE at its own cost and expense will do all such things and execute such
documents as may be required for this purpose.
9.3 Warranty Claims. LESSEE will diligently and promptly pursue
any valid claims it may have against Manufacturer and others under such
warranties with respect to the Aircraft and at LESSOR's request, will provide
notice of the same to LESSOR.
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ARTICLE 10 OPERATION OF AIRCRAFT
---------- ---------------------
10.1 Costs of Operation. LESSEE will pay all costs incurred in the
operation of the Aircraft during the Lease Term, for profit or otherwise,
including the costs of flight crews, cabin personnel, fuel, oil, lubricants,
maintenance, insurance, storage, landing and navigation fees, airport charges,
passenger service and any and all other expenses of any kind or nature, directly
or indirectly, in connection with or related to the use, movement and operation
of the Aircraft. The obligations, covenants and liabilities of LESSEE under this
paragraph arising prior to return of the Aircraft to LESSOR will continue in
full force and effect, notwithstanding the termination of this Lease or
expiration of the Lease Term except as set forth in Article 5.11.2.
10.2 Compliance with Laws. LESSEE agrees throughout the Lease Term
to maintain operational control of the Aircraft and use the Aircraft in
accordance with applicable Laws of the State of Registration and of any country,
state, territory or municipality into or over which LESSEE may operate and in
accordance with the applicable regulations of IATA. LESSEE will not employ,
suffer or cause the Aircraft to be used in any business which is forbidden by
Law or in any manner which may render it liable to condemnation, destruction,
seizure, or confiscation by any authority. LESSEE will not permit the Aircraft
to fly to any airport or country if so doing would cause LESSOR to be in
violation of any U.S. Law.
10.3 Training. LESSEE will not use the Aircraft for testing or for
training of flight crewmembers other than LESSEE crewmembers and will not use
the Aircraft for training any more than it utilizes for training the other
aircraft in its fleet.
10.4 No Violation of Insurance Policies. LESSEE will not use or
permit the Aircraft to be used in any manner or for any purpose which is not
covered by the insurance policies LESSEE is required to carry and maintain as
set forth in this Lease. LESSEE will not carry any goods of any description
excepted or exempted from such policies or do any other act or permit to be done
anything which could reasonably be expected to invalidate or limit any such
insurance policy.
10.5 Flight Charges.
10.5.1 LESSEE will pay promptly when due all enroute navigation
charges, navigation service charges and all other charges
payable by LESSEE (unless incurred by a third party or LESSOR
following a breach of LESSOR's covenant of quiet enjoyment)
for the use of or for services provided at any airport in
respect of the Aircraft and will indemnify and hold LESSOR
harmless in respect of the same. This indemnity will continue
in
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full force and effect notwithstanding the termination or
expiration of the Lease Term for any reason or the return of
the Aircraft.
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ARTICLE 11 SUBLEASES
---------- ---------
11.1 No Sublease without LESSOR Consent. LESSEE WILL NOT SUBLEASE
OR PART WITH POSSESSION OF THE AIRCRAFT OTHER THAN AS SET FORTH IN ARTICLE 11.3
HEREOF (EXCEPT FOR MAINTENANCE AND REPAIR) AT ANY TIME WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR (NOT TO BE UNREASONABLY WITHHELD) AND IN ACCORDANCE WITH SUCH
REQUIREMENTS AS MAY FROM TIME TO TIME BE AGREED IN WRITING BETWEEN LESSOR AND
LESSEE. The wet leasing of the Aircraft during the Lease Term (in which LESSEE
and its crews retain operational control of the Aircraft) will not be considered
a sublease of the Aircraft.
11.2 Subleasing Proposal Fee. Any subleasing proposals submitted to
LESSOR will be subject to a processing fee of [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX], payable on demand (whether the sublease is approved or not). In
addition, LESSEE will indemnify LESSOR on demand for all out-of-pocket expenses
(including legal fees) incurred in connection with its assessment of the
proposal or its implementation. Notwithstanding the foregoing, if LESSEE
contacts LESSOR and suggests a sublessee which LESSOR rejects without having to
do any analysis, LESSEE will not be required to pay the processing fee.
11.3 Civil Reserve Air Fleet Program. LESSEE may subject the
Aircraft to the Civil Reserve Air Fleet Program ("CRAF") and transfer possession
of the Aircraft to the United States, or any agency or instrumentality thereof,
pursuant to CRAF, so long as (i) LESSEE shall promptly notify LESSOR upon
subjecting the Aircraft to CRAF and provide LESSOR with the name and address of
the appropriate Contracting Officer Representative for the Military Airlift
Command of the United States Air Force, (ii) LESSEE shall promptly notify LESSOR
of any such transfer, and (iii) the period of such transfer does not extend
beyond the end of the Lease Term.
11.4 Any Approved Sublease. Any sublease approved by LESSOR will be
for a term no greater than the remaining Lease Term and contain provisions
consistent with this Lease protecting LESSOR's title to the Aircraft. Any such
sublease will also provide LESSOR indemnities substantially similar to those set
forth in this Lease and contain maintenance and repair standards for the
Aircraft substantially similar to those set forth in this Lease. The insurances
which will be carried by the sublessee and the circumstances which constitute a
Total Loss of the Aircraft will also be substantially similar to those set forth
herein. Any such sublease will be subject and subordinate to this Lease. In its
sole discretion, LESSOR may require an opinion of counsel in connection with
such sublease, including LESSOR's rights to repossess the Aircraft in the event
of an Event of Default hereunder or under the sublease. LESSEE will not amend
the terms of any approved sublease without the prior written consent of LESSOR,
which will not be unreasonably withheld.
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11.5 Assignment of Sublease. Any approved sublease will be assigned
to LESSOR as security. LESSEE will deliver the original counterpart of the
sublease to LESSOR and make any filings necessary to protect LESSOR's security
interest.
11.6 Continued Responsibility of LESSEE. LESSEE will continue to be
responsible for performance of its obligations under this Lease during any
period of sublease.
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ARTICLE 12 MAINTENANCE OF AIRCRAFT
---------- -----------------------
12.1 General Obligation. During the Lease Term and until the
Aircraft is returned to LESSOR in the condition required by this Lease, LESSEE
alone has the obligation, at its expense, to maintain and repair the Aircraft,
Engines and all of the Parts (i) in accordance with the Maintenance Program,
(ii) in accordance with the rules and regulations of the Aviation Authority,
(iii) in conformance to its type design, (iv) in accordance with any other
regulations or requirements necessary in order to maintain a valid Certificate
of Airworthiness for the Aircraft (except during those periods when the Aircraft
is undergoing maintenance or repairs as required or permitted by this Lease and
to the extent in conflict with the requirements of the Aviation Authority) and
(v) in the same manner and with the same care as used by LESSEE with respect to
similar aircraft, engines, and parts operated by LESSEE and without in any way
discriminating against the Aircraft.
12.2 Specific Obligations. Without limiting Article 12.1, LESSEE
agrees that such maintenance and repairs 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.
(b) Incorporation in the Aircraft of all applicable
airworthiness directives or equivalent (referred to in this
Lease generally as "airworthiness directives") of the FAA and
the Aviation Authority, all alert service bulletins of
Manufacturer, Engine manufacturer and other vendors or
manufacturers of Parts incorporated on the Aircraft and any
service bulletins which must be performed in order to maintain
the warranties on the Aircraft, Engines and Parts.
(c) Incorporation in the Aircraft of all other service
bulletins of Manufacturer, the Engine manufacturer and other
vendors which LESSEE schedules to adopt within the Lease Term
for the rest of its 737-300 aircraft fleet. It is the intent
of the parties that the Aircraft will not be discriminated
from the rest of LESSEE's fleet in service bulletin compliance
(including method of compliance) or other maintenance matters.
LESSEE will not discriminate against the Engines with respect
to Overhaul build standards and life limited part
replacements.
(d) Incorporation into the Maintenance Program for the
Aircraft of a corrosion prevention and control program as
recommended by Manufacturer, the Aviation Authority and the
FAA and the correction of any discrepancies in
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accordance with the recommendations of Manufacturer and the
Structural Repair Manual. In addition, all inspected areas
will be properly treated with corrosion inhibitor as
recommended by Manufacturer.
(e) Incorporation into the Maintenance Program of an
anti-fungus/biological growth and contamination prevention,
control and treatment program of all fuel tanks in accordance
with Manufacturer's approved procedures.
(f) Providing LESSOR with written summaries of the
results of all maintenance and inspection sampling programs,
if any, involving or affecting the Aircraft and the rest of
its 737-300 aircraft fleet.
(g) Maintaining in English and keeping in an up-to-date
status the records and historical documents set forth in
Attachment 1 of Exhibit I, however LESSEE will not be
responsible for any specific documents not delivered to LESSEE
by LESSOR or for the translation of any documents delivered by
LESSOR in a language other than English.
(h) Maintaining historical records, in English, for
on-condition, condition-monitored, hard time and life limited
Parts (including certification documents from the manufacturer
of such Part or a repair facility which evidence that such
Part is new or overhauled and establish authenticity, total
time in service expressed in hours, cycles and/or calendar
time as applicable and time since overhaul for such Part), the
hours and cycles the Aircraft and Engines operate and all
maintenance and repairs performed on the Aircraft.
(i) Properly documenting and maintaining historical
records of all maintenance, repairs, Modifications,
alterations, compliance with Airworthiness Directives,
accomplishment of instructions and recommendations from the
manufacturer such as service bulletins, service letters,
in-service activities, etc., and the addition, removal or
replacement of equipment, systems or components in accordance
with the rules and regulations of the Aviation Authority and
reflecting such items in the Aircraft Documentation. In
addition, all repairs to the Aircraft will be accomplished in
accordance with Manufacturer's Structural Repair Manual (or
FAA- approved data supported by FAA Form 8110-3 or equivalent
and FAA Form 337). All Modifications and alterations will also
be accomplished in accordance with FAA-approved data supported
by FAA Form 8110-3 or equivalent and FAA Form 337.
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(j) Ensuring that Overhauls are accomplished utilizing
maintenance and quality control procedures approved by the
Aviation Authority and that the repair agency provides a
complete record and description of all work performed during
the course of such overhaul including teardown, inspection,
shop findings reports and certifies that such Overhaul was
accomplished in accordance with the manufacturer's overhaul
manual, that the equipment is airworthy and released for
return to service and that the Aircraft, Engine, or Part was
in conformity with its original type design.
12.3 Replacement of Parts.
12.3.1 LESSEE, at its own cost and expense, will promptly replace all
Parts that may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair
or rendered unfit or beyond economical repair (BER) for use
for any reason. In the ordinary course of maintenance, repair,
Overhaul or testing, LESSEE may remove any Part provided that
LESSEE replaces such part as promptly as practicable. All
replacement Parts will (i) be free and clear of all Security
Interests (except Permitted Liens) of any kind or description,
(ii) be in airworthy condition and of at least equivalent
model, service bulletin and modification status and have a
value and utility at least equal to the Parts originally
installed at Delivery and (iii) have a current FAA-approved
"serviceable tag" of the manufacturer or maintenance facility
providing such items to LESSEE, indicating that such Parts are
new, serviceable or overhauled. So long as a substitution
meets the requirements of the Maintenance Program and Aviation
Authority, LESSEE may substitute for any Part a part that does
not meet the requirements of the foregoing sentence if a
complying Part cannot be procured or installed within the
available groundtime of the Aircraft and as soon as
practicable the noncomplying part is removed and replaced by a
complying Part.
12.3.2 All Parts removed from the Airframe or any Engine will remain
the property of LESSOR and subject to this Lease no matter
where located, until such time as such Parts have been
replaced by Parts (which have been incorporated or installed
in or attached to the Airframe or such Engine) which meet the
requirements for replacement Parts specified above and title
to such replacement Parts has passed to LESSOR under the Laws
of the State of Registration and lex situs. To the extent
permitted by the Laws of the State of Registration and the lex
situs it is the intent of LESSOR and LESSEE that without
further act and immediately upon any replacement Part becoming
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incorporated, installed or attached to the Airframe or an
Engine as above provided, (i) title to the removed Part will
thereupon vest in LESSEE, free and clear of all rights of
LESSOR, (ii) title to the replacement Part will thereupon vest
in LESSOR free and clear of all rights of LESSEE and (iii)
such replacement Part will become subject to this Lease and be
deemed to be a Part hereunder to the same extent as the Parts
originally incorporated or installed in or attached to the
Airframe or such Engine.
12.4 Removal of Engines.
12.4.1 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.
12.4.2 LESSEE will be entitled 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:
(a) The insurance requirements set forth in Article 18
and Exhibit C are in place.
(b) LESSEE ensures that the identification plates
referred to in Article 15 are not removed from any Engine upon
such Engine being detached from the Aircraft.
(c) Title to the Engine remains with LESSOR free from all
Security Interests (except Permitted Liens) regardless of the
location of the Engine or its attachment to or detachment from
the Aircraft.
12.5 Installation of Engines on other aircraft. Any Engine removed
from the Aircraft may be installed on another aircraft in
LESSEE's fleet which utilizes engines of the same type as
the Engine only if one of the situations described in this
Article 12.5 exists:
12.5.1 LESSEE or LESSOR has title to such other aircraft free and
clear of all Security Interests (except Permitted Liens).
12.5.2 LESSEE, LESSOR and all of the Creditors of LESSEE of such
aircraft enter into an engines cooperation agreement in form
and substance acceptable to LESSOR in which each party agrees
to recognize the other parties' rights in the engines. LESSEE
will reimburse LESSOR and its Lender for their reasonable
attorneys' fees and costs in negotiating and finalizing the
engine cooperation agreements with LESSEE and its Creditors.
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12.5.3 Such other aircraft is subject to a Creditor Agreement (but no
other Security Interests except Permitted Liens) which by its
terms expressly or effectively states that such Creditor and
its successors and assigns will not acquire any right, title
or interest in any Engine by reason of such Engine being
installed on such aircraft. To evidence the foregoing, at or
before Delivery, LESSEE will provide LESSOR with an officer's
certificate as to this matter (and such an officer's
certificate will be provided annually during the Lease Term in
accordance with Article 22 with respect to other Creditor
Agreements regarding aircraft entering LESSEE's operating
fleet subsequent to Delivery). LESSEE hereby agrees that if
LESSOR's title to an Engine is in fact impaired under any such
Creditor Agreement, such impairment will be a Total Loss of
such Engine and the provisions of Article 19.5 will apply. To
the extent another Creditor Agreement contains such
provisions, then LESSOR hereby agrees for the benefit of the
Creditor of such Creditor Agreement that neither LESSOR nor
its successors or assigns will acquire or claim any right,
title or interest in any engine in which LESSEE or another
Creditor has an interest as a result of such engine being
installed on the Airframe.
12.6 Modifications.
12.6.1 No modification, alteration, addition or removal to the
Aircraft ("Modification") expected to cost over Four Hundred
Thousand U.S. Dollars (US$ 400,000) or deviation from the
Aircraft's original type design or configuration will be made
without the prior written consent of LESSOR, which consent
will not be unreasonably withheld. "Modifications" do not
include airworthiness directives of the Aviation Authority or
FAA or Manufacturer's recommended service bulletins or any
other work required to be performed by LESSEE under this
Lease, for which LESSOR consent is not required.
12.6.2 LESSOR may review LESSEE's proposed designs, plans,
engineering drawings and diagrams, and flight and maintenance
manual revisions for any proposed Modification. If requested
by LESSOR, LESSEE will furnish LESSOR with such documents in
final form and any other documents required by Law, as a
result of such Modification. All Modifications incorporated on
the Aircraft will be properly documented in the Aircraft
Documentation and be fully approved by the Aviation Authority.
12.6.3 Notwithstanding any other provision of this Lease, no
modification will be made which has the effect of
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decreasing the utility or value of the Aircraft or
invalidating any warranty applicable to the Aircraft.
12.6.4 No Modification will be made by LESSEE if an Event of Default
exists and is continuing hereunder.
12.6.5 Unless otherwise agreed by LESSOR in writing, all permanent or
structural Modifications (except for the installation of a
leased telephone system) will forthwith become a part of the
Aircraft and LESSEE relinquishes to LESSOR all rights and
title thereto. However, all temporary and non-structural
Modifications will remain the property of LESSEE and, at
LESSEE's option or LESSOR's request and LESSEE's cost, will be
removed from the Aircraft prior to return of the Aircraft,
with LESSEE restoring the Aircraft to the condition it was in
prior to the Modification in a manner cosmetically acceptable
to LESSOR. Notwithstanding the foregoing, no such removal will
be permitted without LESSOR's permission after the occurrence
of an Event of Default hereunder and immediately upon the
occurrence of an Event of Default hereunder, without the
requirement of any further act or notice, all right, title and
interest in such Modifications will immediately vest in
LESSOR.
12.6.6 LESSOR will bear no liability for the cost of Modifications of
the Aircraft whether in the event of grounding or suspensions
of certification, or for any other cause.
12.7 Pooling of Engines and Parts. LESSEE may subject the Engines
and Parts to normal interchange or pooling agreements with responsible scheduled
commercial air carriers customary in the airline industry and entered into by
LESSEE in the ordinary course of its business with respect to its entire 737-300
fleet so long as (i) in the case of pooling of an Engine, such Engine is
returned to LESSEE within three (3) months, (ii) no transfer of title to the
Engine occurs, (iii) all other terms of this Lease continue to be observed with
respect to the Engines or Parts, including but not limited to Articles 8, 10,
14, 15, 16, 17, 18 and 19 and (iv) LESSEE continues to be fully responsible to
LESSOR for the performance of all of its obligations hereunder.
12.8 Performance of Work by Third Parties. Whenever maintenance and
repair work on the Aircraft or Engines will be regularly performed by a Person
other than LESSEE, such Person will be an FAA-approved repair station.
12.9 Reporting Requirements.
(a) Commencing with a report furnished ten (10) days
after the end of the calendar month in which Delivery
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occurs, LESSEE will furnish to LESSOR a monthly report in
English in the form attached hereto as Exhibit J or another
form that contains substantially the same information. Each
monthly report will be furnished within ten (10) days after
the end of each calendar month, except that the monthly report
pertaining to the last month (or any portion thereof) of the
Lease Term will be furnished to LESSOR on the Termination
Date.
(b) Thirty (30) days prior to the induction of the
Aircraft into each "C" check, LESSEE will advise LESSOR of the
location of the check, the date the Aircraft will be inducted
and the workscope.
(c) Upon LESSOR's request, LESSEE will provide LESSOR
with a technical report for the Aircraft in the form and
substance of Exhibit L, as revised.
12.10 Information Regarding Maintenance Program. LESSEE will provide
LESSOR with a copy of or information regarding the Maintenance Program for the
Aircraft, as requested by LESSOR and LESSOR will maintain the confidentiality of
such Maintenance Program and/or such information.
12.11 LESSOR Rights to Inspect Aircraft. On reasonable notice,
LESSOR and/or its authorized agents or representatives will have the right to
inspect the Aircraft and Aircraft Documentation. LESSOR agrees that such
requests will be coordinated with LESSEE so as to cause the minimum practical
disturbance to LESSEE's operation or its personnel. LESSEE agrees to cooperate
with LESSOR in making the Aircraft and Aircraft Documentation available to such
authorized technical teams. LESSOR will have no duty to make any such inspection
and will not incur any liability or obligation by reason of (and LESSEE's
indemnity obligations pursuant to Article 17 will apply notwithstanding) not
making any such inspection or by reason of any reports it receives or any
reviews it may make of the Aircraft records.
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ARTICLE 13 USE OF RESERVES
---------- ---------------
13.1 Airframe Reserves. LESSOR will reimburse LESSEE from the
Airframe Reserves for the actual cost of the structural inspection portion of
completed scheduled "C" checks as described in the MPD and the rectification of
any structural deficiencies resulting from such inspection, with work performed
for all other causes excluded, including those causes set forth in Article 13.4.
Excluding handling, packaging, shipping charges, and Taxes, reimbursement will
be made up to the amount in the Airframe Reserve.
13.2 Engine Reserves.
13.2.1 Subject to the limitations set forth in Article 13.2.2, LESSOR
will reimburse LESSEE from the Engine Reserves for the actual
cost associated with performance restoration or the
replacement of life limited parts or permanent repair of
on-condition parts in the basic Engine during completed Engine
shop visits (i.e. heavy maintenance visits) requiring off-wing
teardown and/or disassembly, with work performed for all other
causes excluded, including those causes set forth in Article
13.4. Subject to Article 13.2.2 and excluding handling,
packaging, and shipping charges and Taxes, reimbursement for
an Engine will be made up to the amount in the Engine Reserve
applicable to such Engine.
13.2.2 Twenty-five percent (25%) of the per hour Engine Reserve
payable by LESSEE for an Engine will be designated and will be
reimbursable solely for the replacement of life limited parts
in such Engine.
13.3 Reimbursement. LESSOR shall reimburse LESSEE from the Reserves
after the work is completed and invoices and proper documentation have been
submitted to LESSOR, provided such documentation is submitted within six (6)
months after completion of the work. LESSOR will use diligent and reasonable
efforts to reimburse Reserves as soon as possible but in no event later than
thirty (30) days following receipt of the complete and proper documentation. In
the event any portion of a claim is being disputed, LESSOR will reimburse the
undisputed portion within said 30 days and the disputed portion at such time as
the dispute is resolved. For the Airframe, proper documentation includes a list
of all routine and non-routine work cards with corresponding references to the
MPD task card reference and an itemized labor and materials report. For each
Engine, proper documentation includes a description of the reason for removal,
TSN and CSN at removal, a shop teardown report, a shop findings report, a full
description of the workscope and complete disk records for the Engine both prior
to and after the shop visit. Both the invoice supplied by the Engine repair
facility and that submitted by LESSEE to LESSOR with respect to an Engine will
state whether or
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not credits were provided due to life remaining on any removed Engine Parts and
the amount of any such credits will be itemized.
13.4 Reimbursement Adjustment. By way of example, among the
exclusions from reimbursement are those items resulting from repairs covered by
LESSEE's or a third party's insurance, (deductibles being for the account of
LESSEE) or required as a result of an airworthiness directive, manufacturer's
service bulletin, faulty maintenance or installation, improper operations,
misuse, neglect, accident, incident, ingestion, or other accidental cause.
Reimbursement from the Reserves will not be available for the APU, thrust
reversers, landing gear or any of their associated-components. All invoices
subject to reimbursement from LESSOR will be reduced (by adjustment between
LESSEE and LESSOR retroactively if necessary) by the actual amounts received by
LESSEE on account of such work from responsible third parties or other sources,
such as insurance proceeds, manufacturer's warranties, guarantees, concessions
and credits (including, with respect to Engines, credits due to life remaining
on any removed Engine Parts).
13.5 Costs in Excess of Reserves. LESSEE will be responsible for
payment of all costs in excess of the amounts reimbursed hereunder. If on any
occasion the balance in the Airframe or an Engine Reserve is insufficient to
satisfy a claim for reimbursement in respect of the Airframe or such Engine, the
shortfall may not be carried forward or made the subject of any further claim
for reimbursement.
13.6 Reimbursement after Termination Date. LESSEE may not submit
any invoice for reimbursement from the Reserves after the Termination Date
unless on or prior to such date LESSEE has notified LESSOR in writing that such
outstanding invoice will be submitted after the Termination Date and the
anticipated amount, of such invoice. So long as LESSEE has provided such notice
to LESSOR, LESSEE may then submit such outstanding invoice at any time within
six (6) months after the Termination Date. Subject to the foregoing, any balance
remaining in the Airframe and Engine Reserves on the Termination Date, will be
retained by LESSOR. Notwithstanding the foregoing, following a Total Loss of the
Aircraft, any balance remaining in the Reserves will be shared equally by LESSOR
and LESSEE after deducting and first paying to LESSEE any reimbursable amounts
for which LESSEE has already submitted invoices.
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ARTICLE 14 TITLE AND REGISTRATION
---------- ----------------------
14.1 Title to the Aircraft During Lease Term. Title to the Aircraft
will be and remain vested in LESSOR. LESSOR and LESSEE intend this Lease to be a
"true lease." LESSEE will have no right, title or interest in the Aircraft
except as provided in this Lease.
14.2 Registration of Aircraft. LESSOR at LESSEE's sole cost and
expense will (i) register and maintain registration of the Aircraft in the name
of LESSOR at the register of aircraft in the State of Registration, and (ii)
file UCC-1 financing statements regarding the Aircraft and LESSOR's interest
therein in the State of Colorado. LESSEE will, to the extent possible, from time
to time, take all other steps then required by Law (including the Geneva
Convention if applicable) or by practice, custom or understanding or as LESSOR
may reasonably request to protect and perfect LESSOR's interest in the Aircraft
and this Lease in the State of Registration or in any other jurisdictions in or
over which LESSEE may operate the Aircraft.
14.3 Filing of this Lease. To the extent permitted by Law and in
accordance with the requirements of the Law from time to time, LESSEE at its
sole cost and expense will cause this Lease to be kept, filed, recorded and
refiled or rerecorded at the FAA, with the proviso that the commercial terms are
to be reacted prior to recordation.
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ARTICLE 15 IDENTIFICATION PLATES
---------- ---------------------
LESSOR will affix and LESSEE will at all times maintain on the Airframe
and each Engine the identification plates containing the following legends or
any other legend requested by LESSOR in writing:
Airframe Identification Plates
------------------------------
Location: One to be affixed to the Aircraft structure above the
forward entry door adjacent to and not less prominent
than that of the Manufacturer's data plate and
another in a prominent place on the flight deck.
Size: No smaller than 4" X 6"
Legend: "THIS AIRCRAFT IS OWNED BY INTERNATIONAL LEASE
FINANCE CORPORATION.
MANUFACTURER'S SERIAL NO: 24299
OWNER'S ADDRESS:
INTERNATIONAL LEASE FINANCE CORPORATION 1999 Avenue
of the Stars, 39th Floor Los Angeles, California
90067 United States of America
Telex: 69-1400 INTERLEAS BVHL
Fax: (310) 788-1990"
Engine Identification Plates
----------------------------
Location: The legend on the plate must be no less prominent
than the Engine data plate and must be visible.
Size: No smaller than 2" X 6"
Legend
(Engines): "THIS ENGINE IS OWNED BY INTERNATIONAL LEASE FINANCE
CORPORATION, LOS ANGELES, CALIFORNIA, USA."
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ARTICLE 16 TAXES
---------- -----
16.1 General Obligation of LESSEE. Except as set forth in Article
16.2, LESSEE agrees to pay promptly when due, and to indemnify and hold harmless
LESSOR on a full indemnity basis from, all license and registration fees and all
taxes, fees, levies, imposts, duties, charges, deductions or withholdings of any
nature (including without limitation any value added, franchise, transfer,
sales, gross receipts, use, business, excise, personal property, stamp or other
tax) together with any assessments, penalties, fines, additions to tax or
interest thereon, however or wherever imposed (whether imposed upon LESSEE,
LESSOR, on all or part of the Aircraft, the Engines or otherwise), by any
Government Entity or taxing authority in the U.S. or any foreign country or by
any international taxing authority (including the City or County of Los
Angeles), upon or with respect to, based upon or measured by any of the
following (collectively, "Taxes"):
(a) the Aircraft, the Engines or any Parts.
(b) the use, operation or maintenance of the Aircraft or
carriage of passengers or freight during the Lease Term.
(c) this Lease, the payments due hereunder and the terms
and conditions hereof.
(d) the ownership, financing, delivery, import or export,
return, sale, payment of Total Loss Proceeds or other
disposition of the Aircraft.
16.2 Exceptions to Indemnity. The indemnity provided for in Article
16.1 does not extend to any of the following Taxes:
(a) Imposed by the U.S., any State thereof or any foreign
country or international taxing authority on the net or gross
income, gross receipts, capital or net worth of LESSOR, or
doing business, franchise, minimum or similar Taxes.
(b) Attributable to the period prior to Delivery or after
return of the Aircraft to LESSOR in accordance with this Lease
or after the termination of this Lease (it being understood
and agreed that the exclusion contained in this Section
16.2(b) shall not apply to Taxes assessed following such
periods or prior to such periods) if such Taxes are
attributable to such periods.
(c) Attributable to LESSOR's gross negligence, willful
misconduct or breach of this Lease.
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(d) (I) Imposed as a result of a sale, assignment,
transfer or other disposition (whether voluntary or
involuntary) by LESSOR of any legal or beneficial interest in
the Aircraft or in this Lease (a "LESSOR, Transfer") or (II)
to the extent such Taxes exceed the amount of Taxes that would
have been imposed and indemnified against by the LESSEE had
there not been a LESSOR Transfer; provided that the exclusion
set forth in this subparagraph (d) shall not apply to a LESSOR
Transfer resulting from LESSOR's exercise of any remedies
provided for in Article 25 in connection with an Event of
Default that has occurred and is continuing.
(e) Being contested in accordance with the provisions of
Section 16.5.
(f) That would not have been imposed but for any failure
of LESSOR to (i) file proper and timely reports or returns or
to pay any Taxes when due, or (y) comply with any
certification, information, documentation, reporting or other
similar requirements concerning the nationality, residence,
identity or connection with the jurisdiction imposing such
Taxes, if such compliance is required to obtain or establish
relief or exemption from or reduction in such Taxes and LESSOR
was eligible to comply with such requirement.
16.3 After-Tax Basis. The amount which LESSEE is required to pay
with respect to any Taxes indemnified against under Article 16.1 is an amount
sufficient to restore LESSOR on an after-tax basis to the same position LESSOR
would have been in had such Taxes not been incurred.
16.4 Timing of Payment. Any amount payable to LESSOR pursuant to
this Article 16 will be paid within ten (10) days after receipt of a written
demand therefor from LESSOR accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable (and if reasonably requested by LESSEE, LESSOR will provide
additional information as may be reasonably necessary to substantiate such
claims) provided, however, that such amount need not be paid by LESSEE prior to
the earlier of (i) the date any Tax is payable to the appropriate Government
Entity or taxing authority or (ii) in the case of amounts which are being
contested by LESSEE in good faith or by LESSOR pursuant to Article 16.5, the
date such contest is finally resolved.
16.5 Contests. If written claim is made against LESSOR for Taxes
with respect to which LESSEE is liable for a payment or indemnity under this
Lease, LESSOR will promptly give LESSEE notice in writing of such claim
provided, however, that LESSOR's failure to give notice will not relieve LESSEE
of its obligations hereunder, unless such failure materially impairs or
precludes
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LESSEE's ability to contest the claim. So long as (i) a contest of such Taxes
does not involve any danger of the sale, forfeiture or loss of the Aircraft or
any interest therein, (ii) if LESSOR so requests, LESSEE has provided LESSOR
with an opinion of independent tax counsel that a reasonable basis exists for
contesting such claim and (iii) adequate reserves have been made for such Taxes
or, if required, an adequate bond has been posted, then LESSOR at LESSEE's
written request will in good faith, with due diligence and at LESSEE's expense,
contest (or permit LESSEE to contest in the name of LESSEE or LESSOR) the
validity, applicability or amount of such Taxes.
16.6 Tax Benefits. Upon receipt by LESSOR of a refund of all or any
part of any Taxes (including any deductions or withholdings referred to in
Article 5.8) which LESSEE has paid, LESSOR will promptly pay to LESSEE an amount
that is equal to the amount of such Tax Benefit, or any other Tax Benefit
resulting from Taxes paid by LESSEE.
16.7 Cooperation in Filing Tax Returns. LESSEE and LESSOR will
cooperate with one another in providing information which may be reasonably
required to fulfill each party's tax filing requirements and any audit
information request arising from such filing. LESSOR shall furnish from time to
time to LESSEE such returns, statements or other documentation ("Tax Forms") in
such form and with such substance as in the reasonable opinion of LESSEE shall
enable LESSOR or LESSEE to claim an available reduction of or exemption from
Taxes that LESSEE may be required to pay or indemnify against hereunder.
16.8 Survival of Obligations. The representations, warranties and
agreements of LESSEE provided for in this Article 16 shall survive the
Termination Date and the indemnities provided for in this Article 16 shall
survive until the expiration of the applicable statute of limitations for the
Taxes to which such indemnities relate.
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ARTICLE 17 INDEMNITIES
---------- -----------
17.1 General Indemnity. Except as set forth in Article 17.2, LESSEE
agrees to indemnify and hold harmless LESSOR and its officers, directors,
employees, agents and shareholder (individually an "Indemnitee" and collectively
"Indemnitees") from any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs, disbursements and expenses (including
legal fees, costs and related expenses) of every kind and nature, whether or not
LESSEE accepts the Aircraft (however, if LESSEE has not accepted the Aircraft,
LESSEE will not be obligated to indemnify LESSOR for Expenses arising out of
subparagraphs (b), except with respect to inspections or injury or death to
LESSEE employees or agents, (c), or (e)) (collectively "Expenses"), which are
imposed on, incurred by or asserted against any Indemnitee and which are in any
way relating to, based on or arising out of any of the following:
(a) This Lease or any transactions contemplated hereby.
(b) The operation, possession, use, non-use, control,
leasing, subleasing, maintenance, storage, Overhaul testing,
inspections or return flights of the Aircraft, any Engine or
any Part during the Lease Term by LESSEE, any sublessee or any
other Person, whether or not the same is in compliance with
the terms of this Lease, including without limitation claims
for death, personal injury, property damage, other loss or
harm to any Person and claims relating to any Laws, including
without limitation environmental control, noise and pollution
laws, rules or regulations.
(c) The manufacture, design, sale after an Event of
Default, acceptance hereunder, rejection, delivery, return,
export after an Event of Default, condition, repair,
modification, servicing, rebuilding, enforcement of warranties
whether in LESSOR's or LESSEE's name, airworthiness,
registration, reregistration, performance, merchantability,
fitness for use, substitution or replacement of the Aircraft,
Engine or any Part under this Lease or other transfer of use
or possession of the Aircraft, Engine or any Part, including
under a pooling or interchange arrangement, including without
limitation, latent and other defects, whether or not
discoverable, and patent, trademark or copyright infringement.
(d) Any non-compliance by LESSEE with any term of this
Lease or the falsity or inaccuracy of any representation or
warranty of LESSEE set forth herein.
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(e) The prevention or attempt to prevent the arrest,
confiscation, seizure, taking in execution, impounding,
forfeiture or detention of the Aircraft, or in securing the
release of the Aircraft.
(f) As a consequence of any Default in payment by LESSEE
of any sum to be paid by LESSEE when due under this Lease or
any other Default by LESSEE in the due and punctual
performance of its obligations under this Lease.
The foregoing indemnity by LESSEE is intended to include and cover any Expense
to which an Indemnitee may be subject (in contract, tort, strict liability or
under any other theory) regardless of the negligence, active or passive or any
other type, of such Indemnitee, so long as such Expense does not fall within any
of the exceptions listed in Article 17.2.
17.2 Exceptions to General Indemnities. The indemnity provided for
in Article 17.1 will not extend to Expenses of any Indemnitee to the extent
resulting from or arising out of any of the following:
(a) Expenses which LESSEE and LESSOR mutually agree or,
absent mutual agreement, are judicially determined to have
resulted from the willful misconduct of, or breach of this
Lease by, any Indemnitee.
(b) Expenses which LESSEE and LESSOR mutually agree or,
absent mutual agreement, are judicially determined to be
attributable to acts or events which occurred prior to
Delivery or after the Termination Date and return of the
Aircraft to LESSOR in the condition required hereunder.
(c) Expenses representing Taxes, it being acknowledged
that the terms of Article 16 represent LESSEE's sole indemnity
obligations with respect to Taxes.
(d) Expenses due to the breach by LESSOR of its covenant
of quiet enjoyment pursuant to Article 22.1.
17.3 After-Tax Basis. The amount which LESSEE will be required to
pay with respect to any Expense indemnified against under this Article 17 will
be an amount sufficient to restore the Indemnitee, on an after-tax basis, to the
same position such Indemnitee would have been in had such Expense not been
incurred.
17.4 Timing of Payment. LESSEE will pay an Indemnitee or the party
claiming such Expense for Expenses pursuant to this Article 17 whether or not
the claim that gave rise to any Expense indemnified under this Article 17 is
meritorious and whether or not liability with respect to such claim is
established (but subject to Article 17.8) within fifteen (15) days after receipt
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of a written demand therefor from such Indemnitee accompanied by a written
statement describing in reasonable detail the basis for such indemnity and if
such payment is to be made directly to the Indemnitee, providing reasonable
evidence that such Indemnitee has, in fact, paid the amount so claimed.
17.5 Subrogation. Upon the payment in full of any indemnity
pursuant to this Article 17 by LESSEE, LESSEE will be subrogated to any right of
the Indemnitee in respect of the matter against which such indemnity has been
made.
17.6 Notice. Each Indemnitee and LESSEE will give prompt written
notice one to the other of any liability of which such party has knowledge for
which LESSEE is, or may be, liable under this Article 17 provided, however, that
failure to give such notice will not terminate any of the rights of Indemnitees
under this Article 17 except to the extent that LESSEE has been materially
prejudiced by the failure to provide such notice.
17.7 Refunds. If any Indemnitee obtains a recovery of all or any
part of any amount which LESSEE has paid to such Indemnitee, such Indemnitee
will pay to LESSEE the net amount recovered by such Indemnitee together with
interest thereon from the date of payment to LESSOR.
17.8 Defense of Claims. Unless a payment Default or an Event of
Default has occurred and is continuing, LESSEE and its insurers will have the
right (in each such case at LESSEE's sole expense) to investigate or, provided
that LESSEE or its insurers have not reserved the right to dispute liability
with respect to any insurance policies pursuant to which coverage is sought,
defend or compromise any claim covered by insurance for which indemnification is
sought pursuant to Article 17.1 and each Indemnitee will cooperate with LESSEE
or its insurers with respect thereto. If LESSEE or its insurers are retaining
attorneys to handle such claim, such counsel must be reasonably satisfactory to
LESSOR.
17.9 Survival of Obligation. Notwithstanding anything in this Lease
to the contrary, the provisions of this Article 17 will survive the Termination
Date and continue in full force and effect notwithstanding any breach by LESSOR
(except in the case where LESSOR's breach of this Lease is the cause of such
Expense) or LESSEE of the terms of this Lease, the termination of the lease of
the Aircraft to LESSEE under this Lease or the repudiation by LESSOR (except
where such repudiation by LESSOR constitutes a breach by LESSOR under this Lease
and is the cause of such Expense) or LESSEE of this Lease.
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ARTICLE 18 INSURANCE
---------- ---------
18.1 Categories of Insurance. Throughout the Lease Term and until
the Termination Date LESSEE will, at its own expense, effect and maintain in
full force and effect the insurance described in Exhibit C through such brokers
and with such insurers as may be approved by LESSOR, such approval not to be
unreasonably withheld, in London or New York or such other insurance markets as
mutually agreed upon by the parties it being understood that, as of the date
hereof, LESSEE's broker is Marsh & McLennan and such broker is satisfactory to
LESSOR.
18.2 Insurance for Indemnities. The liability insurance referred to
in Article 18.1 will in each case include and insure (to the extent of the risks
covered by the policies) the indemnity provisions of Article 17 and LESSEE will
maintain liability insurance of the indemnities for a minimum of two (2) years
following the Termination Date.
18.3 Renewal. Not less than five (5) Business Days before the
expiration or termination date of any insurance required hereunder, LESSEE will
provide LESSOR with telex or fax confirmation from LESSEE's insurance brokers
that renewed certificates of insurance evidencing the renewal or replacement of
such insurance and complying with Exhibit C will be issued on the termination
date of the prior certificate. Within seven (7) days after such renewal, LESSEE
will furnish its brokers' certificates of insurance to LESSOR.
18.4 Assignment of Rights by LESSOR. If LESSOR assigns all or any
of its rights under this Lease as permitted by this Lease or otherwise disposes
of any interest in the Aircraft to any other Person, LESSEE will, upon request,
procure that such Person hereunder be substituted as loss payee and/or added as
additional assured in the policies effected hereunder and enjoy the same rights
and insurance enjoyed by LESSOR under such policies. LESSOR will nevertheless
continue to be covered by such liability policies for 2 years.
18.5 Deductibles. If there is a material adverse change in the
financial condition of LESSEE which LESSOR reasonably believes will prevent
LESSEE from paying the deductible upon the occurrence of a partial loss of the
Aircraft or an Engine, then LESSOR may require LESSEE at LESSEE's expense to
lower its deductibles on the insurance maintained hereunder to a level which is
available on commercially reasonable terms in the insurance market.
18.6 Other Insurance. LESSOR may from time to time by notice to
LESSEE require LESSEE at LESSEE's expense to effect such other insurance or such
variations to the terms of the existing insurance as may then be customary in
the airline
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industry for aircraft of the same type as the Aircraft and at the time commonly
available in the insurance market.
18.7 Information. LESSEE will provide LESSOR with any information
reasonably requested by LESSOR from time to time concerning the insurance
maintained with respect to the Aircraft or in connection with any claim being
made or proposed to be made thereunder.
18.8 Currency. All proceeds of insurance pursuant to this Lease
will be payable in Dollars except as may be otherwise agreed by LESSOR.
18.9 Grounding of Aircraft. If at any time any of the insurance
required pursuant to this Lease will cease to be in full force and effect,
LESSEE will forthwith ground the Aircraft and keep the Aircraft grounded until
such time as such insurance is in full force and effect again.
18.10 Failure to Insure. If at any time LESSEE fails to maintain
insurance in compliance with this Article 18, LESSOR will be entitled but not
bound to do any of the following (without prejudice to any other rights which it
may have under this Lease by reason of such failure):
(a) To pay any premiums due or to effect or maintain
insurance satisfactory to LESSOR or otherwise remedy such
failure in such manner as LESSOR considers appropriate (and
LESSEE will upon demand reimburse LESSOR in full for any
amount so expended in that connection).
(b) At any time while such failure is continuing, to
require the Aircraft to remain at any airport or (as the case
may be), proceed to and remain at any airport designated by
LESSOR in the continental U.S., until such failure is remedied
to LESSOR's satisfaction.
18.11 Reinsurance. Any reinsurance will be maintained with
reinsurers and brokers approved by LESSOR. Such reinsurance will contain each of
the following terms and will in all other respects (including amount) be
satisfactory to LESSOR:
(a) The same terms as the original insurance.
(b) A cut-through and assignment clause satisfactory to
LESSOR.
(c) Payment will be made notwithstanding (i) any
bankruptcy, insolvency, liquidation or dissolution of any of
the original insurers and/or (ii) that the original insurers
have made no payment under the original insurance policies.
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18.12 Limit on Hull in favor of LESSEE. LESSEE may carry hull all
risks or hull war and allied perils on the Aircraft in excess of the Agreed
Value (which is payable to LESSOR) only to the extent such excess insurance
which would be payable to LESSEE in the event of a Total Loss does not exceed
[XXXXXXXXXXXXXXXXX] of the Agreed Value and only to the extent that such
additional insurance will not prejudice the insurances required herein or the
recovery by LESSOR thereunder. LESSEE agrees that it will not create or permit
to exist any liens or encumbrances over the insurances, or its interest therein,
except as constituted by this Lease.
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ARTICLE 19 LOSS, DAMAGE AND REQUISITION
---------- ----------------------------
Throughout the Lease Term and until the Termination Date,
LESSEE will bear all risk of loss, theft, damage and destruction to the
Aircraft.
19.1 Definitions. In this Article 19:
"Agreed Value" means [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] during the first five (5) years of the
Term and [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] thereafter.
"Net Total Loss Proceeds" means the Total Loss Proceeds
actually received by LESSOR following a Total Loss, less any reasonable legal
and other out-of-pocket expenses, taxes other than LESSOR's income taxes, or
duties incurred by LESSOR in connection with the collection of such proceeds as
reasonably documented by LESSOR.
"Total Loss" means any of the following occurring during the
Term in relation to the Aircraft, Airframe or any Engine and "Total Loss Date"
means the date set forth in parenthesis after each Total Loss:
(a) Destruction, damage beyond repair or being rendered
permanently unfit for normal use for any reason (the date such
event occurs or, if not known, the date on which the Aircraft,
Airframe or Engine was last heard of).
(b) Actual, constructive, compromised, arranged or agreed
total loss (the earlier of the date on which the loss is
agreed or compromised by the insurers or sixty (60) days after
the date of notice to LESSEE's brokers or insurers claiming
such total loss).
(c) Requisition of title, confiscation, forfeiture or any
compulsory acquisition or other similar event by any
governmental entity (the date on which the same takes effect).
(d) Sequestration, detention, seizure or any similar
event for more than thirty (30) consecutive days (the earlier
of the date on which insurers make payment on the basis of a
total loss or the date of expiration of such period).
(e) Requisition for use other than by government of U.S.
for more than one hundred and eighty (180) consecutive days
(the earlier of the date on which the insurers make payment on
the basis of a total loss or the date of expiration of such
period).
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(f) In the case of an Engine, the event described in
Article 12.5.3 (the date on which the same takes effect).
(g) Any other occurrence not permitted under this Lease
which deprives LESSEE of use or possession for a period of
sixty (60) consecutive days or longer, other than as the
result of a breach of LESSOR's covenant of quiet enjoyment
(the sixtieth (60th) day of such period).
"Total Loss Proceeds" means the proceeds of any insurance or
any compensation or similar payment arising in respect of a Total Loss.
19.2 Notice of Total Loss. LESSEE will notify LESSOR within two (2)
Business Days and follow up with written notice within five (5) days after a
Total Loss Date of the Aircraft, Airframe or any Engine.
19.3 Total Loss of Aircraft or Airframe. If the Total Loss of the
Aircraft or Airframe occurs during the Lease Term, the following will occur:
(a) After the Total Loss Date and until receipt by LESSOR
of the Agreed Value as set forth in Exhibit C and all other
amounts then due under this Lease, LESSEE will continue to pay
Rent and the parties will perform all of their other
obligations under this Lease.
(b) On the date which is the earlier of the following
dates:
(1) the date on which the Total Loss Proceeds of
the Aircraft or the Airframe are paid by LESSEE's
insurance underwriters or brokers and
(2) the date which falls forty-five (45) days,
or in the case of (c) or (d) of 19.1, one hundred
twenty (120) days, after the Total Loss Date,
LESSEE will pay to LESSOR an amount equal to the sum of:
(3) the Agreed Value and
(4) all other amounts then due and payable under
this Lease other than Reserves for hours which have
not been flown,
less an amount equal to the Net Total Loss Proceeds received
by LESSOR.
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(c) LESSOR will apply the Net Total Loss Proceeds and any
amounts received from LESSEE pursuant to this Article 19.3(b)
as follows:
(1) first, in discharge of any unpaid Rent and
any other amounts other than Reserves then due and
payable up to the date of LESSOR's receipt of the
Agreed Value;
(2) second, in discharge of the Agreed Value
together with interest thereon calculated at the
Default Rate for any period from the due date set
forth in Article 19.3(b) up to the date of discharge;
and
(3) third, payment of the balance, if any, to
LESSEE.
(d) Upon receipt by LESSOR of all moneys payable by
LESSEE in Article 19.3, LESSOR will refund any prepaid Rent in
respect of the period following the date on which all such
moneys are paid and this Lease will terminate except for
LESSEE's obligations under Articles 10.5, 16 and 17 which
survive the Termination Date and except for LESSOR's
obligation to return the Security Deposit and a portion of the
Reserves to LESSEE as set forth in Articles 13.6 and 19.8.
FOR AVOIDANCE OF DOUBT, THE AGREED VALUE OF THE AIRCRAFT WILL BE PAYABLE TO
LESSOR PURSUANT TO THIS ARTICLE 19.3 WHEN A TOTAL LOSS OF THE AIRFRAME OCCURS
EVEN IF THERE HAS NOT BEEN A TOTAL LOSS OF AN ENGINE OR ENGINES.
19.4 Surviving Engine(s). If a Total Loss of the Airframe occurs
and there has not been a Total Loss of an Engine or Engines, then (subject to
agreement of relevant insurers), on receipt of all monies due under Article 19.3
LESSOR will transfer all its right, title and interest in the surviving
Engine(s) to LESSEE, but without any responsibility, condition or warranty on
the part of LESSOR other than as to freedom from any LESSOR's Lien.
19.5 Total Loss of Engine and not Airframe.
19.5.1 Upon a Total Loss of any Engine not installed on the Airframe
or a Total Loss of an Engine installed on the Airframe not
involving a Total Loss of the Airframe, LESSEE will give
LESSOR prompt written notice thereof. LESSEE will replace such
Engine as soon as reasonably possible by duly conveying to
LESSOR title to another engine (i) free and clear of all
Security Interests (except Permitted Liens) of any kind or
description, (ii) in airworthy condition and of the same or
improved model, service bulletin, modification status and AD
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compliance status and in the same or better operating
condition as the Engine which sustained a Total Loss
(immediately prior to the Total Loss) and having a value and
utility at least equal to the Engine that sustained the Total
Loss, taking into account time in service, hours and cycles
since new and hours and cycles available to the next
inspection, Overhaul or scheduled or anticipated removal
thereof. Such replacement engine will be an Engine as defined
herein and the Engine which sustained such Total Loss will
cease to be an Engine and LESSOR will transfer all its right,
title and interest in the replaced Engine(s) to LESSEE, but
without any responsibility, condition or warranty on the part
of LESSOR other than as to freedom from any LESSOR's Lien.
19.5.2 LESSEE agrees at its own expense to take such action as LESSOR
may reasonably request in order that any such replacement
Engine becomes the property of LESSOR and is leased hereunder
on the same terms as the destroyed Engine. LESSEE's obligation
to pay Rent will continue in full force and effect, but an
amount equal to the Net Total Loss Proceeds received by LESSOR
with respect to such destroyed Engine will, subject to
LESSOR's right to deduct therefrom any amounts then due and
payable by LESSEE under this Lease, be paid to LESSEE.
19.6 Other Loss or Damage.
19.6.1 If the Aircraft or any part thereof suffers loss or damage
during the Term not constituting a Total Loss of the Aircraft
or the Airframe or any Engine, all the obligations of LESSEE
and LESSOR under this Lease (including payment of Rent) will
continue in full force.
19.6.2 In the event of any loss or damage to the Aircraft or Airframe
that does not constitute a Total Loss of the Aircraft or the
Airframe, or any loss or damage to an Engine that does not
constitute a Total Loss of such Engine, LESSEE will at its
sole cost and expense fully repair the Aircraft or Engine in
order that the Aircraft or Engine is placed in an airworthy
condition and substantially the same condition as it was prior
to such loss or damage. All repairs will be performed in a
manner that preserves and maintains all warranties and service
life policies to the same extent as they existed prior to such
loss or damage. LESSEE will notify LESSOR forthwith of any
loss, theft or damage to the Aircraft for which the cost of
repairs is estimated to exceed [xxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx], together with LESSEE's proposal for
carrying out the repair. In the event that LESSOR does not
agree with LESSEE's proposals for repair, LESSOR
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will so notify LESSEE within two (2) Business Days after its
receipt of such proposal. LESSEE and LESSOR will then consult
with Manufacturer and LESSEE and LESSOR agree to accept as
conclusive, and be bound by, Manufacturer's directions or
recommendations as to the manner in which to carry out such
repairs. If Manufacturer declines to give directions or
recommendations, LESSEE will carry out the repairs in
accordance with the FAA approved directions of LESSOR at an
FAA approved repair facility.
19.6.3 To the extent insurance proceeds received by LESSEE directly
from its insurers under the hull policy do not cover the cost
of such repair work on the Aircraft or Engine and LESSOR has
received additional insurance proceeds from LESSEE's insurers
with respect to such repair work, LESSOR will (subject to
LESSOR's right to deduct therefrom any amounts then due and
payable by LESSEE under this Lease and submission by LESSEE of
reasonable documentation in support of such excess repair
costs) pay to LESSEE insurance proceeds received by LESSOR as
and when such repair work is performed on the Aircraft.
19.7 Government Requisition. If the Aircraft, Airframe or any
Engine is requisitioned for use by any Government Entity and such requisition
does not constitute a Total Loss, LESSEE will promptly notify LESSOR of such
requisition. All of LESSEE's obligations hereunder will continue as if such
requisition had not occurred. So long as no Default has occurred and is
continuing, all payments received by LESSOR or LESSEE from such Government
Entity will be paid over to or retained by LESSEE. if a Default has occurred and
is continuing, all payments received by LESSEE or LESSOR from such Government
Entity shall be used by LESSOR to satisfy any obligations owing by LESSEE.
19.8 Division of Reserves. For avoidance of doubt, the parties
agree that upon the Total Loss of the Aircraft LESSOR will pay to LESSEE
one-half of all Airframe and Engine Reserves paid by LESSEE and not previously
reimbursed or the subject of previous proper invoices submitted by LESSEE to
LESSOR pursuant to Article 13.3.
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ARTICLE 20 REPRESENTATIONS, WARRANTIES AND
---------- COVENANTS OF LESSEE
-------------------------------
20.1 Representations and Warranties. LESSEE represents and warrants
the following to LESSOR as of the date of execution of this Lease and as of the
Delivery Date:
20.1.1 Corporate Status. LESSEE is a corporation duly incorporated,
validly existing and in good standing under the Laws of
Delaware. It has the corporate power and authority to carry on
its business as presently conducted and to perform its
obligations hereunder.
20.1.2 Governmental Approvals. No authorization, approval, consent,
license or order of, or registration with, or the giving of
notice to the Aviation Authority or any other Government
Entity is required for the valid authorization, execution,
delivery and performance by LESSEE of this Lease, except as
will have been duly effected as of the Delivery Date.
20.1.3 Binding. LESSEE's Board of Directors has authorized LESSEE to
enter into this Lease, any Side Letters hereto and any other
documentation in connection with the leasing of the Aircraft
from LESSOR (collectively, the "Operative Documents") and
perform its obligations under the Operative Documents. This
Lease and the other Operative Documents have been duly
executed and delivered by LESSEE and represent the valid,
enforceable and binding obligations of LESSEE except as may be
limited by bankruptcy, insolvency, reorganization or other
Laws of general application affecting the enforcement of
creditors' rights. When executed by LESSEE at Delivery, the
same will apply to the Estoppel and Acceptance Certificate.
20.1.4 No Breach. The execution and delivery of the Operative
Documents, the consummation by LESSEE of the transactions
contemplated herein and compliance by LESSEE with the terms
and provisions hereof do not and will not contravene any Law
applicable to LESSEE, or result in any breach of or constitute
any default under or result in the creation of any Security
Interest upon any property of LESSEE, pursuant to any
indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement,
corporate charter, by-law or other agreement or instrument to
which LESSEE is a party or by which LESSEE or its properties
or assets may be bound or affected. When executed by LESSEE at
Delivery, the same will apply to the Estoppel and Acceptance
Certificate.
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20.1.5 Filings. Except for any filing or recording that may be
required under the U.S. Federal Aviation Administration no
filing or recording of any instrument or document (including
the filing of any financing statement) is necessary under the
Laws of the State of Registration and Colorado in order for
this Lease to constitute a valid lease of record relating to
the Aircraft.
20.1.6 Licenses. LESSEE holds all licenses, certificates and permits
from applicable Government Entities in the U.S. for the
conduct of its business as a certificated air carrier and
performance of its obligations under this Lease.
20.1.7 No Suits. There are no suits, arbitrations or other
proceedings pending or threatened against LESSEE before any
court or administrative agency against or affecting LESSEE
which, if adversely determined, would have a material adverse
effect on the business, assets or condition (financial or
otherwise) of LESSEE or its ability to perform under this
Lease, except as described in the filings provided to LESSOR
pursuant to Article 22.
20.1.8 General Obligations. The obligations of LESSEE under this
Lease are direct, general and unconditional obligations of
LESSEE and rank or will rank at least pari passu in right of
payment with all other present ---- ----- and future unsecured
and unsubordinated obligations (including contingent
obligations) of LESSEE, with the exception of such obligations
as are mandatorily preferred by law and not by reason of any
encumbrance.
20.1.9 Tax Returns. All necessary returns have been delivered by
LESSEE to all relevant taxation authorities in the
jurisdiction of its incorporation or extensions have been
obtained as required, and LESSEE is not in default in the
payment of any taxes shown to be payable thereon.
20.1.10 No Material Adverse Effect. LESSEE is not in default under any
agreement to which it is a party or by which it may be bound
which would have a material adverse effect on its ability to
perform its obligation hereunder.
20.1.11 No Default under this Lease. At the time of execution of this
Lease, no Default has occurred and is continuing and the
financial statements provided to LESSOR fairly present the
financial condition of LESSEE.
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20.1.12 Shareholder Equity. At the time of execution of this Lease,
LESSEE has common shareholder equity in an amount of at least
Fifty Million U.S. Dollars (US$ 50,000,000).
20.2 Covenants. LESSEE covenants to LESSOR that it will comply with
the following throughout the entire Lease Term:
20.2.1 Restrictions on Mergers. LESSEE will not sell or convey
substantially all of its property and assets or merge or
consolidate with or into any other corporation unless LESSEE
has obtained LESSOR's prior written consent which will not be
unreasonably withheld or, unless the surviving entity has a
net worth after the merger or consolidation that is at least
equal to that of LESSEE immediately prior to the merger or
consolidation.
20.2.2 No Security Interests. LESSEE will not create or agree to or
permit to arise any Security Interest (other than Permitted
Liens) on or with respect to the Aircraft, title thereto or
any interest therein. LESSEE will forthwith, at its own
expense, take all action as may be necessary to discharge or
remove any such Security Interest if it exists at any time.
20.2.3 Representations to Other Parties. LESSEE will not represent or
hold out LESSOR as carrying goods or passengers on the
Aircraft or as being in any way connected or associated with
any operation of the Aircraft so long as LESSOR is, in fact,
not in any way so connected or associated.
20.2.4 Shareholder Equity. During the Lease Term, LESSEE will
maintain common shareholder equity in an amount of at least
Fifty Million U.S. Dollars (US$ 50,000,000), provided that in
the event that LESSEE is not able to comply with this
covenant, LESSEE will within fourteen (14) days following
receipt of LESSOR's request therefor, provide to LESSOR an
additional cash security deposit in an amount to be reasonably
determined by LESSOR at such time.
20.2.5 LESSEE's Fleet. During the Lease Term, LESSEE will not operate
aircraft of any type other than Boeing 737 CFM- powered Stage
III aircraft, without LESSOR's prior written consent which
consent shall not be unreasonably withheld.
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ARTICLE 21 REPRESENTATIONS, WARRANTIES AND
---------- COVENANTS OF LESSOR
-------------------------------
21.1 Representations and Warranties. LESSOR represents and warrants
the following to LESSEE as of the date of execution of the Lease and as of the
Delivery Date and ALL OTHER WARRANTIES, EXPRESS OR IMPLIED HAVE BEEN WAIVED IN
ACCORDANCE WITH ARTICLE 8:
21.1.1 Corporate Status. LESSOR is a corporation duly incorporated,
validly existing and in good standing under the Laws of the
State of California. It has the corporate power and authority
to carry on its business as presently conducted and to perform
its obligations hereunder.
21.1.2 Governmental Approvals. No authorization, approval, consent,
license or order of, or registration with, or the giving of
notice to the Aviation Authority or any Government Entity or
any other Person is required for the valid authorization,
execution, delivery and performance by LESSOR of this Lease.
21.1.3 Binding. This Lease and the other Operative Documents have
been duly authorized, executed and delivered by LESSOR and
represent the valid, enforceable and binding obligations of
LESSOR except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other Laws of general
application affecting the enforcement of creditors' rights.
21.1.4 No Breach. The execution and delivery of the Operative
Documents, the consummation by LESSOR of the transactions
contemplated herein and compliance by LESSOR with the terms
and provisions hereof do not and will not contravene any Law
applicable to LESSOR, or result in any breach of or constitute
any default under any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, bank loan or credit
agreement, corporate charter, by-law or other agreement or
instrument to which LESSOR is a party or by which LESSOR or
its properties or assets may be bound or affected.
21.1.5 Title to Aircraft. On the Delivery Date and at all times
thereafter during the Term (subject to Article 24) LESSOR will
have good and valid title to the Aircraft.
21.2 Covenants. LESSOR covenants to LESSEE that it will comply with
the following throughout the entire Lease Term:
21.2.1 Quiet Enjoyment. So long as no Event of Default has occurred
and is continuing hereunder, LESSOR covenants that neither
LESSOR nor any person lawfully claiming
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through LESSOR will interfere with LESSEE's quiet, peaceful
and undisturbed use and enjoyment of the Aircraft, except as
otherwise permitted under this Lease.
21.2.2 Registration Requirements. At all times during the Lease Term,
LESSOR shall satisfy all requirements applicable to it in
order to maintain in effect the registration of the Aircraft
in the United States. LESSOR shall not take any act or omit to
take any act that is required to be performed by it in order
to ensure the continuous registration of the Aircraft in the
United States.
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ARTICLE 22 FINANCIAL AND RELATED INFORMATION
---------- ---------------------------------
LESSEE agrees to furnish each of the following to LESSOR
during the Term:
(a) Within forty-five (45) days after the end of each
fiscal quarter of LESSEE, or sixty (60) days if U.S.
Securities and Exchange Commission (SEC) rules permit, three
(3) copies of the 10Q, or if LESSEE is not a reporting
company, unaudited consolidated financial statements
(including a balance sheet and profit and loss statement)
prepared for such quarter in accordance with generally
accepted accounting principles in the U.S.
(b) Within ninety (90) days after the end of each fiscal
year of LESSEE, or one hundred twenty (120) days if SEC rules
permit, three (3) copies of the 10K, or if LESSEE is not a
reporting company, audited consolidated financial statements
(including a balance sheet and profit and loss statement)
prepared as of the close of such fiscal year in accordance
with generally accepted accounting principles in the U.S.
LESSEE's chief financial officer will also provide a
certificate stating that no Default exists under this Lease
and that such officer has examined the Creditor Agreements
between LESSEE and the other Creditors for aircraft that
entered LESSEE's fleet during LESSEE's previous fiscal year
and none of such Creditor Agreements contains terms which
provide or contemplate that such Creditors will obtain any
right, title or interest in an Engine which is installed on
another aircraft (or, if this is not the case, such officer
will identify in the certificate the parties, the aircraft and
the Creditor Agreements for which this statement is untrue).
(c) Promptly after distribution, three (3) copies of all
reports and financial statements which LESSEE sends or makes
available to its stockholders or creditors.
(d) From time to time, such other reasonable information
as LESSOR may reasonably request concerning the location,
condition, use and operation of the Aircraft or the financial
condition of LESSEE and not previously delivered by LESSEE.
22.1 Information about Suits. LESSEE will promptly give to LESSOR a
notice in writing of any suit, arbitration or proceeding before any court,
administrative agency or Government Entity which, if adversely determined, would
have a material adverse effect on the business, assets or condition (financial
or otherwise), of LESSEE or its ability to perform under this Lease.
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ARTICLE 23 RETURN OF AIRCRAFT
---------- ------------------
23.1 Date of Return. LESSEE is obligated to return the Aircraft,
Engines, Parts and Aircraft Documentation to LESSOR in accordance with Article
23 on the Termination Date, unless a Total Loss of the Aircraft has occurred, or
this Lease was terminated prior to Delivery, in accordance with Articles 3.5 or
3.6. If an Event of Default occurs prior to the Expiration Date and LESSOR
repossesses the Aircraft, the return requirements set forth in this Article 23
nonetheless must be met on the date the Aircraft is actually returned to LESSOR
or repossessed by LESSOR.
23.2 Technical Reporting. Six (6) months prior to the Expiration
Date at LESSOR's request, LESSEE will provide LESSOR with a technical report in
the form and substance of Exhibit L, as revised, and, in addition upon LESSOR's
request, will make copies available of (i) drawings of the interior
configuration of the Aircraft both as it presently exists and as it will exist
at return (ii) airworthiness directive compliance status report, (iii) service
bulletin incorporation list, (iv) hard time and life limited component inventory
and status report, (v) on- condition and condition monitored component inventory
and status report, (vi) a list of LESSEE-initiated modifications and
alterations, (vii) interior material FAR 25.853 conformance certificates, (viii)
Aircraft maintenance program, (ix) complete workscope for the checks,
inspections and other work to be performed prior to return, (x) current Engine
disk sheets trend monitoring reports and (xi) any other data which is reasonably
requested by LESSOR.
23.3 Return Location. LESSEE at its expense will return the
Aircraft, Engines, Parts and Aircraft Documentation to LESSOR at LESSEE's FAA
approved maintenance provider's facility in the continental U.S. or to such
other airport as may be mutually agreed to by LESSEE and LESSOR.
23.4 Aircraft Documentation Review. For the period commencing at
least ten (10) Business Days prior to the proposed redelivery date and
continuing until the date on which the Aircraft is accepted by LESSOR, LESSEE
will provide for the review by LESSOR and/or its representative of all of the
Aircraft Documentation described in Exhibit K in one central location at the
Aircraft return location.
23.5 Aircraft Inspection.
23.5.1 Lessor may observe the maintenance checks performed
immediately prior to the proposed redelivery. At redelivery,
LESSOR and/or its representatives will have an opportunity to
conduct a full systems functional and operational inspection
of the Aircraft (and other types of reasonable inspections
based upon the Aircraft type, age, use and other known factors
with respect to the
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Aircraft) and a full inspection of the Aircraft Documentation
(including records and manuals), all to LESSOR's satisfaction.
Any deficiencies from the Aircraft return condition
requirements set forth in this Article 23 will be corrected by
LESSEE at its cost prior to the acceptance flight described in
Article 23.5.2.
23.5.2 Immediately prior to the proposed redelivery of the Aircraft,
LESSEE will carry out for LESSOR and/or LESSOR's
representatives an Aircraft acceptance flight in accordance
with Manufacturer's standard flight operation check flight
procedures or, if agreed to in writing by LESSOR, in
accordance with an airline acceptance flight procedure, either
of which will be for the duration necessary to perform such
check flight procedures but in any event not less than two (2)
hours. Flight costs and fuel will be furnished by and at the
expense of LESSEE. Any deficiencies from the Aircraft return
condition requirements set forth in this Article 23 will be
corrected by LESSEE at its cost prior to return of the
Aircraft.
23.5.3 To the extent that the ground inspection and acceptance flight
extend beyond the Expiration Date, unless such delay is solely
the result of LESSOR's breach of its obligations under this
Lease, the Lease Term will be deemed to have been
automatically extended and the obligations of LESSEE hereunder
(including Article 23.10(c)) will continue on a day-to-day
basis until LESSOR delivers to LESSEE the Return Acceptance
Receipt.
23.5.4 LESSEE agrees to indemnify and hold harmless LESSOR, its
officers, directors, employees, agents and representatives
from and against all Expenses for injury to or death of any
person (other than LESSOR's employees) or damage to any
property (including the Aircraft) arising out of or in any way
connected with such ground inspection and acceptance flight
unless caused by the willful misconduct of such parties.
23.6 Certificate of Airworthiness Matters.
23.6.1 The Aircraft at return shall have a U.S. Standard Certificate
of Airworthiness for transport category aircraft issued by the
FAA in accordance with FAR Part 21 and, in addition, meet the
operating requirements of FAR Part 121.
23.6.2 If the Aircraft is to be registered in a country other than in
the U.S. after return from LESSEE, LESSOR may in its sole
discretion waive the requirements of Article 23.6.1 and
instead require that LESSEE at its
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expense (to the extent such expense is no greater than that
which LESSEE would have incurred pursuant to Article 23.6.1
with any additional expenses being for LESSOR's account and
with the agreement that no Rent will accrue during the delay
caused by such LESSOR request) put the Aircraft in a condition
to meet the requirements for issuance of a Certificate of
Airworthiness of the Aviation Authority of such country.
Lessor will provide the workscope for such work.
23.7 General Condition of Aircraft at Return.
23.7.1 The Aircraft, Engines and Parts will, during the Lease Term,
have been maintained and repaired in accordance with the
Maintenance Program, the rules and regulations of the FAA and
this Lease.
23.7.2 Aircraft Documentation (including records and manuals) will
have been maintained in an up-to-date status, in accordance
with the rules and regulations of the FAA and will be in a
form necessary in order to meet the requirements of Article
23.6.1. The records and historical documents set forth in
Attachment 1 of Exhibit I generated by LESSEE will be in
English, it being agreed that LESSEE is not responsible for
translating any documents that were delivered by LESSOR in a
language other than English.
23.7.3 The Aircraft will be in the same working order and condition
as at Delivery (subject to the other provisions of this
Article 23, reasonable wear and tear from normal flight
operations excepted), with all pilot discrepancies, minimum
equipment list (MEL) and deferred maintenance items cleared on
a terminating action basis.
23.7.4 The Aircraft will be airworthy (conform to its type design and
be in a condition for safe operation), with all Aircraft
equipment, Parts, components and systems operating within
limits approved by Manufacturer, and FAA.
23.7.5 The Aircraft interior (including flight deck, passenger cabin
and windows) and exterior (including cargo compartments) will
be clean and cosmetically acceptable to LESSOR, with all
compartments free of foreign objects, dirt, grease, fluids,
stains, grime, cracks, tears and rips and ready to be placed
into immediate commercial airline passenger operations. All
interior placards, signs and markings will be properly
attached, free from damage, clean and legible.
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23.7.6 No special or unique Manufacturer, Engine manufacturer or
Aviation Authority inspection or check requirements which are
specific to the Aircraft or Engines (as opposed to all
aircraft or engines of their types) will exist with respect to
the Airframe, Engines and Aircraft equipment, Parts,
components and systems.
23.7.7 All repairs, modifications and alterations to the Aircraft
effected by LESSEE or any of its sublessees will have been
accomplished in accordance with Manufacturer's Structural
Repair Manual (or FAA- approved data supported by FAA Form
8110-3 and FAA Form 337).
23.7.8 The Aircraft will be returned with the Engines installed and
with the same equipment as at Delivery, subject only to those
replacements, additions and Modifications permitted under this
Lease.
23.7.9 All airworthiness directives and other instructions of the
Aviation Authority and FAA applicable to the Aircraft which
are issued prior to the date of return of the Aircraft and
require compliance (either by means of repetitive inspections,
modifications or terminating action) prior to return of the
Aircraft to LESSOR will have been complied with on the
Aircraft on a terminating action basis. Any airworthiness
directives of the Aviation Authority or FAA which must be
completed within one (1) year after the Termination Date must
also be performed on a terminating action basis by LESSEE at
LESSEE's cost. Airworthiness directives and instructions which
do not have a terminating action will be accomplished at the
highest level of inspection or modification possible. If,
after using best efforts, LESSEE is unable to acquire the
material, parts or components necessary to accomplish such
airworthiness directive, LESSEE will pay to LESSOR upon return
of the Aircraft the estimated cost of terminating such
airworthiness directive. If the estimated cost cannot be
mutually agreed upon by LESSEE and LESSOR, LESSEE and LESSOR
will each obtain an estimate from a reputable FAA approved
maintenance facility and the estimated cost will be the
average of the two estimates.
23.7.10 The Aircraft will be in compliance with Manufacturer's
Corrosion Prevention and Control Program (CPCP) specified for
the model type by Manufacturer.
23.7.11 If any waivers, alternate means of compliance, dispensations,
extensions or carry-overs with respect to airworthiness
directives or operating or maintenance requirements are
granted by the Aviation Authority or permitted by the
Maintenance Program, LESSEE at its
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sole cost and expense will nonetheless perform such
airworthiness directives and other operating or maintenance
requirements on a terminating action basis as if such waivers,
alternate means of compliance, dispensations or extensions did
not exist.
23.7.12 The Aircraft will be free from any Security Interest except
Permitted Liens.
23.7.13 All no-charge vendor and Manufacturer's service bulletin kits
received by LESSEE for the Aircraft but not installed thereon
will be on board the Aircraft as cargo. At LESSOR's request,
any other service bulletin kit that LESSEE has paid, or will
pay, for will also be delivered to LESSOR on board the
Aircraft, but LESSOR will reimburse LESSEE for its actual
out-of-pocket costs for such kit, unless LESSEE purchased such
kit as part of its implementation of a service bulletin on its
fleet of aircraft of the same type of the Aircraft but had not
yet installed such kit on the Aircraft, in which case such kit
will be furnished free of charge to LESSOR.
23.7.14 The Aircraft will be free of any system-related leaks and any
damage resulting therefrom. All repairs will have been
performed on a permanent basis in accordance with the
applicable manufacturer's instructions.
23.7.15 The Aircraft fluid reservoirs (including oil, oxygen,
hydraulic and water) will be serviced to full and the waste
tank freshly serviced in accordance with Manufacturer's
instructions. Each fuel tank will be at least as full as at
Delivery.
23.7.16 All fuel tanks will have recently undergone an anti-
fungus/biological growth contamination laboratory evaluation,
with appropriate correction taken in the event that excessive
levels of contamination are identified.
23.7.17 At LESSOR's request, LESSEE will provide LESSOR with a written
summary of the results of all maintenance and inspection
sampling programs involving or affecting the Aircraft and the
rest of its 737-300 aircraft fleet.
23.8 Checks Prior to Return. Immediately prior to return of the
Aircraft to LESSOR, LESSEE at its expense will do each of the
following:
(a) Have performed, by an FAA-approved repair station,
the next full and complete zonal, systems, corrosion and
structural "C" check and any other tasks listed in the MPD and
scheduled for completion at such date including all lesser and
corresponding Flight Hour,
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Cycle and calendar controlled maintenance and inspection
tasks, all in accordance with the MPD, sufficient to clear the
Aircraft for [XXXX] Flight Hours or Cycles of operation or
until its next scheduled full and complete "C" check interval
in accordance with the MPD (whichever is greater) (which in
any event will not be less than one year). LESSEE will also
weigh the Aircraft, revise the weight and balance equipment
list records and compute new weight and balance data. Any
discrepancies revealed during such inspection will be
corrected in accordance with Manufacturer's maintenance and
repair manuals or FAA-approved data. So long as the same does
not require any additional downtime, LESSEE agrees to perform
during such check any other work reasonably required by LESSOR
(and not otherwise required under this Lease) and LESSOR will
reimburse LESSEE for LESSEE's actual cost of such work, or if
such work is performed by LESSEE, LESSOR will reimburse LESSEE
at LESSEE's preferred customer rates, in either case within
ten (10) days after submission of complete and proper
invoices.
(b) Perform an internal and external corrosion inspection
in accordance with the MPD and correct any discrepancies in
accordance with the recommendations of Manufacturer and the
Structural Repair Manual. In addition, all inspected areas
will be properly treated with corrosion inhibitor as
recommended by Manufacturer.
(c) Remove LESSEE's exterior markings, including all
exterior paint, by stripping (or, at LESSOR's option,
pneumatically scuff/sanding) the paint from the Airframe and
clean, reseal, refinish, prepare (including application of
alodine or another corrosion inhibitor) and prime the surfaces
to be painted, all in accordance with Manufacturer's and paint
manufacturer's recommendations. LESSEE will then repaint the
Airframe white. Such painting will be accomplished in such a
manner as to result in a uniformly smooth and cosmetically
acceptable aerodynamic surface. All external placards, signs
and markings will be properly attached, free from damage,
clean and legible.
(d) If reasonably required by LESSOR repaint the interior
of the Aircraft, including flight deck, and replace placards.
(e) In accordance with Manufacturer's Structural Repair
Manual or FAA-approved data, permanently repair damage to the
Aircraft that exceeds Manufacturer's limits and replace any
non-flush structural patch repairs installed on the Airframe
with flush-type repairs, unless otherwise agreed in writing by
LESSOR.
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LESSEE will not be required to replace any non-flush patches
that were present on the Aircraft at Delivery.
(f) Perform full and complete hot and cold section
videotape borescope on each Engine and its modules in
accordance with the Engine manufacturer's maintenance manual,
with LESSOR or its representatives entitled to be present.
LESSEE will provide documentation to LESSOR's satisfaction
that such inspection does not reveal any condition which would
cause the Engine or any module to be unserviceable, beyond
serviceable limits or serviceable with limitations under the
Engine manufacturer's maintenance manual. LESSEE will correct
any discrepancies in accordance with the guidelines set out by
the Engine manufacturer which may be discovered during such
inspection.
(g) If the Engine or APU historical and technical records
and/or condition trend monitoring data of any Engine or APU
indicate an acceleration in the rate of deterioration in the
performance or a material increase in oil consumption of an
Engine or APU, LESSEE will correct, to LESSOR's satisfaction,
the conditions that are determined to be causing such
accelerated rate of deterioration or material increase in oil
consumption.
(h) In accordance with the applicable maintenance manual,
accomplish a maximum take-off power assurance run and
condition, acceleration and bleed valve scheduling checks on
the Engines. LESSEE will record the results of such checks and
evaluate the Engine performance, with LESSOR and/or its
representative entitled to be present. The performance and all
operating parameters of each Engine will be within the limits
specified in the Manufacturer's maintenance manual.
(i) In the event the Engine historical and technical
records, borescope inspection, trend monitoring and other
checks specified in (f), (g) and (h) above result in a dispute
regarding the conformity of an Engine with the requirements of
this Article 23, LESSEE and LESSOR will consult with Engine
manufacturer and follow Engine manufacturer's recommendations
with regard to determining if such Engine complies with the
requirements of this Article 23 and the manner in which any
discrepancies from the requirements of this Article 23 will be
rectified.
23.9 Part Lives. At return, the condition of the Aircraft will be
as follows:
(a) The Aircraft will have zero (0) hours consumed since
the last full and complete zonal, systems,
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corrosion and structural "C" check (excluding hours consumed
on the acceptance flight) and will not have accumulated more
than 12,800 hours, or four (4) times the then MPD hourly "C"
check interval, since the last full and complete systems,
zonal, corrosion and structural "C7" check as defined in MPD.
(b) (i) Each Part of an Engine which has a hard time
limit will, except as set forth in (ii) below, have at least
[XXXXXXXXXXXXXXXXXXX] of its full allotment of hours/cycles
(whichever is the more limiting) remaining to operate until
its next-scheduled overhaul or removal. In addition, each
Engine will also have at least [XXXXXXXXXXXXXXXXXXX] hours and
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] remaining until its
next-anticipated full performance restoration shop visit
(based upon the Engine manufacturer's estimated mean time
between removals (MTBR) for engines of the same type as the
Engines). Each Engine will also have a remaining EGT margin
sufficient to permit the operation of such Engine for the
hours and cycles set forth in the preceding sentence, based
upon the historical experience of the Engine manufacturer for
engines of the same type as the Engines. In the event that on
Delivery LESSEE received the Engine or any Part thereof from
LESSOR in a condition less than what is set forth above in
this paragraph, as evidenced on the attachments to the
Estoppel and Acceptance Certificate, it is agreed that LESSEE
will not be required to return such Engine or Part thereof in
a better condition than that in which it was received.
(ii) Each Part of an Engine which has a life limit will
have at least [XXX] cycles remaining to operate until its next
scheduled removal. In addition, the overall average life
remaining on all life limited Parts of an Engine will be no
less than the overall average life remaining on the Parts of
such Engine as they were received at Delivery.
(c) The installed APU will be in serviceable condition
with no more than [XXX] hours accumulated since its last
Overhaul (excluding hours consumed on the acceptance flight).
(d) The installed main and nose landing gear, components
and their associated actuators, side braces and parts (the
"Landing Gear") will have no more hours/cycles/calendar time
consumed since the last Overhaul than at Delivery of the
Aircraft. In the event the installed Landing Gear does not
meet the foregoing condition, LESSEE will be entitled to
return the Landing Gear with a minimum of [XXXXXXXXXXXXXXXXXXX
XXXX] of the full allotment of hours/cycles/calendar
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time (whichever is the more limiting factor) remaining until
the next overhaul or scheduled removal, provided that LESSEE
will reimburse LESSOR an amount equal to the number of
hours/cycles/calendar time (whichever is the more limiting
factor) consumed on the Landing Gear at return since the last
overhaul in excess of that which existed at Delivery
multiplied by a Landing Gear Overhaul cost per hour calculated
as follows:
such Landing Gear Overhaul cost price per hour will
be the quotient obtained by dividing (i) the expected
cost of the next Landing Gear Overhaul by (ii) the
full allotment of hours between scheduled Overhauls
for such Landing Gear as approved by the MPD. If
LESSEE and LESSOR are unable to agree on the expected
cost of the next scheduled Landing Gear Overhaul,
such cost will be established by taking the average
of the price quotes submitted by two (2) reputable
FAA-approved Landing Gear Overhaul facilities, one
selected by LESSEE and the other selected by LESSOR.
(e) Each component or Part of the Aircraft which has a
hard time (hour/cycle) limit to overhaul pursuant to the MPD
will have the greater of (i) [XXXXXXXXXXXXXXXXXXX] of the full
allotment of hours and cycles, or (ii) the lesser of (1) [XXX
XXXXXXXXXXXXXXX] hours or cycles (whichever is applicable) or
(2) [XXXXXXXXXXXXXXXXXXXXXXXXX] of its total approved life, if
its approved life is less than [XXXXXXXXXXXXXXXXXXXX] hours or
cycles, remaining to operate until its next scheduled overhaul
pursuant to the MPD. In the event that on Delivery LESSEE
received from LESSOR hard time controlled components or Parts
less than what is set forth above in this paragraph, as
evidenced on the attachments to the Estoppel and Acceptance
Certificate, it is agreed that LESSEE will not be required to
return such hard time controlled components or Parts in better
condition than that in which they were received.
(f) Each life-limited component or Part of the Aircraft
will have the greater of (i) [XXXXXXXXXXXXXXXXXXX] of the full
allotment of hours and cycles, or (ii) the lesser of (1) [XXX
XXXXXXXXXXXXXXXX] hours or cycles or (2) [XXXXXXXXXXXXXXXXXXX
XXXXX] of its total approved life remaining to operate
pursuant to the Maintenance Program. In the event that on
Delivery LESSEE received from LESSOR life-limited components
or Parts in a condition less than what is set forth above in
this paragraph, as evidenced on the attachments to the
Estoppel and Acceptance Certificate, it is agreed that LESSEE
will not be required to return such life- limited components
or Parts in better condition than that in which they were
received.
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(g) Each component or Part of the Aircraft that has a
calendar limit (including emergency equipment) will have at
least as much time remaining to operate at the date of return
of the Aircraft to LESSOR as it had at Delivery, pursuant to
the Maintenance Program.
(h) No Engine, installed component or Part will have a
total time since new greater than one hundred ten percent
(110%) of that of the Airframe and, with respect to all
installed components as a group, the components will have an
average total time since new no greater than that of the
Airframe, so long as such condition was met at Delivery.
(i) The Aircraft tires and brakes will be new or in the
same condition as at Delivery.
23.10 LESSEE's Continuing Obligations. In the event that LESSEE does
not return the Aircraft to LESSOR on the Expiration Date in
the condition required by this Article 23 for any reason
(whether or not the reason is within LESSEE's control,
except as provided below):
(a) the obligations of LESSEE under this Lease will
continue in full force and effect on a day-to-day basis until
such return. This will not be considered a waiver of LESSEE's
Event of Default or any right of LESSOR hereunder;
(b) Until such time as the Aircraft is redelivered to
LESSOR and put into the condition required by this Article 23,
instead of paying the Rent specified in Article 5.3, LESSEE
will pay twice the amount of Rent for each day from the
scheduled Expiration Date until the Termination Date (the
monthly Rent payable under Article 5.3.1 will be prorated
based on the actual number of days in the applicable month).
Notwithstanding the foregoing, if the delay is caused solely
by a force majeure, LESSEE will only be required to pay the
normal stated Rent during any such delay and payment will be
made upon presentation of LESSOR's invoice; and if such delay
in return is the direct and sole result of LESSOR's failure to
perform any redelivery inspection and acceptance in a
commercially reasonable manner, LESSEE shall pay no Rent
during such delay;
(c) LESSOR may elect, in its sole and absolute
discretion, to accept the return of the Aircraft prior to the
Aircraft being put in the condition required by this Article
23 and thereafter have any such non- conformance corrected at
such time as LESSOR may deem appropriate (but within ninety
(90) days following the return of the Aircraft) and at
commercial rates then
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charged by the Person selected by LESSOR to perform such
correction. Any direct expenses incurred by LESSOR for such
correction will become additional Rent payable by LESSEE
within fifteen (15) days following the submission of a written
statement by LESSOR to LESSEE, identifying the items corrected
and setting forth the expense of such corrections. LESSEE's
obligation to pay such supplemental Rent will survive the
Termination Date.
23.11 Return Acceptance Certificate. Upon return of the Aircraft in
accordance with the terms of this Lease, LESSOR will prepare and execute two (2)
Return Acceptance Certificates in the form and substance of Exhibit I. In
addition, LESSEE and LESSOR will execute a Lease Termination for filing with the
FAA evidencing termination of this Lease.
23.12 Indemnities and Insurance. The indemnities and insurance
requirements set forth in Articles 17 and 18, respectively, will apply to
Indemnitees and LESSOR's representatives during return of the Aircraft,
including the ground inspection and acceptance flight.
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ARTICLE 24 ASSIGNMENT
---------- ----------
24.1 No Assignment by LESSEE. EXCEPT AS MAY BE SPECIFICALLY
PERMITTED IN THIS LEASE, NO ASSIGNMENT, NOVATION, TRANSFER,
MORTGAGE OR OTHER CHARGE MAY BE MADE BY LESSEE OF ANY OF ITS
RIGHTS WITH RESPECT TO THE AIRCRAFT, ENGINE OR PART OR THIS
LEASE.
24.2 Sale or Assignment by LESSOR.
24.2.1 Subject to LESSEE's rights pursuant to this Lease, LESSOR may
at any time and without LESSEE's consent sell, assign or
transfer its rights and interest hereunder or with respect to
the Aircraft to a third party ("LESSOR's Assignee"). For a
period of two (2) years after such sale or assignment and at
LESSEE's cost, LESSEE will continue to name LESSOR as an
additional insured under the Aviation and Airline General
Third Party Liability Insurance specified in Exhibit C.
24.2.2 Notwithstanding Article 24.2.1 hereof, LESSOR shall not
assign, mortgage, pledge, convey or otherwise transfer any of
its right, title or interest in or to this Lease or the
Aircraft, whether directly or indirectly, through the sale or
other transfer of all or substantially all of its assets or
business, or otherwise, except on the conditions set forth in
this Article 24. LESSOR may transfer to another Person
("Lessor's Assignee") such right, title and interest, subject
to the conditions that:
(a) LESSOR's Assignee shall have full power, authority
and legal right to execute and deliver and to perform all of
the obligations of the LESSOR under this Lease that are being
assigned to it and shall provide reasonably satisfactory
evidence of such power and authority to LESSEE;
(b) LESSOR's Assignee shall enter into one or more legal,
valid, binding and enforceable agreements that (i) is/are in
form suitable for recordation by the FAA (accompanied by an
opinion of counsel addressed to LESSEE to the effect that such
agreement or agreements are legal, valid, binding and
enforceable, subject to a customary exception relating to
insolvency and similar laws), (ii) is/are effective to confirm
that such LESSOR's Assignee agrees to be bound by all of the
terms of, and to undertake all of the obligations of, the
transferring LESSOR, whether or not LESSOR has also
transferred to such LESSOR's Assignee any portion of the
Security Deposit, any Reserves or any other amount paid by
LESSEE hereunder and (iii) contain(s) each of
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the representations and warranties made by the LESSOR herein;
(c) LESSOR's Assignee shall not be an airline which
directly competes with LESSEE;
(d) In connection with any transfer by LESSOR of less
than all of its right, title and interest in this Lease or the
Aircraft (other than a mortgage or other security agreement)
(i) the obligations of LESSOR arising under this Lease shall
become joint and several obligations among LESSOR, the new
LESSOR's Assignee and all other LESSOR's Assignees (if any)
and (ii) notwithstanding the other provisions of this Article
24, LESSEE shall pay to one party, and that party shall
receive on behalf of each LESSOR's Assignee, all payments,
notices and other communications to be provided by LESSEE
hereunder and each LESSOR's Assignee by accepting any such
assignment appoints LESSOR or the appointed representative as
its agent for the purposes of taking any action hereunder;
(e) No assignment, sale, transfer or granting of a
Security Interest by LESSOR hereunder shall impose or increase
any costs or expenses, including any costs related to Taxes,
to which LESSEE would not have been subject absent such
transfer, assignment, sale, or security interest.
24.3 LESSEE Cooperation. On request by LESSOR, LESSEE will execute
all such documents (such as a lease assignment agreement) as
LESSOR may reasonably require to confirm LESSEE's
obligations under this Lease and obtain LESSEE's
acknowledgement that LESSOR is not in breach of the Lease,
if such is the case. LESSEE will provide all other
reasonable assistance and cooperation to LESSOR, LESSOR's
Assignee and LESSOR's Lender in connection with any such
sale or assignment. LESSOR will reimburse LESSEE for its
reasonable out-of-pocket costs, including reasonable legal
fees incurred in reviewing documents required by LESSOR.
24.4 Protections.
24.4.1 Wherever the term "LESSOR" is used in this Lease in relation
to any of the provisions relating to disclaimer, title and
registration, indemnity and insurance contained in Articles 8,
14, 17 and 18, respectively, or with respect to Article
20.2.3, the term "LESSOR" will be deemed to include LESSOR's
Assignee and LESSOR's Lender, if applicable. Provided LESSOR's
assignee meets the requirement of this Article 24, LESSEE will
acknowledge and accept LESSOR's Assignee as the new "LESSOR"
under this Lease and (except in accordance with Article
24.2.2(d)) will look solely to LESSOR's Assignee for the
performance of all
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LESSOR obligations and covenants under this Lease arising on
and after the Aircraft sale date.
24.4.2 In the event that LESSOR advises LESSEE that LESSOR intends to
sell the Aircraft and assign this Lease to a Person who has a
net worth which is less than US$25,000,000, LESSEE shall have
five (5) Business Days to irrevocably commit to purchase the
Aircraft for the price, on the terms and within the time frame
that LESSOR's purchaser has agreed to. If LESSEE does not
irrevocably commit in writing within such five (5) Business
Days to purchase the Aircraft, LESSOR may sell the Aircraft to
LESSOR's purchaser provided such purchaser complies with and
meets all of the requirements of this Article 24. LESSOR will
advise LESSEE as soon as possible of any offers LESSOR
receives regarding the purchase of the Aircraft that would
trigger this provision.
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ARTICLE 25 DEFAULT OF LESSEE
---------- -----------------
25.1 LESSEE Notice to LESSOR. LESSEE will promptly notify LESSOR if
LESSEE becomes aware of the occurrence of any Default.
25.2 Events of Default. The occurrence of any of the following will
constitute an Event of Default and material breach of this
Lease by LESSEE:
(a) LESSEE fails to take delivery of the Aircraft when
obligated to do so under the terms of this Lease.
(b) LESSEE fails to make a Rent or other payment due
hereunder in the manner and by the date provided herein and
such failure continues for three (3) Business Days after such
payment is due.
(c) LESSEE fails to obtain or maintain the insurance
required by Article 18.
(d) LESSEE fails to return the Aircraft to LESSOR on the
Expiration Date in accordance with Article 23 unless delay is
caused solely by LESSOR.
(e) LESSEE fails to observe or perform any of its other
obligations hereunder and fails to cure the same within
fifteen (15) days after written notice thereof to LESSEE. If
such failure cannot by its nature be cured within fifteen (15)
days, LESSEE will have the reasonable number of days necessary
to cure such failure (not to exceed a period of sixty (60)
days) so long as it uses diligent and all reasonable efforts
to do so.
(f) Any representation or warranty of LESSEE herein
proves to have been untrue in any material respect as of the
date when made and the same remains material at the time of
discovery.
(g) The registration of the Aircraft is cancelled other
than as a result of an act or omission of LESSOR.
(h) LESSEE or an approved sublessee no longer has
unencumbered control (other than Permitted Liens) or
possession of the Aircraft or Engines, except as otherwise
permitted by this Lease.
(i) LESSEE temporarily or permanently discontinues
business (except in the case of a labor action which does not
create a material risk of LESSEE not being able to perform
hereunder) or sells or otherwise disposes of all or
substantially all of its assets, except as may be specifically
permitted under this Lease.
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(j) LESSEE no longer possesses the licenses, certificates
and permits required for the conduct of its business as a
certificated air carrier in the U.S.
(k) LESSEE (i) suspends payment on its debts or other
obligations generally, (ii) is unable to or admits its
inability to pay its debts or other obligations as they fall
due, (iii) is adjudicated or becomes bankrupt or insolvent or
(iv) proposes or enters into any composition or other
arrangement for the benefit of its creditors generally.
(l) Any proceedings, resolutions, filings or other steps
are instituted with respect to LESSEE relating to the
bankruptcy, liquidation, reorganization or protection from
creditors of LESSEE or a substantial part of LESSEE's
property. If instituted by LESSEE, the same will be an
immediate Event of Default. If instituted by another Person,
the same will be an Event of Default if not dismissed,
remedied or relinquished within sixty (60) days.
(m) Any order, judgment or decree is entered by any court
of competent jurisdiction appointing a receiver, trustee or
liquidator of LESSEE or a substantial part of its property, or
if a substantial part of LESSEE's property is to be
sequestered. If instituted or done with the consent of LESSEE,
the same will be an immediate Event of Default. If instituted
by another Person, the same will be an Event of Default if not
dismissed, remedied or relinquished within sixty (60) days.
(n) Any indebtedness for borrowed moneys or a guarantee
or similar obligation owed by LESSEE with an unpaid balance of
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] or more becomes due
or is declared due before its stated maturity or LESSEE is in
payment default under any other lease, conditional sale
agreement or other agreement (and any applicable cure periods
have expired) pursuant to which LESSEE has possession of any
aircraft.
(o) LESSEE is in default under any other lease or
agreement between LESSEE and LESSOR and the same is not waived
or cured within its specified cure period.
(p) Any approved sublessee acts so as to prevent present
or future performance by LESSEE of its obligations under this
Lease.
25.3 LESSOR's General Rights. Upon the occurrence of any Event of
Default, all rights of LESSEE hereunder to continued
possession of the Aircraft will immediately cease and
terminate
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(but LESSEE's obligations hereunder will continue, including
the obligations to protect and insure the Aircraft as
required under this Lease). LESSOR may do all or any of the
following at its option (in addition to such other rights
and remedies which LESSOR may have by statute or otherwise
but subject to any requirements of applicable Law):
(a) Terminate this Lease by giving written notice to
LESSEE.
(b) Require that LESSEE immediately move the Aircraft to
an airport or other location in the continental U.S.
designated by LESSOR.
(c) For LESSEE's account, do anything that may reasonably
be required to cure any default and recover from LESSEE all
reasonable costs, including legal fees and expenses incurred
in doing so and Default Interest.
(d) Proceed as appropriate to enforce performance of this
Lease and to recover any damages for the breach hereof,
including the amounts specified in Article 25.5.
(e) Terminate this Lease by taking possession of the
Aircraft or by serving notice requiring LESSEE to return the
Aircraft to LESSOR at the location specified by LESSOR in the
continental U.S. If LESSOR takes possession of the Aircraft,
it may enter upon LESSEE's premises where the Aircraft is
located without liability. Upon repossession of the Aircraft,
LESSOR will then be entitled to sell, lease or otherwise deal
with the Aircraft free of any right or claim of LESSEE. LESSOR
will be entitled to the full benefit of its bargain with
LESSEE.
(f) Apply all or any portion of the Security Deposit or
the Reserves and any other security deposits or reserves held
by LESSOR pursuant to any other agreements between LESSOR and
LESSEE to any amounts due.
25.4 Deregistration and Export of Aircraft. If an Event of Default
has occurred and is continuing, LESSOR may take all steps necessary to
deregister the Aircraft in and export the Aircraft from the State of
Registration.
25.5 LESSEE Liability for Damages. If an Event of Default occurs,
in addition to all other remedies available at law or in equity, LESSOR has the
right to recover from LESSEE and LESSEE will pay LESSOR within two (2) Business
Days after LESSOR's written demand, all of the following, but without
duplication:
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(a) All amounts which are then due and unpaid hereunder
and which become due prior to the earlier of LESSOR's recovery
of possession of the Aircraft or LESSEE making an effective
tender thereof.
(b) Any losses suffered by LESSOR because of LESSOR's
inability to place the Aircraft on lease with another lessee
or to otherwise utilize the Aircraft on financial terms as
favorable to LESSOR as the terms hereof or, if LESSOR elects
to sell or dispose of the Aircraft, the funds arising from
such sale or other disposition are not as profitable to LESSOR
as leasing the Aircraft in accordance with the terms hereof
would have been (and LESSOR will be entitled to accelerate any
and all scheduled Rent which would have been due from the date
of LESSOR's recovery or repossession of the Aircraft through
the Expiration Date).
(c) All properly documented costs associated with
LESSOR's exercise of its remedies hereunder, including but not
limited to repossession costs, legal fees, Aircraft storage
costs, Aircraft re-lease or sale costs and LESSOR's internal
reasonable and actual costs and expenses (including the cost
of personnel time calculated based upon the compensation paid
to the individuals involved on an annual basis).
(d) Any amount of principal, interest, fees or other sums
paid or by LESSOR payable on account of funds borrowed in
order to carry any unpaid amount resulting from LESSEE's
failure to make any payments due hereunder.
(e) Any loss, cost, expense or liability sustained by
LESSOR due to LESSEE's failure to redeliver the Aircraft in
the condition required by this Lease.
(f) Any other loss, damage, expense, cost or liability
which LESSOR suffers or incurs as a result of the Event of
Default and/or termination of this Lease.
25.6 Waiver of Default. By written notice to LESSEE, LESSOR may at
its election waive any Default or Event of Default and its consequences and
rescind and annul any prior notice of termination of this Lease. The respective
rights of the parties will then be as they would have been had no Default or
Event of Default occurred and no such notice been given.
25.7 Present Value of Payments. In calculating LESSOR's damages
hereunder, upon an Event of Default all Rent that would have been due hereunder
during the Lease Term if an Event of Default had not occurred will be calculated
on a present value basis using a discount rate of [XXXXXXXXXXXXXXXX] per annum
discounted to the date of payment.
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25.8 Use of "Termination Date". For avoidance of doubt, it is
agreed that if this Lease terminates and the Aircraft is repossessed by LESSOR
due to an Event of Default, then, notwithstanding the use of the term
"Termination Date" in this Lease, the period of the Lease Term and the
"Expiration Date" will be utilized in calculating the damages to which LESSOR is
entitled pursuant to Article 25.5.
25.9 Mitigation of Damages. LESSOR will use reasonable efforts to
mitigate damages.
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ARTICLE 26 NOTICES
---------- -------
26.1 Manner of Sending Notices. Any notice, request or information
required or permissible under this Lease will be in writing and in English.
Notices will be delivered in person or sent by telex, fax, letter (mailed
airmail, certified and return receipt requested), or by expedited delivery
addressed to the parties as set forth in Article 26.2. In the case of a telex or
fax, notice will be deemed received upon actual receipt (in the case of a fax
notice, the date of actual receipt will be deemed to be the date set forth on
the confirmation of receipt produced by the sender's fax machine immediately
after the fax is sent). In the case of a mailed letter, notice will be deemed
received on the tenth (10th) day after mailing. In the case of a notice sent by
expedited delivery, notice will be deemed received on the date of delivery set
forth in the records of the Person which accomplished the delivery. If any
notice is sent by more than one of the above listed methods, notice will be
deemed received on the earliest possible date in accordance with the above
provisions.
26.2 Notice Information. Notices will be sent:
If to LESSOR: INTERNATIONAL LEASE FINANCE CORPORATION
1999 Avenue of the Stars
39th Floor
Los Angeles, California 90067
United States of America
Attention: Legal Department
Telex: 69-1400 INTERLEAS BVHL
Fax: 310-788-1990
Telephone: 310-788-1999
If to LESSEE: WESTERN PACIFIC AIRLINES, INC.
2864 South Circle Drive
Suite 1100
Colorado Springs, CO 80906
Attention: Chief Financial Officer
Fax: 1-719-527-7481
Telephone: 1-719-529-7737
or to such other places and numbers as either party directs in writing to the
other party.
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ARTICLE 27 GOVERNING LAW AND JURISDICTION
---------- ------------------------------
27.1 California Law. This Lease is being delivered in the State of
California and will in all respects be governed by and construed in accordance
with the Laws of the State of California (notwithstanding the conflict Laws of
the State of California).
27.2 Non-Exclusive Jurisdiction in California. As permitted by
Section 410.40 of the California Code of Civil Procedure, the parties hereby
irrevocably submit to the non-exclusive jurisdiction of the Federal District
Court for the Central District of California and the State of California
Superior or Municipal Court in Los Angeles, California. Nothing herein will
prevent either party from bringing suit in any other appropriate jurisdiction.
27.3 Service of Process. The parties hereby consent to the service
of process (i) out of any of the courts referred to above, (ii) in accordance
with Section 415.40 of the California Code of Civil Procedure by mailing copies
of the summons and complaint to the person to be served by air mail, certified
or registered mail to the address set forth in Article 26.2, postage prepaid,
return receipt requested or (iii) in accordance with the Hague Convention, if
applicable.
27.4 Prevailing Party in Dispute. If any legal action or other
proceeding is brought in connection with or arises out of any provisions in this
Lease, the prevailing party will be entitled to recover reasonable attorneys'
fees and other costs incurred in such action or proceedings. The prevailing
party will also, to the extent permissible by Law, be entitled to receive pre-
and post-judgment Default Interest.
27.5 Waiver. LESSEE and LESSOR hereby waive the right to a trial by
jury. LESSEE and LESSOR hereby irrevocably waive any objection which it may now
or hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or related to this Lease brought in any of the courts referred to
in Article 27.2, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
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ARTICLE 28 MISCELLANEOUS
---------- -------------
28.1 Press Releases. The parties will give copies to one another,
in advance if possible, of all news, articles and other releases provided to the
public media specifically regarding this Lease.
28.2 Power of Attorney. LESSEE hereby irrevocably appoints LESSOR
as its attorney for the purpose of exercising remedies provided in Article 25
following an Event of Default, including without limitation, the return,
repossession, deregistration of the Aircraft.
28.3 LESSOR Performance for LESSEE. The exercise by LESSOR of its
remedy of performing a LESSEE obligation hereunder is not a waiver of and will
not relieve LESSEE from the performance of such obligation at any subsequent
time or from the performance of any of its other obligations hereunder.
28.4 LESSOR's Payment Obligations. Any obligation of LESSOR under
this Lease to pay or release any amount to LESSEE is conditioned upon (i) all
amounts then due and payable by LESSEE to LESSOR under this Lease or under any
other agreement between LESSOR and LESSEE having been paid in full and (ii) no
Default having occurred and continuing hereunder at the time such payment or
release of payment is payable to LESSEE.
28.5 Usury Laws. The parties intend to contract in strict
compliance with the usury Laws of the State of California and, to the extent
applicable, the U.S. Notwithstanding anything to the contrary in the Operative
Documents, LESSEE will not be obligated to pay Default Interest or other
interest in excess of the maximum non-usurious interest rate, as in effect from
time to time, which may by applicable Law be charged, contracted for, reserved,
received or collected by LESSOR in connection with the Operative Documents.
During any period of time in which the then-applicable highest lawful rate is
lower than the Default Interest rate, Default Interest will accrue and be
payable at such highest lawful rate. However, if at later times such highest
lawful rate is greater than the Default Interest rate, then LESSEE will pay
Default Interest at the highest lawful rate until the Default Interest which is
paid by LESSEE equals the amount of interest that would have been payable in
accordance with the interest rate set forth in Article 5.7.
28.6 Delegation by LESSOR. LESSOR may delegate to any Person(s) all
or any of the rights, powers or discretion vested in it by this Lease and any
such delegation may be made upon such terms and conditions as LESSOR in its
absolute discretion thinks fit but no such delegation shall release LESSOR from
any of its obligations except to the extent discharged by such delegates.
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28.7 Confidentiality. The Operative Documents and all non-public
information obtained by either party about the other are confidential and are
between LESSOR and LESSEE only and will not be disclosed by a party to third
parties (other than to such party's auditors or legal advisors or as required in
connection with any filings of this Lease in accordance with Article 14 or
otherwise as required by law) without the prior written consent of the other
party. If disclosure is required as a result of applicable Law, LESSEE and
LESSOR will cooperate with one another to obtain confidential treatment as to
the commercial terms and other material provisions of this Lease.
28.8 Rights of Parties. The rights of the parties hereunder are
cumulative, not exclusive, may be exercised as often as each party considers
appropriate and are in addition to its rights under general Law. The rights of
one party against the other party are not capable of being waived or amended
except by an express waiver or amendment in writing. Any failure to exercise or
any delay in exercising any of such rights will not operate as a waiver or
amendment of that or any other such right any defective or partial exercise of
any such rights will not preclude any other or further exercise of that or any
other such right and no act or course of conduct or negotiation on a party's
part or on its behalf will in any way preclude such party from exercising any
such right or constitute a suspension or any amendment of any such right.
28.9 Further Assurances. Each party agrees from time to time to do
and perform such other and further acts and execute and deliver any and all such
other instruments as may be required by Law or reasonably requested by the
auditors of the other party or requested by other party to establish, maintain
or protect the rights and remedies of the requesting party or to carry out and
effect the intent and purpose of this Lease.
28.10 Use of Word "including". The term "including" is used herein
without limitation and by way of example only.
28.11 Headings. All article and paragraph headings and captions are
purely for convenience and will not affect the interpretation of this Lease. Any
reference to a specific article, paragraph or section will be interpreted as a
reference to such article, paragraph or section of this Lease.
28.12 Invalidity of any Provision. If any of the provisions of this
Lease become invalid, illegal or unenforceable in any respect under any Law, the
validity, legality and enforceability of the remaining provisions will not in
any way be affected or impaired.
28.13 Negotiation. The terms of this Lease are agreed by LESSOR from
its principal place of business in Los Angeles, California.
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28.14 Time is of the Essence. Time is of the essence in the
performance of all obligations of the parties under this Lease and,
consequently, all time limitations set forth in the provisions of this Lease
will be strictly observed.
28.15 Amendments in Writing. The provisions of this Lease may only
be amended or modified by a writing executed by LESSOR and LESSEE.
28.16 Counterparts. This Lease may be executed in any number of
identical counterparts, each of which will be deemed to be an original, and all
of which together will be deemed to be one and the same instrument when each
party has signed and delivered one such counterpart to the other party.
28.17 Delivery of Documents by Fax. Delivery of an executed
counterpart of this Lease or of any other documents in connection with this
Lease by fax will be deemed as effective as delivery of an originally executed
counterpart. Any party delivering an executed counterpart of this Lease or other
document by fax will also deliver an originally executed counterpart, but the
failure of any party to deliver an originally executed counterpart of this Lease
or such other document will not affect the validity or effectiveness of this
Lease or such other document.
28.18 Entire Agreement. The Operative Documents constitute the
entire agreement between the parties in relation to the leasing of the Aircraft
by LESSOR to LESSEE and supersede all previous proposals, agreements and other
written and oral communications in relation hereto. The parties acknowledge that
there have been no representations, warranties, promises, guarantees or
agreements, express or implied, except as set forth herein.
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IN WITNESS WHEREOF, LESSEE and LESSOR have caused this Lease to be
executed by their respective officers of this 31st day of May, 1996.
INTERNATIONAL LEASE FINANCE WESTERN PACIFIC AIRLINES, INC.
CORPORATION
By: ______________________________ By: _______________________________
Its: _____________________________ Its: ______________________________
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EXHIBIT A AIRCRAFT DESCRIPTION
--------- --------------------
Aircraft Manufacturer and Model: Boeing 737-3Q8
Seating Configuration: 148Y
Manufacturer's Serial Number: 24299
Registration Mark: N956WP
(formerly EC-FER)
Engine Manufacturer and Model: CFM-56-3B2
Engine Serial Numbers: 722248 and 722249
Engine Thrust Rating 22,000 pounds
Maximum Gross Takeoff Weight: 137,000 pounds
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EXHIBIT B CONDITION AT DELIVERY
--------- ---------------------
Engines
- - -------
Each Engine will be in serviceable condition.
Each life limited part of an Engine will have at least three thousand (3,000)
cycles remaining until removal.
LESSOR will accomplish maximum takeoff power assurance checks of each Engine in
accordance with the Engine manufacturer's recommended procedures.
LESSOR will accomplish a full hot and cold section videotape borescope
inspection of each Engine in accordance with the manufacturer's maintenance
manual and ensure all parameters are within the engine manufacturer's
maintenance manual limits.
LESSEE is entitled to be present during accomplishment of the above items.
APU
- - ---
The APU will be in serviceable condition.
Landing Gear
- - ------------
The installed landing gear will have at least fifty percent (50%) of its
allowable hours/cycles remaining until its next overhaul.
Time-Controlled Components
- - --------------------------
Time controlled ("Hard-time") components will have at least three thousand
(3,000) hours/cycles or twelve (12) months remaining until the next scheduled
overhaul.
Maintenance Checks
- - ------------------
The Aircraft will be delivered fresh from a full and complete systems, zonal,
corrosion and structural "7C" check per the MPD and all calendar controlled
corrosion inspection tasks will be completed corresponding with the age of the
Aircraft.
The Aircraft will be weighed prior to delivery and LESSOR shall revise the
weight and balance records and compute new weight and balance data.
Interior Configuration
- - ----------------------
The Aircraft will be delivered with 148 Jepson Burns tourist class seats, four
(4) Driessen galleys (G1, G2, G3 and G6) and three (3) lavatories ((1) FWD LAV A
and (2) AFT, LAV B, LAV C) installed. However, LESSEE has contracted directly
with Pemco to configure the Aircraft with 138 tourist class seats.
Exterior & Interior Markings
- - ----------------------------
The Aircraft will be delivered with the fuselage stripped, primed and painted
white in accordance with Major U.S. Airline standards (provided LESSEE advises
LESSOR of the paint specification in
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sufficient time not to delay delivery or cause overtime charges) and all FAA
required exterior and interior placards, signs and markings will be properly
attached, free of damage, clean and legible.
The flight deck paint will be touched up as necessary.
FAA Airworthiness Directives
- - ----------------------------
All applicable FAA AD's which require terminating action within one year after
the delivery of the Aircraft will be complied with.
Aircraft Damage & Repairs
- - -------------------------
All damage on the Aircraft which is out of limits as prescribed in the B737 SRM
will be permanently repaired in accordance with FAA-approved data.
All existing repairs will be permanent FAA-approved repairs.
Deferred Maintenance Items
- - --------------------------
All pilot discrepancies and deferred maintenance items will be cleared on a
terminating action basis at the time of delivery, including those defects noted
during the acceptance flight check which are out of manufacturers approved
limits.
Certification
- - -------------
The Aircraft will be airworthy and delivered with a current and valid US FAA
Certificate of Airworthiness for Transport Category Aircraft in accordance with
FAR Part 21 (TCAS will not be installed on the Aircraft).
Aircraft Cleanliness
- - --------------------
The Aircraft interior (including flight deck, passenger cabin and windows),
exterior and cargo compartments will be clean and cosmetically acceptable in
accordance with Major U.S. Airline standards and ready to be placed into
immediate commercial airline passenger flight operations.
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EXHIBIT C CERTIFICATE OF INSURANCE
--------- ------------------------
[Refer to Aircraft Lease Agreement dated as of May 31, 1996 between LESSEE and
LESSOR (the "Lease"). If applicable, insurance certificates from both the
insurers and reinsurers will be provided. If there is a LESSOR's Lender, include
references to it where appropriate after references to LESSOR.]
To: INTERNATIONAL LEASE FINANCE CORPORATION ("LESSOR")
1999 Avenue of the Stars
39th Floor
Los Angeles, California 90067
WESTERN PACIFIC AIRLINES, INC.
Boeing 737-3Q8
Manufacturer's Serial No.: 24299
Registration Mark: N956WP (the "Aircraft")
The following security has subscribed to the insurance and/or
reinsurance policies:
[LIST COMPANIES & PERCENTAGES]
THIS IS TO CERTIFY THAT, as Insurance Brokers, we have effected Fleet
Insurance in respect of aircraft owned or operated by LESSEE (including the
Aircraft) as specified below.
AIRCRAFT HULL ALL RISKS
-----------------------
COVERING:
- - --------
All risks of physical loss or damage to the Aircraft from any cause
(subject only to the exclusions as specified below), for an Agreed
Value of Aircraft in the amount of [[XXXXXXXXXXXXX] for years 1-5 and
[XXXXXXXXX] thereafter].
DEDUCTIBLES:
- - -----------
US$ each and every loss. Not applicable to Total
Loss/Constructive Total Loss or Arranged Total Loss.
GEOGRAPHICAL COVERAGE:
- - ---------------------
Worldwide
AVIATION AND AIRLINE GENERAL THIRD PARTY LIABILITY
--------------------------------------------------
COVERING:
- - --------
Aircraft Third Party, Passenger, Baggage, Cargo and Mail Liability and
Airline General Third Party Liability (including Premises,
Hangarkeepers and Products Liability) for combined single limit of not
less than US$ [XXXXXXXXX]
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<PAGE>
(or such higher amount as LESSEE may carry on any other aircraft in its
fleet) any one accident/occurrence (but in the aggregate in relation to
Products Liability), extended to cover LESSEE's liability under the
Lease to the extent of the risks covered by the policy including war
and allied perils under Extended Coverage Endorsement as per AVN 52
subject only to exclusions as specified below.
GEOGRAPHICAL LIMITS:
- - -------------------
Worldwide
HULL WAR AND ALLIED PERILS
--------------------------
COVERING:
- - --------
Hull War Risks as per RJM Airline One, but including (i) confiscation
or requisition (including by State of Registration), (ii) hijacking or
other unlawful seizure or wrongful exercise of control of the Aircraft
or crew in flight (including any attempt at such seizure or control)
and including "All Risks" Continuation Clause and Extortion Risks
(including expenses) and covering claims excluded from Hull All Risks
Policy while Aircraft outside Assured's control by reason of perils
insured under this policy, for an Agreed Value of Aircraft in the
amount of US$ [XXXXXXXX]
DEDUCTIBLE:
- - ----------
GEOGRAPHICAL LIMITS:
- - -------------------
Worldwide
AIRCRAFT SPARES ALL RISKS INSURANCE
-----------------------------------
COVERING:
- - --------
All risks of physical loss or damage to Aircraft Parts or spares or
Engines at all times when removed from the Aircraft from whatever
cause, subject only to the exclusions specified below, including the
risks set down in AVN 48B other than paragraphs (a) and (b) thereof
(but including paragraph (a) in respect of transit risks) for limits
of:
US$ [AMOUNT] any one location US$ [AMOUNT] any one sending and covering
replacement cost.
DEDUCTIBLE:
- - ----------
___________ - each and every loss
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GEOGRAPHICAL COVERAGE:
- - ---------------------
Worldwide
INSURANCE REQUIRED BY MANUFACTURER
----------------------------------
LESSEE will carry the insurance required by Manufacturer in connection
with LESSOR's assignment of Manufacturer's warranties and product
support to LESSEE.
CONTRACTUAL INDEMNITY
---------------------
LESSEE has insurance coverage for the indemnities agreed to by LESSEE
pursuant to Article 17 of the Lease to the extent provided in the
relevant policies.
PERIOD OF COVERAGE (ALL POLICIES)
---------------------------------
From Delivery Date of Aircraft to [EXPIRATION DATE]
It is further certified that LESSOR has an interest in respect of the
Aircraft under the Lease. Accordingly, with respect to losses occurring
during the period from the Effective Date until the expiry of the
Insurance or until the expiry or agreed termination of the Lease or
until the obligations under the Lease are terminated by any action of
the Insured or Lessor and in consideration of the Additional Premium it
is confirmed that the Insurance afforded by the Policy is in full force
and effect and it is further agreed that the following provisions are
specifically endorsed to the Policy.
1. UNDER THE HULL (ALL RISKS AND HULL WAR AND ALLIED RISKS) AND
AIRCRAFT SPARES INSURANCES
- - --------------------------------------------------------------------------------
(a) In respect of any claim on Equipment that becomes
payable on the basis of a Total Loss, settlement (net of any relevant Policy
Deductible) shall be made to, or to the order of the contract Party(ies). In
respect of any other claim, settlement (net of any relevant Policy Deductible)
shall be made with such party(ies) as may be necessary to repair the Equipment
unless otherwise agreed after consultation between the Insurers and the Insured
and, where necessary under the terms of the Contract(s), the Contract
Party(ies). Such payments shall only be made provided they are in compliance
with all applicable laws and regulations.
(b) Insurers agree 50/50 settlement in terms of AVS 103.
(c) Insurers have no right to replace the Aircraft on a
Total Loss (arranged, constructive or otherwise).
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(d) Insurers recognize that LESSEE and LESSOR have agreed
that a Total Loss of the Airframe will constitute a Total Loss of the Aircraft.
(e) In the event of Total Loss of the Aircraft, Insurers
agree to pay LESSOR all amounts up to the Agreed Value.
(f) In the event that LESSEE does reinsure, the following
cut-through clause will apply: Insurers confirm that in the event of any claim
arising under the hull insurances, the Reinsurers will in lieu of payment of the
Insurers, its successors in interest and assigns, pay to the person named as
sole loss payee under the original insurances that portion of any loss due for
which the Reinsurers would otherwise be liable to pay the Insurers (subject to
proof of loss), it being understood and agreed that any such payment by any
Reinsurers will fully discharge and release such Reinsurer from any and all
further liability in connection therewith and provide for payment to be made
notwithstanding (a) any bankruptcy, insolvency, liquidation or dissolution of
the Insurers and (b) that the Insurers have made no payment under the original
insurance policies.
(g) Insurers confirm that under the insurance policies,
if the Insured installs an engine owned by a third party on the Aircraft, either
(i) the hull insurance will automatically increase to such higher amount as is
necessary in order to satisfy both Lessor's requirement to receive the Agreed
Value in the event of a Total Loss, Constructive Total Loss or Arranged Total
Loss and the amount required by the third party engine owner, or (ii) separate
additional insurance on such engine will attach in order to satisfy separately
the requirements of the Insured to such third party engine owner.
2. UNDER THE LEGAL LIABILITY INSURANCE
-----------------------------------
(a) Subject to the provisions of this Endorsement, the
Insurance will operate in all respects as if a separate Policy had been issued
covering each party insured hereunder, but this provision will not operate to
include any claim howsoever arising in respect of loss or damage to the Aircraft
insured under the Hull or Spares Insurance of the Insured. Notwithstanding the
foregoing the total liability of Insurers in respect of any and all Insureds
will not exceed the limits of liability stated in the Policy.
(b) The Insurance provided hereunder will be primary and
without right of contribution from any other insurance which may be available to
the Lessor.
(c) This Endorsement does not provide coverage for the
Lessor with respect to claims arising out of its legal liability as
manufacturer, repairer, or servicing agent of the Aircraft.
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3. UNDER ALL INSURANCES
--------------------
(a) Lessor, its successors and assigns, and (with respect
to Aviation and Airline General Third Party Liability only) its directors,
officers and employees for their respective rights and interests, are included
as Additional Insured.
(b) The cover afforded to Lessor by the Policy in
accordance with this Endorsement will not be invalidated by any act or omission
(including misrepresentation and non-disclosure) of any other person or party
which results in a breach of any term, condition or warranty of the Policy
PROVIDED THAT Lessor has not caused, contributed to or knowingly condoned the
said act or omission.
(c) Lessor will have no responsibility for premium and
insurers will waive any right of set-off or counterclaim against Lessor except
in respect of outstanding premium in respect of the Aircraft, provided that
Insurer may only set-off for premiums against the proceeds of the hull insurance
for outstanding premiums in connection with hull all risks and hull war and
allied perils insurance.
(d) Upon payment of any loss or claim to or on behalf of
Lessor, Insurers will to the extent and in respect of such payment be thereupon
subrogated to all legal and equitable rights of Lessor indemnified hereby (but
not against Lessor). Insurers will not exercise such rights without the consent
of those indemnified, such consent not to be unreasonably withheld. At the
expense of Insurers Lessor will do all things reasonably necessary to assist the
Insurers to exercise said rights.
(e) Except in respect of any provision for Cancellation
or Automatic Termination specified in the Policy or any endorsement thereof,
cover provided by this Endorsement may only be canceled or materially altered in
a manner adverse to Lessor by the giving of not less than thirty (30) days
notice in writing to the appointed broker. Notice will be deemed to commence
from the date such notice is given by the Insurers. Such notice will NOT,
however, be given at normal expiry date of the Policy or any endorsement.
4. EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THE
ENDORSEMENT:
- - --------------------------------------------------------------------------------
(a) LESSOR IS COVERED BY THE POLICY SUBJECT TO ALL TERMS,
CONDITIONS, LIMITATIONS, WARRANTIES, EXCLUSIONS AND CANCELLATION PROVISIONS
THEREOF.
(b) THE POLICY WILL NOT BE VARIED BY ANY PROVISIONS
CONTAINED IN THE LEASE WHICH PURPORT TO SERVE AS AN ENDORSEMENT OR AMENDMENT TO
THE POLICY.
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<PAGE>
SUBJECT (save as specifically stated in this Certificate) to policy
terms, conditions, limitations and exclusions.
Yours faithfully,
[BROKERS]
-94-
<PAGE>
EXHIBIT D BROKERS' LETTER OF UNDERTAKING
--------- ------------------------------
To: INTERNATIONAL LEASE FINANCE CORPORATION
1999 Avenue of the Stars
39th Floor
Los Angeles, California 90067
United States
Date: Our Ref:
Dear Sirs:
WESTERN PACIFIC AIRLINES, INC.
Boeing 737-3Q8
Manufacturer's Serial No.: 24299
Registration Mark: N956WP
We confirm that insurance has been effected for the account of [LESSEE]
(the "Operator") covering all aircraft owned or operated by them, including the
above-mentioned aircraft (the "Aircraft"). [Also confirm, if applicable, the
amount of any hull all risks or hull war and allied perils on the Aircraft which
LESSEE is carrying in excess of the Agreed Value (which excess insurance would
be payable to LESSEE). Such excess insurance may not exceed ten percent (10%) of
the Agreed Value.]
Pursuant to instructions received from the Operator and in
consideration of your approving the arrangement of the Operator's "Fleet Policy"
(under which the above-mentioned Aircraft is insured) through the intermediary
of ourselves as Brokers in connection with the insurance (the "Insurance")
mentioned in our Certificate of Insurance (Reference No. [ ] dated [ ] and
attached hereto), we undertake as follows:
1. In relation to the Hull and War Risks Insurance to hold to
your order the insurance Slips or Contracts and any Policies which may be issued
or any policies substituted (with your consent) therefor (but only insofar as
the same relate to the Aircraft only) and the benefit of the Hull and War Risks
Insurance thereunder, but subject to our requirements to operate the Fleet
Policy insofar as it relates to any other aircraft insured thereunder.
2. To advise you of any of the following:
(a) If any insurer cancels or gives notice of
cancellation of any of the Insurance at least thirty (30) days (or such lesser
period as may be available in the case of war and Allied Perils) before such
cancellation is to take effect in respect of the Aircraft.
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<PAGE>
(b) Of any act or omission or of any event (including
non-payment of premium) of which we have knowledge or are notified and which
might invalidate or render unenforceable in whole or in part any of the
Insurance, insofar as the same relate to the Aircraft.
(c) If we do not receive instructions to renew all or any
of the Insurance at least thirty (30) days prior to their expiration.
(d) If any of the Insurance are not renewed on the same
terms (save as to premium and period of cover and as you might otherwise have
notified us to be acceptable to you) seven (7) days prior to expiry thereof.
The above undertakings are given subject to our continuing appointment
for the time being as Insurance Brokers to the Operator.
We also undertake to advise you if we cease to be Insurance Brokers to
the operator.
Yours faithfully,
-96-
<PAGE>
EXHIBIT E ESTOPPEL AND ACCEPTANCE CERTIFICATE
--------- -----------------------------------
WESTERN PACIFIC AIRLINES, INC. ("LESSEE"), a corporation organized
under the laws of Colorado does hereby represent, acknowledge, warrant and agree
as follows:
1. LESSEE and INTERNATIONAL LEASE FINANCE CORPORATION, as LESSOR,
have entered into an Aircraft Lease Agreement dated as of May 31, 1996
(hereinafter referred to as the "Lease"). Words used herein with capital letters
and not otherwise defined will have the meanings set forth in the Lease.
2. LESSEE has this ____ day of ___________, 19__ (Time: ________)
at ________________________ received from LESSOR possession of:
(a) One (1) Boeing 737-3Q8 Aircraft, bearing
Manufacturer's serial number 24299, together with two (2) CFM-56- 3B2 engines
bearing manufacturer's serial numbers 722248 and 722249, all 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 listed in the Document Receipt attached
hereto.
3. The Airframe, Engines and Parts had the following hours/cycles
at Delivery:
(a) Airframe:
Total hours _________ Total landings ___________
_____ hours/_____ cycles since last "7C" check
_____ hours/_____ cycles since last "22,400 flight
hour structural check" check
(b) Engines:
Total Hrs/Cycles since
Position Serial No. Total Hrs Cycles last shop visit
- - -------- ---------- --------- ------ ----------------
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<PAGE>
Time Remaining to next
Life Limited Part Removal
-------------------------
Hours Cycles
----- ------
MSN
MSN
(c) APU: MSN ____
Total hours _____
_______ hours/_______ cycles remaining until next
HSI inspection
_______ hours/_______ cycles remaining on turbine
and compressor life limited parts
(d) Landing Gears:
Hrs/Cycles Hrs/Cycles to
Total since last next Sched.
Position Serial No. Hrs/Cycles Overhaul Removal
- - -------- ---------- ---------- ---------- -------------
Nose
Right Main
Left Main
(e) Status of components or Parts with time/cycle and
calendar limits (see attached sheet)
(f) Fuel on board at delivery: _______ (circle one)
pounds/kilos (_______ gallons)
(g) Tire life remaining ____, ____, ____, ____
(h) Brake life remaining ____, ____, ____, ____
4. All of the foregoing has been delivered and accepted on the
date set forth above to LESSEE's full satisfaction and pursuant to the terms and
provisions of the Lease.
5. Pursuant to the terms of the Lease, the first Rent payment was
due and payable one (1) Business Day prior to the date set forth above and all
subsequent monthly payments are due and payable as provided in Article 5.3.2 of
the Lease.
6. The Aircraft, Engines, Parts and Aircraft Documentation as
described in the Lease have been fully examined by LESSEE and have been received
in a condition fully satisfactory to LESSEE and in full conformity with the
Lease in every respect.
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<PAGE>
7. The Lease is in full force and effect, LESSOR has fully, duly
and timely performed all of its obligations of every kind or nature thereunder
and LESSEE has no claims, offsets, deductions, set-off or defenses of any kind
or nature in connection with the Lease.
8. Prior to the Delivery Date, LESSEE has obtained all required
permits, authorizations, licenses and fees of the State of Registration or any
Government Entity thereof necessary in order for LESSEE to operate the Aircraft
as permitted by the terms of the Lease.
Dated on the date set forth above
WESTERN PACIFIC AIRLINES, INC.
By:__________________________
Its:_________________________
AGREED AND ACCEPTED:
INTERNATIONAL LEASE FINANCE CORPORATION
By:______________________
Title:___________________
Date:____________________
ATTACHMENTS: 1. List of Loose Equipment
2. List of Aircraft Documentation
3. List of Discrepancies
4. List of time/cycle/calendar controlled
components and times since overhaul or new.
-99-
<PAGE>
ATTACHMENT 1 TO ESTOPPEL AND ACCEPTANCE CERTIFICATE
---------------------------------------------------
LIST OF LOOSE EQUIPMENT
-----------------------
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<PAGE>
ATTACHMENT 2 TO ESTOPPEL AND ACCEPTANCE CERTIFICATE
---------------------------------------------------
LIST OF AIRCRAFT DOCUMENTATION
------------------------------
[The (a) manuals,and (b) Aircraft records and historical documents set
forth below are to be returned with the Aircraft in a current, up-to-date and
correct status]
MANUALS
-------
Name
----
1. FAA Approved Airplane Flight Manual
2. Manufacturer's Operations Manual - Volume No. _____
3. Quick Reference Handbook
4. Maintenance Manuals
5. Wiring Diagram Manuals
6. Structural Repair Manual
7. Illustrated Parts Catalog
8. Vendor Illustrated Parts Catalog
9. Overhaul Manuals
10. Vendor Overhaul Manuals
11. Drawings (Major Assembly and Installation)
12. Weight and Balance Control and Loading Manual
13. Weight and Balance Manual Supplement
14. Actual Weight and Balance Compliance
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<PAGE>
AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS
-----------------------------------------
1. Aircraft log book (current and file copies)
2. Aircraft Readiness Log (revised to time of return)
3. Maintenance Time Control Report (components, maintenance visit, special
items next due Airframe hours and cycles)
4. Aircraft previous maintenance visit record including the last inspection
performed.
5. Airworthiness Directive Compliance Summary
6. Rigging Document
7. Serviceable Tags for all rotable components installed (Airframe & Engines)
8. ADs requiring continuous surveillance
9. Service bulletin terminated accomplishment status
10. Service bulletin requiring continuous surveillance summary and maintenance
control action
11. Airframe and component history records
12. FAA Form 337 for Airframe, repair/overhaul certification of last major
visit
13. FAA Form 337 for each Engine, repair/overhaul certification of last shop
visit
14. Engine Readiness Log for each Engine (components installed)
15. Summary of Service Bulletin's accomplished for each Engine
16. Summary of AD's accomplished for each Engine
17. SB and AD status requiring continuous surveillance with maintenance,
control action for each Engine
18. Engine time summary sheet including life limited items (for each Engine)
19. Engine log books for each Engine (current and file copies)
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<PAGE>
Receipt of the foregoing documents, except as noted,
is hereby acknowledged.
-103-
<PAGE>
EXHIBIT F OPINION OF COUNSEL
--------- ------------------
TO BE GIVEN BY INDEPENDENT OUTSIDE COUNSEL OF LESSEE OR OTHER LAWYERS ACCEPTABLE
TO LESSOR
To: International Lease Finance Corporation
1999 Avenue of the Stars
39th Floor
Los Angeles, California 90067
United States
Gentlemen:
This opinion is furnished to you pursuant to Article _______ of the Aircraft
Lease Agreement dated as of May 31, 1996 (the "Lease") between WESTERN PACIFIC
AIRLINES, INC. ("LESSEE") and INTERNATIONAL LEASE FINANCE CORPORATION
("Lessor"). Defined terms in this opinion are used herein as defined in the
Lease.
I have acted as counsel for the LESSEE in connection with the preparation,
execution and delivery of the Lease.
In that connection I have examined:
(a) The Lease and Estoppel and Acceptance Certificate
(b) The charter of the LESSEE and all amendments thereto
(the "Charter") and
(c) Such other documents, agreements and instruments, and
such treaties, laws, rules, regulations, decrees and the like, as I have deemed
necessary as a basis for the opinions hereinafter expressed.
[ (d) All of the agreements and any amendments thereto
between LESSEE and all other lessors and lenders of LESSEE covering other
aircraft operated by LESSEE on which the Engines can be installed.]
Based upon the foregoing and having regard for legal considerations which I deem
relevant, I am of the opinion that:
1. LESSEE is a corporation duly incorporated, validly existing
and in good standing under the Laws of Delaware. It has the corporate power and
authority to carry on its business as presently conducted and to perform its
obligations hereunder.
2. No authorization, approval, consent, license or order of, or
registration with, or the giving of notice to the Aviation Authority or any
other regulatory body or authority is required for the valid authorization,
execution, delivery and performance by the LESSEE of the Lease.
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<PAGE>
3. The Lease and the Estoppel and Acceptance Certificate have
each been duly authorized, executed and delivered by LESSEE. Each such
instrument is a valid, enforceable and binding obligation of LESSEE except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
Laws of general application affecting the enforcement of creditors' rights.
4. The execution and delivery of the Lease and the Estoppel and
Acceptance Certificate, the consummation by the LESSEE of the transactions
contemplated therein and compliance by the LESSEE with the terms and provisions
thereof do not and will not contravene any Law applicable to LESSEE, or result
in any breach of or constitute any default under or result in the creation of
any lien, charge or encumbrance upon any property of LESSEE, under any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement, corporate charter, by-law or other
agreement or instrument to which LESSEE is a party or by which LESSEE or its
properties or assets may be bound or affected.
5. Except for any filing or recording that may be required under
the U.S. Federal Aviation Administration and except for filing a UCC-1 Financing
Statement with the State of Colorado, no other filing or recording of any
instrument or document or any other acts are necessary or advisable under the
laws of the U.S. or Colorado to protect LESSOR's title to and ownership of the
Aircraft or in order for the Lease to constitute a valid and perfected lease of
record relating to the Aircraft, it being understood that such counsel expresses
no opinion as to the nature of the LESSOR's title to the Aircraft on the
Delivery Date. [In opinion given at Delivery, also confirm that the filings and
other steps described have been accomplished.]
6. LESSEE holds all licenses, certificates and permits from
applicable governmental authorities in the U.S. necessary for the conduct of its
business as a certificated air carrier and performance of its obligations under
the Lease.
7. To my knowledge, there are no suits or proceedings pending or
threatened against LESSEE before any Government Entity against or affecting
LESSEE which, if adversely determined, would have a material adverse effect on
the financial condition or business of LESSEE or its ability to perform under
the Lease, except as described in the filings provided to LESSOR pursuant to
Article 22.
8. The obligations of LESSEE under the Lease are direct, general
and unconditional obligations of LESSEE and rank or will rank at least pari
passu with all other present and future unsecured and unsubordinated obligations
(including contingent obligations) of LESSEE, with the exception of such
obligations as are mandatorily preferred by law and not by reason of any
encumbrance.
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<PAGE>
[ 9. None of the agreements and any amendments thereto between
LESSEE and all other lessors and lenders to LESSEE covering other aircraft
operated by LESSEE on which the Engines can be installed contain terms which
provide or contemplate that such other lessors or lenders will obtain any right,
title or interest in an Engine which is installed on such other aircraft.]
Very truly yours,
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<PAGE>
EXHIBIT G ASSIGNMENT OF RIGHTS (AIRFRAME)
--------- -------------------------------
Vice President - Aircraft Contracts
The Boeing Company
P.O. Box 3707
Seattle, Washington 98124
Subject: Assignment of Rights - International Lease Finance Corporation, as
Lessor and _______________________, as Lessee of one B ________
Aircraft, MSN ______
Gentlemen:
In connection with International Lease Finance Corporation's lease to
_______________________________ ("Lessee") of a Boeing aircraft (more fully
described below), reference is made to the following documents:
1. Purchase Agreement No. _____ dated as of _________, 19__ between The
Boeing Company ("Boeing") and International Lease Finance Corporation
("ILFC") (the "Purchase Agreement") under which ILFC purchased a
certain Boeing Model ___-___ aircraft, bearing Manufacturer's Serial
No. _______ (the "Aircraft").
2. Spare Parts General Terms Agreement No. Q8 dated as of May 20, 1977, as
amended and supplemented, between Boeing and International Lease
Finance Corporation (the "ILFC GTA").
3. Aircraft Lease Agreement ("Lease") for the Aircraft bearing
manufacturer's serial number _____ dated as of ________ __, 19__,
between ILFC and _______________________________.
Pursuant to the Lease, ILFC has leased the Aircraft to Lessee. Included in such
Lease are the transfer to Lessee for and during the term of the Lease and
commencing on ________ __, 1996 of (a) rights related to the Aircraft under the
Purchase Agreement and (b) rights to purchase from Boeing Spare Parts related to
the Aircraft. In order to accomplish such transfer of rights, as authorized by
the provisions of Article 10 of the Purchase Agreement,
(1) Lessee, its successors and assigns, hereby agrees to be bound by and
comply with all applicable terms, conditions, and limitations of the
Purchase Agreement including, without limitation, paragraph 10
Exclusion of Liabilities, of Part A ------------------------ of Exhibit
B (Product Assurance Document) and paragraphs 1 and 2, Buyer's
Indemnification of Boeing and Buyer's ---------------------------------
------- Insurance, respectively, of Part E of Exhibit C (Customer
--------- Support Document) (matters relating to indemnification and
insurance), to the Purchase Agreement. Lessee recognizes that Boeing's
obligation to provide support and services to Lessee pursuant to
Exhibit C of the Purchase Agreement is
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<PAGE>
conditioned on the receipt by Boeing of evidence of compliance by
Lessee with the insurance requirements set forth in paragraph 2 of Part
E of Exhibit C in a form satisfactory to Boeing prior to the
commencement of such support and services; and
(2) Lessee, its successors and assigns, confirms to Boeing that Lessee
which is not presently a party to the Spare Parts General Terms
Agreement with Boeing, agrees to be bound by all applicable terms,
conditions, and limitations of the ILFC GTA including, without
limitation, paragraphs 15.9 and 15.10 of Article 15 of the ILFC GTA,
and Article 17 of the ILFC GTA, and paragraphs 9.8, 9.9 and 11 of
Exhibit A to the ILFC GTA, with respect to any Spare Parts or Leased
Parts ordered for the Aircraft; and
(3) ILFC agrees to remain responsible for any payments due Boeing (a) with
respect to the Aircraft under Exhibit D (Airframe and Engine Price
Adjustment) of the Purchase Agreement and (b) with respect to any Spare
Part or Leased Part for the Aircraft ordered by ILFC under the ILFC
GTA.
(4) Further, ILFC hereby assigns to Lessee the sole authority to exercise
all rights and powers of ILFC with respect to the Aircraft under the
Purchase Agreement. Such authorization shall continue until Boeing
shall have received from ILFC written notice to the contrary addressed
to Boeing's Vice President, Contracts, P.O. Box 3707, Seattle,
Washington 98124-2207. Until Boeing shall have received such notice
Boeing shall be entitled to deal exclusively and solely with Lessee
with respect to the Aircraft, under the Purchase Agreement and, with
respect to the rights, powers, duties or obligations under the Purchase
Agreement, and all actions taken by Lessee or agreements entered into
by Lessee during the period prior to Boeing's receipt of such notice,
shall be final and binding upon ILFC.
(5) Lessee hereby accepts the authorization set forth in paragraph (4)
herein and agrees to be bound by and to comply with all the terms,
conditions and limitation of the Purchase Agreement. We request that
Boeing, upon receipt of this letter, acknowledge receipt thereof and
the transfer of rights, under the Purchase Agreement as set forth
above, by
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<PAGE>
signing the acknowledgment set forth below and forwarding one copy of
this letter, so acknowledged, to each of the undersigned.
Very truly yours,
__________________________ INTERNATIONAL LEASE FINANCE
____________ (Lessee) CORPORATION (Lessor)
By: ______________________ By: _______________________
Its: _____________________ Its: ______________________
Dated: ___________________ Dated: ____________________
Boeing Acknowledgment and Consent to Assignment
-----------------------------------------------
Receipt of the above letter acknowledged and transfer of rights under the
Purchase Agreement, with respect to the Aircraft, confirmed effective as of the
date indicated below:
THE BOEING COMPANY
By:_______________________
Its:______________________
Dated:____________________
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<PAGE>
EXHIBIT H ASSIGNMENT OF RIGHTS (ENGINES)
--------- ------------------------------
___________________________ date
GENERAL ELECTRIC COMPANY
One Neumann Way
Cincinnati, OH 45215-6301
Attention: Ms. Riv Goldman
GE Warranties
Dear Ms. Goldman:
Reference is hereby made to that Consent to Assignment made as of April
29, 1988 (the "Consent to Assignment"), by and between GENERAL ELECTRIC COMPANY
("GE") and INTERNATIONAL LEASE FINANCE CORPORATION ("ILFC"). Terms defined in
the Consent to Assignment are used herein with the same meaning as in the
Consent to Assignment.
As of _____________, ILFC has assigned all of its rights and interest
in, to and under the Engine Warranties to _________________ ("Assignee") in
connection with its lease to Assignee of a _____________ ("Aircraft") together
with ________ (__) GE Model ________ Engines bearing Manufacturer's Serial
Numbers ____________ (the "Engines") as of the date each such Engine was
delivered to Assignee. Such assignment shall be effective from such date until
ILFC notifies GE that such assignment has been terminated.
The Assignee has accepted such assignment and all the limitations and
liabilities pertaining to the Engine Warranties as stated in the provisions of
the GTA listed in Schedule 2 to the Consent to Assignment.
A copy of the aforesaid assignment is attached hereto.
Very truly yours,
INTERNATIONAL LEASE FINANCE CORPORATION
By: ____________________________________
Its: ____________________________________
cc: Ruben M. Cabrera
Director, Commercial Contracts
-110-
<PAGE>
ASSIGNMENT OF WARRANTIES
________________ (date)
In consideration of ____________________ ("Lessee") leasing from International
Lease Finance Corporation ("ILFC") one (1) _______________ aircraft together
with ____________ (__) GE Model ______________ Engines bearing manufacturer's
serial numbers ___________ and __________, it is hereby agreed as follows:
1. ILFC hereby assigns and transfers to Lessee all of ILFC's
respective rights and interest in and to and in and under the
Engine Warranties set forth in and subject to the limitations
and liabilities set forth in Exhibit B, Section X (the "Engine
Warranties") of General Electric Company ("GE") - ILFC General
Terms Agreement No. 6-5792 dated 01 November 1985 (the "GTA")
during the term of such leases so long as Lessee is not in
default thereunder.
2. Lessee hereby accepts such assignment including all the
limitations and liabilities pertaining to said Engine
Warranties as stated in the provisions of Exhibit B, Section X
of the GTA.
3. This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors
and assigns to the extent permitted by the GTA and hereunder.
4. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
5. This Agreement may be executed in any number of counterparts,
each of which when executed and delivered is an original but
all of which taken together constitute one and the same
instrument and any party may execute this Agreement by signing
any counterpart.
-111-
<PAGE>
IN WITNESS WHEREOF, the authorized representative of the parties hereto have
executed this Agreement as of the day and year first above written.
For and on behalf of
INTERNATIONAL LEASE FINANCE CORPORATION
_______________________________________
For and on behalf of
_____________________________
_______________________________________
-112-
<PAGE>
EXHIBIT I RETURN ACCEPTANCE RECEIPT
--------- -------------------------
Date _______________, 19__
1. WESTERN PACIFIC AIRLINES, INC., as LESSEE, and INTERNATIONAL
LEASE FINANCE CORPORATION, as LESSOR, have entered into an Aircraft Lease
Agreement dated as of May 31, 1996 (the "Lease"). Words used herein with capital
letters and not otherwise defined will have the meanings set forth in the Lease.
2. LESSOR has this __ day of ______, 19__ (Time: _____
_____________) at _________________________ received from LESSEE possession of:
(a) One (1) Boeing 737-3Q8, bearing Manufacturer's serial
number 24299, together with two (2) CFM-56-3B2 engines bearing manufacturer's
serial numbers 722248 and 722249, 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 listed in the Document Receipt attached
hereto.
3. The Airframe, Engines and Parts had the following hours/cycles
at return:
(a) Airframe:
Total hours___________ Total landings___________
_____ hours/_____ cycles since last "C" check
_____ hours/_____ cycles since last "A" check
(b) Engines:
Total Hrs/Cycles since
Position Serial No. Total Hrs Cycles last shop visit
- - -------- ---------- --------- ------ ----------------
-113-
<PAGE>
Time Remaining to next
Life Limited Part Removal
-------------------------
Hours Cycles
----- ------
MSN
MSN
(c) APU: MSN
Total hours _____
_____ hours/_____ cycles remaining until next HSI
inspection
_____ hours/_____ cycles remaining on turbine and
compressor life limited parts
(d) Landing Gears:
Hrs/Cycles Hrs/Cycles to
Total since last next Sched. _
Position Serial No. Hrs/Cycles Overhaul Removal
- - -------- ---------- ---------- ---------- -------------
Nose
Right Main
Left Main
(e) Status of components or Parts with time/cycle and
calendar limits (see attached sheet)
(f) Fuel on board at return: (circle one) _____
pounds/kilos (______ gallons)
4. Other technical information regarding the Aircraft and its
components are correctly set forth on the Technical Evaluation Report (in form
of Exhibit L) attached hereto.
5. The above specified aircraft, engines, and documentation are
hereby accepted by LESSOR, subject to (a) the provisions of the Lease and (b)
correction by LESSEE (or procurement by LESSEE at LESSEE's cost) as soon as
reasonably possible of the discrepancies specified in Attachment 2 hereto.
-114-
<PAGE>
6. Subject to the following paragraph, the leasing of the
Aircraft by LESSOR to LESSEE pursuant to the Lease is hereby terminated and
LESSOR hereby acknowledges that LESSEE has no further obligations under the
Lease except pursuant to paragraph 5(b) above and Articles 10.5, 16 and 17 of
the Lease.
7. LESSEE represents and warrants that during the term of the
Lease all maintenance and repairs to the Airframe and Engines were performed in
accordance with the requirements contained in the Lease, provided that the
foregoing representation and warranty will expire upon the completion of the
next heavy maintenance "C7" check on the Aircraft. LESSEE further confirms that
all of its obligations under the Lease which survive the termination of the
Lease by their terms will remain in full force and effect until all such
obligations have been satisfactorily completed.
8. This Return Acceptance Supplement is executed and delivered by
the parties in [place].
IN WITNESS WHEREOF, the parties hereto have caused this Return Acceptance
Receipt to be executed in their respective corporate names by their duly
authorized representatives as of the day and year first above written.
INTERNATIONAL LEASE FINANCE WESTERN PACIFIC AIRLINES, INC.
CORPORATION
By: _________________________ By: __________________________
Its: ________________________ Its: _________________________
ATTACHMENTS: 1. Aircraft Documentation
2. List of Discrepancies
3. Technical Evaluation Report (in form of Exhibit L)
-115-
<PAGE>
ATTACHMENT 1
TO RETURN ACCEPTANCE SUPPLEMENT
-------------------------------
AIRCRAFT DOCUMENTATION
----------------------
[The (a) manuals and (b) Aircraft records and historical documents set
forth below are to be returned with the Aircraft in a current, up-to-date and
correct status]
MANUALS
-------
Name
----
1. FAA Approved Airplane Flight Manual
2. Manufacturer's Operations Manual - Volume No.____
3. Quick Reference Handbook
4. Maintenance Manuals
5. Wiring Diagram Manuals
6. Structural Repair Manual
7. Illustrated Parts Catalog
8. Vendor Illustrated Parts Catalog
9. Overhaul Manuals
10. Vendor Overhaul Manuals
11. Drawings (Major Assembly and Installation)
12. Weight and Balance Control and Loading Manual
13. Weight and Balance Manual Supplement
14. Actual Weight and Balance Compliance
-116-
<PAGE>
AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS
-----------------------------------------
1. Aircraft log book (current and file copies)
2. Aircraft Readiness Log (revised to time of return)
3. Maintenance Time Control Report (components, maintenance visit, special
items next due Airframe hours and cycles)
4. Aircraft previous maintenance visit record including the last inspection
performed.
5. Airworthiness Directive Compliance Summary
6. Rigging Document
7. Serviceable Tags for all ratable components installed (Airframe & Engines)
8. ADs requiring continuous surveillance
9. Service bulletin terminated accomplishment status
10. Service bulletin requiring continuous surveillance summary and maintenance
control action
11. Airframe and component history records
12. FAA Form 337 for Airframe, repair/overhaul certification of last major
visit
13. FAA Form 337 for each Engine, repair/overhaul certification of last shop
visit
14. Engine Readiness Log for each Engine (components installed)
15. Summary of Service Bulletin's accomplished for each Engine
16. Summary of AD's accomplished for each Engine
17. SB and AD status requiring continuous surveillance with maintenance,
control action for each Engine
18. Engine time summary sheet including life limited items (for each Engine)
19. Engine log books for each Engine (current and file copies)
-117-
<PAGE>
Receipt of the foregoing documents, except as
noted, is hereby acknowledged.
-118-
<PAGE>
ATTACHMENT 2
TO RETURN ACCEPTANCE SUPPLEMENT
-------------------------------
Discrepancies
-------------
-119-
<PAGE>
EXHIBIT J MONTHLY REPORT
--------- --------------
(SEE FOLLOWING SHEET)
-120-
<PAGE>
MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT
----------------------------------------------
To: INTERNATIONAL LEASE FINANCE CORPORATION
1999 Avenue of the Stars, 39th Floor
Los Angeles, California 90067 Fax: (310) 788-1990
From: WESTERN PACIFIC AIRLINES, INC. Page 1 of 2
AIRCRAFT TYPE: ______________ REGISTRATION: ________
ENGINE TYPE: ______________
SERIAL NUMBER: __________ MONTH OF ____________ 19__
================================================================================
AIRCRAFT TOTAL TIME SINCE NEW HRS:
- - --------------------------------------------------------------------------------
AIRCRAFT TOTAL CYCLES SINCE NEW CYCLES:
- - --------------------------------------------------------------------------------
AIRFRAME HOURS FLOWN DURING MONTH HRS:
- - --------------------------------------------------------------------------------
AIRFRAME CYCLES/LANDING DURING MONTH CYCLES:
- - --------------------------------------------------------------------------------
TIME REMAINING TO NEXT SCHEDULED "C"
CHECK
- - --------------------------------------------------------------------------------
TIME REMAINING TO NEXT SCHEDULED
"7C" and 22,400 FH STRUCTURED CHECK.
================================================================================
=================================================
HOURS FLOWN X US$ PER = OVERHAUL
DURING FLIGHT HOUR RESERVES
MONTH
- - --------------------------------------------------------------------------------
AIRFRAME HRS: X =
- - --------------------------------------------------------------------------------
ORIGINAL ENGINE HRS:
SERIAL NUMBER:
- - --------------------------------------------
ORIGINAL ENGINE HRS:
SERIAL NUMBER:
- - --------------------------------------------------------------------------------
TOTAL ENGINES HRS: X =
- - --------------------------------------------------------------------------------
AMOUNT OF OVERHAUL RESERVES (US$)
PAID THIS MONTH FOR AIRFRAME AND
ENGINES
================================================================================
-121-
<PAGE>
Page 2 of 2
================================================================================
ENGINE SERIAL NUMBER ___________ ENGINE SERIAL NUMBER ___________
ORIGINAL POSITION ________________ ORIGINAL POSITION ________________
- - --------------------------------------------------------------------------------
ACTUAL LOCATION: ACTUAL LOCATION:
- - --------------------------------------------------------------------------------
CURRENT THRUST RATING: CURRENT THRUST RATING:
- - --------------------------------------------------------------------------------
HOURS: HOURS:
- - --------------------------------------------------------------------------------
TOTAL TIME SINCE NEW TOTAL TIME SINCE NEW
- - --------------------------------------------------------------------------------
TOTAL CYCLES SINCE NEW TOTAL CYCLES SINCE NEW
- - --------------------------------------------------------------------------------
HOURS FLOWN DURING MONTH HOURS FLOWN DURING MONTH
- - --------------------------------------------------------------------------------
CYCLES DURING MONTH
- - --------------------------------------------------------------------------------
TIME SINCE LAST SHOP VISIT (HSI) TIME SINCE LAST SHOP VISIT (HSI)
- - --------------------------------------------------------------------------------
TIME SINCE LAST SHOP VISIT (FULL TIME SINCE LAST SHOP VISIT (FULL
REFURBISHMENT) REFURBISHMENT)
================================================================================
NOTE: IF ILFC OWNED ENGINE IS REMOVED OR INSTALLED ON ANOTHER AIRCRAFT IT
MUST BE REPORTED MONTHLY ON THIS FORM.
-122-
<PAGE>
EXHIBIT K AIRCRAFT DOCUMENTATION
--------- ----------------------
(SEE FOLLOWING SHEETS)
-123-
<PAGE>
EXHIBIT L TECHNICAL EVALUATION REPORT
--------- ---------------------------
(SEE FOLLOWING SHEETS)
-124-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
AIRCRAFT SUMMARY............................................................ 1
MAINTENANCE PROGRAM GENERAL................................................. 2
LANDING GEAR................................................................ 5
ENGINES ................................................................... 7
AUXILIARY POWER UNIT (APU).................................................. 12
PASSENGER CABIN CONFIGURATION............................................... 13
GALLEY PROVISIONS........................................................... 14
LAVATORIES.................................................................. 15
IN-FLIGHT AUDIO & ENTERTAINMENT SYSTEM...................................... 15
HYDRAULIC SYSTEM............................................................ 16
FUEL SYSTEM................................................................. 16
WEIGHT & BALANCE............................................................ 16
AVIONICS SYSTEMS............................................................ 17
AIRCRAFT MANUALS............................................................ 21
AIRCRAFT RECORDS AND DOCUMENTS.............................................. 23
INSPECTOR RECORD............................................................ 25
-i-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AIRCRAFT SUMMARY
AIRCRAFT MAKE ___________ MODEL __________
FUS No. ________________ S/N _________________
MFG DATE _____ PROD No. __________ LN No. ___________________
DETAIL SPECIFICATION No. ______________ REV. _______________________________
A/C TYPE CERT No. ________________ ENG TYPE CERT No. _______________________
CURRENT REGISTRATION __________________ COUNTRY ____________________________
PREVIOUS REGISTRATION _______________ COUNTRY ______________________________
ANNUAL UTILIZATION ____________________ HOUR/CYCLE RATIO _____________________
TOTAL AIRCRAFT TIME: TAT (Hrs) ______________ AS OF
(Date) ____________________
TOTAL AIRCRAFT CYCLES: TAC (Cyc) ____________
TIME SINCE LAST "C" CHECK (Hrs) ______________ (Cyc) _________________________
TIME SINCE LAST "D" CHECK (Hrs) ______________ (Cyc) _________________________
ENGINE MAKE ______________ MODEL ___________ THRUST RATING _________________
ENGINE: 1 S/N __________ 2 S/N ___________
TSN: (Hrs) ______________ _________________
CSN: (Cyc) ______________ _________________
TIME TO (Hrs) (Hrs)
1st LIMIT: _________ (Cyc) _________ (Cyc)
Page 1
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
MAINTENANCE PROGRAM GENERAL
AIRCRAFT MAINTENANCE PROGRAM OWNED BY: [ ] OPERATOR [ ] _______________________
PROGRAM APPROVED BY AUTHORITY OF: [ ] FAA APPROVED [ ] _______________________
MAINTENANCE PROGRAM/SCHEDULE (Document Title) __________________________________
REPAIR STATION PROVIDING SERVICE _______________________________________________
REPAIR STATION NUMBER __________ FAA APPROVED: [ ] YES [ ] NO
PRIMARY LINE MAINTENANCE PROVIDED BY: [ ] OPERATOR [ ] CONTRACT SERVICE
RELIABILITY CONTROLLED MAINTENANCE PROGRAM: [ ] YES [ ] NO
OPERATOR APPROVED FOR COMPONENT ESCALATION: [ ] YES [ ] NO
WHAT PERCENT WITHOUT AIRWORTHINESS AGENCY APPROVAL _____________________________
OPERATOR APPROVED FOR SCHEDULED CHECK ESCALATION: [ ] YES [ ] NO
WHAT PERCENT WITHOUT AIRWORTHINESS AGENCY APPROVAL _____________________________
METHOD OF RECORDING A/C HOURS & CYCLES: [ ] COMPUTER RUN [ ] LOG BOOK
FAA APPROVED "CORROSION PREVENTION & CONTROL PROGRAM": [ ] YES [ ] NO
CORROSION & STRUCTURAL MAINTENANCE PROGRAM: [ ] 100% [ ] SAMPLING
ALGAE CHEMICAL INHIBITOR USED IN FUEL SYSTEM: [ ] YES [ ] NO
TYPE OF INHIBITOR USED _______________ FREQ ________________________________
AIRCRAFT SUPPLEMENTAL STRUCTURAL INSPECTION "SSI" CANDIDATE: [ ] YES [ ] NO
MAINTENANCE CHECKS SCHEDULED AND RECORDED: [ ] CARD FILE [ ] COMPUTER
CONTROLLED COMPONENTS SCHEDULED AND RECORDED: [ ] CARD FILE [ ] COMPUTER
COMPONENT TAGS AVAILABLE FOR CONTROLLED COMPONENTS: [ ] YES [ ] NO
DOES OPERATOR HAVE AN APPROVED "MEL" DEFERRAL SYSTEM: [ ] YES [ ] NO
"MEL" DEFERRALS RECORDED (Document Name) _______________________________________
DOES OPERATOR HAVE A SYSTEM TO DEFER NON "MEL" ITEMS: [ ] YES [ ] NO
NON "MEL" DEFERRALS RECORDED (Document Name)____________________________________
Page 2
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
MAINTENANCE & INSPECTION PROGRAM DESCRIPTION
OPERATOR'S FREQUENCY NUMBER OF
CHECK NOMENCLATURE CALENDAR HRS CYC PHASES
"A" ______________ __________ ___________ __________ ___________
"B" ______________ __________ ___________ __________ ___________
"C" ______________ __________ ___________ __________ ___________
"D" ______________ __________ ___________ __________ ___________
"CPCP" ______________ __________ ___________ __________ ___________
"Structural" ______________ __________ ___________ __________ ___________
Describe any difference to the above program, list variations and special
inspections. Explain how phases are grouped and if a higher Check zero's the
lower Checks i.e., does the "C" Check zero the "A" & "B" Checks.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
PROVIDE COPIES OF THE FOLLOWING DOCUMENTS AS CHECKED
1. AIRWORTHINESS DIRECTIVE STATUS LIST ------------------------- [ ]
2. SERVICE BULLETIN INCORPORATION LIST ------------------------- [ ]
3. CONTROLLED COMPONENT STATUS LIST ---------------------------- [ ]
4. CURRENT INSPECTIONS STATUS REPORT --------------------------- [ ]
5. LIST OF CURRENT MAJOR ALTERATIONS --------------------------- [ ]
6. CURRENT STATUS OF LIFE LIMITED PARTS ------------------------ [ ]
7. A/C "LOPA" INTERIOR CONFIGURATION DRAWING ------------------- [ ]
8. MAINTENANCE INSPECTION PROGRAM SPECIFICATION ---------------- [ ]
9. LAST WEIGHT AND BALANCE REPORT ------------------------------ [ ]
10. _______________________________________---------------------- [ ]
Page 3
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
MAINTENANCE & INSPECTION PROGRAM STATUS
PHASE DATE A/C TAT A/C TAC
NEXT "A" __________ _____/_____/____ _______________ _______________
LAST "A" __________ _____/_____/____ _______________ _______________
TIME REMAINING (Days) __________ (Hrs) ___________ (Cyc) ___________
NEXT "B" __________ _____/_____/____ _______________ _______________
LAST "B" __________ _____/_____/____ _______________ _______________
TIME REMAINING (Days) __________ (Hrs) ___________ (Cyc) ___________
NEXT "C" __________ _____/_____/____ _______________ _______________
LAST "C" __________ _____/_____/____ _______________ _______________
TIME REMAINING (Days) __________ (Hrs) ___________ (Cyc) ___________
NEXT "D" __________ _____/_____/____ _______________ _______________
LAST "D" __________ _____/_____/____ _______________ _______________
TIME REMAINING (Days) __________ (Hrs) ___________ (Cyc) ___________
NEXT CPCP/STRUCTURAL
__________ _____/_____/____ _______________ _______________
NEXT CPCP/STRUCTURAL
__________ _____/_____/____ _______________ _______________
TIME REMAINING (Days) __________ (Hrs) ___________ (Cyc) ___________
ANTICIPATED DATE OF NEXT SCHEDULED "C" CHECK _____/____/____
DATE OF LSAT ATC TRANSPONDER TEST: # 1 _______________ # 2 ________________
DATE OF LAST PITOT STATIC TEST: CAPT ______________ F/O ________________
DATE OF LAST ALTIMETER INST. TEST: # 1 _______________ # 2 ________________
DATE OF LAST COMPASS SWING: ___________________________________________________
DATE OF LAST FLIGHT RECORDER CHECK: ___________________________________________
DATE OF LAST A/C WEIGHING: ____________________________________________________
Page 4
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
LANDING GEAR
MLG TIRES: (Size) __________ (MPH Rating) ___________ (MFG) ____________
NLG TIRES: (Size) __________ (MPH Rating) ___________ (MFG) ____________
LEFT MAIN: P/N ______________________ S/N _____________________
AGENCY PERFORMING SERVICE _____________________________ CERT # _____________
LAST OVERHAUL: (Date) ____/____/____ (Hrs) __________ (Cyc) ____________
ALLOWABLE LIMIT TO NEXT OVERHAUL (Hrs) __________ (Cyc) ____________
PRESENT LANDING GEAR TOTAL TIME (Hrs) __________ (Cyc) _________
TIME REMAINING TO NEXT OVERHAUL (Hrs) __________ (Cyc) _________
RIGHT MAIN: P/N ______________________ S/N _____________________
AGENCY PERFORMING SERVICE _____________________________ CERT # _____________
LAST OVERHAUL: (Date) ____/____/____ (Hrs) __________ (Cyc) ____________
ALLOWABLE LIMIT TO NEXT OVERHAUL (Hrs) __________ (Cyc) ____________
PRESENT LANDING GEAR TOTAL TIME (Hrs) __________ (Cyc) _________
TIME REMAINING TO NEXT OVERHAUL (Hrs) __________ (Cyc) _________
NOSE: P/N ______________________ S/N _____________________
AGENCY PERFORMING SERVICE _____________________________ CERT # _____________
LAST OVERHAUL: (Date) ____/____/____ (Hrs) __________ (Cyc) ____________
ALLOWABLE LIMIT TO NEXT OVERHAUL (Hrs) __________ (Cyc) ____________
PRESENT LANDING GEAR TOTAL TIME (Hrs) __________ (Cyc) _________
TIME REMAINING TO NEXT OVERHAUL (Hrs) __________ (Cyc) _________
CENTER: P/N ______________________ S/N _____________________
AGENCY PERFORMING SERVICE _____________________________ CERT # _____________
LAST OVERHAUL: (Date) ____/____/____ (Hrs) __________ (Cyc) ____________
ALLOWABLE LIMIT TO NEXT OVERHAUL (Hrs) __________ (Cyc) ____________
PRESENT LANDING GEAR TOTAL TIME (Hrs) __________ (Cyc) _________
TIME REMAINING TO NEXT OVERHAUL (Hrs) __________ (Cyc) _________
Page 5
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
LANDING GEAR (Continued)
LEFT BODY: P/N ______________________ S/N _____________________
AGENCY PERFORMING SERVICE _____________________________ CERT # _____________
LAST OVERHAUL: (Date) ____/____/____ (Hrs) __________ (Cyc) ____________
ALLOWABLE LIMIT TO NEXT OVERHAUL (Hrs) __________ (Cyc) ____________
PRESENT LANDING GEAR TOTAL TIME (Hrs) __________ (Cyc) _________
TIME REMAINING TO NEXT OVERHAUL (Hrs) __________ (Cyc) _________
RIGHT BODY: P/N ______________________ S/N _____________________
AGENCY PERFORMING SERVICE _____________________________ CERT # _____________
LAST OVERHAUL: (Date) ____/____/____ (Hrs) __________ (Cyc) ____________
ALLOWABLE LIMIT TO NEXT OVERHAUL (Hrs) __________ (Cyc) ____________
PRESENT LANDING GEAR TOTAL TIME (Hrs) __________ (Cyc) _________
TIME REMAINING TO NEXT OVERHAUL (Hrs) __________ (Cyc) _________
Page 6
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
ENGINES
ENGINE MAINTENANCE PROGRAM
ENGINE MAINTENANCE PROGRAM OWNED BY ____________________________________________
PROGRAM APPROVED BY AUTHORITY OF _______________________________________________
OPERATORS MAINTENANCE PROGRAM SPECIFICATION (Copy) _____________________________
DOCUMENT NAME, NUMBER & REV. ___________________________________________________
REPAIR STATION PROVIDING SHOP SERVICE __________________________________________
REPAIR STATION NUMBER ________________ FAA APPROVED: [ ] YES [ ] NO
ENGINE MAINTENANCE PROGRAM PRIMARY MAINTENANCE PROCESS: [ ] HT [ ] OC [ ] CM
HSI (Hrs/Cyc) __________/__________ OVERHAUL (Hrs/Cyc) __________/__________
BORESCOPE INSPECTION SCHEDULE FREQ: (Hrs/Cyc) _____________________________
HOT SECTION INSPECTION SCHEDULE FREQ: (Hrs/Cyc) _________________________
ENGINE CONDITION MONITORING TREND ANALYSIS PROGRAM: [ ] YES [ ] NO
SERVICE PROVIDED BY ____________________________________________________________
OIL SPECIAL ANALYSIS PART OF PROGRAM: [ ] YES [ ] NO (Freq) ___________
SERVICE PROVIDED BY ____________________________________________________________
ENGINE OIL TYPE _______________ CSD/IDG _______________ STARTER ____________
Engine(s) operated at INCREASED or DECREASED Thrust Rating Program
limitations & required Mods. to operate at designated thrust rating
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Page 7
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
ENGINE SPECIFICATIONS
ENGINE NUMBER 1
ENGINE MAKE __________________ MODEL __________________ S/N __________________
DATE OF MFG: _________________ TOTAL TIME: (Hrs) __________ (Cyc) __________
LAST HOT SECTION (Date) ____________________ (Hrs) __________ (Cyc) __________
LAST OVERHAUL VISIT (Date) _________________ (Hrs) __________ (Cyc) __________
LAST SHOP VISIT (Date) _____________________ (Hrs) __________ (Cyc) __________
WORK SCOPE _____________________________________________________________________
AGENCY PERFORMING SERVICE ______________________________________________________
AGENCY FAA APPROVED: [ ] YES [ ] NO CERT. #____________________________
1st LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
2nd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
3rd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
4th LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
Page 8
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
ENGINE SPECIFICATIONS
ENGINE NUMBER 2
ENGINE MAKE __________________ MODEL __________________ S/N __________________
DATE OF MFG: _________________ TOTAL TIME: (Hrs) __________ (Cyc) __________
LAST HOT SECTION (Date) ____________________ (Hrs) __________ (Cyc) __________
LAST OVERHAUL VISIT (Date) _________________ (Hrs) __________ (Cyc) __________
LAST SHOP VISIT (Date) _____________________ (Hrs) __________ (Cyc) __________
WORK SCOPE _____________________________________________________________________
AGENCY PERFORMING SERVICE ______________________________________________________
AGENCY FAA APPROVED: [ ] YES [ ] NO CERT. #____________________________
1st LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
2nd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
3rd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
4th LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
Page 9
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INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
ENGINE SPECIFICATIONS
ENGINE NUMBER 3
ENGINE MAKE __________________ MODEL __________________ S/N __________________
DATE OF MFG: _________________ TOTAL TIME: (Hrs) __________ (Cyc) __________
LAST HOT SECTION (Date) ____________________ (Hrs) __________ (Cyc) __________
LAST OVERHAUL VISIT (Date) _________________ (Hrs) __________ (Cyc) __________
LAST SHOP VISIT (Date) _____________________ (Hrs) __________ (Cyc) __________
WORK SCOPE _____________________________________________________________________
AGENCY PERFORMING SERVICE ______________________________________________________
AGENCY FAA APPROVED: [ ] YES [ ] NO CERT. #____________________________
1st LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
2nd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
3rd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
4th LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
Page 10
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INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
ENGINE SPECIFICATIONS
ENGINE NUMBER 4
ENGINE MAKE __________________ MODEL __________________ S/N __________________
DATE OF MFG: _________________ TOTAL TIME: (Hrs) __________ (Cyc) __________
LAST HOT SECTION (Date) ____________________ (Hrs) __________ (Cyc) __________
LAST OVERHAUL VISIT (Date) _________________ (Hrs) __________ (Cyc) __________
LAST SHOP VISIT (Date) _____________________ (Hrs) __________ (Cyc) __________
WORK SCOPE _____________________________________________________________________
AGENCY PERFORMING SERVICE ______________________________________________________
AGENCY FAA APPROVED: [ ] YES [ ] NO CERT. #____________________________
1st LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
2nd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
3rd LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
4th LIMITED DISK/MODULE: ________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _______________ (Cyc) _______________
TOTAL COMPONENT TIME: (Hrs) _______________ (Cyc) _______________
TIME REMAINING (Hrs) _______________ (Cyc) _______________
Page 11
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AUXILIARY POWER UNIT (APU)
APU MAKE __________________ MODEL __________________ S/N _____________________
DATE OF MFG _______________ TOTAL TIME: (Hrs) __________ (Cyc)N1 /N2
APU MAINTENANCE PROGRAM IS: [ ] O/C [ ] C/M [ ] H/T
APU TIMES ARE RECORDED BY: [ ] APU CLOCK or [ ] A/C TIME RATIO ____:____
TIME BETWEEN OVERHAUL (Hrs) __________ (Cyc) ____________
TIME BETWEEN HOT SECTION INSPECTIONS (Hrs) __________ (Cyc) ____________
LAST HOT SECTION (Date) _________________ (Hrs) __________ (Cyc) ____________
LAST OVERHAUL (Date) ____________________ (Hrs) __________ (Cyc) ____________
LAST SHOP VISIT (Date) __________________ (Hrs) __________ (Cyc) ____________
WORK SCOPE _____________________________________________________________________
AGENCY PERFORMING SERVICE ______________________________________________________
AGENCY FAA APPROVED: [ ] YES [ ] NO CERT. #________________________
1st LIMITED DISK/MODULE: _______________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _____________ (Cyc) ______________
TOTAL COMPONENT TIME: (Hrs) _____________ (Cyc) ______________
TIME REMAINING: (Hrs) _____________ (Cyc) ______________
2nd LIMITED DISK/MODULE: _______________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _____________ (Cyc) ______________
TOTAL COMPONENT TIME: (Hrs) _____________ (Cyc) ______________
TIME REMAINING: (Hrs) _____________ (Cyc) ______________
3rd LIMITED DISK/MODULE: _______________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _____________ (Cyc) ______________
TOTAL COMPONENT TIME: (Hrs) _____________ (Cyc) ______________
TIME REMAINING: (Hrs) _____________ (Cyc) ______________
4th LIMITED DISK/MODULE: _______________________________________________________
ALLOWABLE LIFE/INSP LIMIT: (Hrs) _____________ (Cyc) ______________
TOTAL COMPONENT TIME: (Hrs) _____________ (Cyc) ______________
TIME REMAINING: (Hrs) _____________ (Cyc) ______________
Page 12
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
PASSENGER CABIN CONFIGURATION
SEATING CONFIGURATION
MAX CERTIFIED OCCUPANCY _____ PRESENT CONFIGURATION OCCUPANCY ______________
NO. OF HANDICAP SEATS INSTALLED __________
FIRST CLASS
PAX _____ SEAT MFG __________ MODEL ___________ P/N ________________
SEATS FIREBLOCKED [ ] YES [ ] NO COLOR ______________________________
BUSINESS CLASS
PAX _____ SEAT MFG __________ MODEL ___________ P/N ________________
SEATS FIREBLOCKED [ ] YES [ ] NO COLOR ______________________________
COACH CLASS
PAX _____ SEAT MFG __________ MODEL ___________ P/N ________________
SEATS FIREBLOCKED [ ] YES [ ] NO COLOR ______________________________
UPPER DECK
PAX _____ SEAT MFG __________ MODEL ___________ P/N ________________
SEATS FIREBLOCKED [ ] YES [ ] NO COLOR ______________________________
SEAT BAGGAGE RESTRAINTS INSTALLED: [ ] YES [ ] NO
PROVISIONS FOR LIFE VESTS UNDER SEAT: [ ] YES [ ] NO
ENTERTAINMENT CONTROLS INSTALLED: [ ] YES [ ] NO
SEATS/SEAT BELTS, TSO CONFORMITY: [ ] YES [ ] NO
SEAT BELTS PART NUMBER _____________________ COLOR _________________________
CONFIGURATION DRAWING No. _______________________ SOURCE ___________________
ENGINEERING ORDER/INSTALLATION DOCUMENT ________________________________________
INSTALLATION FAA APPROVED: [ ] YES [ ] NO METHOD OF APPROVAL: ____________
Page 13
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
GALLEY PROVISIONS
GALLEY MODEL PART EQUIPPED
LOCATION MANUFACTURER NUMBER NUMBER WATER POWER
1. _____________ _____________ _____________ ______________ [ ] [ ]
2. _____________ _____________ _____________ ______________ [ ] [ ]
3. _____________ _____________ _____________ ______________ [ ] [ ]
4. _____________ _____________ _____________ ______________ [ ] [ ]
5. _____________ _____________ _____________ ______________ [ ] [ ]
6. _____________ _____________ _____________ ______________ [ ] [ ]
7. _____________ _____________ _____________ ______________ [ ] [ ]
8. _____________ _____________ _____________ ______________ [ ] [ ]
9. _____________ _____________ _____________ ______________ [ ] [ ]
10. _____________ _____________ _____________ ______________ [ ] [ ]
NOTE: Galley Locations per Spec or LOPA drawing i.e., G1, G2 etc. Galley
Location numbers above correspond to the number below
OVENS BUN REFER COFFEE WATER HOT HOT BEV
WARMERS UNITS CHILLERS MAKERS BOILERS JUGS CUPS JUGS
_____ _______ _____ ________ ______ _______ _______ ______ ______
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Page 14
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
LAVATORIES
NUMBER OF LAVATORIES ___________________ TYPE: [ ] FLUSH or [ ] VACUUM
LOCATIONS: ____________________________ HANDICAP PROVISIONS: ________
COLOR SCHEME: _________________________________________________________________
IN-FLIGHT AUDIO & ENTERTAINMENT SYSTEM
BOARDING MUSIC: [ ] YES [ ] NO
AUTO EVAC & WARNING: [ ] YES [ ] NO
PRE-RECORDED ANNOUNCEMENT: [ ] YES [ ] NO
PASSENGER ENTERTAINMENT (Audio): [ ] YES [ ] NO
PASSENGER ENTERTAINMENT (Video): [ ] YES [ ] NO
[ ] PROJECTOR [ ] PSU MONITOR [ ] ISLE MONITOR [ ] IN-SEAT
PASSENGER EN-ROUTE INFORMATION DISPLAY: [ ] YES [ ] NO
INTERIOR COLORS, SIGNS & PLACARDS
INTERIOR COLOR SCHEME CARPETS _______________ CURTAINS _________________
GALLEY FLOOR MATS ___________ GALLEY DECORATIVE FACING ________________________
CEILING PANELS ______________ OVERHEAD BAGGAGE BINS ___________________________
BULKHEADS, WINDSCREEN & CLASS DIVIDERS _________________________________________
LOWER SIDEWALL PANELS _______ SIDE WALL PANELS ________________________
LAVATORY WALL PANELS _______ LAVATORY FLOOR MATS __________________________
PLACARDS & LIGHTED SIGNS ENGLISH [ ] YES [ ] NO BI-LINGUAL [ ] YES [ ] NO
FIRST LANGUAGE ________________ SECOND LANGUAGE _________________________
FLOOR TRACK LIGHTING INSTALLED [ ] YES [ ] NO MFG _____________________________
FLOOR TRACK LIGHTING INSTALLED [ ] AT PRODUCTION [ ] POST DELIVERY
Page 15
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
HYDRAULIC SYSTEM
TYPE OF HYDRAULIC FLUID USED __________________ (MFG) ______________________
FUEL SYSTEM
FUEL CAPACITY (US GAL) __________________ (LBS/KILOS) ________________________
NUMBER OF TANKS _________________ AUXILIARY TANKS INSTALLED: [ ] YES [ ] NO
AUXILIARY TANK CAPACITY (U.S. GAL) __________ (LBS/KILOS) __________________
FUEL DUMP SYSTEM INSTALLED: [ ] YES [ ] NO
FUEL INSTRUMENTATION / CALIBRATION: [ ] U.S. POUNDS [ ] KILOGRAMS
WEIGHT & BALANCE
HAS AIRCRAFT BEEN MODIFIED FOR INCREASED GROSS WEIGHT: [ ] YES [ ] NO
FROM ______________ MTGW TO ____________________ MTGW
GROSS WEIGHT MODIFICATION AUTHORIZED BY WHAT DOCUMENT: _________________________
PERMANENT BALLAST INSTALLED TO CORRECT C.G. IMBALANCE: [ ] YES [ ] NO
IF YES, LOCATION OF BALLAST ______________ WEIGHT IN U.S. LBS. _____________
WEIGHT & BALANCE CONTROL COMPUTER SYSTEM INSTALLED: [ ] YES [ ] NO
WEIGHT & BALANCE MANUAL DOCUMENT NO. __________________ REV _________________
For the below weights specify the source: [ ] AFM [ ] DESIGN SPECIFICATION
POUNDS KILOS
MAXIMUM TAKEOFF GROSS WEIGHT (MTOGW) ___________________/__________________
MAXIMUM TAXI WEIGHT (MTW) ___________________/__________________
MAXIMUM LANDING WEIGHT (MLW) ___________________/__________________
MANUFACTURERS EMPTY WEIGHT (MEW) ___________________/__________________
MAXIMUM ZERO FUEL WEIGHT (MZW) ___________________/__________________
OPERATIONAL EMPTY WEIGHT (OEW) - ___________________/__________________
MAXIMUM PAYLOAD = ___________________/__________________
Page 16
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AVIONICS SYSTEMS
22 AUTO FLIGHT
MODEL or
QTY COMPONENT MANUFACTURER PART NUMBER
_____ FLIGHT CONTROL COMPUTER: _________________ __________________
_____ AUTOTHROTTLE COMPUTER: _________________ __________________
_____ STAB AUG COMPUTER: _________________ __________________
_____ STALL MANAGEMENT COMPUTER: _________________ __________________
_____ AUTOFLIGHT ACCESSORY UNIT _________________ __________________
_____ FLIGHT INSTRUMENT ACCESSORY UNIT: _________________ __________________
_____ AUTO PILOT SYSTEM: _________________ __________________
_____ FLIGHT DIRECTOR: _________________ __________________
_____ PITCH COMPUTER _________________ __________________
_____ ROLL COMPUTER _________________ __________________
23 COMMUNICATIONS
_____ PA AMPLIFIER: _________________ __________________
_____ HF TRANSCEIVER _________________ __________________
_____ VHF TRANSCEIVER _________________ __________________
_____ COCKPIT VOICE RECORDER: _________________ __________________
_____ TAPE REPRODUCER _________________ __________________
(Pre-Recorded PAX Address)
_____ TAPE REPRODUCER _________________ __________________
(Audio) ENTERTAINMENT:
_____ TAPE REPRODUCER _________________ __________________
(Video) ENTERTAINMENT:
_____ SELCAL DECODER: _________________ __________________
_____ ACARS MANAGEMENT UNIT _________________ __________________
Page 17
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AVIONICS SYSTEMS (Continued)
31 INDICATING AND RECORDING
MODEL or
QTY COMPONENT MANUFACTURER PART NUMBER
FLIGHT DATA
_____ RECORDER (DFDR): _________________ __________________
DIGITAL FLIGHT DATA
_____ ACQUISITION UNIT (DFDAU): _________________ __________________
_____ ACCELEROMETER: _________________ __________________
_____ WEIGHT AND BALANCE
COMPUTER: _________________ __________________
ELECTRONIC FLIGHT INSTRUMENT SYSTEM
EFIS DISPLAY PANEL ADI
_____ (Attitude) / FLIGHT DISPLAY: _________________ __________________
EFIS DISPLAY PANEL HIS
_____ (Directional) / NAV DISPLAY: _________________ __________________
_____ EFIS SYMBOL GENERATORS: _________________ __________________
ENGINE INDICATING AND CREW ALERTING SYSTEM (EICAS)
EICAS DISPLAY PANEL/UNIT _________________ __________________
_____ (Primary):
EICAS DISPLAY PANEL/UNIT _________________ __________________
______ (Secondary):
______ EFIS/EICAS INTERFACE UNIT: _________________ __________________
AIRPLANE CONDITION MONITORING SYSTEM (ACMS)
_____ DATA MANAGEMENT UNIT (DMU): _________________ __________________
_____ AIRBORNE DATA LOADER: _________________ __________________
_____ AIR DATA COMPUTER: _________________ __________________
GROUND PROXIMITY WARNING _________________ __________________
_____ SYSTEM (GPWS) COMPUTER:
_____ WINDSHEAR SYSTEM: [ ] YES [ ] NO
Page 18
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AVIONICS SYSTEMS (Continued)
34 NAVIGATION
MODEL or
QTY COMPONENT MANUFACTURER PART NUMBER
INERTIAL REFERENCE SYSTEM (IRS)
INERTIAL REFERENCE
_____ UNIT (IRU): _________________ __________________
OMEGA NAVIGATION SYSTEM (ONS)
RECEIVER PROCESSOR
_____ UNIT (RPU): _________________ __________________
_____ CONTROL DISPLAY UNIT (CDU): _________________ __________________
VHF NAVIGATION
DISTANCE MEASURING EQUIPMENT
_____ (DME) INTERROGATORS: _________________ __________________
_____ VHF VOR/ILS RECEIVER: _________________ __________________
_____ VHF VOR/MKR RECEIVER _________________ __________________
_____ VHF ILS/only RECEIVER: _________________ __________________
RADIO DIGITAL DISTANCE
_____ MAGNETIC INDICATOR (RDDMI): _________________ __________________
_____ RADIO MAGNETIC INDICATOR: _________________ __________________
_____ RADIO ALTIMETER TRANSCEIVER: _________________ __________________
_____ WEATHER RADAR TRANSCEIVER: _________________ __________________
TRAFFIC ALERT AND COLLISION
AVOIDANCE
_____ SYSTEM (TCAS) COMPUTER: _________________ __________________
AIR TRAFFIC CONTROL (ATC)
_____ SYSTEM TRANSPONDER: _________________ __________________
_____ MICRO WAVE LANDING RECEIVER: _________________ __________________
_____ MARKER BEACON RECEIVER _________________ __________________
AUTOMATIC DIRECTION FINDER _________________ __________________
_____ (ADF) RECEIVER:
Page 19
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AVIONICS SYSTEMS (Continued)
34 NAVIGATION
MODEL or
QTY COMPONENT MANUFACTURER PART NUMBER
FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS)
_____ FLIGHT MANAGEMENT COMPUTER: _________________ __________________
_____ CONTROL DISPLAY UNIT (CDU): _________________ __________________
_____ CONTROL DISPLAY UNIT (CDU): _________________ __________________
45 CENTRAL MAINTENANCE SYSTEM (CMS)
CENTRAL MAINTENANCE
_____ COMPUTER: _________________ __________________
MAINTENANCE CONTROL
_____ AND DISPLAY PANEL: _________________ __________________
_____ PRINTER: _________________ __________________
77 ENGINE INDICATING
PRIMARY ENGINE DISPLAY
_____ PANEL: _________________ __________________
SECONDARY ENGINE DISPLAY
_____ PANEL: _________________ __________________
Page 20
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AIRCRAFT MANUALS
MANUAL or DOCUMENT DOCUMENT No. REV QTY QTY
MICRO HARD
FILM COPY
1 FAA APPROVED FLIGHT MANUAL: ________________ _____ _______ ______
2 AIRPLANE FLIGHT OPERATION
MANUAL: ________________ _____ _______ ______
3 AIRCRAFT RECOVER MANUAL: ________________ _____ _______ ______
4 QUICK REFERENCE HANDBOOK
(QRH): ________________ _____ _______ ______
5 WEIGHT AND BALANCE MANUAL: ________________ _____ _______ ______
6 AIRCRAFT FUELING MANUAL: ________________ _____ _______ ______
7 AIRCRAFT MAINTENANCE MANUAL
(MM): ________________ _____ _______ ______
8 AIRCRAFT MAINTENANCE MANUAL
SUPPLEMENT: ________________ _____ _______ ______
9 RAMP MAINTENANCE MANUAL
(RMM): ________________ _____ _______ ______
10 CARGO LOADING MANUAL: ________________ _____ _______ ______
11 FAULT REPORTING MANUAL (FRM): ________________ _____ _______ ______
12 FAULT ISOLATION MANUAL (FIM): ________________ _____ _______ ______
13 ILLUSTRATED PARTS CATALOG
(IPC): ________________ _____ _______ ______
14 LIFE LIMITED PARTS MANUAL: ________________ _____ _______ ______
15 STRUCTURAL REPAIR MANUAL
(SRM): ________________ _____ _______ ______
16 APERTURE CARDS: ________________ _____ _______ ______
17 WIRING DIAGRAM MANUAL (WD): ________________ _____ _______ ______
18 WIRING PRACTICES MANUAL: ________________ _____ _______ ______
19 SYSTEM SCHEMATICS MANUAL: ________________ _____ _______ ______
20 B.I.T.E. MANUAL: ________________ _____ _______ ______
21 NON-DESTRUCTIVE TEST MANUAL: ________________ _____ _______ ______
Page 21
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
22 CORROSION PREVENTION MANUAL: ________________ _____ _______ ______
23 AIRCRAFT OVERHAUL MANUAL
(OHM): ________________ _____ _______ ______
24 COMPONENT MAINTENANCE MANUAL: ________________ _____ _______ ______
25 APU LOG BOOK: ________________ _____ _______ ______
26 ENGINE MAINTENANCE MANUAL: ________________ _____ _______ ______
27 ENGINE LOG BOOK: ________________ _____ _______ ______
28 ENGINE ILLUSTRATED PARTS
CATALOG: ________________ _____ _______ ______
29 ENGINE DATA SUBMITTAL BOOK: ________________ _____ _______ ______
30 ENGINE OVERHAUL MANUAL: ________________ _____ _______ ______
31 POWER PLANT BUILD-UP MANUAL: ________________ _____ _______ ______
Page 22
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AIRCRAFT RECORDS AND DOCUMENTS
AVAILABLE
1 CERTIFICATE OF AIRWORTHINESS [ ]
2 EXPORT CERTIFICATE OF AIRWORTHINESS [ ]
3 COPY OF ORIGINAL EXPORT CERTIFICATE OF AIRWORTHINESS
4 OPERATOR'S SCHEDULED MAINTENANCE AND INSPECTION PROGRAM
SPECIFICATION (to include component limits) [ ]
5 OPERATOR ACCIDENT/INCIDENT STATEMENT [ ]
6 ORIGINAL AIRCRAFT READINESS LOG [ ]
7 OPERATOR EMERGENCY EQUIPMENT LAYOUT [ ]
8 AIRCRAFT TECHNICAL LOG CURRENT OPERATOR [ ]
9 AIRCRAFT TECHNICAL LOG PREVIOUS OPERATOR [ ]
10 CURRENT FUEL SAMPLE MICROBIAL GROWTH LABORATORY RESULTS [ ]
11 AIRCRAFT FLIGHT LOG OR FLIGHT TIME REPORT [ ]
12 ENGINE CONDITION MONITORING REPORT [ ]
13 ENGINE LOG CURRENT OPERATOR [ ]
14 CURRENT ENGINE DISC SHEET [ ]
15 ENGINE LOG PREVIOUS OPERATOR (including Delivery Records) [ ]
16 APU/ENGINE LOG & HISTORICAL RECORDS [ ]
17 APU/ENGINE SHOP VISIT REPORTS/RECORDS [ ]
18 TIME CONTROLLED / LIFE LIMITED COMPONENT STATUS FOR
AIRFRAME, ENGINES, LANDING GEAR AND APU
(including component tags) [ ]
19 FAA AIRWORTHINESS DIRECTIVE STATUS LIST [ ]
20 FAA AIRWORTHINESS DIRECTIVE METHOD OF COMPLIANCE DOCUMENTS [ ]
21 FAA REPETITIVE AIRWORTHINESS DIRECTIVE STATUS LIST [ ]
22 INTERIOR MATERIAL BURN CERTIFICATES [ ]
23 AIRCRAFT WEIGHT AND BALANCE RECORDS & EQUIPMENT LIST (Current) [ ]
Page 23
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
AVAILABLE
24 EXPLANATION OF ANY OPERATOR SAMPLING PROGRAMS [ ]
25 MAJOR REPAIR / MAJOR ALTERATION RECORDS (to include
STC's, FAA 337's, Operator EO's, 8110-3's [ ]
26 LIST OF NON-TSO'D ITEMS INSTALLED ON AIRCRAFT [ ]
27 SERVICE BULLETIN & ALL OPERATOR LETTER INCORPORATION LIST [ ]
28 OPERATOR DENT AND DAMAGE REPORT/MAP [ ]
29 AIRCRAFT INSPECTION STATUS & "CHECK RECORDS" [ ]
30 OPERATOR COMPONENT PART NUMBER TO MANUFACTURER PART NUMBER
CROSS REFERENCE [ ]
31 GALLEY CERTIFICATE OF SANITARY CONSTRUCTION [ ]
32 FLIGHT CONTROL BALANCE RECORDS [ ]
33 FLIGHT DATA RECORDER READOUT OF PARAMETERS [ ]
34 DEFERRED ITEMS LIST [ ]
35 AIRFRAME AND ENGINE OWNERSHIP PLACARDS [ ]
Page 24
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
AIRCRAFT/OPERATOR
TECHNICAL EVALUATION REPORT
- - --------------------------------------------------------------------------------
INSPECTOR RECORD
INSPECTED BY ____________________ DATE _______________________________
OPERATOR ________________________ REGISTERED OWNER ________________________
ADDRESS OF OPERATOR ____________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
CONTACT (Name/Title) ___________________________________________________________
PHONE ________________________ FAX _____________________________________
Page 25
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO RULE 24b-2 AS INDICATED BY "[XXX]".
WET LEASE AGREEMENT
N363PA
N366PA
N367PA
BETWEEN: EXPRESS ONE INTERNATIONAL, INC.
a Delaware Corporation with principal offices at
3890 West Northwest Highway, Suite 700
Dallas, Texas 75220
214/902-2500 Telephone
214/395-0979 Fax
hereinafter referred to as "Express One"
AND WESTERN PACIFIC AIRLINES, INC.
2864 Circle Drive, Suite 1100
Colorado Springs, CO 80906
719-527-7370 Telephone
719-527-7480 Fax
hereinafter referred to as "WestPac"
Wet Lease Agreement Page 1
<PAGE>
I. SERVICES PROVIDED BY EXPRESS ONE
--------------------------------
A. Air Transportation
------------------
1. Commencing on the Effective Date as hereinafter
defined under Article VI.A., Express One shall
provide direct passenger and cargo air transportation
for WestPac utilizing two B-727-200 aircraft from
among, Registration Nos. N363PA, N366PA and N367PA
("Aircraft") in order to provide the services in
Appendix A ("Services") which may from time to time
be amended by mutual agreement of the parties.
2. Express One shall operate the said Services for
WestPac during the term of this Agreement as set out
in Article VI.A. and in the performance of such
services shall furnish and maintain the Aircraft and
employ adequate and efficient personnel in order to
comply with all applicable statutes, rules and
regulations of any government, governmental agency or
airport in the countries in or to which the Services
shall be provided.
3. Express One represents that:
a. It has or will acquire all necessary
certificates, authorization permits, landing
rights, licenses and authority required to
provide such Services.
b. The Aircraft to be used by Express One in
the performance of the Services are in an
airworthy condition and will at all times be
operated and maintained in full compliance
with all laws, regulations, operating
authority, maintenance standards and
specifications, rules and certificates which
may be required for the performance of the
Services hereunder.
4. Express One shall be solely responsible for and will
pay for Aircraft; operating crews and associated
costs (hotel, per diem, transportation, etc.);
maintenance of the Aircraft; and insurance (hull,
passenger liability, third-party liability, and war
as described under Article IV of this Agreement).
5. In the event that WestPac indicates to Express One a
desire to amend in any reasonable way the route or
frequency of Express One's schedule contained in
Appendix A, Express One shall use reasonable efforts
to comply with and perform such amendments.
Wet Lease Agreement Page 2
<PAGE>
B. Handling Services
-----------------
1. WestPac, through its contractors, shall provide and
be solely responsible for the ground handling of
Aircraft, passengers and cargo at all airports
("Handling Services").
Express One hereby acknowledges that WestPac has
negotiated and concluded agreements with local
handling companies for the Handling Services. WestPac
will cause its Station Managers, whether they be
WestPac employees or contractors, to satisfy all
operational requirements established by Express One
in conjunction with Express One's F.A.A. inspection
and the Department of Transportation. Express One
will provide training to the appropriate WestPac
personnel.
2. WestPac shall provide Express One with a copy of the
handling agreement prior to commencement of the
Services by Express One and will confirm to Express
One, in writing, that the provider of Handling
Services at each airport served by Express One has
been notified that WestPac is responsible for all
costs. Any contract, relationship, claim, demand or
dispute shall be made and dealt with directly between
WestPac and the handling company.
II. COMPENSATION
------------
A. WestPac shall pay Express One, as compensation for the
performance of the Services of Express One hereunder, the sums
calculated according to the terms in Appendix B.
B. Express One shall invoice WestPac on Friday of every week for
operations completed in the immediately preceding 7 days.
WestPac will wire transfer payment on such invoice on the
immediately following Monday, provided WestPac has approved
such invoice. WestPac acknowledges its representation that
review of such invoices shall be given the highest priority
with the expectations that invoices for flights shall be paid
by wire transfer by close of business on the Monday following
the Friday invoice submission. In the event any portion of an
invoice is disputed, the undisputed portion shall not be
delayed pending resolution of such dispute.
C. In the event that Aircraft should be rerouted for reasons
relating to a technical failure of the Aircraft, Express One
shall bear the Aircraft operating costs, en
Wet Lease Agreement Page 3
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route charges, landing fees, fuel, and block hour charges
resulting from such rerouting.
III. EXPRESS ONE'S INABILITY TO PERFORM
----------------------------------
A. In the event that Express One is unable to perform the
Services required hereunder with its Aircraft due to force
majeure as defined in Article VII or due to other causes,
including, without limitation, aircraft mechanical failure,
scheduled maintenance, unavailability of parts, flight crews
or mechanics, or the inability to operate Express One's
aircraft to, from or between any point of transit covered by
this Agreement due to failure to comply with, obtain, or
maintain any certification, authority, registration, license
or permit, then WestPac shall not be obligated to pay any fees
for such Services and WestPac may make any reasonable or
necessary arrangements at its own expense with other carriers
to expeditiously transport its passengers and cargo to the
destinations served by Express One under this Agreement.
B. Any positioning flights of Express One's Aircraft required to
continue the schedule shall be at the sole expense of Express
One.
IV. INSURANCE
---------
Throughout the term of this Agreement, Express One shall procure and
maintain in full force and effect with insurers of recognized
responsibility who are reasonably acceptable to WestPac.
A. Aviation Liability Insurance of the type and in the amounts
usually carried by air carriers owning and operating similar
aircraft but in no event less than US $700,000,000 per
aircraft for any one accident. Such insurance shall name
WestPac, its directors, officers, employees and agents as an
Additional Insured.
B. Aviation Hull Insurance in amounts covering the full value,
with such deductibles as Express One shall deem appropriate,
of all such aircraft. Such insurance shall contain a waiver of
any recourse in favor of WestPac, its directors, officers,
employees and agents in respect of any damages to the Aircraft
arising out of or in any way connected with the performance of
all flights under this Agreement, a breach of warranty clause
and at least thirty (30) days' prior written notice of
cancellation or change to coverage to WestPac.
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Express One shall furnish to WestPac proof of such compliance
in the form of a certificate of insurance upon execution of
this Agreement in the form of a Certificate of Insurance.
V. INDEMNITY
---------
A. Express One shall defend, indemnify and hold WestPac harmless
against any and all liability losses and costs suffered by
WestPac and arising out of:
1. claims for death of or injury to persons and for loss
or destruction of or damage to any property,
including cargo, freight or baggage, caused by,
resulting from, or arising out of, or in any manner
connected with, Express One's possession,
maintenance, use or operation of the Aircraft.
2. theft, embezzlement or defalcation on the part of
Express One or any of its employees or agents; or
3. the failure of Express One to comply strictly at all
times with all applicable laws, enactments,
regulations, ordinances, and rules of each country,
state (or other subdivision), and municipality in
which Express One performs Services hereunder with
respect to any operation of Aircraft, tax, employer's
liability, worker's compensation, social security and
all such other laws, rules and regulations applicable
and Services to be performed by Express One
hereunder, and, when requested by WestPac, Express
One shall furnish WestPac proof of such compliance.
B. WestPac shall defend, indemnify and hold Express One harmless
against any and all liability losses and costs suffered by
Express One and arising out of any claims for injury and for
loss of or damage to any passengers, cargo or baggage arising
out of or in any manner connected with the gross negligence of
WestPac, or its employees.
C. The foregoing obligations of the parties to defend and
indemnify each other shall survive any termination of this
Agreement with respect to any event for which such defense and
indemnity is required which occurs during this Agreement.
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<PAGE>
VI. DURATION
--------
A. The Agreement shall take effect on or about June 10, 1996, and
shall continue until September 4, 1996. This Agreement may be
renewed by mutual consent on a month-to-month basis.
B. Either party may terminate this Agreement forthwith upon the
occurrence of any of the following events:
1. where either party commits a breach of this Agreement
which is not capable of remedy or, if capable, shall
not have been remedied within seven (7) days of
receiving a written notice of complaint from the
other party, except for non receipt by Express One of
payment, in which event Express One may either
terminate this Agreement or suspend flying with 24
hours notice until such breach is remedied.
2. if either party shall, without the prior written
consent of the other, attempt to assign or
subcontract any of its material rights, duties or
obligations hereunder in violation of the provisions
of this Agreement.
C. Notwithstanding anything to the contrary contained in this
Agreement, WestPac may terminate this Agreement forthwith if
Express One shall terminate or have terminated or have
suspended any license, permit, authorization, certification,
approval or permission of any governmental agency or airport
authority required to legally operate its Aircraft for the
purposes of providing the Services required to be performed
hereunder to, for or between any of the locations listed in
Appendix A, and such condition shall continue for a period of
seven days.
D. In the event of any early termination as a result of default
by Express One, WestPac shall not be responsible for payment
of any ferry charges under Appendix B.
VII. FORCE MAJEURE
-------------
Except as provided elsewhere in this Agreement, a delay in or failure
of performance of either party hereto shall not constitute default or
basis for termination hereunder nor give right to any claim for damage
if and to the extent such delay or failure is caused by occurrences
beyond the control of the party affected including, but not limited to:
riots, strikes, lockouts, civil commotion, existence or apprehension or
imminence of war between any nations, civil wars, blockade, hijacking,
embargo, acts of God, fire, flood,
Wet Lease Agreement Page 6
<PAGE>
fog, frost, ice, epidemics, quarantine, or any similar cause beyond the
control of the party affected and which by exercise of reasonable
diligence said party is unable to prevent.
The party so affected shall give to the other party prompt notice of
any such event of force majeure, and shall use its best efforts to
minimize the extent and effect of any such event which cannot be
overcome by due diligence.
Notwithstanding any other provision of this Agreement, WestPac may
terminate this Agreement or suspend or terminate this Agreement as to
any route or flight segment if Express One is unable to perform its
obligations hereunder with respect to such route or flight segment for
a period of seven (7) days by reason of any event constituting a force
majeure, and in such event of any early termination, WestPac shall not
be responsible for payment of ferry charges under Appendix B.IV.
VIII. CONFIDENTIALITY
---------------
Express One agrees and undertakes that it shall not disclose to third
parties during the term of this Agreement or at any time thereafter any
information relating to the operations of WestPac without the prior
written consent of WestPac.
IX. WHOLE AGREEMENT
---------------
This Agreement represents the entire Agreement. Any additions or
amendment to this Agreement shall be agreed in writing.
X. SEVERABILITY
------------
Should any provision of this Agreement be unenforceable or invalid, the
remaining provisions shall remain in full force and effect, and there
shall be deemed to have been substituted for the enforceable or invalid
provision which from an economic point of view comes closest to the
purposes pursued by the unenforceable or invalid provision.
XI. GOVERNING LAWS AND ARBITRATION
------------------------------
All disputes arising in connection with this Agreement shall be settled
by arbitration in Colorado by one or several arbitrators appointed in
accordance with the rules of the American Arbitration Association and
the laws of the State of Colorado and any
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judgment upon the award rendered shall be final and binding and may be
entered in any court having jurisdiction.
XII. COUNTERPARTS
------------
This Wet Lease Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
XIII. HEADINGS
--------
All paragraph headings and captions are purely for convenience and will
not affect the interpretation of this Agreement.
XIV. NOTICES
-------
All communications to be given pursuant to this Agreement shall be in
writing and given to the parties as follows:
If to Express One Express One International, Inc.
3890 West Northwest Hwy, Suite 700
Dallas, Texas 75220
Stephen R. Thompkins, General Counsel
214/902-2502 Telephone
214/352-0979 Fax
If to WestPac Western Pacific Airlines, Inc.
2864 Circle Drive, Suite 1100
Colorado Springs, Colorado 80906
Ed Beauvais, Chairman, President and CEO
719-527-7370 Telephone
719-527-7480 Fax
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<PAGE>
DATED this 28th day of May, 1996, in duplicate originals, each party
acknowledging receipt of one original.
EXPRESS ONE INTERNATIONAL, INC.
Subject to final approval of the United States
Bankruptcy Court for the Eastern District of
Texas
By: __________________________________________
Its: General Counsel
__________________________________________
WESTERN PACIFIC AIRLINES, INC.
By:
Its:
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<PAGE>
APPENDIX A
1. SERVICE: Air Transportation, Passenger and Cargo
ROUTES AND SCHEDULE:
[X] [X] [X]
--- --- ---
ARRIVE: [XX] [XX]
DEPART: [XX] [XX]
[X] [X] [X]
--- --- ---
ARRIVE: [XX] [XX]
DEPART: [XX] [XX]
All times are approximate and stated in local time for departure and
destination airports.
FREQUENCY: [X] Days Per Week
2. AIRCRAFT: B727-200
TYPE: Passenger
REGISTRATION NO.: N366 and N367
CONFIGURATION: 158 Coach Seats
This Appendix A is effective from ________ __, 1996.
EXPRESS ONE INTERNATIONAL, INC. WESTERN PACIFIC AIRLINES, INC.
By: _________________________ By: ___________________________
Title: General Counsel Title: ________________________
_______________________
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APPENDIX B
I. Charges
WestPac will pay Express One [XXXX] per block hour.
II. Inclusions
The price includes items such as the Aircraft; operating crews and
associated costs (hotel, per diem, transports, etc.), and insurance
(hull, passenger liability, third-party liability and war as described
under Article IV of this Agreement).
III. Exclusions
The above inclusions are not exhaustive, but specifically excludes
items below where WestPac has responsibility for the supply and costs
thereof:
Aircraft de-icing; airport fees; cargo handling (which is transfer of
cargo to/from the aircraft and its loading and off-loading); ramp,
parking and landing fees; aircraft cleaning and toilet servicing;
aircraft towing (except for maintenance); route charges; use of GPU;
and fuel required to accomplish the flights described in Appendix A.
IV. Ferry Flight Charges
WestPac shall pay US [XXXXXXX] per block hour for the positioning of
the Aircraft from and to COS. This charge shall be an all-inclusive
price and is an exception with respect to the other conditions set
forth in Appendix B III.
This Appendix is effective from ________ __, 1996.
EXPRESS ONE INTERNATIONAL, INC. WESTERN PACIFIC AIRLINES, INC.
By: _________________________ By: ___________________________
Title: General Counsel Title: ________________________
_______________________
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